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PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
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[LOGO]
PICTET INTERNATIONAL
MANAGEMENT LIMITED
ANNUAL REPORT
DECEMBER 31, 1997
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PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
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Dear Shareholders,
It is with pleasure that I present a combined 1997 Annual Report for both
Funds summarising the performance last year together with our 1998 outlook.
The long-awaited turning point in emerging markets to which the adviser
hopefully referred last year appeared to have occurred at the half year point;
unfortunately, events in the Far East in the second half quickly reversed any
gains. At the time of writing the adviser is seeing a recovery in the region
but the true scale and implications of the crisis remain to be seen. Pictet
believes the downside risks are now fully priced in the markets, and that the
year should see positive returns for investors.
International smaller companies fared better in the period, and the Pictet
International Small Companies Fund performed favorably in the face of sharp
market movements. The valuation discrepancies compared with large companies
referred to last year remain, and we continue to be optimistic for the asset
class. Quality small companies are still overlooked in terms of price and
research coverage.
We are pleased to report that the size of the Funds remained stable over
the year reflecting the continuing demand for these complementary, specialist
asset classes. Once again we look forward to helping you, the shareholders,
achieve your investment objectives in 1998.
Yours sincerely,
/s/ Jean G. Pilloud
Jean G. Pilloud
President and Chairman
February 25 1998
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PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
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PORTFOLIO MANAGER'S REPORT
1997 was the worst year for emerging equity markets since 1990 when the
IFC Global Composite Index fell by 31%. This time around the benchmark fell
14.5% in a very difficult year during which the Fund outperformed by 3.2%.
The Fund remained underweight in Asia for most of 1997 which accounted for
some early outperformance. However, towards the end of the year, as valuations
in Asia fell to unprecedented levels, some purchases were made in selected
markets and specific sectors. This has inevitably diluted the short-term
performance for the region. The Fund's positions in Korea, Indonesia and
Thailand were all boosted significantly resulting in small overweight
positions in all three markets by the year end. In Malaysia, however, the Fund
successfully delayed its entry, remaining very underexposed all year, which
gave a big boost to its relative performance and more than offset the short-
term losses incurred in Korea and Indonesia. The performance in China has been
frustrating; the China benchmark is composed of "A" shares which are reserved
for local investors and rose by 33% during the year; the Shanghai "B" share
index, which only foreign investors can buy, and where the portfolio's shares
are concentrated, fell by nearly 18%. Although the Fund's investments
outperformed the "B" share index it was overweight in a strongly
underperforming market, which resulted in a negative contribution to excess
performance through the year of over 200 basis points.
During the course of the year Russia joined the IFC index, and the
significant returns experienced there in the first half of the year caused its
index weighting to rise quickly over 5%. The Russian market was a major
contributor to the Fund's overall return in early 1997, although share prices
corrected sharply in the last quarter of the year. However, the country's
increased weighting combined with continuous profit-taking within the
portfolio had all but eliminated the overweight position by year end.
Elsewhere in Europe the most positive contributor was Turkey which was second
only to Russia in terms of overall performance. The Fund maintained a very
large overweight stance in this market all year and, in terms of stock
picking, our Turkish shares even managed to outperform the market's
extraordinary 117% rise. A smaller, though by no means insignificant,
contribution came from the portfolio's investments in Greece, another of the
year's solid outperformers; again the Fund was overweighted all year in a
market which outperformed the IFC benchmark by over 50%.
Latin America, by contrast, was not a success. The portfolio maintained an
underweight stance throughout the year on pure valuation grounds and the
region's resilience through the Asian crisis did little to help the Fund's
performance. Poor stock picking across the region, but particularly in Brazil,
contributed to a decrease in the value of our investments.
Towards the end of the year the portfolio ran a higher than average cash
position, particularly in the latter stages when the market declines became
severe. However, the unprecedented price declines of recent weeks have
triggered a further round of purchases in Asia which will likely reduce the
cash balance to normal operating levels relatively quickly. We are attempting
to keep to a minimum the short term impact of the Fund's entry into Asia.
However, trading conditions are currently very volatile and some dilution of
performance is to be expected. The Fund should emerge well positioned for the
strong recovery we foresee in Asia and other emerging stock markets during the
course of 1998.
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FUND COUNTRY WEIGHTS AS A PERCENTAGE OF NET ASSETS
AT DECEMBER 31, 1997
Mexico 8.9
Brazil 8.3
India 8.2
South Africa 8.0
China 7.8
Turkey 7.4
Russia (Fed.) 7.2
Cash 4.4
Taiwan 4.0
Indonesia 3.5
Argentina 3.4
Philippines 3.3
Greece 3.1
South Korea 3.0
Czech Republic 2.5
Israel 2.4
Thailand 2.0
Hungary 1.9
Pakistan 1.7
Malaysia 1.5
Egypt 1.2
Venezuela 1.2
Chile 0.9
Portugal 0.7
Kenya 0.6
Bahrain 0.5
Poland 0.4
Slovakia 0.4
Peru 0.3
Jordan 0.3
Sri Lanka 0.3
Zimbabwe 0.3
Lebanon 0.3
Slovenia 0.1
FUND COUNTRY WEIGHTS VERSUS IFC GLOBAL COMPOSITE INDEX
AT DECEMBER 31, 1997
Taiwan -11.2
Chile -3.8
Malaysia -3.6
Portugal -1.6
Columbia -1.1
South Africa -1.1
Brazil -1.1
Mexico -0.9
Morocco -0.8
South Korea -0.8
Peru -0.8
Nigeria -0.2
Poland -0.2
Jordan -0.0
Other* 0.0
Zimbabwe 0.1
Sri Lanka 0.2
Venezuela 0.2
Argentina 0.2
Slovak Republic 0.2
Egypt 0.4
Thailand 0.5
Israel 0.6
Hangary 1.0
Pakistan 1.1
Philippines 1.4
Indonesia 1.5
Greece 1.6
Czech Republic 2.2
Russia (Fed.) 2.5
China 3.2
India 3.3
Turkey 4.8
*Other is the following countries: Kenya, Bahrain, Lebanon and Slovenia.
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MARKET REVIEWS & INVESTMENT OUTLOOK
ASIA
After such a relentlessly negative quarter, the frustration felt by
investors in the emerging equity markets is wholly understandable. With the
IFC Global Composite Index standing barely above the level it attained in
mid-1993 it is tempting to write off five lost years. We would urge investors
not to lose sight of two key factors which, we think, could signal a turning
point for these markets: the first, and most powerful in our view, is
valuation; the second is the speed and depth of restructuring at political,
economic and corporate levels that the current crisis has forced upon the many
countries.
Starting with valuation, we have rarely seen stock values as low as they
are today. This is particularly true of Asia where, incredible as it may
sound, the entire market capitalisation of Korea, Malaysia, Indonesia,
Thailand and the Philippines can be bought for substantially less than the
price of Microsoft ($150 billion). Realistically, many of the companies quoted
on those exchanges will go bankrupt. But the equity markets appear to be
pricing Asian companies as if they were all going to go bust, an assumption
which the most rudimentary analyst can easily disprove. These are emotional
times and it is easy to confuse perception and reality, rumour and fact. What
is clear is that any well-managed company with little or no debt and
reasonably stable or inelastic cash flow will not only survive the Asian
crisis, but will use it as an opportunity to grow and strengthen its business
at the expense of weaker rivals. If, in addition, that company is valued at
one-fifth or, in some cases, one-tenth of the value of its emerging market
peer group, then it is equally clear that investors who can successfully
identify and exploit these anomalies will make a great deal of money.
Telekom Indonesia, which three years ago was valued at an enterprise value
per installed telephone line of $5,000 (including debt), could in early
January have been purchased for one-tenth of that amount. This represents
around half of the company's replacement value and less than one-third of the
average value at which all emerging market telephone shares currently trade.
In Asia and elsewhere there are many such examples, and in the years ahead
investors will likely kick themselves for not pouncing on what, with
hindsight, was a once-in-a-lifetime opportunity.
Valuation, however, is not everything. Countries can, and occasionally do,
disappear from the investment map for prolonged periods because of apparently
insurmountable structural obstacles. Much of Africa still resides within this
category, and some of the former Soviet states, in their infancy, were classic
examples. But an analysis of recent economic and political decisions in Asia
surely points the other way. After a hesitant start, almost all the region's
governments have publicly committed themselves to whatever orthodox action is
necessary to restore stability. A multitude of politically difficult,
previously unthinkable decisions have been taken.
In Indonesia, the Suharto family's business interests are no longer being
protected. All the sacred cows of the Malaysian Prime Minister's grandiose
infrastructure schemes have been shelved; most of the notorious Thai finance
companies have disappeared. More banks have been allowed to fail in Korea in
the last three months than in Japan in the last five years. South-East Asia
appears to have learnt important lessons from the travails of its rich
northern neighbour. Perhaps the greatest Asian sacred cow -- growth -- has
also been sacrificed in return for renewed stability. The effect on Asia's
external accounts, especially trade balances, has been nothing short of
spectacular. Thailand is enjoying its first significant trade surplus in
twenty years and large current account deficits, the root of the current
problems, could soon be a thing of the past. And one factor, of course, has
not changed: Asians are still generally the most prolific savers on the
planet.
Many potential obstacles remain to the kind of rapid recovery witnessed,
for example, in Latin America after the Mexican crisis. Little has been said
about Asia's labour laws, and still the traditional "job-for-life" mentality
prevails. The coming months are likely to see the patience of labour markets
and trade unions stretched, probably beyond breaking point. Add to the mixture
a military establishment which, in some countries, still likes to meddle in
politics, and what remains is a potentially lethal recipe for severe social
unrest on a scale not seen in Asia for a generation or more.
For equity investors there are even more immediate concerns. In Malaysia
Renong, a large holding company in difficulties, forced its subsidiary UEM, a
strong cash-rich company heavily owned by foreign investors, to bail it out by
buying new shares. This blatant violation of minority shareholder rights was
appalling, even by emerging markets standards, but shows the extent to which
the politically well-connected elite are still making decisions with their own
interests, rather than those of the country, in mind. This attitude must
change before Malaysia enjoys the trust of the financial markets again and we
have delayed our entry here accordingly.
And what of Asia's short-term debt obligations? Even the International
Monetary Fund (IMF) has nothing like the capital required to refinance these
obligations, which make the bail-out of Mexico a positive bargain in
comparison. In addition the IMF's particular brand of medicine is now being
criticised as inappropriate for Asia. Creditors from the developed world have
mostly been persuaded to roll over credit lines but this cannot continue
indefinitely and their willingness to do so could still be jeopardised by
unforeseen events in Japan or the US. Finally there is the greatest wildcard
of all -- China. Its decision to devalue in 1994 probably sowed the seeds of
the current crisis. Since then the country has integrated further with the
rest of the world, both politically and economically, and it has regained Hong
Kong. A unilateral uncoordinated devaluation by China, although unlikely in
our view, would almost certainly spark a further round of declines in Asian
currencies, the fall of the Hong Kong dollar, and probably a concerted attack
on the world's remaining fixed-currency regimes in Eastern Europe and Latin
America.
EMERGING EUROPE
Although Asia is the focus of attention there have been serious
implications elsewhere in the emerging world, far more serious in fact than we
had anticipated. Europe, from where so much of our outperformance was derived
in recent quarters, must now be a source of funds. In Russia the stock market
has borne the brunt of the selling as the currency itself is hard to sell
short. It is heartening to see the big foreign direct investors such as Shell
and BP still prepared to commit huge sums of capital to Russia, but these
companies necessarily operate on ten-year time horizons, a luxury which few
portfolio investors enjoy. The immaturity of this market still makes it
vulnerable and its huge relative outperformance over Asia means there are
fewer real bargains to be had.
We feel much safer in the Visegrad countries. Valuations here remain very
supportive although, again, the outperformance of these markets has left some
sectors looking less attractive than before. Hungarian companies such as Raba
and Pick Szeged have successfully continued to raise equity capital throughout
the fourth quarter. Rates across the region remain high but, by and large,
they have been high for some time as a response to domestic issues, not the
Asian crisis, and thus appear to have been largely discounted by the equity
markets. Turkey has been another favourite of ours, an absurdly mispriced
stock market which only now, after a period of huge outperformance, has
started to decline in our valuation rankings. One of Turkey's unique
attributes is that we are still finding auto and steel producers priced below
those of their Asian competitors, some of which have fallen by 90% in US
dollar terms. The stock market also has privatisation momentum behind it, as
well as a proposed Stabilisation Plan which, whether IMF-sponsored or not,
looks set to tackle the inflation problem.
LATIN AMERICA
Latin Ameria has also outperformed, extending further the relative
overvaluation of the region. With hindsight we exited the Brazilian market too
early but the huge correction which has taken place has, in our view, only
taken some of the risk out. The valuation disparity between parts of Latin
America and the rest of the emerging world is clearer than ever, with Chile
and the Brazilian large caps most vulnerable. The price of Brazil's currency
defence could be a recession in 1998 with a critical election looming. In both
Chile and Brazil current account deficits heading towards 5% of Gross Domestic
Product (GDP) stand out conspicuously in the current environment. Brazil alone
has a financing requirement of nearly $50 billion in 1998, equivalent to
nearly 90% of the Central Bank's foreign exchange reserves. At a stretch $15
billion will come from the much vaunted privatisation program, but they could
struggle to raise the remainder. The Chilean peso has fallen further in the
last three months than in the previous three years, and faster than at any
time since its own banking crisis in the early 1980s; and this is the safe
haven of Latin America. Only in Mexico, and there only in selected sectors, do
shares look interesting. The policy responses from Latin American governments
have been faultless; after all, they have a recent "home grown" learning
experience by which to judge events. But we would largely avoid the equity
markets whilst these events take place.
To summarise, the pure valuation work from our proprietary database
suggests a gradual shift of assets towards Asia from Europe and Latin America.
Unless we are about to witness the disappearance of Asia from the investment
map (unlikely), valuations are simply too cheap to ignore. Applying our
macroeconomic negative test, we find that most Asian stock markets are already
discounting a bleak economic and political picture. The remaining question is
one of timing. History shows that only truly long-term investors participate
fully in the outperformance exhibited by the emerging markets asset class; few
investors consistently outperform by trading. This makes a powerful argument
for a disciplined investment process that forces you to accumulate stock when
it is cheap. Today, an entire region appears to be fundamentally mispriced
relative to an already mispriced emerging markets universe. Under these
circumstances market timing is less relevant and those investors prepared to
stay the course will reap an abundant harvest.
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PANORAMA TRUST
PICTET INTERNATIONAL SMALL COMPANIES FUND
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PORTFOLIO MANAGER'S REPORT
The value of the portfolio declined by 7.7% in 1997, compared to a loss of
12.8% recorded by the HSBC James Capel World ex-U.S. Smaller Companies Index
(the "Index"); outperformance resulted from asset allocation in Europe and the
Asia Pacific region and stock selection in the UK, Japan and Canada.
Asia dominated the headlines in 1997 as currency and equity markets came
under attack. Speculators eventually won the day and regional equities paid
the price. In U.S. Dollar terms, the 20% decline in Hong Kong's Hang Seng
Index was modest relative to other regional exchanges; Singapore's Straits
Times Index fell more than 40%, the Korean and Malaysian Composites plummeted
almost 70% and Thailand and Indonesia fared even worse. And while Australia
posted an unconvincing gain in local currency terms, the All Ordinaries Index
actually lost 11.7%.
To exacerbate regional problems, it was another grim year in Japan; the
Nikkei 225 Index fell 30% in Dollars, with 21% of that loss incurred in the
final quarter of the year. Deteriorating economic conditions due to weak
domestic consumption and a disruption in Asian trade combined with doubts
about the vialibility of the financial sector to drive investors from the
market. The bankruptcies of Yamaichi Securities and Hokkaido Takushoku Bank in
November ushered in a period of high volatility, but the government has failed
to deliver either a credible package for the banking system or fiscal measures
to boost the economy.
Given the poor performance in principal indices and the resultant flight
of liquidity from the region, it is no surprise that smaller companies
underperformed large caps. Looking at the country indices for the Index, Japan
and Singapore both lost more than 50%, Malaysia declined an astonishing 75%
and Australia slipped 18.5%. Only in Hong Kong did small companies fare
relatively well, with a loss of just 18%.
Against this backdrop, our underweight position in the Asia Pacific region
was very beneficial. And while the portfolio underperformed in Hong Kong
because of company specific factors, stronger relative returns in Singapore
meant that stock selection had no material impact. The change in reference
index during the year resulted in a major reduction in the weighting of Japan;
while the portfolio is currently underweight in this market, the average
weighting for the year exceeded that of the Index and consequently, Japan
impinged on the success of our asset allocation strategy. Fortunately,
superior stock selection in this market mitigated this cost with the result
that Japan actually made a positive contribution.
For much of 1997, conditions in the U.S. were very favourable; by the end
of September, the Standard & Poors 500 Index had chalked up a gain in excess
of 28%. Events in Asia calmed the rise but the index still managed to
appreciate by just under 2.5% in the final quarter. With leadership from the
U. S., European equity markets actually performed reasonably well, though
there was a wide dispersion of returns from the region and again, wide
divergence between small and large companies. Looking at the Index, the UK
gained a paltry 3.3%, compared to almost 20% in Dollar terms for the FTSE
(Financial Times Stock Exchange 100 Index) of the largest stocks in the
market. In Germany, small caps rose 4.3%, against more than 25% for the DAX
Index and this pattern is consistent across the region.
While we are disappointed with the poor performance of European smaller
companies in 1997, our overweight position in continental markets, and
effective asset allocation within the region, paid dividends. Decisions to
overweight Italy, Belgium, Sweden and Switzerland had the greatest impact.
Unfortunately, stock selection negated these gains after a particularly
difficult fourth quarter. In general, the defensive mood of the final quarter
caused growth stocks to be sold down in favour of cyclicals. This was combined
with weakness in the oil sector and a strong showing by Italian banks, all of
which hope to benefit from pre-EMU takeover activity.
In the UK, our shift to technology and service-oriented firms, at the
expense of the out-of-favour building and engineering companies, allowed us to
outperform the Index with a gain of 9.8%, compared to 3.2%. Sterling remains a
problem in the UK and the poor performance of export-oriented industrial
companies bears that out. As evidence of renewed pressure on wages began to
appear after the end of the year, the risk of further increases in interest
rates, and further gains by the currency, cannot be discounted. In such an
environment, our focus on companies with resilient growth prospects,
especially in the home markets, is considered appropriate.
We continue to note that smaller companies in the UK and Europe are valued
at a significant discount to their main index counterparts, and that the
region remains an attractive investment area when compared with the U.S.,
Japan or Asia. Small European companies are relatively unaffected by Far
Eastern developments; they also stand to benefit from increasing domestic
growth during 1998. For these reasons, we are optimistic about their relative
performance, although we acknowledge that a difficult year could lie ahead.
We believe that most of the damage has been done in Asia and we are
considering increasing our exposure to the region. However, we believe that a
cautious approach to small cap stocks is warranted because liquidity flowing
back into the region will alight first on the largest blue-chip companies and
there is a risk of further shocks, arising from factors such as backsliding on
structural reforms, debt defaults and bankruptcies. Further, an eventual
devaluation of the Chinese Renminbi, which could spark another rout of
regional markets, cannot be ruled out.
FUND COUNTRY WEIGHTS AS A PERCENTAGE OF NET ASSETS
AT DECEMBER 31, 1997
UK 19.3
Japan 9.2
Italy 7.9
Switzerland 7.1
Germany 6.6
France 6.4
Hong Kong 5.3
Sweden 4.4
Norway 3.9
Spain 3.9
Belgium 3.8
Australia 3.5
Canada 3.3
Cash 2.5
Austria 2.5
Finland 2.5
Netherlands 2.4
Denmark 1.8
Singapore 1.2
New Zealand 0.9
Ireland 0.8
South Africa 0.4
Mexico 0.4
FUND COUNTRY WEIGHTS VERSUS HSBC JAMES CAPEL WORLD EX-U.S. SMALLER COMPANIES
AT DECEMBER 31, 1997
UK -6.2
HK -3.3
Malaysia -2.8
France -2.7
Netherlands -2.0
NZ -1.8
Denmark -1.1
Ireland -1.1
Singapore -0.7
Portugal -0.7
Germany -0.6
Australia -0.4
Other* 0.1
Spain 0.3
Japan 0.5
Sweden 0.5
Austria 0.6
Finland 0.8
Norway 1.4
Switzerland 2.3
Belgium 2.6
Italy 3.9
*Other is the following countries: Canada, South Africa and Mexico
SELECTED MARKET REVIEWS & INVESTMENT OUTLOOK
UNITED KINGDOM
UK smaller companies trailed larger companies by a wide margin in 1997.
For the year, the Financial Times Stock Exchange (FTSE) Small Cap Index gained
a paltry 1.9% in U.S. Dollar terms, compared to almost 20% in the case of the
FTSE 100 Index of the largest companies in the market. On a positive note,
small caps were relatively resilient in a turbulent fourth quarter and
actually outperformed in that period. While we draw some encouragement from
this reversal, we do not anticipate the beginning of a trend; outperformance
reflects modest valuations and the absence of liquidity rather than a
fundamental increase in the attractiveness of the asset class.
Concerns over inflation continued to influence UK markets. Increases of
more than 3.5% in the Retail Price Index in October and November provided the
ammunition for a further rise in base interest rates, the fifth tightening of
monetary policy since the month of May, 1977. The 25 basis points increase in
November took base rates to 7.25%, their highest level in five years. Higher
rates lent further support to the currency and kept the pressure on exporters
and companies with significant foreign operations.
This pressure is reflected in the performance of different industry groups
during the year. Export-oriented companies, such as engineering firms (+3.6%
in local terms), distributors (-17.2%), and paper and packaging companies
(-17.6%) dragged the market down. Winners have their feet firmly planted on
home soil: gas distributors (+61%), telecommunications companies (+29.1%),
pharmaceuticals companies (+43%), and electricity companies (+40%) led the
market.
The Bank of England Monetary Policy Committee (MPC) has championed the
fight against inflation. With that in mind, some relief can be found in poor
retail sales data and evidence that the strength of Sterling is beginning to
have an appreciable impact on manufacturing output. The Organisation for
Economic Co-operation and Development (OECD) expects Gross Domestic Product
(GDP) growth of only 2.2% in 1998, down from 3.4% in 1997, and some private
sector forecasts are more bearish than that.
While this would normally give rise to expectations of interest rate cuts
in 1998, we believe that it is too early to make such an assumption. It will
take several months to determine whether wage pressure arising from shortages
of skilled workers in certain sectors will have a knock-on effect on retail
prices and the cost of housing and the MPC can be expected to err on the side
of caution. Market expectations are divided; the poor performance of building-
related companies over the last few months of 1997 tells us that investors are
not convinced that interest rates have peaked.
Nevertheless, we see attractive opportunities in the UK market. Exporters
have had ample opportunity to adapt to new conditions, and valuations of some
world-class companies are attractive. We have seen takeover activity in the
most down-trodden industries, chemicals and engineers in particular, and there
is good potential for continued outperformance by support service companies,
particularly in the technology sector.
TARGET WEIGHTING: NEUTRAL
CONTINENTAL EUROPE
Though buffeted by global equity crises, the Continent sailed smoothly
through the fourth quarter, with small caps losing only 2.4% of their average
value. This relative immunity to shock may be a temporary phenomenon, implying
that investors are waiting to dispose of more illiquid holdings, but we prefer
an alternative account which points up three factors: low exposure to Far
Eastern clients and customers, thus limiting the damage from that region; a
widening discrepancy in valuation for the average smaller company share
compared with its main index counterpart, particularly in the core EMU
territories; and finally, attractive bond yields.
In reviewing the year, we see the predicted division between "periphery"
and "core" countries resulting in Italy being the top-performing market,
gaining some 36%, followed by Spain (27%), Finland (18%), Switzerland (17%)
and Norway (17%). Germany, conversely, managed only 11%, France gained 4%, and
Austria fell by 6%. There could be few more graphic examples of how the EMU
alignment process, now in its final phase, rewards some countries and hurts
others. In addition, the lead taken by those countries with an "equity
culture" is now quite developed.
Thus the year ends with Continental small companies having achieved ECU
gains close to 30%, which translates into 11% in U.S. Dollars. The reference
currency's strength was clearly a feature of the period, or perhaps one should
express this as EMU softness. Either way, it was a respectable showing for the
asset class, particularly considering alternative specialist equity
opportunities. However, we are under no illusion that this was competitive
with larger companies whose prices continued to reflect valuations in the
U.S., the premium for liquidity, and the anticipation of merger benefits.
Should 1998 prove a difficult year for securities markets in general, as
many think it will, there are reasons for modest optimism. Smaller company
returns and growth are priced attractively in many European markets,
particularly Italy and Norway. The population of companies is more heavily
biased towards cyclicals than, for instance, the Russell 2000 Index in the
U.S., and these should move with resuming growth. Research material is
improving in scope and quantity. Finally, the weight of money requiring
investment, combined with the state of European pension funds and their
propensity to own bonds, should buoy up quality shares.
TARGET WEIGHTING: OVERWEIGHT
JAPAN
The sharp reversal in momentum experienced by the Japanese equity market
half-way through the year accelerated in the final quarter as disappointment
over economic conditions (made worse by the problems in the rest of Asia)
worsened and concerns over the viability of the financial system intensified.
Latent profits on equity portfolios that the banks include in calculating
capital adequacy ratios are fast being eroded at current market levels; indeed
at around 14,300 on the Nikkei the largest 19 banks will actually be carrying
hidden losses of around $5 billion. Under the new initiative of Prompt
Corrective Action, which encourages the early disclosure and write-off of bad
debts, banks have little option but to continue to sell equity and call in
loans, especially from smaller companies. Not only has this severely
restricted capital at the time it is most needed but it has also increased the
incidence of bankruptcies.
This so-called spiral of death came to a head in November when the
difficulties faced by Japanese banks in international money markets (the
"Japan Premium" having risen to 150 basis points) effectively brought about
the closure of three high profile institutions: Sanyo Securities and two
companies enjoying their hundredth anniversaries, Hokkaido Takushoku (Japan's
tenth largest bank) and Yamaichi Securities (at one time the country's largest
broker). With the government's policy apparently the protection of depositors
rather than institutions, rumours abounded as to the next candidate for
bankruptcy, and this ushered in a period of considerable volatility in the
equity market as foreigners sold heavily amid orchestrated buying by public
funds.
Meanwhile, the cheerless environment was made even darker by economic
releases. After declining by an annualised rate of over 10% in the second
quarter, GDP disappointed hugely in rising by an annualised rate of just 3.1%
in the third quarter. This leaden rebound was due to the exceptionally
depressed housing investment (down by over 35% for the second consecutive
quarter) and weak consumer spending, which failed to show any significant
recovery after the disruption of the April sales tax hike. With the prospect
of unemployment rising sharply over the medium term, consumer confidence
cannot be expected to recover strongly for some time. Furthermore exports,
which have hitherto provided the one bright spot in the economy, will be
disrupted by "Asian flu" as this region accounts for around 40% of Japanese
exports. In consequence there has been a series of sharp downward revisions in
GDP forecasts to almost zero growth for both the 1997 and 1998 fiscal years,
and the outlook for corporate profits appears similarly subdued.
Against this background, the market has continued to reward larger
companies with a strong market presence and a relatively secure earnings
stream. Return/reversal strategy ceased to be effective in 1996 but in 1997
the yawning gap between winners and losers was taken to new highs.
Consequently, the extraordinary outperformance of stocks like Toyota, Honda,
Acom, NTT, Keyence and Rohm was mirrored by the disappearing acts of sectors
like oils, steels, chemicals, housing, textiles, bridgebuilders, construction,
mining and brokers. A rotational investment strategy had been successful in a
managed economy in which weak industries were protected from bankruptcy and
subsidised, but the wholesale divestment from such areas indicates investors'
belief that this era has come to an end.
Thus, smaller companies have been driven to highly attractive valuations
in relation both to historic levels and to their larger peers, with a
staggering 60% of the Over-The-Counter (OTC) market trading at a discount to
book value. In terms of Pictet's price to appraised value measure, Japanese
companies worth less than US$1 billion trade at a discount of over 40% to
those of a higher market capitalisation and are also beginning to offer value
commensurate with European small caps. However, in terms of the Pictet profit
ranking measure Japanese smaller companies remain unattractive, evidenced by
the low average return on equity of just 4.7%, a fraction of that available
elsewhere.
Clearly the way restructuring of Japanese industry is handled in the
coming months will do much to set the tone of the market. Widespread
bankruptcy in a weak economic environment could precipitate a market collapse
but, at least in the long term, would improve the returns generated for
shareholders by the survivors. Astute mergers and acquisitions could achieve
the same result with less pain but, unfortunately, these are relatively rare
in Japan.
In the short term, therefore, we are not inclined to increase our exposure
to Japanese small caps as we do not see them being the primary beneficiaries
of such a process and believe that small caps need a stronger economic
background than currently exists. Nevertheless, the value inherent in the
asset class cannot remain dormant forever, especially given its dramatic
underperformance relative to larger stocks. In consequence, we will interpret
an increase in bank lending and rising interest rates as evidence of an
environment in which small caps would add earnings momentum to their other
undoubted qualities.
TARGET WEIGHTING: UNDERWEIGHT
FAR EAST
Life in Hong Kong after the handover ceremony started on a benign note;
the first major policy speech by Chief Executive CH Tung calmed fears of tough
measures to curb property speculation and improve the affordability of
housing. Perhaps Mr. Tung had an inkling of what was to come because, by the
end of the year, turmoil in Asia had taken the steam out of Hong Kong property
prices and negated the need for government intervention.
Having triumphed in Thailand, Indonesia, Malaysia and the Philippines,
currency speculators attempted to wrest the Hong Kong Dollar away from its peg
to the U.S. currency. While the attack proved futile, the Hong Kong Monetary
Authority was still required to jack up interbank rates to protect the
currency. And after the first wave of attacks on regional markets subsided,
South Korea imploded and Hong Kong resumed its downward trajectory.
The spectre of higher borrowing costs affected all sectors of the market,
led by a 42% fall in the Hang Seng property index and a 35% decline in the
sub-index of commercial and industrial stocks over the course of the last
three months of the year. Smaller companies were particularly badly affected
as retail investors withdrew and institutions shifted into safe-haven stocks,
such as utilities; losses of more than 50% were not uncommon. While sentiment
is still negative in the small companies market, well managed firms with
strong balance sheets and U.S. Dollar earnings are available at attractive
prices.
Singapore was affected by the regional crisis in much the same way as Hong
Kong, though market losses in local currency terms were exacerbated by a
decline in the value of the currency against the U.S. Dollar. Another factor
also had a major impact on Singaporean equities: electronics stocks collapsed
after the demise of the Korean Won on fears of reduced demand and sharper
competition from regional manufacturers.
While this market is often referred to as a regional safe haven, the local
property and retail sectors were sluggish even before the collapse of
neighbouring markets, and it is difficult to see much scope for significant
gains in Singapore. However, indiscriminate selling in the electronics sector
provides an opportunity to acquire well-managed companies with good track
records.
Resource stocks were a drag on the Australian market last year. Base
metals stocks suffered, principally because of worries over the impact of a
decline in Asian economic growth. Oil prices fell late in the year as the
lastest confrontation with Iraq fizzled out and gold prices continued to slip
on expectations that central banks would continue to sell their reserves and
concerns over the affordability of the metal in Asia after currency
devaluations.
While gold staged a modest recovery late in the year to break through
US$290 an ounce, we see little impetus for a sustained rally. The same holds
true of oil now the Organisation for Petroleum Exporting Countries (OPEC) has
endorsed higher production quotas, and base metals because of expectations of
a slowdown in demand from Asia and the price dampening effects of deliveries
from "wildcard" markets such as China.
Elsewhere in the region, governments are proceeding with structural
reforms, mandated by the International Monetary Fund (IMF) in some cases, and
out of the desire for self-preservation in others. These developments are
positive but substantial risks remain. Any appearance of slippage in the
reform process, or a devaluation of the Chinese currency, could herald a
return of currency speculators and a period of renewed volatility in equity
markets.
TARGET WEIGHTING: UNDERWEIGHT
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PORTFOLIO HIGHLIGHTS -- DECEMBER 31, 1997
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
PICTET GLOBAL EMERGING MARKETS FUND
VS.
INTERNATIONAL FINANCE CORPORATION GLOBAL COMPOSITE INDEX
TOTAL RETURN+
International Finance
Pictet Global Corporation Global Composite
Emerging Markets Fund Index Total Return
10/95 10.00% 10.00%
12/95 9.70% 9.53%
12/96 10.30% 10.30%
3/97 11.01% 10.76%
6/97 10.65% 10.05%
9/97 10.47% 10.32%
12/97 9.16% 8.94%
+ International Finance Corporation Global Composite Index Total Return is an
index composed of 1,650 stocks covering 27 markets.
Index information is available at month-end only; therefore, the closest month-
end to inception date of the Fund has been used.
NOTE: The performance shown represents past performance and is not a guarantee
of future results. The Fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN*
PICTET GLOBAL EMERGING MARKETS FUND ACTUAL
----------------------------------- ------
Year Ended 12/31/97 ........................................ -11.29%
Inception (10/04/95) through 12/31/97 ...................... -3.86%
- -------------------------------------------------------------------------------
*Assumes the reinvestment of all dividends and distributions.
<PAGE>
PANORAMA TRUST
PICTET INTERNATIONAL SMALL COMPANIES FUND
PORTFOLIO HIGHLIGHTS -- DECEMBER 31, 1997
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
PICTET INTERNATIONAL SMALL COMPANIES FUND
VS.
HSBC JAMES CAPEL WORLD EXCLUDING U.S. SMALL COMPANIES INDEX+
&
FINANCIAL TIMES/S&P WORLD EX-U.S. MEDIUM-SMALL CAP INDEX++
HSBC James Financial
Pictet International Capel World excluding Times/S&P World ex-U.S.
Small Companies Fund* Small Companies Index Medium-Small Cap Index
2/96 10.00% 10.00% 10.10%
12/96 10.30% 10.04% 10.30%
3/97 10.57% 10.67% 10.01%
6/97 10.40% 10.08% 10.96%
9/97 10.30% 10.28% 10.46%
12/97 9.49% 9.28% 9.21%
+ The HSBC James Capel World excluding U.S. Small Companies Index is an index
composed of 1,200 smaller company stocks covering 21 markets.
++ The Financial Times/S&P World Indices are capitalization weighted indices.
The Financial Times/S&P World ex-U.S. Medium -- Small Capitalization Index
represents the bottom 25% of the World Index in terms of market
capitalization.
* During the year, the benchmark index for the Fund was changed from the FT/
S&P World ex-US Medium-Small Cap (FT/S&P) Index to the HSBC James Capel World
ex-US Smaller Companies (HSBC) Index. This change was made on the
recommendation of the Adviser after an analysis of the various alternative
indices available to advisors of small cap funds. The HSBC Index is preferred
to other options for two principal reasons; first, it is more representative
of the typical composition of the Adviser's small cap portfolios in terms of
the average market capitalization of the constituents, and second, because
index performance is not distorted by the presence of very large companies as
in the case of the FT/S&P Index.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: The performance shown represents past performance and is not a guarantee
of future results. The Fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN*
PICTET INTERNATIONAL SMALL COMPANIES FUND ACTUAL
----------------------------------------- ------
Year Ended 12/31/97 ...................................... -7.68%
Inception (02/07/96) through 12/31/97 .................... -2.70%
- --------------------------------------------------------------------------------
*Assumes the reinvestment of all dividends and distributions.
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIOS OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.6%
ARGENTINA - 3.4%
46,352 Banco Sud Americano, Series B+ $ 477,516
189,320 Central Puerto SA, Class B 530,197
196,500 Nobleza Piccardo SA@ 884,418
56,000 Quilmes Industrial SA, ADR 763,000
443,037 Siderca SA 1,231,878
41,360 Telecom Argentina Stet - France Telecom S.A.,
Sponsored ADR, Class B 1,478,620
36,000 YPF Sociedad Anonima, Sponsored ADR, Class D 1,230,750
------------
6,596,379
------------
BAHRAIN - 0.5%
50,000 Arab Insurance Group, Sponsored GDR +@ 860,000
------------
BRAZIL - 1.2%
4,000 Companhia Antarctica Paulista Industria@ 250,885
141,764 Confeccoes Guararapes SA+@ 494,119
82,000 Souza Cruz SA 661,261
85,500 Votorantim Celulose e Papel SA, ADR+ 865,687
------------
2,271,952
------------
CHILE - 0.9%
27,928 Chilgener SA, ADR 684,236
32,000 Compania Cervecerias Unidas SA, Sponsored ADR 940,000
------------
1,624,236
------------
CHINA - 7.8%
3,018,000 Anhui Conch Cement Company Ltd., Class H+ 525,784
2,100,000 Beijing Datang Power Generation Company Ltd.,
Class H+ 962,060
714,643 China International Marine Containers Ltd.,
Class B 644,645
1,892,000 China Resources Beijing Land 903,394
600,000 China Telecom Ltd.+ 1,029,810
1,533,000 Cosco Pacific Ltd. 1,246,341
1,930,000 Founder Hong Kong Ltd. 1,195,509
825,000 Guangdong Kelon Electric Holding, Class H 846,400
1,091,000 Heilongjiang Electric Power Company Ltd., Class B+ 835,706
44,800 Huaneng Power International, ADR, Series N+ 1,038,800
1,639,500 Inner Mongolia Erdos Cashmere Products
Company Ltd., Class B 557,430
719,000 Ng Fung Hong Ltd. 756,207
1,460,000 Qingling Motor Company Ltd., Class H 715,963
1,364,300 Shanghai Dazhong Taxi Company, Class B+ 1,020,496
1,270,800 Shanghai New Asia (Group), Class B@ 343,116
1,300,000 Shanghai Refrigerator, Class B+ 361,400
505,000 Shenzhen Chiwan Wharf Holdings Ltd., Class B@ 159,014
792,940 Shenzen Fangda Company Ltd., Class B+ 910,720
872,400 Wuxi Little Swan Company Ltd., Class B 907,413
------------
14,960,208
------------
CZECH REPUBLIC - 2.5%
53,300 Ceska Sporitelna AS 352,909
27,700 Ceske Energeticke Zavody AS+ 909,024
34,150 Nova Hut AS+@ 453,214
23,200 Skoda Koncern Plzen AS+ 410,524
22,170 SPT Telekom AS+ 2,371,740
121,800 Unipetrol AS+ 350,334
------------
4,847,745
------------
EGYPT - 1.2%
39,000 Commercial International Bank, GDR 819,000
10,329 Egypt International Pharmaceutical Investments
Company@ 722,499
4,900 Egyptian Financial and Industrial 295,195
50 Egyptian Starch & Glucose Manufacturing Company+@ 487
14,470 Oriental Linen & Cotton Company+ 250,913
14,395 Upper Egypt Flour Mills 237,766
------------
2,325,860
------------
GREECE - 3.1%
78,000 Athens Medical Care SA+ 921,931
61,200 Bank Of Piraeus SA 1,045,693
52,000 Delta Dairy SA+ 589,889
36,000 Hellenic Telecommunication Organization SA 738,136
26,000 Intracom SA 1,199,930
8,760 National Bank of Greece SA+ 771,380
15,000 Titan Cement Company SA 684,340
------------
5,951,299
------------
HUNGARY - 1.9%
12,500 BorsodChem RT, GDR 450,625
30,000 Euronet Services, Inc.+ 232,500
6,600 Gedeon Richter, Sponsored GDR 758,175
35,000 MATAV Rt., Sponsored ADR, Series B+ 910,000
32,700 Mol Magyar Olay Es Gazipari, GDR, Series A 794,610
17,000 Mol Magyar Olay Es Gazipari 412,005
------------
3,557,915
------------
INDIA - 8.2%
250,000 Arvind Mills Ltd., GDR 481,250
110,000 Gujarat Ambuja Cements Ltd., GDR 786,500
38,000 Hindalco Industries, GDR+ 748,125
62,000 ICICI, GDR 801,350
188,647 India Access Fund+ 1,768,567
94,000 Larsen & Toubro Ltd., GDR+ 1,034,000
264,000 Mahanager Telephone Nigam Ltd., Sponsored GDR+ 4,094,640
109,134 Mahindra & Mahindra Ltd., GDR 1,158,185
280,000 Reliance Industries Ltd., GDR 2,362,500
82,100 State Bank of India, GDR 1,467,537
72,000 Videsh Sanchar Nigam Ltd., GDR+ 1,002,600
------------
15,705,254
------------
INDONESIA - 3.5%
1,470,000 Astra International Inc. (F)+ 380,864
1,647,878 Bank International of Indonesia (F) 97,375
2,058,000 Bank Negara Indonesia (F) 196,445
152,000 Barito Pacific Timber+@ 43,527
2,521,500 Barito Pacific Timber (F)@ 722,066
3,517,100 Fiskaragung Perkasa (F)+@ 479,605
812,500 Lippo Bank (F) 88,636
5,986,300 Lippo Life Insurance (F)@ 217,684
4,291,000 Matahari Putra Prima (F) 351,082
156,000 Ramayana Lestari Sentosa 146,782
848,000 Ramayana Lestari Sentosa (F) 797,891
1,979,500 Semen Gresik 1,160,707
400,500 Semen Gresik (F) 234,839
3,375,500 Telekomunikasi Indonesia, Series B (F) 1,795,152
------------
6,712,655
------------
ISRAEL - 2.4%
30,000 Agan Chemical Ilsi Ltd. 894,180
330,000 Bank Hapoalim Ltd. 792,291
30,400 Formula Systems Ltd.+ 936,191
20,000 Gilat Satellite Networks Ltd.+ 572,500
130,000 Indigo NV+ 520,000
13,000 Orbotech, Ltd.+ 414,375
36,300 Tower Semiconductor Ltd. 363,000
------------
4,492,537
------------
JORDAN - 0.3%
15,000 Jordan Petroleum Refinery 220,797
46,500 Jordan Phosphate Mines 243,236
12,000 Jordan Worsted Mills@ 118,097
------------
582,130
------------
KENYA - 0.6%
356,000 Kenya Breweries Ltd.@ 273,846
147,414 Kenya Commercial Bank Ltd.@ 180,030
262,062 Kenya Power & Lighting Company Ltd.@ 748,155
------------
1,202,031
------------
LEBANON - 0.3%
18,400 Banque Audi Sal, GDR 554,300
------------
MALAYSIA - 1.5%
451,000 Commerce Asset Holding Berhad 215,673
382,000 Kuala Lumpur Kepong Berhad 820,080
250,000 Malaysian Assurance Alliance Berhad 286,669
122,000 Malaysan Banking Berhad 354,441
268,000 Malaysian Pacific Industries Berhad 644,247
257,000 Perusahaan Otomobil Nasional Berhad 251,086
247,000 Star Publications (Malaysia) Berhad 281,959
------------
2,854,155
------------
MEXICO - 8.9%
1,500,000 Controladora Comercial Mexicana SA de CV 1,955,269
340,000 Embotelladores del Valle de Anahuac SA, Class B+ 370,733
64,000 Empresas ICA Sociedad Controladora SA de CV,
Sponsored ADR 1,052,000
243,000 Grupo Financiero Banamex, Class L+ 626,281
3,089,000 Grupo Financiero Bancomer, SA de CV, Class B+ 2,005,620
3,650,000 Grupo Gigante SA, Series B+ 1,582,925
56,300 Grupo Minsa SA de CV, Sponsored ADR, Class C+@ 381,292
53,000 Grupo Televisa SA, GDR+ 2,050,438
73,000 Pepsi-Gemex SA, ADR 1,053,938
70,900 Telefonos de Mexico SA, Sponsored ADR 3,974,831
153,000 Vitro SA, Sponsored ADR 1,998,563
------------
17,051,890
------------
PAKISTAN - 1.7%
890,500 DG Khan Cement+@ 165,934
210,000 Fauji Fertilizer Company Ltd. 402,047
396,500 Nishat Textile+@ 131,548
36,247 Pakistan Refinery, Ltd. 32,124
83,616 Pakistan State Oil Company Ltd. 711,589
1,580,000 Pakistan Telecom Corporation, Class A 1,193,815
893,575 Sui Northern Gas Pipelines Ltd.+ 546,225
------------
3,183,282
------------
PERU - 0.3%
75,000 Southern Peru Copper Corporation, Class T 276,606
23,550 Southern Peru Copper Corporation 314,981
------------
591,587
------------
PHILIPPINES - 3.2%
4,266,000 Cosmos Bottling Company@ 347,600
6,000,000 Filinvest Land Inc.+ 237,037
5,583,000 International Container Terminal Services, Inc.+@ 689,259
309,780 Manila Electric Company, Class B 1,024,951
66,642 Metropolitan Bank & Trust Company 448,394
902,000 PCI Leasing and Finance, Inc.+@ 19,042
33,000 Philippine National Bank+ 72,519
970,000 Republic Glass Holdings Corporation@ 30,417
1,830,000 RFM Corporation@ 298,222
1,191,200 San Miguel Corporation, Class B 1,455,911
10,191,400 SM Prime Holdings Inc. 1,509,837
------------
6,133,189
------------
POLAND - 0.4%
25,000 Bank Handlowy W Warszawie+ 330,625
37,250 Bank Handlowy W Warszawie, GDR+ 492,631
------------
823,256
------------
PORTUGAL - 0.7%
48,000 Banco Espirito Santo 1,428,394
------------
RUSSIA - 6.4%
110 AO Norilsk Nickel, Barings RDC (Represents 1,000
Shares)+@ 687,500
22,000 AO Norilsk Nickel, Credit Suisse Financial
Products Finance Limited, Certificates +@ 137,500
1,500 AO Tatneft, ADR 213,750
6,500 AO Tatneft, Sponsored ADR, REG 926,250
57,000 Gazprom, ADR (Represents 10 Shares) 1,365,150
20,000 LUKoil Holdings, Sponsored ADR (Represents
4 Shares) 1,841,600
10 Moscow City Telecom Network (MGTS), RDC
(Represents 10,000 Shares)+@ 675,000
400,000 Mosenergo, Credit Suisse Financial Products
Finance Limited, Certificates+ 508,000
96,150 RAO Unified Energy Systems of Russia, GDR+ 2,907,576
35 Rostelecom, RDC (Represents 10,000 Shares) REG+ 1,242,500
169,300 Surgutneftegaz, Sponsored ADR 1,726,860
------------
12,231,686
------------
SLOVAKIA - 0.4%
2,700 Chirana Prema AS+@ 15,469
5,326 Nafta Gbely AS@ 202,159
26,000 VSZ AS@ 504,985
------------
722,613
------------
SLOVENIA - 0.1%
13,000 SKB Banka, GDR 236,600
------------
SOUTH AFRICA - 8.0%
155,668 Anglo American Platinum Corporation Ltd. 2,079,199
94,000 Barlow Ltd. 797,740
412,460 Dimension Data Holdings Ltd.+ 1,779,854
27,300 Edgars Stores Ltd.@ 465,612
127,000 Engen Ltd. 645,895
52,653 Evander Gold Mines Ltd. 99,539
79,000 Fedsure Holdings Ltd.+ 972,383
72,500 Harmony Gold Mining Company, Ltd.+ 177,283
467,000 Illovo Sugar Ltd.@ 806,082
62,400 Liberty Life Association of Africa Ltd. 1,602,795
770,000 Metro Cash and Carry Ltd. 672,455
74,000 Nedcor Ltd. 1,642,248
660,059 New Clicks Holdings Ltd. 807,018
24,700 Pretoria Portland Cement Company Ltd. 304,531
53,000 Randgold & Exploration Company Ltd.+ 68,612
173,700 Sasol, Ltd. 1,820,343
12,000 Vaal Reefs Exploration & Mining Company Ltd.+ 480,838
------------
15,222,427
------------
SOUTH KOREA - 3.0%
38,380 Hyundai Motor Company Ltd.+ 423,425
3,380 II Shin Spinning Company+@ 67,600
60,300 Korea Electric Power Corporation 558,531
14,556 Korea Green Cross Corporation 369,255
90,870 LG Electronics Inc. 691,577
20,320 LG Information & Communication+ 569,440
56,900 LG Semiconductor Company+ 553,894
22,020 Pohang Iron & Steel Company Ltd. 596,294
46,715 Samsung Display Devices Company 881,935
27,060 Samsung Electronics 613,041
3,100 Samsung Fire & Marine Insurance 356,637
298 SK Telecom Company Ltd. 78,236
------------
5,759,865
------------
SRI LANKA - 0.3%
104,285 John Keells Holdings Ltd. 567,446
------------
TAIWAN - 4.0%
315,672 Accton Technology Corporation, GDR+ 1,349,498
137,500 Acer Inc., GDR+ 1,045,000
116,000 Asia Cement Corporation, GDR+ 1,371,700
101,250 China Steel Corporation GDS+ 1,506,094
89,917 Macronix International Company Ltd.,
Sponsored ADR+ 1,258,838
62,000 Taiwan Semiconductor Manufacturing Company Ltd.,
Sponsored ADR,+ 1,166,375
------------
7,697,505
------------
THAILAND - 2.0%
129,600 Advanced Information Service Public Company,
Ltd. (F) 638,629
56,900 Alucon Manufacturing Company (F)@ 95,088
107,700 Bangkok Bank Public Company Ltd. 276,893
51,200 Bangkok Bank Public Company Ltd. (F) 131,634
386,500 Bangkok Expressway Public Company Ltd. (F)+@ 221,508
120,900 Delta Electronics Public Company Ltd. (F)+ 1,036,101
333,500 Electricity Generating Power Company (F) 643,064
55,800 Grammy Entertainment Public Company Ltd. (F)@ 245,078
119,600 Jasmine International Public Company Ltd. (F)+@ 23,574
62,300 K.R. Precision Public Company Ltd. (F) 242,927
8,600 PTT Exploration & Production Public Company
Ltd. (F) 102,076
56,100 Singer Thailand Public Company Ltd.@ 33,654
684,000 TelecomAsia Corporation Public Company Ltd. (F)+ 134,822
25,000 Thai German Ceramic Industries, Ltd. (F)+@ 3,508
------------
3,828,556
------------
TURKEY - 7.4%
4,192,484 Akcansa Cimento 586,644
17,500,000 Aksigorta AS+ 1,118,818
4,736,250 Bati Cimento 548,468
16,000,000 Haci Omer Sabanci Holding AS+ 984,318
2,648,000 Koc Holding AS 619,677
1,986,000 Netas Northern Electric Telekomunikasyon AS+ 718,697
1,270,000 Petkim Petrokimya Holding AS+ 689,385
3,750,000 Petrol Ofisi AS 895,657
4,900,000 Sarkuysan Electrolitik Bakir Sanayi ve Ticaret AS+ 437,394
12,400,000 T. Garanti Bankasi+ 613,269
14,638,000 Tofas Otomobil Ticaret 829,899
6,240,600 Tupras Turkiye Petrol Rafinerileri AS+ 707,619
20,300,000 Turkiye Is Bankasi 3,673,100
43,680,360 Yapi Kredi Bankasi 1,665,017
------------
14,087,962
------------
VENEZUELA - 1.2%
146,666 Ceramica Carabobo, Sponsored ADR, Class A 102,552
143,232 Ceramica Carabobo, Class A 107,928
1,033,192 Electricidad de Caracas 1,239,503
10,360,000 Sudamtex de Venezuela, Class B 472,497
1,523,816 Venezolana de Pulp Y Papel, Class A 277,991
------------
2,200,471
------------
ZIMBABWE - 0.3%
192,000 Bindura Nickel Corporation@ 31,025
266,600 Meikles Africa Ltd.@ 239,940
780,000 Trans Zambesi Industries@ 249,600
------------
520,565
------------
TOTAL COMMON STOCKS (COST $203,663,760) 167,385,950
------------
PREFERRED STOCKS -- 8.0%
BRAZIL - 7.1%
63,614,000 Banco Bradesco 626,992
2,796,000 Banco Itau SA 1,503,158
2,987,000 Brasmotor SA 294,404
15,168,720 Caemi Mineracao e Metal SA+ 543,657
21,350,000 Companhia Energetica Minas Gerais 927,612
85,500,000 Companhia Energetica Paranaense, "B" 1,160,633
18,320,000 Eletrobras, "B" 935,657
300 Mineracao da Trinidade Samitri SA 8
15,391,000 Petroleo Brasileiro 3,599,347
49,500,000 Petroleo Ipiranga 753,998
744,000 Sadia Concordia 486,645
14,550,000 Telebras 1,659,617
59,900 Vale do Rio Doce 1,204,924
59,900 Vale do Rio Doce, Debenture+ 536
------------
13,697,188
------------
PHILIPPINES - 0.1%
988,333 Cosmos Bottling Company, Convertible
Preferred## 102,494
------------
RUSSIA - 0.8%
50,000 LUKoil Holdings, ADR 1,575,000
------------
TOTAL PREFERRED STOCKS (COST $14,322,041) 15,374,682
------------
RIGHTS - 0.0%#
BRAZIL - 0.0%#
2,719,827 Banco Bradesco SA, Expire 02/02/98+ 417
82,000 Souza Cruz SA, Expire 01/21/98+ 646
------------
TOTAL RIGHTS (COST $947) 1,063
------------
PRINCIPAL
AMOUNT
---------
TIME DEPOSIT -- 4.3% (COST $8,126,000)
$8,126,000 Morgan Guaranty (London), 5.000% due 01/02/98 8,126,000
-----------
TOTAL INVESTMENTS (COST $226,112,748*) 99.9% 190,887,695
OTHER ASSETS AND LIABILITIES (NET) 0.1 34,014
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $190,921,709
- -------------------------------------------------------------------------------
* Aggregate cost for Federal tax purposes was $226,332,684.
+ Non-income producing security.
# Amount represents less than 0.1%.
## The valuations of these securities have been determined by procedures
established by the Pricing Committee of the Trust's Board of Trustees. The
cost of these denotes securities at December 31, 1997 was $157,372, with a
value of $102,494 representing 0.1% of total net assets.
@ Illiquid Security (unaudited). These are securities that the Adviser believes
cannot be sold or disposed of in the ordinary course of business within seven
days at approximately the value at which the Fund has valued the investment.
The value of the denoted securities at December 31, 1997 was $13,821,451,
representing 7.2% of total net assets.
Abbreviations:
ADR American Depositary Receipt
(F) Foreign Shares
(L) Local Shares
GDR Global Depositary Receipt
GDS Global Depositary Share
RDC Russian Depositary Certificates
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
AT DECEMBER 31, 1997, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS
(UNAUDITED):
% OF NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (NOTE 1)
- -------------------------------------------------------------------------------
COMMON STOCKS:
Banking 10.3% $ 19,618,277
Telecommunications 10.1 19,206,592
Multi-Industry 7.7 14,727,066
Energy 6.7 12,762,521
Utilities - Electrical and Gas 5.5 10,552,502
Metals 4.3 8,226,982
Beverages and Tobacco 3.8 7,279,583
Building Materials and Components 3.6 6,953,220
Electronic Components and Instruments 2.9 5,593,423
Insurance 2.8 5,414,986
Data Processing and Reproduction 2.6 5,033,812
Automobiles 2.5 4,810,335
Chemicals 2.5 4,702,922
Merchandising 2.3 4,358,153
Financial Services 2.3 4,338,025
Food and Household Products 2.2 4,238,935
Miscellaneous Materials and Commodities 2.0 3,828,961
Electrical and Electronics 1.8 3,442,104
Broadcasting and Publishing 1.5 2,904,897
Health and Personal Care 1.5 2,771,860
Transportation 1.4 2,739,259
Appliances and Household Durables 1.1 2,148,867
Recreation, Other Consumer Goods 1.0 1,955,269
Forest Products and Paper 0.9 1,769,081
Textiles and Apparel 0.9 1,758,226
Machinery and Engineering 0.8 1,602,389
Real Estate 0.8 1,509,838
Construction and Housing 0.8 1,436,504
Business and Public Services 0.5 767,733
Leisure and Tourism 0.3 588,194
Gold Mines 0.2 345,434
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS 87.6 167,385,950
PREFERRED STOCKS 8.0 15,374,682
RIGHTS 0.0# 1,063
TIME DEPOSIT 4.3 8,126,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS 99.9% 190,887,695
OTHER ASSETS AND LIABILITIES (NET) 0.1 34,014
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $190,921,709
- -------------------------------------------------------------------------------
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
SCHEDULE OF FOREIGN EXCHANGE SPOT CONTRACTS
CONTRACT
VALUE MARKET
CONTRACTS DATE VALUE
- -------------------------------------------------------------------------------
FOREIGN EXCHANGE SPOT CONTRACTS TO BUY:
1,220,082,673 Indonesian Rupee 01/02/98 $ 221,833
- -------------------------------------------------------------------------------
TOTAL FOREIGN EXCHANGE SPOT CONTRACTS TO BUY
(CONTRACT AMOUNT $225,941) $ 221,833
- -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
PORTFOLIOS OF INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.1%
AUSTRALIA -- 3.5%
96,000 Australian Hospital Care Ltd. $ 128,264
100,000 Becker Group Ltd. 66,153
100,000 Ci Technologies Group Ltd.+ 138,171
50,000 Computer Power Group Ltd.+ 117,315
89,279 Futuris Corporation Ltd. 97,755
87,500 Mirvac Ltd. 144,908
37,500 New Cap Reinsurance Corporation Holdings Ltd.+ 56,213
58,000 Portman Mining Ltd. 83,163
-----------
831,942
-----------
AUSTRIA -- 2.5%
1,800 KTM Motorradholding AG 90,916
900 Mayr-Melnhof Karton AG 48,457
2,650 Semperit Holding AG 239,164
5,850 Voest-Alpine Stahl AG+ 225,543
------------
604,080
------------
BELGIUM -- 3.8%
420 Bekaert NV+ 249,953
500 B.M.T. NV 95,004
2,000 Deceuninck Plastics Industries SA 393,512
3,080 Tessenderlo Chemie 170,414
------------
908,883
------------
CANADA -- 3.3%
5,500 CFM Majestic, Inc.+ 101,991
28,200 Dylex Ltd.+ 128,267
4,500 Leitch Technology Corporation+ 135,405
35,000 Mitel Corporation+ 273,084
10,000 Tesco Corporation+ 148,700
------------
787,447
------------
DENMARK -- 1.8%
1,000 Icopal AS+ 214,539
650 Martin Gruppen 27,985
2,670 Neurosearch AS, New+ 178,860
------------
421,384
------------
FINLAND -- 2.5%
2,850 Asko OY 50,732
1,710 Fiskars OY AB, Class A+ 185,146
19,960 Jaakko Poyry Group OY+ 216,112
1,000 Kone Cranes International OY 33,032
5,440 Nordic Aluminum OY+ 42,927
5,100 YIT-Yhtyma OY+ 57,559
------------
585,508
------------
FRANCE -- 6.4%
2,320 Alliance & Gestion Company+ 102,897
1,200 Cie Generale de Geophysique+ 153,488
700 Euraltech+ 110,465
1,026 Europeene D'Extincteurs SA 69,025
1,026 Europeene D'Extincteurs New SA+ 0
540 GFI Industries SA 106,296
1,020 Grande Paroisse SA+ 61,759
2,750 Infogrames Entertainment SA+ 87,936
4,202 Ingenico 82,155
960 Le Carbone-Lorraine+ 299,801
810 Leon de Bruxelles+ 53,821
200 Manitou BF SA 23,422
600 Radiall SA 62,292
650 Rochefortaise Communication SA 39,950
1,540 UBI Soft Entertainment SA+ 141,977
1,290 Union Financiere de France Banque SA 126,429
------------
1,521,713
------------
GERMANY -- 5.2%
7,450 Data Modul AG 310,175
1,340 Duerr Beteiligungs AG 44,133
5,150 Grammer AG 108,783
1,150 KSB AG 255,698
312 Leonische Drahtwerke AG 103,191
4,850 Rinol AG 137,493
1,850 Turbon International AG 40,003
4,140 Vossloh AG 231,278
------------
1,230,754
------------
HONG KONG -- 5.3%
70,000 ASM Pacific Technology 44,264
68,000 Chen Hsong Holdings 20,622
32,800 Dickson Concepts International, Ltd. 47,831
365,000 Elec & Eltek International Holding Ltd. 90,437
280,000 Founder Hong Kong Ltd. 173,442
184,000 Goodwill Investment Holding Ltd. 23,745
450,000 Kwong Chung Bus Holdings Ltd.+ 108,014
184,000 Li & Fung Ltd.+ 257,633
455,000 Moulin International Holding Ltd. 54,607
64,000 QPL International Holdings Ltd. 28,494
616,000 Techtronic Industries Company+ 143,089
336,000 Vanda Systems & Communication Holdings Ltd. 69,377
66,000 VTech Holdings Ltd.+ 194,619
------------
1,256,174
------------
IRELAND -- 0.8%
60,500 Heiton Holdings Plc 186,858
------------
ITALY -- 7.9%
27,500 CSP International Industria Calze SpA+ 310,133
16,000 De Rigo SpA+ 100,000
46,030 Editoriale L' Expresso SpA 221,173
7,980 Ericsson SpA 348,251
17,000 Gewiss SpA+ 321,933
120,000 Gruppo Ceramiche Ricchetti 153,646
9,000 Industrie Zignago, ORD 69,548
59,500 Pagnossin SpA+ 269,079
1,700 Recordati ORD+ 13,838
18,000 Sorin Biomedica Group SpA 81,402
------------
1,889,003
------------
JAPAN -- 9.2%
500 Aichi Bank Ltd. 35,619
61 Almetax Manufacturing Company 190
7,000 Amatsuji Steel Ball Manufacturing
Company, Ltd. @ 52,493
300 Asahi Printing & Packaging Company 1,999
1,000 Bellsystem 24, Inc. 130,984
3,000 Benesse Corporation 72,156
10,000 Biofermin Pharmaceuticals 47,568
7,000 Chiyoda Shoe Company Ltd. 45,576
400 Circle K Japan Company Ltd. 19,150
5,560 Daiseki Company, Ltd. 57,495
600 Daito Bank Ltd. 1,838
8,000 Daiwa Rakuda Industry Company Ltd. 31,498
8,000 Denkyosha Company 34,623
4,600 Denny's Japan 101,478
4,000 Denyo Company, Ltd. 19,763
5,000 Enix Corporation 95,749
3,630 Fast Retailing Company Ltd. 58,113
6,000 Futaba Industrial Company 64,343
22,000 Hibiya Engineering 99,426
8,000 Higashi Nihon House 36,461
3,300 H.I.S. Company Ltd. 57,380
9,000 Hokkaido Coca-Cola Bottling Company 65,492
3,000 Inaba Denkisangyo 25,048
3,000 Innotech Corporation+ 20,222
2,000 Japan Associated Finance 71,237
11,000 Meiwa Industry Company Ltd. 19,380
6,000 Misumi Corporation+ 97,894
4,800 Nihon Dempa Kogyo 34,745
12,000 Nihon Electric Wire & Cable Company Ltd. 51,475
8,000 Nissei Industries Ltd. 45,347
2,000 Nissin Company Ltd. 41,363
5,500 Nitto Electric Works Ltd. 45,500
200 OYO Corporation 2,880
2,000 Riken Corundum Company Ltd. @ 3,263
5,000 Ryoyo Electro Corporation 52,470
11,000 Sanden Corporation 47,185
6,570 Santen Pharmaceutical Company 75,488
8,000 Shinkigosei Company, Ltd. @ 20,529
400 Shohkoh Fund and Company 121,946
9,000 Sodick Company+ 25,783
6,000 Toa Medical Electronics Company Ltd. 55,151
150 Tokushima Bank Ltd. 1,020
3,000 Trusco Nakayama Corporation 41,134
19,000 Tsukiji Uochiba Company 25,615
13,000 Tsurumi Soda Company, Ltd. @ 29,874
14,000 Uehara Sei Shoji 33,029
4,000 Yamada Denki+ 30,946
11,000 Yokogawa Construction Company 32,861
------------
2,180,779
------------
MEXICO -- 0.4%
15,000 Grupo Financiero Banamex, Class B+ 44,886
16,500 Grupo Financiero Banamex, Class L+ 42,525
------------
87,411
------------
NETHERLANDS -- 2.4%
2,000 CSM NV $ 88,771
8,740 Fugro McClelland NV+ 266,377
3,750 Konin Emballage Ind Van Leer NV 77,119
6,200 Nutreco Holding NV+ 141,264
------------
573,531
------------
NEW ZEALAND -- 0.9%
75,000 Sky Network Television Ltd.+ 112,791
210,000 Wrightson Ltd. 97,549
------------
210,340
------------
NORWAY -- 3.9%
12,000 Blom AS 68,339
6,590 Leif Hoegh & Company Asa+ 134,034
83,830 NCL Holdings 300,083
4,620 Petroleum Geo-Services Asa+ 290,982
6,460 Tandberg Asa+ 138,397
------------
931,835
------------
SINGAPORE -- 1.2%
19,800 Elec & Eltek International Company, Ltd. 90,684
25,000 Overseas Union Enterprises Ltd. 59,923
34,100 Venture Manufacturing Ltd. 95,088
60,000 Wong's Circuits Holdings Ltd.+ 39,300
------------
284,995
------------
SOUTH AFRICA -- 0.4%
4,200 Nedcor Ltd. 93,209
------------
SPAIN -- 3.9%
3,000 Aldeasa SA+ 63,604
3,550 Amper SA 95,770
2,000 Campofrio Alimentacion SA+ 109,353
6,000 Grupo Duro Felguera SA 64,194
2,470 Miquel Y Costas SA 95,979
53,920 Tubacex SA 141,569
5,190 Vidrala SA 231,991
7,000 Vidriera Leonesa SA+ 115,970
------------
918,430
------------
SWEDEN -- 4.4%
8,500 Array Printers AB, B Shares+ 51,386
6,660 Finnveden Invest AB Free, B Shares+ 123,723
1,330 Hoganas AB, B Shares 40,705
16,680 Lindab AB, B Shares 249,993
5,160 Munters AB+ 44,517
8,110 OXiGENE, Inc.+ 145,042
2,500 Pricer AB, B Shares+ 46,285
3,360 Prosolvia AB+ 134,148
7,070 Spectra-Physics AB 134,011
4,000 Svedala Industri AB Free 65,996
------------
1,035,806
------------
SWITZERLAND -- 7.1%
800 AGIE Charmilles Holding AG Registered+ 62,943
110 Christ AG Registered+ 75,257
200 Fotolabo SA 44,470
40 Gurit Heberlein AG Bearer 118,770
220 Huber Suhner AG Registered 352,205
500 Interroll Holding AG+ 95,440
25 Kuoni Reisen Holding, Class B Registered 93,644
600 Mikron Holding AG, New Registered+ 99,750
700 PubliGroupe SA+ 152,773
80 Sarna Kunsstoff Holding AG Registered 104,539
310 Saurer AG Arbon Registered 224,814
40 SEZ Holding AG, Class A Registered 67,048
168 Siegfried AG Registered 205,740
------------
1,697,393
------------
UNITED KINGDOM -- 19.3%
45,000 Adwest Group Plc 109,750
40,000 Alexon Group Plc+ 175,403
90,000 Alfred McAlpine Group Plc 198,806
33,000 Amec Plc 63,682
250,000 Anite Group Plc+ 192,976
6,658 Berkeley Group Plc 68,069
22,800 Bradford Property Trust Plc 103,724
120,000 Budgens Plc 110,859
60,000 Bullough Plc+ 99,034
35,000 Cordiant Communications Group Plc+ 62,656
60,540 Crest Packaging Plc @ 58,662
100,000 Dawson International Plc 110,859
14,002 Dennis Group Plc 71,633
15,000 Eidos Plc+ 165,056
56,000 Finlay (James) Plc @ 101,629
14,500 Galen Holdings Plc+ 82,278
31,204 Great Portland Estates Plc 122,995
127,000 Hampson Industries, Inc. 150,176
7,300 Hardys & Hanson Plc 27,455
16,000 Heywood Williams Group Plc 54,526
33,684 John Maunders Group Plc 87,130
50,000 Lambert Fenchurch Group Plc 89,097
17,300 Lex Service Plc 132,545
6,500 McKechnie Group Plc 49,160
6,161 Micro Focus Group Plc+ 242,085
19,000 MSB International Plc 195,029
87,000 Northamber Plc 338,636
17,308 Oxford Instruments Plc 82,861
70,000 Perkins Foods Plc @ 120,138
19,103 RCO Holdings Plc @ 53,335
170,000 Rebus Group Plc 220,567
35,601 Redrow Group Plc 84,780
35,000 Saatchi & Saatchi Plc+ 63,230
67,000 Skillsgroup Plc+ 200,818
28,000 Somerfield Plc 96,340
63,700 TBI Plc 97,556
120,000 Verity Group Plc 135,002
32,000 Westminster Health Care Holdings Plc+ 191,038
------------
4,609,575
------------
TOTAL COMMON STOCKS (COST $23,834,190) 22,847,050
------------
PREFERRED STOCKS -- 1.4%
GERMANY -- 1.4%
2,900 Creaton AG 82,212
6,750 Draegerwerk AG 123,068
450 Dyckerhoff AG 118,816
------------
TOTAL PREFERRED STOCKS (COST $347,278) 324,096
------------
RIGHTS -- 0.0%# (COST $1,147)
AUSTRALIA -- 0.0%#
3,500 Mirvac Ltd., Expire 06/30/01+ 1,004
------------
WARRANTS -- 0.0%# (COST $913)
HONG KONG -- 0.0%#
37,916 Moulin International Ltd., Expire 10/16/99+ $ 567
------------
PRINCIPAL
AMOUNT
- ------------------
TIME DEPOSIT -- 0.1% (COST $32,000)
$32,000 Brown Brothers Harriman & Co. (Cayman),
5.000% due 01/02/98 32,000
------------
TOTAL INVESTMENTS (COST $24,215,528*) 97.6% 23,204,717
OTHER ASSETS AND LIABILITIES (NET) 2.4 568,318
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $23,773,035
- -------------------------------------------------------------------------------
* Aggregate cost for Federal tax purposes was $24,303,705.
+ Non-income producing security.
# Amount represents less than 0.1%.
@ Illiquid Security (unaudited). These are securities that the Adviser
believes cannot be sold or disposed of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued
the investment. The value of the denoted securities at December 31, 1997 was
$439,923, representing 1.9% of total net assets.
Abbreviation:
ORD Ordinary
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
AT DECEMBER 31, 1997, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS
(UNAUDITED):
% OF NET VALUE
INDUSTRY DIVERSIFICATION ASSETS (NOTE 1)
- -------------------------------------------------------------------------------
COMMON STOCKS:
Electrical and Electronics 12.6% $ 2,992,435
Machinery and Engineering 9.2 2,176,391
Multi-Industry 5.8 1,379,807
Business and Public Services 4.9 1,169,588
Electronics Components and Instruments 4.7 1,115,228
Construction and Housing 4.4 1,052,424
Building Materials and Components 4.3 1,030,390
Health and Personal Care 3.8 902,269
Wholesale and International Trade 3.7 890,342
Food and Household Products 3.7 868,628
Broadcasting and Publishing 3.6 864,220
Data Processing and Reproduction 3.5 841,352
Textiles and Apparel 2.9 690,071
Financial Services 2.8 677,332
Chemicals 2.8 661,814
Leisure and Tourism 2.7 640,097
Merchandising 2.5 570,217
Real Estate 2.0 469,183
Industrial Components 1.9 458,236
Energy Equipment and Services 1.9 444,470
Telecommunications 1.7 393,751
Appliances and Household Durables 1.6 379,215
Transportation 1.5 345,239
Metals 1.4 331,993
Miscellaneous Materials and Commodities 1.3 320,935
Automobiles 1.2 290,712
Recreation, Other Consumer Goods 0.8 186,450
Banking 0.7 174,211
Insurance 0.6 145,310
Forest Products and Paper 0.6 144,436
Beverages and Tobacco 0.4 92,947
Gold Mines 0.3 83,163
Utilites -- Electrical and Gas 0.3 64,194
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS 96.1 22,847,050
PREFERRED STOCKS 1.4 324,096
RIGHTS 0.0 # 1,004
WARRANTS 0.0 # 567
TIME DEPOSIT 0.1 32,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS 97.6% 23,204,717
OTHER ASSETS AND LIABILITIES (NET) 2.4 568,318
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $23,773,035
- -------------------------------------------------------------------------------
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PICTET PICTET
GLOBAL EMERGING INTERNATIONAL SMALL
MARKETS FUND COMPANIES FUND
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost
$226,112,748 and $24,215,528,
respectively) (Note 1) See
accompanying schedules $190,887,695 $23,204,717
Cash 5,523 325
Foreign currency (Cost $1,270,072 and
$534,869, respectively) 1,190,391 524,575
Receivable for investment securities
sold 57,336 54,245
Receivable for Fund shares sold 28,251 --
Receivable from investment adviser
(Note 2) -- 9,363
Dividends receivable 263,451 42,382
Interest receivable 1,134 --
Unamortized organization costs
(Note 1) 24,666 746
Prepaid expenses 6,648 5,381
Other assets 395 262
- --------------------------------------------------------------------------------
TOTAL ASSETS 192,465,490 23,841,996
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased 689,551 --
Net unrealized depreciation of foreign
currency spot contracts 4,108 --
Investment advisory fee (Note 2) 609,052 --
Payable for Fund shares redeemed 28,791 --
Custodian fees payable (Note 2) 76,236 20,327
Administration fee payable (Note 2) 22,706 6,224
Trustees fees and expenses payable
(Note 2) 5,549 701
Transfer agent fees payable (Note 2) 4,018 1,000
Professional fees payable (Note 2) 45,976 28,284
Printing fees payable (Note 2) 32,118 6,959
Other accrued expenses and payables 25,676 5,466
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 1,543,781 68,961
- --------------------------------------------------------------------------------
NET ASSETS $190,921,709 $23,773,035
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Accumulated distributions in excess of
net investment income (Note 1) $ (95,221) $ (132,257)
Accumulated net realized loss on
investments sold (Note 1) (3,448,033) (889,630)
Net unrealized depreciation of
investments (35,225,053) (1,010,811)
Net unrealized depreciation of foreign
currency related transactions (90,806) (10,294)
Par value 215,316 25,722
Paid-in capital in excess of par value
(Notes 1 and 4) 229,565,506 25,790,305
- --------------------------------------------------------------------------------
TOTAL NET ASSETS $190,921,709 $23,773,035
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
OUTSTANDING (Note 4) 21,531,570 2,572,151
- --------------------------------------------------------------------------------
NET ASSET VALUE:
Net asset value, offering and
redemption price per share (Note 4) $8.87 $9.24
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
PICTET PICTET
GLOBAL EMERGING INTERNATIONAL SMALL
MARKETS FUND COMPANIES FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign withholding
taxes of $222,773
and $80,232, respectively) $ 3,645,336 $ 514,578
Interest 508,499 6,752
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,153,835 521,330
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) 2,569,857 256,059
Custodian fees (Note 2) 617,970 126,888
Administration fee (Note 2) 277,468 74,782
Professional fees 69,444 33,175
Transfer agent fees (Note 2) 51,384 12,000
Trustees' fees and expenses (Note 2) 25,621 3,312
Amortization of organization costs
(Note 1) 8,969 236
Other 163,434 60,895
- --------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE EXPENSE
REDUCTIONS 3,784,147 567,347
- --------------------------------------------------------------------------------
Expense reductions (Note 2) (294,489) (257,851)
- --------------------------------------------------------------------------------
Net Expenses 3,489,658 309,496
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 664,177 211,834
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(Notes 1 and 3):
Net realized loss on:
Security transactions (1,089,138) (804,130)
Foreign currency contracts (616,084) (3,627)
Foreign currency related
transactions (59,372) (127,349)
- --------------------------------------------------------------------------------
Net realized loss on investments
during the year (1,764,594) (935,106)
- --------------------------------------------------------------------------------
Change in unrealized appreciation/
(depreciation) of:
Securities (33,998,711) (1,248,255)
Foreign currency spot contracts (4,108) --
Foreign currency related transactions (62,994) 1,335
- --------------------------------------------------------------------------------
Net unrealized depreciation of
investments during the year (34,065,813) (1,246,920)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (35,830,407) (2,182,026)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(35,166,230) $(1,970,192)
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET YEAR ENDED YEAR ENDED
ASSETS FROM OPERATIONS DECEMBER 31, 1997 DECEMBER 31, 1996
- --------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 664,177 $ 838,421
Net realized gain/(loss) on investments
during the year (1,764,594) 990,570
Change in unrealized depreciation of
investments during the year (34,065,813) (781,774)
- --------------------------------------------------------------------------------
Net increase/(decrease) in net assets
resulting from operations (35,166,230) 1,047,217
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders from net
investment income (125,929) (838,421)
Distributions to shareholders in excess of
net investment income (189,740) (4,335)
Distributions to shareholders from net
realized gains on investments -- (990,570)
Distributions to shareholders in excess of
net realized gains on investments (2,187,788) (129,364)
Net increase in net assets from Fund share
transactions (Note 4) 106,544,495 113,339,297
- --------------------------------------------------------------------------------
Net increase in net assets 68,874,808 112,423,824
NET ASSETS:
Beginning of year 122,046,901 9,623,077
- --------------------------------------------------------------------------------
End of year (including accumulated
distributions in excess of net
investment income and undistributed net
investment income of $(95,221) and
$32,907, respectively) $190,921,709 $122,046,901
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS FROM YEAR ENDED PERIOD ENDED
FROM OPERATIONS DECEMBER 31, 1997 DECEMBER 31, 1996*
- --------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 211,834 $ 227,839
Net realized gain/(loss) on
investments during the year (935,106) 90,819
Change in unrealized appreciation/
(depreciation) of investments
during the year (1,246,920) -- 225,815
- ---------------------------------------------------------- --------------------
Net increase/(decrease) in net assets
resulting from operations (1,970,192) 544,473
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders from
net investment income (211,834) (227,839)
Distributions in excess of net
investment income (106,650) (63,792)
Distributions from net realized
gains on investments -- (49,542)
Distributions from tax return of
capital -- (6,172)
Net increase in net assets from Fund
share transactions (Note 4) 318,484 25,545,999
- --------------------------------------------------------------------------------
Net increase/(decrease) in net assets (1,970,192) 25,743,127
NET ASSETS:
Beginning of year 25,743,227 -- 100**
- ---------------------------------------------------------- --------------------
End of year (including accumulated
distributions in excess of net
investment income of $(132,257) and
$(16,660), respectively) $23,773,035 $25,743,227
- --------------------------------------------------------------------------------
* Pictet International Small Companies Fund commenced operations on February
7, 1996.
** Original capital January 29, 1996.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/97 12/31/96(b) 12/31/95*(b)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $10.13 $ 9.51 $10.00
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04 0.07 0.02
Net realized and unrealized gain/(loss) on
investments (1.18) 0.71 (0.49)
- -----------------------------------------------------------------------------------------------------
Total from investment operations (1.14) 0.78 (0.47)
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income (0.01) (0.07) (0.02)
Distributions in excess of net investment
income (0.01) (0.00)# (0.00)#
Distributions from net realized gains on
investments -- (0.08) --
Distributions in excess of net realized gains
on investments (0.10) (0.01) --
- -----------------------------------------------------------------------------------------------------
Total distributions (0.12) (0.16) (0.02)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 8.87 $10.13 $ 9.51
- -----------------------------------------------------------------------------------------------------
Total return++ (11.29)% 8.32% (4.72)%
- -----------------------------------------------------------------------------------------------------
Ratios to average daily net assets/supplemental data:
Net assets, end of year (in 000's) $190,921 $122,047 $9,623
Ratio of operating expenses 1.70% 1.70% 1.95%+
Ratio of operating expenses without expense
reductions 1.84% 2.20% 8.39%+
Ratio of net investment income 0.32% 0.88% 0.68%+
Ratio of net investment income/(loss) without
expense reductions 0.18% 0.38% (5.77)%+
Net investment income/(loss) per share without
expense reductions $ 0.02 $ 0.03 $(0.13)
Portfolio turnover rate 77% 48% 5%
Average commission rate (per share of
security)(a) $0.0011 $0.0009 $0.0010
- ------------
* Pictet Global Emerging Markets Fund commenced operations on October 4, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period.
# Amount represents less than $0.01 per share.
(a) Average commission rate paid per share of securities purchased and sold by the Fund.
(b) Per share amounts have been restated to reflect the stock dividend of 9 additional shares for
each share outstanding. On December 2, 1996, the Board of Trustees declared a stock dividend of
nine additional shares for each share outstanding of Pictet Global Emerging Markets Fund. The
record date of the stock dividend was December 31, 1996, payable on January 1, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR PERIOD
ENDED ENDED
12/31/97 12/31/96*(b)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year $10.15 $10.00
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08 0.09
Net realized and unrealized gain/(loss) on investments (0.86) 0.20
- -------------------------------------------------------------------------------------------------
Total from investment operations (0.78) 0.29
- -------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income (0.09) (0.09)
Distributions in excess of net investment income (0.04)
Distributions from net realized gains on investments -- (0.02)
Distributions from tax return of capital -- (0.00)#
- -------------------------------------------------------------------------------------------------
Total distributions (0.13) (0.14)
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 9.24 $10.15
- -------------------------------------------------------------------------------------------------
Total return++ (7.68)% 2.85%
- -------------------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $23,773 $25,743
Ratio of operating expenses 1.20% 1.20%+
Ratio of operating expenses without expense reductions 2.20% 2.46%+
Ratio of net investment income 0.82% 1.04%+
Ratio of net investment loss without expense reductions (0.18)% (0.22)%+
Net investment loss per share without expense reductions $(0.02) $(0.02)
Portfolio turnover rate 90% 53%
Average commission rate (per share of security)(a) $0.0098 $0.0152
- ------------
* Pictet International Small Companies Fund commenced operations on February 7, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period.
# Amount represents less than $0.01 per share.
(a) Average commission rate paid per share of securities purchased and sold by the Fund.
(b) Per share amounts have been restated to reflect the stock dividend of 9 additional shares for
each share outstanding. On December 2, 1996, the Board of Trustees declared a stock dividend of
nine additional shares for each share outstanding of Pictet International Small Companies Fund.
The record date of the stock dividend was December 31, 1996, payable on January 1, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Panorama Trust (the "Trust"), a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), is a
no-load, diversified, open-end management investment company which offered
shares of two series, Pictet Global Emerging Markets Fund and Pictet
International Small Companies Fund (individually, a "Fund" collectively, the
"Funds") as of December 31, 1997. A third series, Pictet Eastern European
Fund, commenced offering shares on January 23, 1998. The accompanying
financial statements and financial highlights are those of the Funds. The
Funds' financial statements are prepared in accordance with generally accepted
accounting principles which require the use of management estimates. The
following is a summary of the significant accounting policies followed
consistently by the Funds in the preparation of their financial statements.
Securities Valuations: 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 New York Stock 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. Portfolio
securities primarily traded on the London Stock Exchange are generally valued
at the mid-price between the current bid and asked prices. Price information
on listed securities is taken from the exchange where the security is
primarily traded. Generally, 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 bid and asked 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
approved by the Board of Trustees. In the absence of readily ascertainable
market values for such securities, inherent uncertainty of valuation exists.
Methods for valuing these securities may differ from the values that would
have been used had a ready market for the securities existed, and the
differences could be material. One or more pricing services may be used to
provide security valuations in connection with the determination of the net
asset value of the Funds. Short-term investments that mature in 60 days or
less are valued at amortized cost
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund pays
a counterparty cash for and takes possession of a debt obligation and the
seller agrees to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period. The value of
the collateral held by the Fund, at all times, is at least equal to the total
amount of the repurchase obligations, including interest. In the event of
counterparty default, the Fund generally has the right to use the collateral
to offset losses incurred. There is potential loss to the Fund in the event
the Fund is delayed or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value
of the underlying securities during the period while the Fund seeks to assert
its rights. The Funds' investment adviser, acting under the supervision of the
Board of Trustees, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Funds enter into
repurchase agreements to evaluate potential risks.
Foreign Currency Contracts: Each Fund may enter into forward foreign
currency contracts to hedge against anticipated future changes in exchange
rates which otherwise might either adversely affect the value of the portfolio
securities of the Fund or adversely affect the prices of securities which the
Fund intends to purchase or sell at a later date. Forward foreign currency
contracts are valued at the forward rate and are marked-to-market daily. The
change in market value is recorded by the Fund as an unrealized gain or loss.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Funds' investment securities, but
it does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency contracts limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In addition,
such Fund could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts.
Each Fund may enter into spot foreign currency contracts for the purchase
or sale of securities denominated in foreign currencies to "lock" in the U.S.
exchange rate of the transaction covering the period between trade date and
settlement date.
Foreign Currency: The books and records of the Funds are maintained in
U.S. dollars. Foreign currencies, investments and other assets and liabilities
are translated into U.S. dollars at the bid prices of such currencies against
U.S. dollars last quoted by a major bank. Unrealized gains and losses on
investments which result from changes in foreign currency exchange rates have
been included in the unrealized appreciation/(depreciation) of investments.
Net realized foreign currency gains and losses resulting from changes in
exchange rates include foreign currency gains and losses between trade date
and settlement date of investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Funds and the amount actually received. The
portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial purchase trade date and subsequent sale
trade date is included in realized gains and losses on investment securities
sold.
Securities Transactions and Investment Income: Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date, except that certain dividends from foreign securities are recorded as
soon as the Fund is informed of the ex-dividend date.
Dividends and Distributions to Shareholders: Distributions from net
investment income, if any, are declared and paid annually. The Funds' net
realized capital gain (including net short-term capital gain), unless offset
by any available capital loss carryforward, is distributed to shareholders
annually. Additional distributions of net investment income and capital gain
may be made at the discretion of the Board of Trustees in order to avoid the
application of a 4% non-deductible Federal excise tax. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are due primarily to timing differences and differing
characterization of distributions made by a Fund. Dividends and other
distributions are reinvested automatically in additional shares of the Funds
at the net asset value next determined after such dividend or distribution is
declared.
Permanent differences incurred during the year ended December 31, 1997,
resulting from differences in book and tax accounting, have been reclassified
at year end to undistributed net investment income, accumulated net realized
gain/(loss) and paid-in capital as follows:
DECREASE INCREASE
DECREASE UNDISTRIBUTED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME GAIN/(LOSS)
- --------------------------------------------------------------------------------
Pictet Global Emerging
Markets Fund $(191,686) $(476,636) $668,322
Pictet International
Small Companies Fund (42,188) (8,947) 51,135
Income Taxes: Each Fund intends to qualify each year as a regulated
investment company by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to shareholders. Therefore, no
Federal income tax provision is required.
Organization Costs: Expenses incurred in connection with the organization
of each Fund are being amortized on the straight-line method over a period of
five years from the commencement of operations. In the event that any of the
shares issued by the Funds are redeemed by any holders thereof during such
amortization period, the redemption proceeds will be reduced by any
unamortized costs in the same proportion as the number of shares redeemed
bears to the number of initial shares outstanding at the time of the
redemption.
Expenses: General expenses of the Trust are allocated between the Funds
based upon relative net assets. Operating expenses directly attributable to a
Fund are charged to that Fund's operations.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER PARTY TRANSACTIONS
The Trust, on behalf of the Funds, has entered into an investment advisory
agreement (the "Advisory Agreement") with Pictet International Management
Limited ("Pictet International"), a wholly-owned subsidiary of Pictet (Canada)
& Company ("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 six limited partners, each of whom is also a partner of Pictet &
Cie, a Swiss private bank founded in 1805. Under the terms of the Advisory
Agreement, Pictet Global Emerging Markets Fund and Pictet International Small
Companies Fund pay Pictet International a fee, computed daily and payable
quarterly, at an annual rate of 1.25% and 1.00%, respectively, of the average
daily net assets of each Fund. Pictet International has voluntarily agreed to
waive its fees and reimburse expenses to the extent necessary to ensure that
the total ordinary operating expenses of Pictet Global Emerging Markets Fund
and Pictet International Small Companies Fund do not exceed 1.70% and 1.20%,
respectively, of each Fund's average daily net assets.
For the year ended December 31, 1997, Pictet International waived fees and
reimbursed expenses as follows:
EXPENSES
FEES WAIVED REIMBURSED
- -------------------------------------------------------------------------------
Pictet Global Emerging Markets Fund $294,489 --
Pictet International Small Companies Fund 210,536 $47,315
First Data Investor Services Group, Inc., a wholly-owned subsidiary of
First Data Corporation, serves as the Trust's administrator, accounting agent
and transfer agent. First Data Investor Services Group, Inc., as accounting
agent, is paid a fee computed daily and payable monthly at an annual rate of
0.04% of the average daily net assets of each Fund, subject to a $50,000
annual minimum from each Fund. For administrative services, First Data
Investor Services Group, Inc. is entitled to receive $220,000 per annum from
the Trust. In addition, for its services as transfer agent, First Data
Investor Services Group, Inc. is paid separate compensation.
No officer, director or employee of Pictet International, First Data
Investor Services Group, Inc., or any affiliate thereof, receives any
compensation from the Trust for serving as Trustee or officer of the Trust.
The Trust pays each Trustee who is not an affiliated person of Pictet
International an annual fee of $5,000, plus an additional $500 for each board
and committee meeting attended. The Trust also reimburses expenses incurred by
each Trustee in attending such meetings.
Brown Brothers Harriman & Co. serves as the Funds' custodian. First Data
Distributors, Inc., a wholly-owned subsidiary of First Data Investor Services
Group, Inc., serves as the Funds' principal underwriter and distributor.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities,
excluding short-term securities and U.S. Government securities, for the year
ended December 31, 1997 were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
Pictet Global Emerging Markets Fund $247,644,082 $145,624,595
Pictet International Small Companies Fund 22,744,136 22,695,242
At December 31, 1997, aggregate gross unrealized appreciation and
unrealized depreciation for tax purposes were as follows:
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
- -------------------------------------------------------------------------------
Pictet Global Emerging Markets Fund $24,356,780 $59,801,769
Pictet International Small Companies Fund 3,024,184 4,123,172
4. SHARES OF BENEFICIAL INTEREST
Each Fund has one class of shares of beneficial interest, par value $0.01
per share, of which an unlimited number of shares is authorized. Transactions
in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pictet Global Emerging Markets Fund:
Sold 9,649,457 $108,632,793 11,215,170 $115,282,514
Issued as reinvestment of dividends 284,465 2,503,293 194,200 1,962,690
Redeemed (453,312) (4,591,591) (370,640) (3,905,907)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 9,480,610 $106,544,495 11,038,730 $113,339,297
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996*
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pictet International Small Companies Fund:
Sold -- -- 2,502,950 $25,198,654
Issued as reinvestment of dividends 34,641 $318,484 34,550 347,345
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 34,641 $318,484 2,537,500 $25,545,999
- -----------------------------------------------------------------------------------------------------------------------------------
* Pictet International Small Companies Fund commenced operations on February 7, 1996.
</TABLE>
At December 31, 1997, Pictet Global Emerging Markets Fund had 3
institutional shareholders owning 30.4%, 16.3% and 10.8%, respectively, of the
outstanding shares of beneficial interest of the Fund.
At December 31, 1997, Pictet International Small Companies Fund had 2
institutional shareholders owning 59.9% and 40.1%, respectively, of the
outstanding shares of beneficial interest of the Fund.
5. FOREIGN SECURITIES
Pictet Global Emerging Markets Fund invests primarily in foreign emerging
markets securities and Pictet International Small Companies Fund invests
primarily in foreign securities. Investing in securities of foreign companies
and foreign governments involves special risks and considerations not
typically associated with investing in U.S. companies and the U.S. Government.
These risks include re-valuation of currencies, less reliable information
about issuers, varying securities transaction clearance and settlement
practices, and future adverse political and economic developments. These risks
are heightened for investments in emerging markets countries. Moreover,
securities of many foreign companies and foreign governments and their markets
may be less liquid and their prices more volatile than those of securities of
comparable U.S. companies and the U.S. Government.
6. POST OCTOBER LOSS
Under the current tax law, capital and currency losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following fiscal year. For the fiscal year ended December 31, 1997, the Funds
elected to defer capital losses and currency losses occurring between November
1, 1997 and December 31, 1997 as follows:
CAPITAL LOSSES CURRENCY LOSSES
------------------- ----------------
Pictet Global Emerging Markets Fund $3,255,305 $68,013
Pictet International Small
Companies Fund 413,130 44,080
Such losses will be treated as arising on the first day of the year ending
December 31, 1998.
7. CAPITAL LOSS CARRY FORWARDS
At December 31, 1997 the Pictet International Small Companies Fund had
available for Federal income tax purposes unused capital losses of $476,500,
expiring in 2005.
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees and the Shareholders of Panorama Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments of each of the series of Panorama
Trust (in this report comprised of Pictet Global Emerging Markets Fund and
Pictet International Small Companies Fund) as of December 31, 1997, and the
related statements of operations, the statements of changes in net assets and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Pictet Global Emerging Markets Fund and Pictet International Small Companies
Fund as of December 31, 1997, the results of their operations, the changes in
their net assets and the financial highlights for the periods indicated
therein in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 25, 1998
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Year Ended December 31, 1997
The amount of long-term capital gain paid for the year ended December 31,
1997, all of which is subject to the 20% capital gains tax rate, was as
follows:
Pictet Global Emerging Markets Fund ......................... $1,491,579
