As filed with the Securities and Exchange Commission on April 28, 2000
Securities Act File No. 33-92712
Investment Company Act File No. 811-9050
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 15
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 19
PANORAMA TRUST
(Exact Name of Registrant as Specified in Charter)
101 Federal Street, Boston, MA 02110
Registrant's Telephone Number, including Area Code: (617) 535-0525
Name and Address of Agent for Service: Copies to:
Gail A. Hanson, Esq. Pamela Wilson, Esq.
PFPC Inc. Hale and Dorr
101 Federal Street 60 State Street
BOS 610 Boston, MA 02109
Boston, Massachusetts 02110
It is proposed that the filing will become effective:
____ immediately upon filing pursuant to paragraph (b)
X on April 30, 2000 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
___ on [ ] pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
_ on [ ] pursuant to paragraph (a)(2) of Rule 485
<PAGE>
PICTET EASTERN EUROPEAN FUND
PICTET GLOBAL EMERGING MARKETS FUND
PICTET INTERNATIONAL SMALL COMPANIES FUND
LOGO
PICTET
FUNDS
PROSPECTUS
APRIL 30, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a criminal offense.
TABLE OF CONTENTS
RISK/RETURN SUMMARY - EASTERN EUROPEAN FUND
3
Investment goal
3
Principal investments and strategies
3
Principal investment risks
3
Total return
4
Fees and expenses
5
RISK/RETURN SUMMARY - GLOBAL EMERGING MARKETS FUND
6
Investment goal
6
Principal investments and strategies
6
Principal investment risks
7
Total return
7
Fees and expenses
8
RISK/RETURN SUMMARY - INTERNATIONAL SMALL COMPANIES FUND
9
Investment goal
9
Principal investments and strategies
9
Principal investment risks
10
Total return
11
Fees and expenses
12
THE FUNDS INVESTMENTS
13
INVESTMENT ADVISER
15
Portfolio management
15
INVESTMENT AND ACCOUNT POLICIES
17
Calculation of net asset value
17
Purchasing fund shares
17
Exchanges between Pictet funds
20
Redeeming fund shares
20
Dividends, distributions and taxes
22
FINANCIAL HIGHLIGHTS
23
FOR MORE INFORMATION
back
cover
RISK/RETURN SUMMARY EASTERN EUROPEAN FUND
INVESTMENT
GOAL
Capital appreciation.
PRINCIPAL
INVESTMENTS
AND
STRATEGIES
The fund invests primarily in
equity securities of companies
located or conducting a
significant amount of business
in Eastern
Europe. The fund may invest in
companies with small, medium or
large market capitalizations.
Equity
securities
Equity securities include common
and preferred stocks, investment
company shares, convertible debt
securities, warrants,
subscription rights and
depositary receipts for foreign
stocks.
Eastern Europe includes:
Countries that used to form part
of the Soviet Union, including
the Commonwealth of Independent
States, the Baltic States and
former CEFTA (Central European
Free Trade Agreement) countries.
Emerging countries within both
the Mediterranean and South
Eastern regions of Europe.
In the future, the fund may
include other Emerging European
countries.
How the
adviser
selects the
funds
investments
The adviser uses a bottom-up
approach in managing the funds
portfolio. This means that the
particular stocks selected for
the portfolio will determine the
amount of the funds investment
in each Eastern European
country. However, the adviser
will consider country-specific
risks and the funds total
exposure to any one country in
deciding whether to invest in
particular companies.
In selecting individual stocks,
the adviser looks for companies
with:
Strong or strengthening balance
sheets, defined as improvements
in working net capital over
time.
Strong financial ratios.
Industrial capacity that is
undervalued on an international
basis.
Ability to generate substantial
excess cash flow that may be
reinvested in the company or
distributed as dividends to
stockholders.
Methods used to value companies
in more developed countries may
not apply to Eastern European
companies.
PRINCIPAL
INVESTMENT
RISKS
An
investment
in the fund
is not a
bank deposit
and is not
insured or
guaranteed
by the
Federal
Deposit
Insurance
Corporation
or any other
government
agency.
Investors could lose money on
their investments in the fund or
the fund may not perform as well
as other investments if any of
the following occurs:
Foreign or emerging market stock
prices go down generally.
Changes in foreign currency
rates depress the value of the
funds investments.
Negative developments in Eastern
Europe disproportionately hurt
the companies in the funds
portfolio.
Political instability
develops in countries formerly a
part of the Soviet Union.
An adverse event, such as an
unfavorable earnings report,
depresses the value of a
particular companys stock.
The advisers judgment about
country allocations or the
attractiveness, value or
potential appreciation of a
particular stock proves to be
incorrect.
Negative developments in
Eastern Europe include, but are
not limited to, the following
special risks associated with
emerging market countries.
These include:
Greater likelihood of economic,
political or social instability.
More volatile stock markets.
The contagious effect of market
or economic setbacks in one
country on other emerging market
countries.
Possible governmental
restrictions on currency
conversions or trading.
Difficulty in accurately valuing
emerging market stocks or
selling them at their fair
value, especially in down
markets.
Availability of less information
about emerging market companies
because of less rigorous
accounting and regulatory
standards.
RISK/RETURN SUMMARY EASTERN EUROPEAN FUND (continued)
TOTAL RETURN
QUARTERLY
REUTRN
This bar chart indicates the risks
of investing in the fund by
showing changes in the funds
performance from year to year.
Past performance does not
necessarily indicate how the fund
will perform in the future.
Eastern European Fund
Highest: 35.21% in fourth quarter
1999
Lowest: -31.19% in third quarter
1998
[bar chart]
Year ended
12/31/99
35.63%
The table below indicates the
risks of investing in the fund by
comparing the funds average
annual total returns for the
periods shown to the International
Finance Corporation Global
Eastern Europe Index, an index
composed of 141 stocks covering
five markets and the Barings
Eastern Europe Index, an index
composed of 88 stocks covering
four markets.
Eastern European Fund
Average annual total returns
Periods ended December 31, 1999
1 Year
Life of Fund*
(began 4/7/98)
Pictet Eastern European Fund
35.63%
- -10.40%
IFC Global Eastern Europe Index
57.37%
- -23.46%
Barings Eastern Europe Index
32.08%
- -19.88%
RISK/RETURN SUMMARY EASTERN EUROPEAN FUND (continued)
FEES AND
EXPENSES
This table
describes
the fees and
expenses
that you may
pay if you
buy and hold
shares of
the fund.
For year ended 12/31/99
Shareholder fees (paid directly from your
investment)
Redemption fees for shares held less than
6 months1
None
1.00%
Annual fund operating expenses (deducted
from fund assets)2
Management fees
1.50%
Other expenses
10.04%
Total annual fund operating expenses
11.54%
2 After expense limitation, expenses were
Management fees
0.00%
Other expenses
2.00%
Total annual fund operating expenses
2.00%
This example
is intended
to help you
compare the
cost of
investing in
the fund
with the
cost of
investing in
other mutual
funds.
The example assumes that:
You invest $10,000 in the fund for the
time periods indicated.
Your investment has a 5% return each year.
The funds operating expenses remain the
same.
You redeem your investment at the end of
each period.
Although your actual costs may be
higher or lower, under these
assumptions your costs would be:
1 year
3
years
5 years
10 years
$203
$627
$1,078
$2,327
RISK/RETURN SUMMARY GLOBAL EMERGING MARKETS FUND
INVESTMENT
GOAL
Long term growth of capital.
PRINCIPAL
INVESTMENTS
AND
STRATEGIES
The fund invests primarily in
equity securities of companies in
emerging market countries.
The fund normally invests in at
least 15, but never fewer than
eight, emerging market
countries.
Emerging
market
equities
Equity securities include
common and preferred stocks,
investment company shares,
convertible debt securities,
warrants, subscription rights and
depositary receipts for foreign
stocks.
Emerging market countries are
those identified as developing or
emerging countries by the World
Bank, International Finance
Corporation or United Nations or
countries not listed in the
Morgan Stanley Capital
International World Index.
Emerging market stocks means
equity securities:
That are traded primarily in an
emerging market country.
Of companies that derive 50% or
more of total revenue from goods
or services produced or sold in
emerging market countries.
Of companies organized and with
a principal office in an
emerging market country.
How the
adviser
selects the
funds
investments
In allocating the funds assets
among emerging market countries,
the adviser uses a proprietary
database to screen for countries
that meet the following
standards:
Suitable safe custody of assets
and freedom of capital movement.
A higher than average number
of undervalued stocks when
comparing the companies against
their benchmark values.
A favorable domestic liquidity
environment.
A reasonably liquid and diverse
stock market.
A good or improving fiscal
balance.
An undervalued or fairly valued
exchange rate, combined with
sustainable trade and current
account balances.
In selecting individual
emerging market stocks, the
adviser looks for companies
with:
Current or potential high and
stable cash generation.
Strong, liquid balance sheets.
Asset valuations significantly
below replacement cost, or below
the average for its sector on a
global basis. The adviser will
also consider the debt of a
company.
A high free cash flow relative
to the stock price.
In the case of banks, a low
stock price relative to the
asset base, combined with a high
return on equity.
RISK/RETURN SUMMARY GLOBAL EMERGING MARKETS FUND (continued)
PRINCIPAL
INVESTMENT
RISKS
An
investment
in the fund
is not a
bank deposit
and is not
insured or
guaranteed
by the
Federal
Deposit
Insurance
Corporation
or any other
government
agency.
Investors could lose money on
their investments in the fund or
the fund may not perform as well
as other investments if any of
the following occurs:
Foreign or emerging market stock
prices go down generally.
Changes in foreign currency
rates depress the value of the
funds investments.
An adverse event, such as an
unfavorable earnings report,
depresses the value of a
particular companys stock.
The advisers judgment about
country allocations or the
attractiveness, value or
potential appreciation of a
particular stock proves to be
incorrect.
Emerging market countries and
stocks present the following
special risks:
Greater likelihood of economic,
political or social instability.
More volatile stock markets.
The contagious effect of market
or economic setbacks in one
country on other emerging market
countries.
Possible governmental
restrictions on currency
conversions or trading.
Difficulty in accurately valuing
emerging market stocks or
selling them at their fair
value, especially in down
markets.
Availability of less information
about emerging market companies
because of less rigorous
accounting and regulatory
standards.
TOTAL RETURN
QUARTERLY
RETURN
This bar chart indicates the risks
of investing in the fund by showing
changes in the funds performance
from year to year. Past
performance does not necessarily
indicate how the fund will perform
in the future.
Global Emerging Markets Fund
Highest: 35.70% in second quarter
1999
Lowest: -24.97% in second quarter
1998
[bar chart]
Year ended Year ended Year ended
Year ended
12/31/96 12/31/97
12/31/98 12/31/99
8.32% -11.29% -
23.22% 63.58%
RISK/RETURN SUMMARY GLOBAL EMERGING MARKETS FUND (continued)
The table below indicates the
risks of investing in the fund by
comparing the funds average
annual total returns for the
periods shown to those of the
International Finance Corporation
Global Composite Index, an index
composed of 1,650 stocks covering
27 markets.
Global Emerging Markets Fund
Average annual total returns
Periods ended December 31, 1999
1 Year
Life of Fund**
(began 10/4/95)
Pictet Global Emerging Markets Fund
63.58%
3.35%
IFC Global Composite Index
62.70%
3.31%
FEES AND
EXPENSES
This table
describes
the fees and
expenses
that you may
pay if you
buy and hold
shares of
the fund.
For year ended 12/31/99
Shareholder fees (paid directly from your
investment)
Redemption fees for shares held
less than 6 months1
None
1.00%
Annual fund operating expenses (deducted
from fund assets)2
Management fees
1.25%
Other expenses
0.67%
Total annual fund operating expenses
1.92%
2 After expense limitation, expenses were
Management fees
1.03%
Other expenses
0.67%
Total annual fund operating expenses
1.70%
This example
is intended
to help you
compare the
cost of
investing in
the fund
with the
cost of
investing in
other mutual
funds.
The example assumes that:
You invest $10,000 in the fund for the
time periods indicated.
Your investment has a 5% return each year.
The funds operating expenses remain the
same.
You redeem your investment at the end of
each period.
Although your actual costs may be
higher or lower, under these
assumptions your costs would be:
1 year
3
years
5 years
10 years
$173
$536
$923
$2,009
RISK/RETURN SUMMARY INTERNATIONAL SMALL COMPANIES FUND
INVESTMENT
GOAL
Long term growth of capital.
PRINCIPAL
INVESTMENTS
AND
STRATEGIES
The fund invests primarily in
equity securities of companies
with small market
capitalizations located outside
the United States. The fund may
invest up to 35% of its assets
in medium
and large capitalization
companies. The fund normally
invests in at least three
countries other than the U.S.
Equity
securities
Equity securities include
common and preferred stocks,
investment company shares,
convertible debt securities,
warrants, subscription rights
and depositary receipts for
foreign stocks.
The fund considers companies to
be small cap companies if they
are in the same size range
as the bottom 20% of U.S.
publicly traded companies, as
measured by their market
capitalizations. These small
cap companies usually have
individual market
capitalizations of $1 billion or
less, but may be larger.
Foreign small cap companies may
rank above the bottom 20% or
even among the largest
capitalization companies in
their own countries markets.
How the
adviser
selects the
funds
investments
In allocating the funds assets
among countries, regions and
currencies, the adviser uses a
top-down approach. This
involves using a proprietary,
quantitative model to evaluate
more than 40 countries based on
such factors as:
Economic trends, including the
direction of interest rates and
industrial production capacity
constraints.
Equity and fixed income market
valuations.
Current market liquidity.
In selecting individual stocks,
the adviser uses a bottom-up
approach that focuses on
evaluating individual small cap
companies. The adviser has
access to information on
approximately 8,000 companies
and maintains a proprietary
database on a further 800
companies. The adviser looks
for high quality, growth-
oriented companies with the
following characteristics:
Reasonable valuations and
relatively inexpensive stock
prices.
Strong balance sheets and
surplus net income.
Profitability ratios that are
above-average for a companys
market or sector.
RISK/RETURN SUMMARY INTERNATIONAL SMALL COMPANIES FUND (continued)
PRINCIPAL
INVESTMENT
RISKS
An
investment
in the fund
is not a
bank deposit
and is not
insured or
guaranteed
by the
Federal
Deposit
Insurance
Corporation
or any other
government
agency.
Investors could lose money on
their investments in the fund or
the fund may not perform as well
as other investments if any of
the following occurs:
Foreign stock prices go down
generally.
An adverse event, such as an
unfavorable earnings report,
depresses the value of a
particular companys stock.
The advisers judgment about
country allocations or the
attractiveness, value or
potential appreciation of a
particular stock proves to be
incorrect.
Investing in small cap foreign
companies involves special
risks, which are more severe in
certain emerging market
countries.
There may be unfavorable foreign
government actions, political or
economic instability or less
accurate information about
foreign companies.
A decline in the value of
foreign currencies relative to
the U.S. dollar will reduce the
value of securities denominated
in those currencies.
Small cap companies may have
limited product lines, markets
and financial resources. They
may have shorter operating
histories and more volatile
businesses.
The prices of foreign small cap
stocks tend to be more volatile
than the prices of other stocks.
The stock market may temporarily
favor large cap over small cap
stocks.
Foreign securities and small cap
stocks are sometimes less liquid
and harder to value than
securities of U.S. issuers or
large cap stocks.
RISK/RETURN SUMMARY INTERNATIONAL SMALL COMPANIES FUND (continued)
TOTAL RETURN
QUARTERLY
RETURN
This bar chart indicates the risks
of investing in the fund by
showing changes in the funds
performance from year to year.
Past performance does not
necessarily indicate how the fund
will perform in the future.
International Small Companies Fund
Highest: 44.70% in fourth quarter
1999
Lowest: -16.99% in third quarter
1998
[bar chart]
Year ended Year ended
Year ended
12/31/97 12/31/98
12/31/99
- -7.68% 5.35%
86.45%
The table below indicates the
risks of investing in the fund by
comparing the funds average
annual total returns for the
periods shown to the HSBC James
Capel World excluding U.S. Small
Companies Index, an index composed
of 1,200 smaller company stocks
covering 21 markets and the
Financial Times/S&P World ex-U.S.
Medium-Small Cap Index, an index
which represents the bottom 25% of
the Financial Times/S&P World
Index in terms of market
capitalization.
International Small Companies Fund
Average annual total returns
Periods ended December 31, 1999
1 Year
Life of Fund***
(began 2/7/96)
Pictet International Small Companies Fund
86.45%
17.34%
HSBC James Capel World excluding U.S.
Small Companies Index
33.62%
6.53%
Financial Times/S&P World ex-U.S.
Medium-Small Cap Index
16.77%
5.44%
RISK/RETURN SUMMARY INTERNATIONAL SMALL COMPANIES FUND (continued)
FEES AND
EXPENSES
This table
describes the
fees and
expenses that
you may pay
if you buy
and hold
shares of the
fund.
For year ended 12/31/99
Shareholder fees (paid directly from your
investment)
Redemption fees for shares held less than
6 months1
None
1.00%
Annual fund operating expenses (deducted
from fund assets)2
Management fees
1.00%
Other expenses
3.76%
Total annual fund operating expenses
4.76%
2 After expense limitation, expenses were
Management fees
0.00%
Other expenses
1.20%
Total annual fund operating expenses
1.20%
This example
is intended
to help you
compare the
cost of
investing in
the fund with
the cost of
investing in
other mutual
funds.
The example assumes that:
You invest $10,000 in the fund for the
time periods indicated.
Your investment has a 5% return each year.
The funds operating expenses remain the
same.
You redeem your investment at the end of
each period.
Although your actual costs may be
higher or lower, under these
assumptions your costs would be:
1 year
3 years
5 years
10 years
$122
$381
$660
$1,455
THE FUNDS INVESTMENTS
DEPOSITARY
RECEIPTS
Depositary receipts are
securities issued by banks and
other financial institutions
that represent interests in the
stocks of foreign companies.
They include American
Depositary Receipts, European
Depositary Receipts, Global
Depositary Receipts and Russian
Depositary Certificates.
CONVERTIBLE
SECURITIES
Convertible securities are
fixed-income securities that may
be converted at either a stated
price or stated rate into
underlying shares
of common stock. Convertible
securities have general
characteristics similar to both
fixed-income and equity
securities.
WARRANTS
AND
SUBSCRIPTION
RIGHTS
Warrants and subscription rights
entitle the
holder to acquire the stock of a
company at a
set price.
DEBT
SECURITIES
Each fund may invest up to 35%
of its assets in investment
grade debt securities of U.S.
and foreign corporate and
governmental issuers. These may
include all types of debt
securities of any maturity.
The value of debt securities
will go down if interest rates
go up, or the issuer of the
security has its credit rating
downgraded or defaults on its
obligation to pay principal or
interest.
Securities are investment grade
if they:
Are rated in one of the top four
long-term rating categories of a
nationally recognized
statistical rating organization.
Have received a comparable
short-term or other rating.
Are unrated securities that the
adviser believes to be of
comparable quality.
A funds credit standards also
apply to counterparties to OTC
derivative contracts.
DEFENSIVE
INVESTMENTS
Each fund may depart from its
principal investment strategies
in response to adverse market
conditions by taking temporary
defensive positions in all types
of money
market and short-term debt
securities. If a fund takes a
temporary defensive position, it
may be unable to achieve its
investment goal.
DERIVATIVES
AND HEDGING
TECHNIQUES
Each fund may, but is not
required to, use derivative
contracts for any of the
following purposes:
To hedge against the economic
impact of adverse changes in the
market value of its securities,
because of changes in stock
market prices or currency
exchange rates.
As a substitute for buying or
selling securities or
currencies.
Derivative contracts include
options and futures on
securities, securities indices
or currencies; options on these
futures; forward currency
contracts; and currency swaps.
Derivative contracts are valued
on the basis of the value of the
underlying securities. A
derivative contract will
obligate or entitle a fund to
deliver or receive an asset or
cash payment based on the change
in value of one or more
securities, currencies or
indices.
Even a small investment in
derivative contracts can have a
big impact on a funds stock
market or currency exposure.
Therefore, using derivatives can
disproportionately increase
losses and reduce opportunities
for gains when stock prices or
currency rates are changing.
A fund may not fully benefit
from or may lose money on
derivatives if changes in their
value do not correspond
accurately to changes in the
value of a funds holdings. The
other parties to over-the-
counter derivative contracts
present the same types of
default risk as issuers of fixed
income securities. Derivatives
can also make a fund less liquid
and harder to value, especially
in declining markets.
PORTFOLIO
TURNOVER
Each fund may engage in active
and frequent trading. This may
lead to the realization and
distribution to shareholders of
higher capital gains, which
would increase their tax
liability.
Frequent trading also increases
transaction costs, which could
detract from a funds
performance.
EACH FUNDS
INVESTMENT
GOAL
Each funds goal is non-
fundamental so that the board of
trustees may change the
investment goal of a fund
without obtaining the
approval of the funds
shareholders. A fund might not
succeed in achieving its goal.
INVESTMENT ADVISER
EACH FUNDS
INVESTMENT
ADVISER IS
PICTET
INTERNATIONAL
MANAGEMENT
LIMITED
The adviser provides investment
advice and portfolio management
services to each fund. Under
the supervision of the board of
trustees, the adviser makes each
funds day-to-day investment
decisions, arranges for the
execution of portfolio
transactions and makes available
the research services of its
portfolio managers and security
analysts.
During the year ended December
31, 1999, the Eastern European
Fund and International Small
Companies Fund each paid the
adviser no advisory fee. The
Global Emerging Markets Fund
paid the adviser an advisory fee
equal to 1.03% of the funds
average daily net assets. The
adviser has agreed to cap each
funds total annual operating
expenses at no more than 2.00%,
1.70% and 1.20% annually of the
Eastern European Funds, Global
Emerging Markets Funds and
International Small Companies
Funds average daily net assets,
respectively. These caps do not
apply to brokerage commissions,
taxes, interest and litigation,
indemnification and other
extraordinary expenses. These
expense caps can be revoked
after sufficient notice at any
time.
Established in 1980, the
adviser currently manages
approximately $10 billion of
assets for more than 150
accounts. The adviser focuses
on managing international fixed
income and equity portfolios for
U.S. and international
institutional clients. Its
address is Tower 42, Level 37,
25 Old Broad Street, London,
EC2N 1HQ, United Kingdom. The
adviser is both registered as a
U.S. investment adviser and
regulated in the United Kingdom
by the Investment Management
Regulatory Organisation.
The adviser is an affiliate of
Pictet & Cie, a Swiss private
bank that was founded in 1805.
As of December 31, 1999, Pictet
& Cie managed over $100 billion
of assets for institutional and
private clients. Pictet & Cie
is owned by eight partners.
EASTERN EUROPEAN
FUNDS
PORTFOLIO
MANAGEMENT
TEAM
Names of managers
(how long on fund
team)
Positions during last five years
Jura Ostrowsky
(since 1998)
Senior investment manager of the adviser, on
the emerging markets team, with special
responsibility for Russia and the former
Soviet Union republics.
Jack Arnoff
(since 1998)
Investment manager specializing in the
markets of the former Soviet Union and
Eastern Europe. Before joining Pictet
International Management Limited (Pictet)
in 1998, he was an associate with Schooner
Capital (Boston) working on venture capital
projects in Bulgaria, Romania, Ukraine and
Poland. He has also consulted for Bulgarian
banks on privatization and financing
projects. He completed a Master of Law
degree at Harvard Law School after
graduating in law from Sofia University.
INVESTMENT ADVISER (continued)
GLOBAL EMERGING
MARKETS FUNDS
PORTFOLIO
MANAGEMENT
TEAM
Names of managers
(how long on fund
team)
Positions during last five years
Douglas Polunin
(since 1995)
Senior investment manager of the adviser,
with responsibility for emerging market
investments.
Richard Ormond
(since 1995)
Senior investment manager of the adviser, on
the emerging markets team. He focuses
mainly on the Indian subcontinent, the
Middle East and Africa.
Julian Garel-Jones
(since 1996)
Senior investment manager of the adviser, on
the emerging markets team, with special
responsibility for Latin America. Before
joining the adviser in 1996, a Latin
American fund manager for the Rothschild
Group in London.
Jura Ostrowsky
(since 1995)
Senior investment manager of the adviser, on
the emerging markets team, with special
responsibility for Russia and the former
Soviet Union republics.
Paul Parsons
(since 1995)
Senior investment manager of the adviser, on
the emerging markets team, with special
responsibility for Asia equities. Before
joining the adviser in January 1995, he was
an Asia fund portfolio manager for Invesco
MIM.
INTERNATIONAL
SMALL COMPANIES
FUNDS
PORTFOLIO
MANAGEMENT
TEAM
Names of managers
(how long on fund
team)
Positions during last five years
Robert Treich
(since 1996)
Senior investment manager of the adviser and
head of the Smaller Companies Team. Prior
to joining Pictet, he worked for Richardson
Greenshields of Canada.
Nils Francke
(since 1996)
Senior investment manager of the adviser
within the Smaller Companies Team. Prior to
joining Pictet, he worked for M M Warburg
Bank in Hamburg, Salomon Brothers Inc. in
New York and Schroder Munchmeyer Hengst of
Germany.
Michael McLaughlin
(since 1996)
Senior investment manager of the adviser
within the Smaller Companies Team. He is
responsible for the Asia Pacific region.
Prior to joining Pictet, he was the Japanese
investment manager at Provident Mutual.
Philippe Sarreau
(since 1998)
Senior investment manager of the adviser
within the Smaller Companies Team. Prior to
joining Pictet, he worked at Credit Lyonnais
as a French smaller companies analyst and
later was responsible for the development of
a specialized small cap sales team in
London.
INVESTMENT AND ACCOUNT POLICIES
CALCULATION
OF NET ASSET
VALUE
Each fund calculates its net
asset value per share (NAV) at
the close of regular trading on
the New York Stock Exchange
(NYSE) (normally 4:00 p.m.
Eastern time) on each day the
NYSE is open for business. The
NYSE is open every week, Monday
through Friday, except on
national holidays. If the New
York Stock Exchange closes
early, the time for calculating
NAV and the deadlines for share
transactions will be accelerated
to the earlier closing times.
Each fund generally values its
fund securities based on market
prices or quotations. The
funds currency translations are
done when the London Stock
Exchange closes, which is 12:00
noon Eastern time.
When market prices are not
available, or when the adviser
believes that they are
unreliable or that the value of
securities has been materially
affected by events occurring
after a foreign exchange closes,
a fund may price those
securities at fair value. Fair
value is determined in
accordance with procedures
approved by the board of
trustees. A fund that uses fair
value to price securities may
value those securities higher or
lower than another fund using
market quotations or its own
fair value determination to
price the same securities.
International markets may be
open on days when U.S. markets
are closed. The value of
foreign securities owned by a
fund could change on days when
investors cannot buy or redeem
shares.
PURCHASING
FUND SHARES
The adviser, its affiliates or
other institutions
(collectively, institutions)
may buy shares of a fund at net
asset value. Institutions are
responsible for transmitting
orders promptly to a funds
transfer agent.
INVESTMENT AND ACCOUNT POLICIES (continued)
Purchasing
shares
through
financial
intermediarie
s/
professionals
Purchases may also be made at
net asset value by the
following:
Investment advisers or financial
planners who place trades for
their own accounts or the
accounts of their clients and
who charge a management,
consulting or other fee for
their services; and clients of
these investment advisers or
financial planners who place
trades for their own accounts if
the accounts are linked to the
master account of the investment
adviser or financial planner on
the books and records of the
broker or agent.
Retirement and deferred
compensation plans and trusts
used to fund those plans,
including, but not limited to,
those defined in section 401(a),
403(b), or 457 of the Internal
Revenue Code and rabbi trusts.
Investors may be charged a fee
if they effect transactions in
fund shares through a broker or
agent.
Investment Minimums
Initial purchase
$50,000
Additional purchases
$5,000
Certain retirement accounts
(e.g. IRAs, Roth IRAs,
Educational IRAs) may purchase
shares of a fund with a $2,000
initial purchase and additional
purchases of $2,000 each.
Additional purchases for those
in the Automatic Investment Plan
may be as little as $500 each.
Fund officers have discretion to
waive or reduce any of the above
minimum investment requirements.
Purchase
orders and
payments
A purchase order will be filled
at a funds NAV next calculated
after the order has been
received in proper form by
either the funds transfer
agent, PFPC Inc., by one or more
brokers authorized to accept
purchase orders on a funds
behalf, or by a designated
intermediary authorized by a
broker to accept orders on a
funds behalf. A fund will be
deemed to have received the
order when an authorized broker
or broker authorized designee
accepts the order. Institutions
must send payment for fund
shares in federal funds to the
transfer agent by 12:00 noon
Eastern time on the next
business day.
Institutions and other investors
should contact the adviser for
information about purchasing
fund shares through in-kind
exchanges of securities.
Each fund and its distributor
reserve the right to suspend the
offering of fund shares or to
reject any purchase order.
INVESTMENT AND ACCOUNT POLICIES (continued)
Purchasing
shares by
telephone
Call 1-877-470-0103 to
arrange for a telephone
transaction. If you want to
make future transactions (e.g.,
purchase additional shares,
redeem or exchange shares) by
telephone, you will need to
elect this option either on the
initial application or
subsequently in writing.
Each fund and its transfer agent
have procedures designed to
verify that telephone
instructions are genuine. If
they follow these procedures,
they will not be liable for any
losses caused by acting on
unauthorized telephone
instructions.
Purchasing
shares by
mail
Complete and sign an
application. Make your check
payable to Pictet. If you are
adding to your existing account,
include your account name and
number on the check.
Mail your application and/or
check to :
PFPC Global Fund Services
Attn PICTET Funds
P.O. Box 61503
211 S. Gulph Road
King of Prussia PA 19406
Purchasing
shares by
wire
If you are opening a new
account, call the funds at 1-
877-470-0103 to arrange for a
wire transaction. Then wire
federal funds to:
Boston Safe Deposit & Trust
ABA#: 011001234
Credit: (Insert name of your
fund)
Acct#: 143766
FBO: (Insert shareholder name
and account number)
Complete and sign an application
and mail immediately following
the initial wire transaction to:
PFPC Global Fund Services
Attn PICTET Funds
P.O. Box 61503
211 S. Gulph Road
King of Prussia PA 19406
If you are adding to your
existing account, you do not
need to call the funds to
arrange for a wire transaction,
but be sure to include your name
and account number.
Automatic
Investment
Plan
Through this option, you can
have money electronically
deducted from your checking,
savings or bank money market
accounts and invested in the
funds each month or quarter.
Complete the Automatic
Investment Plan Application,
which is available upon request
by calling 1-877-470-0103, and
mail it to the address
indicated.
The initial $50,000 minimum
investment still applies,
however, subsequent investments
can be as little as $500.
The funds may alter or terminate
the Automatic Investment Plan at
any time.
INVESTMENT AND ACCOUNT POLICIES (continued)
EXCHANGES
BETWEEN
PICTET FUNDS
You may exchange shares of a
fund for shares of any other
Pictet fund at the NAV of the
acquired fund next determined
after receipt of your exchange
request. Both accounts must
have identical registrations.
Exchanges must meet the
applicable minimum initial
investment requirements for the
acquired fund. You may exchange
into another fund only if its
shares may legally be sold in
your home state.
To protect other shareholders of
a fund, a fund may cancel the
exchange privileges of any
person that, in the opinion of
the fund, is using market timing
strategies. The funds may
change or terminate the exchange
privilege on 60 days advance
notice to shareholders.
You may be subject to a
redemption fee if you exchange
shares after holding them less
than six months. Please see
Redeeming Fund Shares
below.
REDEEMING
FUND SHARES
If you exchange or redeem
shares after holding them six
months or less (other than
shares acquired through
reinvestment of dividends or
other distributions), a fee of
1% of the current net asset
value of the shares being
exchanged or redeemed will be
assessed and retained by the
Fund for the benefit of the
remaining shareholders. This
fee is intended to encourage
long-term investment, to avoid
transaction and other expenses
caused by early redemptions, and
to facilitate portfolio
management. The fee is
currently waived for pension
funds, endowments and other
similar institutional funds due
to certain economies associated
with these accounts. The
redemption fee may be modified
or discontinued at any time or
from time to time. This fee is
not a deferred sales charge, is
not a commission paid to Pictet
and does not benefit Pictet in
any way. The fee applies to
redemptions from a Fund and
exchanges into any of the other
no-load mutual funds which are
also advised by Pictet and
distributed by Provident
Distributors, Inc. The first-
in, first-out method will be
used to determine your holding
period. Under this method, the
date of redemption or exchange
will be compared with the
earliest purchase date of shares
held in your account. If your
holding period is less than six
months, the redemption/exchange
fee will be assessed on the
current net asset value of those
shares.
You may redeem shares of a fund
on any business day at the NAV
next calculated after the
transfer agent, broker
authorized to accept redemption
orders on the funds behalf, or
designated intermediary
authorized by a broker to accept
orders on the funds behalf
receives the redemption request
in proper form. The fund will
be deemed to have received the
order when an authorized broker
or broker authorized designee
accepts the order. Institutions
are responsible for promptly
transmitting redemption orders
to a funds transfer agent.
Redemption proceeds are usually
sent by wire on the business day
after the effective date of a
redemption. Under unusual
circumstances, a fund may
suspend redemptions, if allowed
by the SEC, or postpone payment
up to seven days.
Each fund may also pay
redemption proceeds in kind by
giving securities to redeeming
shareholders. You may pay
transaction costs to dispose of
these securities.
If you purchased shares through
a financial institution, a
broker authorized to accept
purchase orders on a funds
behalf, or by a designated
intermediary authorized by a
broker to accept orders on a
funds behalf, you should
contact it for more information.
Each institution, broker or
intermediary may have its own
procedures and requirements for
selling shares and may charge
fees.
Redeeming
shares by
telephone
If you have chosen the
telephone redemption privilege
on the initial application or
later elected the privilege in
writing, you may call 1-877-
470-0103 to redeem up to
$100,000 worth of shares.
INVESTMENT AND ACCOUNT POLICIES (continued)
Redeeming
shares by
mail
Shareholders may sell shares by
making a written request to :
PFPC Global Fund Services
Attn PICTET Funds
P.O. Box 61503
211 S. Gulph Road
King of Prussia PA 19406
Include signatures of all
persons required to sign for
transactions, exactly as their
names appear on the account
application.
To protect your account from
fraud, the funds may require a
signature guarantee for certain
redemptions. We require a
signature guarantee if :
your address of record has
changed within the past 30 days
or
you are selling more than
$100,000 worth of shares
Signature guarantees are
designed to verify that major
transactions or changes to your
account are in fact authorized
by you. You can obtain a
signature guarantee for a
nominal fee from most banks,
brokerage firms and other
financial institutions. A
notary public stamp or seal
cannot be substituted for a
signature guarantee.
Redeeming
shares by
wire
If you have chosen the wire
redemption privilege on the
initial application or later
elected the privilege in
writing, you may have the funds
wire your proceeds to a
predesignated bank account.
Call 1-877-470-0103
Wire redemption requests must be
received by the transfer agent
by 4:00 p.m. Eastern time for
money to be wired the next
business day.
Systematic
Withdrawal
Plan
If you have a minimum of
$100,000 in your account, you
may direct the transfer agent to
make payments to you (or anyone
you designate) monthly,
quarterly or semi-annually.
The amount of withdrawal
payments must be at least $500
per payment. Fund shares are
redeemed in order to make
withdrawal payments. Under the
Systematic Withdrawal Plan, you
must elect to have dividends and
distributions automatically
reinvested in additional fund
shares.
The funds may terminate any
Systematic Withdrawal Plan if
the value of the account falls
below $10,000 due to share
redemptions or an exchange of
shares for shares of another
fund.
Closing
sub-minimum
accounts
Each fund may close your account
if, for reasons other than
investment losses, the value of
shares in the account falls
below $25,000.
After a fund notifies you of its
intention to close the account,
you will have 30 days to bring
the account back to the minimum
level.
INVESTMENT AND ACCOUNT POLICIES (continued)
PERFORMANCE
The performance of a fund may be
compared in publications to the
performance of various indices
and investments for which
reliable performance data is
available. The performance
of a fund may also be compared
in publications to averages,
performance rankings, or other
information prepared by
recognized mutual fund
statistical services.
DIVIDENDS,
DISTRIBUTIONS
AND TAXES
Redemptions and exchanges of
fund shares are taxable events
on which you may recognize a
gain or loss. Dividends and
distributions are also taxable,
as described in the chart below,
whether they are received in
additional shares or cash. Each
fund declares and pays dividends
and distributions according to
the following schedule.
Dividends
are paid in
additional
shares of
a fund.
Type of
Distribution
Declared
and Paid
Federal
Tax Status
Dividends from net investment
income
Annually
Taxable as ordinary income
Distributions of short term
capital gain
Annually
Taxable as ordinary income
Distributions of long term
capital gain
Annually
Taxable as capital gain
You should generally avoid
investing in a fund shortly
before an expected dividend or
distribution. Otherwise, you
may pay taxes on dividends or
distributions that are
economically equivalent to a
partial return of your
investment. You should consult
a tax adviser about particular
federal, state, local and other
taxes that may apply to you.
Every January, each fund will
send shareholders information
about its dividends and
distributions during the
previous calendar year. Most of
a funds distributions are
expected to be capital gain. If
you do not provide a fund with a
correct taxpayer identification
number and required
certifications, you may be
subject to federal backup
withholding tax.
FINANCIAL HIGHLIGHTS The following tables provide financial highlights of each
fund for the periods presented and should be read in conjunction with the
financial statements and related notes that appear in the funds' annual report
dated December 31, 1999 and which are incorporated by reference into the
Statement of Additional Information. The financial statements and related notes
have been audited by PricewaterhouseCoopers LLP, independent accountants.
Additional information concerning the performance of each fund is included in
the annual report which may be obtained without charge by contacting a fund at
the address or phone number on the back cover of this prospectus.
==============================================================================
PANORAMA TRUST
PICTET EASTERN EUROPEAN FUND
Financial Highlights
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
<S> <C> <C>
Year Period
Ended Ended
12/31/99 12/31/98*
-------------------
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $6.54 $10.00
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.09) 0.00 #
Net realized and unrealized gain/(loss) on investments 2.42 (3.39)
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.33 (3.39)
- ------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income - (0.07)
- ------------------------------------------------------------------------------------------------------------------
Total distributions - (0.07)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $8.87 $6.54
- ------------------------------------------------------------------------------------------------------------------
Total return++ 35.63% (33.93)%
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $1,933 $1,636
Ratio of operating expenses to average net assets 2.00% 2.00% +
Ratio of net investment income/(loss) to average net (1.15)% (0.06)% +
assets
Ratio of operating expenses to average net assets 11.54% 9.97% +
without waivers and expenses reimbursed
Ratio of net investment income/(loss) to average net (10.69)% (8.03)% +
assets without waivers and expenses reimbursed
Portfolio turnover rate 117% 91%
- ---------------------------------
* Pictet Eastern European Fund commenced operations on April 7, 1998.
+ Annualized.
++ Total return represents aggregate total return for the period.
# Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
PANORAMA TRUST
PICTET GLOBAL EMERGING MARKETS FUND
Financial
Highlights
For a Fund share outstanding throughout each
period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Year Year Year Period
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96(a) 12/31/95*(a)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of $6.81 $8.87 $10.13 $9.51 $10.00
year
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (0.01) 0.04 0.04 0.07 0.02
Net realized and unrealized gain/(loss) 4.35 (2.10) (1.18) 0.71 (0.49)
on investments
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.34 (2.06) (1.14) 0.78 (0.47)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income - - (0.02) (0.07) (0.02)
Distributions from net realized loss - - (0.10) (0.09) -
on investments
-------------
- ------------------------------------------------------------ ---------------------------------------------
Total distributions - - (0.12) (0.16) (0.02)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.15 $6.81 $8.87 $10.13 $9.51
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total return++ 63.73% (23.22)% (11.29)% 8.32% (4.72)%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $190,275 $94,362 $190,922 $122,047 $9,623
Ratio of operating 1.70% 1.70% 1.70% 1.70% 1.95% +
expenses to average net
assets
Ratio of net investment (0.19)% 0.55% 0.32% 0.88% 0.68% +
income/(loss) to
average net assets
Ratio of operating 1.92% 2.00% 1.84% 2.20% 8.39% +
expenses to average net
assets without waivers
and expenses reimbursed
Ratio of net investment (0.42)% 0.25% 0.18% 0.38% (5.77)% +
income to average net
assets without waivers
and expenses reimbursed
Portfolio turnover rate 126% 123% 77% 48% 5%
- ---------------------------------
* Pictet Global Emerging Markets Fund commenced operations on October 4, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period.
(a) 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 the Pictet Global Emerging Markets Fund. The record date of the
stock dividend was December 31, 1996, payable on January 1, 1997.
</TABLE>
<PAGE>
PANORAMA TRUST
PICTET INTERNATIONAL SMALL COMPANIES FUND
Financial Highlights
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Year Year Period
Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96*(a)
-------------------
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $6.55 $9.24 $10.15 $10.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income/(loss) (0.02) 0.07 +++ 0.08 0.09
Net realized and unrealized gain/(loss) on investments 5.66 0.41 (0.86) 0.20
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.64 0.48 (0.78) 0.29
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Distributions from net investment income - - (0.13) (0.12)
Distributions from net realized capital gains (1.94) (3.17) - (0.02)
Distributions from capital - - - (0.00) #
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.94) (3.17) (0.13) (0.14)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.25 $6.55 $9.24 $10.15
- -------------------------------------------------------------------------------------------------------------------------------
Total return++ 86.45% 5.35% (7.68)% 2.85%
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $4,776 $5,699 $23,773 $25,743
Ratio of operating expenses to average 1.20% 1.20% 1.20% 1.20% +
net assets
Ratio of net investment income/(loss) to (0.02)% 0.65% 0.82% 1.04% +
average net assets
Ratio of operating expenses to average 4.76% 2.36% 2.20% 2.46% +
net assets without waivers and
expenses reimbursed
Ratio of net investment income/(loss) to (3.58)% (0.52)% (0.18)% (0.22)% +
average net assets without waivers
and expenses reimbursed
Portfolio turnover rate 166% 132% 90% 53%
- ----------------------------------
* Pictet International Small Companies Fund commenced operations on February 7, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period.
+++ Per share numbers have been calculated using the average share method.
# Amount represents less than $0.01 per share.
(a) Per share amounts have ben 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 the Pictet International Small Companies Fund. The record date of
the stock dividend was December 31, 1996, payable on January 1, 1997.
</TABLE>
FOR MORE INFORMATION
For investors who want more information
about Pictet Eastern European Fund, Pictet
Global Emerging Markets Fund and Pictet
International Small Companies Fund, the
following documents are available free upon
request.
Annual/Semiannual Reports Additional
information about each funds investments
is available in the funds annual and
semiannual reports to shareholders. The
funds annual report contains a discussion
of the market conditions and investment
strategies that significantly affected each
funds performance during its last year.
Statement of Additional Information (SAI)
The SAI provides more detailed information
about each fund and is incorporated by
reference into this prospectus.
Investors can get free copies of reports
and SAIs, request other information and
discuss their questions about each fund by
contacting a fund at:
PFPC Global Fund Services
Attn PICTET Funds
P.O. Box 61503
211 S. Gulph Road
King of Prussia PA 19406
Telephone: 1-877-470-0103
Investors can review the funds reports and
SAIs at the Public Reference Room of the
Securities and Exchange Commission.
Investors can get text-only copies:
For a fee, by writing to the Public
Reference Room of the Commission,
Washington, D.C. 20549-0102
Free from the Commissions Internet website
at http://www.sec.gov.
Investors can get information about the
operation of the Public Reference Room by
calling 1-202-942-8090.
INVESTMENT ADVISER
Pictet International
Management Limited
TRANSFER AGENT
PFPC Inc.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
ADMINISTRATOR
PFPC Inc.
LEGAL COUNSEL
Hale and Dorr LLP
CUSTODIAN
Brown Brothers
Harriman & Co.
Investment Company Act File No. 811-9050
PICTET EASTERN EUROPEAN FUND
STATEMENT OF ADDITIONAL INFORMATION
April 30, 2000
This Statement of Additional Information is not a prospectus but
should be read in conjunction with Pictet Funds (the "Trust") Prospectus
for Pictet Eastern European Fund (the "Fund") dated April 30, 2000 (the
"Prospectus"). The financial statements for the Fund for the fiscal year
ended December 31, 1999, are incorporated herein by reference to the Annual
Report to shareholders for the Fund dated December 31, 1999. A copy of the
Fund's Annual Report or Prospectus may be obtained without charge by calling
the Trust at 1-877-470-0103.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in the
Prospectus.
Table of Contents Page
Investment Objective and Policies 2
Purchase of Shares 13
Redemption of Shares 13
Portfolio Turnover 14
Investment Limitations 14
Management of the Fund 15
Code of Ethics 18
Investment Advisory and Other Services 18
Portfolio Transactions 19
Additional Information Concerning Taxes 19
Performance Calculations 23
General Information 24
Financial Statements 25
Appendix - Description of Ratings and U.S. Government Securities A-1
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and
policies set forth in the Prospectus:
Equity Securities. The Fund invests in equity securities of U.S. and
foreign companies. Equity securities consist of exchange-traded, over-the-
counter ("OTC") and unlisted common and preferred stocks, warrants, rights,
convertible debt securities, trust certificates, limited partnership
interests and equity participations. The prices of the Fund's equity
investments will change in response to stock market movements.
Depositary Receipts. The Fund may purchase American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and Global Depositary Shares
("GDSs"), (collectively, "Depositary Receipts"). ADRs and ADSs typically
are issued by a U.S. bank or trust company to evidence ownership of
underlying securities issued by a foreign corporation. EDRs and GDRs
typically are issued by foreign banks or trust companies, although they also
may be issued by U.S. banks or trust companies, and evidence ownership of
underlying securities issued by either a foreign or a United States
corporation. Generally, Depositary Receipts in registered form are designed
for use in the U.S. securities market and Depositary Receipts in bearer form
are designed for use in securities markets outside the United States.
Depositary Receipts may not necessarily be denominated in the same currency
as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have
its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be involved directly in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs generally are similar, in some cases it may be easier
to obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs
and there may not be a correlation between such information and the market
value of the Depositary Receipts. Depositary Receipts also involve the
risks of other investments in foreign securities, as discussed below. For
purposes of the Fund's investment policies, the Fund's investments in
Depositary Receipts will be deemed to be investments in the underlying
securities.
Convertible Securities. Convertible securities are fixed-income
securities that may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities have general
characteristics similar to both fixed-income and equity securities.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying common stocks and, therefore, also will react to variations in
the general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same
issuer.
As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher yields than
common stocks. Of course, like all fixed-income securities, there can be no
assurance of current income because the issuers of the convertible
securities may default on their obligations. Convertible securities,
however, generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the potential for
capital appreciation. A convertible security, in addition to providing
fixed income, offers the potential for capital appreciation through the
conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance
of capital appreciation, however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in the right of payment to
all equity securities, and convertible preferred stock is senior to common
stock, of the same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar non-
convertible securities.
Debt Securities. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. In
general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying degrees of quality and varying levels of sensitivity
to changes in interest rates. Longer-term bonds are generally more
sensitive to interest rate changes than short-term bonds.
Privatizations. The Fund may invest in privatizations. The Fund
believes that foreign government programs of selling interests in
government-owned or controlled enterprises ("privatizations") may represent
opportunities for significant capital appreciation. The ability of U.S.
entities, such as the Fund, to participate in privatizations may be limited
by local law, or the terms for participation may be less advantageous than
for local investors. There can be no assurance that privatization programs
will be available or successful.
When-Issued and Forward Commitment Transactions. The Fund may
purchase when-issued securities and enter into other forward commitments to
purchase or sell securities. The value of securities purchased on a when-
issued or forward commitment basis may decline between the purchase date and
the settlement date.
Warrants. Because a warrant does not carry with it the right to
dividends or voting rights with respect to the securities that the warrant
holder is entitled to purchase, and because it does not represent any rights
to the assets of the issuer, a warrant may be considered more speculative
than certain other types of investments. In addition, the value of a
warrant does not necessarily change with the value of the underlying
securities and a warrant ceases to have value if it is not exercised prior
to its expiration date.
Preferred Stock. Preferred stocks, like debt obligations, are
generally fixed-income securities. Shareholders of preferred stocks
normally have the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, but do not participate in other
amounts available for distribution by the issuing corporation. Dividends on
the preferred stock may be cumulative, and all cumulative dividends usually
must be paid prior to common shareholders receiving any dividends.
Preferred stock dividends must be paid before common stock dividends and,
for that reason, preferred stocks generally entail less risk than common
stocks. Upon liquidation, preferred stocks are entitled to a specified
liquidation preference, which is generally the same as the par or stated
value, and are senior in right of payment to common stock. Preferred stocks
are, however, equity securities in the sense that they do not represent a
liability of the issuer and, therefore, do not offer as great a degree of
protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated
in right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of
the same issuer.
Foreign Investments. The Fund may purchase international investments, which
are subject to a variety of risks of loss beyond the risks ordinarily
associated with investing in the U.S. and other mature securities markets.
The discussion of risks set forth below refers to the better understood
risks of investing in less developed markets but is not intended, and should
not be assumed, to be a complete list of all possible risks. Although the
Board of Trustees, the Adviser, and the Custodian and sub-custodians each
review and attempt to minimize the risks of which they are aware, and even
if neither the Trustees nor any service provider to the Fund has failed to
fulfill its duties to the Fund, it is entirely possible that the Fund may
lose some or all of its investment in one or more securities in an emerging
or politically unstable market. An example of such a loss may involve a
fraud in a foreign market not reasonably preventable by the service
providers, notwithstanding oversight by the Trustees and procedures of each
service provider generally considered to be adequate to prevent such a
fraud. In any such case, it is likely that the Fund would not be reimbursed
for its loss.
Investing in foreign companies involves certain special risks and considerations
typically not associated with investing in U.S. companies. These risks and
considerations include differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations; political instability
which could affect U.S. investment in foreign countries and potential
restrictions on the flow of international capital. Also, because the stocks of
foreign companies frequently are denominated in foreign currencies, and because
the Fund may hold uninvested reserves in bank deposits in foreign currencies
temporarily, the Fund may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies. The investment policies
of the Fund permit the Fund to enter into forward foreign currency exchange
contracts in order to hedge its holdings and commitments against changes in the
level of future currency rates. Such contracts involve an obligation to purchase
or sell a specific currency at a future date at a price set at the time of the
contract.
In addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United States.
Moreover, the dividend or interest income or gain from the Fund's foreign
portfolio securities may be subject to foreign withholding or other foreign
taxes, thus reducing the net amount of income available for distribution to the
Fund's shareholders. Further, foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable with those applicable to U.S. companies.
There generally is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States. In addition,
there is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect U.S.
investments in foreign countries. Further, the Fund may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
Although the Fund will endeavor to achieve most favorable execution costs in its
portfolio transactions, fixed commissions on many foreign stock exchanges
generally are higher than negotiated commissions on U.S. exchanges. Certain
foreign governments levy withholding taxes on dividend and interest income and,
in some cases, also tax certain capital gains. Although in some countries a
portion of these taxes are reduced under applicable income tax treaties and/or
are recoverable, the non-recovered portion of foreign taxes will reduce the
income received or returned from foreign companies the stock or securities of
which are held by the Fund.
Brokerage commissions, custodial services, and other services relating to
investment in foreign securities markets generally are more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Developing countries also may impose restrictions on
the Fund's ability to repatriate investment income or capital. Even where there
is no outright restriction on repatriation of investment income or capital, the
mechanics of repatriation may affect certain aspects of the operations of the
Fund.
In addition, excess cash invested with depository institutions
domiciled outside the continental United States, as with any offshore
deposits, may be subject to both sovereign actions in the jurisdiction of
the depository institution and sovereign actions in the jurisdiction of the
currency, including but not limited to freeze, seizure, and diminution. The
risk associated with the repayment of principal and payment of interest on
such instruments by the institution with whom the deposit is ultimately
placed will be borne exclusively by the Fund.
Foreign investment risks are often heightened for investments in
certain Eastern European countries as well as other developing or emerging
markets, where the risks include the possibility that such countries may
revert to a centrally planned economy. Securities of many issuers in
emerging markets may be less liquid and more volatile than securities of
comparable issuers in developed markets. Clearance and settlement
procedures are different in some emerging markets and at times settlements
have not kept pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result
in temporary periods when a portion of the assets of the Fund is uninvested
and no return is earned thereon. The inability of the Fund to make intended
security purchases due to settlement problems could cause the Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in the value of those securities, or, if the
Fund had entered into a contract to sell a security, in possible liability
to the purchaser.
Some of the currencies in emerging markets have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies. Devaluations in the currencies in which the
Fund's portfolio securities are denominated may have a detrimental impact on the
Fund. Some countries also may have managed currencies which are not free
floating against the U.S. dollar. In addition, there is a risk that certain
countries may restrict the free conversion of their currencies into other
currencies. Further, certain currencies may not be traded internationally.
Certain developing countries face serious exchange constraints.
Governments of some developing countries exercise substantial influence over
many aspects of the private sector. In some countries, the government owns or
controls many companies, including the largest in the country. As such,
government actions in the future could have a significant effect on economic
conditions in developing countries in these regions, which could affect private
sector companies, the Fund and the value of its securities. Furthermore, certain
developing countries are among the largest debtors to commercial banks and
foreign governments and are dependent on foreign economic assistance. Trading in
debt obligations issued or guaranteed by such governments or their agencies and
instrumentalities involves a high degree of risk.
In many emerging markets, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. The foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid and
subject to greater price volatility than those in the United States.
Throughout the last decade many emerging markets have experienced, and continue
to experience, high rates of inflation. In certain countries, inflation has
accelerated rapidly at times to hyper inflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on the Fund's non-dollar denominated securities.
Securities traded in certain emerging securities markets may be subject to risks
due to the inexperience of financial intermediaries, the lack of modern
technology and the lack of a sufficient capital base to expand business
operations. Furthermore, there can be no assurance that the Fund's investments
in certain developing countries would not be expropriated, nationalized or
otherwise confiscated. Finally, any change in the leadership or policies of
developing countries, or the countries that exercise a significant influence
over those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies and adversely affect existing investment
opportunities.
Eastern Europe. Since the fall of the Berlin wall in 1989, the
Eastern European region has received a cumulative Foreign Direct Investment
of over US$ 50bn. Average growth rate has the potential to deliver 4-5% per
year in a low inflation environment. Helped by the convergence toward core
Europe, economic and institutional reforms are providing macroeconomic and
political stability. As a result, over 70% of the Regions economy is now
owned by the private sector.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies investing in
securities in which the Fund can invest, provided that such investment
companies invest in portfolio securities in a manner consistent with the
Fund's investment objective and policies. Applicable provisions of the 1940
Act require that the Fund limit its investments so that, as determined
immediately after a securities purchase is made: (a) not more than 10% of
the value of the Fund's total assets will be invested in the aggregate in
securities of investment companies as a group; (b) the Fund and any company
or companies controlled by the Fund will not own together more than 3% of
the total outstanding shares of any one investment company at the time of
purchase; and (c) the Fund will not invest more than 5% of its total assets
in any one investment company. As a shareholder of another investment
company, the Fund would bear its pro rata portion, along with other
shareholders, of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Strategic Transactions. The Adviser does not, as a general rule, intend to
regularly enter into strategic transactions for the purpose of reducing
currency and market risk, for two reasons. First, since financial
derivatives in Eastern European markets currently must be tailor-made to the
Fund's specifications, they are extremely costly and illiquid instruments,
and as such do not offer a cost-effective way to reduce currency and market
risk. Second, the Fund is intended for investors with a long-term
investment horizon and it is the Adviser's view that any short-term losses
due to fluctuations in local currencies or stock market values will be
compensated over the long term by the capital appreciation of the portfolio
securities. Notwithstanding the foregoing, the Adviser may, from time to
time as circumstances dictate, engage in strategic transactions as described
below.
Illiquid Securities. The Fund may invest up to 15% of its net assets
in illiquid securities. The term "illiquid securities" for this purpose
means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the price at which the Fund has
valued the securities and includes, among other securities, repurchase
agreements maturing in more than seven days, certain restricted securities
and securities that are otherwise not freely transferable. Restricted
securities may be sold only in privately negotiated transactions or in
public offerings with respect to which a registration statement is in effect
under the Securities Act of 1933, as amended ("1933 Act"). Illiquid
securities acquired by the Fund may include those that are subject to
restrictions on transferability contained in the securities laws of other
countries. Securities that are freely marketable in the country where they
are principally traded, but that would not be freely marketable in the
United States, will not be considered illiquid. Where registration is
required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including securities
sold in private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments often are
restricted securities because the securities are sold in transactions not
requiring registration. Institutional investors generally will not seek to
sell these instruments to the general public, but instead will often depend
either on an efficient institutional market in which such unregistered
securities can be resold readily or on an issuer's ability to honor a demand
for repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions does
not necessarily mean that such investments are illiquid.
Rule 144A under the 1933 Act establishes a safe harbor from the
registration requirements of the 1933 Act for resales of certain securities
to qualified institutional buyers. Institutional markets for restricted
securities sold pursuant to Rule 144A in many cases provide both readily
ascertainable values for restricted securities and the ability to liquidate
an investment to satisfy share redemption orders. Such markets might
include automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing Rule 144A-
eligible restricted securities, however, could affect adversely the
marketability of such portfolio securities and result in the Fund's
inability to dispose of such securities promptly or at favorable prices.
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines approved
by the Board. The Adviser takes into account a number of factors in
reaching liquidity decisions, including, but not limited to: (i) the
frequency of trades for the security, (ii) the number of dealers that quote
prices for the security, (iii) the number of dealers that have undertaken to
make a market in the security, (iv) the number of other potential
purchasers, and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how bids are solicited and the
mechanics of transfer). The Adviser monitors the liquidity of restricted
securities in the Fund's portfolio and reports periodically on such
decisions to the Board. The Board monitors the liquidity determinations
made by the Adviser. In addition, the value of securities for which no
market quotations are readily available (including restricted securities) is
determined by the Board after considering all relevant information. All
liquidity and valuation procedures are reviewed periodically to ensure their
continued appropriateness and adequacy in light of changing circumstances.
Hedging and Risk Management Practices. In order to hedge against
foreign currency exchange rate risks, the Fund may enter into forward
foreign currency exchange contracts ("forward contracts") and foreign
currency futures contracts, as well as purchase put or call options on
foreign currencies, as described below. The Fund also may conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market.
The Fund also may purchase other types of options and futures and may,
in the future, write covered options, as described below and in the
Prospectus.
Forward Contracts. The Fund may enter into forward contracts to attempt to
minimize the risk from adverse changes in the relationship between the U.S.
dollar and foreign currencies. A forward contract, which is individually
negotiated and privately traded by currency traders and their customers,
involves an obligation to purchase or sell a specific currency for an
agreed-upon price at a future date.
The Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in
a foreign currency or is expecting a dividend or interest payment in order
to "lock in" the U.S. dollar price of a security, dividend or interest
payment. When a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
contract to sell an amount of that foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
contract to buy that currency for a fixed dollar amount.
In connection with the Fund's forward contract purchases, the Fund's
custodian will maintain in a segregated account cash or liquid assets with a
value equal to the amount of the Fund's purchase commitments. Segregated
assets used to cover forward contracts will be marked to market on a daily
basis. While these contracts presently are not regulated by the Commodity
Futures Trading Commission ("CFTC"), the CFTC may regulate them in the
future, and limit the ability of the Fund to achieve potential gains from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance by the Fund than if it had not entered into such
contracts. The Fund generally will not enter into a forward foreign
currency exchange contract with a term greater than one year.
While transactions in forward contracts may reduce certain risks, such
transactions themselves entail certain other risks. Thus, while the Fund
may benefit from the use of hedging positions, unanticipated changes in
currency exchange rates may result in a poorer overall performance for the
Fund than if it had not entered into any hedging positions. If the
correlation between a hedging position and portfolio position which is
intended to be protected is imperfect, the desired protection may not be
obtained, and the Fund may be exposed to risk of financial loss.
Perfect correlation between the Fund's hedging positions and portfolio
positions may be difficult to achieve because hedging instruments in many
foreign countries are not yet available. In addition, it is not possible to
hedge fully against currency fluctuations affecting the value of securities
denominated in foreign currencies because the value of such securities is
likely to fluctuate as a result of independent factors not related to
currency fluctuations.
Futures Contracts and Options on Futures Contracts. To hedge against
movements in interest rates, securities prices or currency exchange rates,
the Fund may purchase and sell various kinds of futures contracts and
options on futures contracts. The Fund also may enter into closing purchase
and sale transactions with respect to any such contracts and options.
Futures contracts may be based on various securities (such as U.S.
Government securities), securities indices, foreign currencies and other
financial instruments and indices.
The Fund will file a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the CFTC and the
National Futures Association, which regulate trading in the futures markets,
before engaging in any purchases or sales of futures contracts or options on
futures contracts. Pursuant to Section 4.5 of the regulations under the
Commodity Exchange Act, the notice of eligibility will include the
representation that the Fund would use futures contracts and related options
for bona fide hedging purposes within the meaning of the CFTC regulations,
provided that the Fund might hold positions in futures contracts and related
options that do not fall within the definition of bona fide hedging
transactions if the aggregate initial margin and premiums required to
establish such positions would exceed 5% of the Fund's net assets (after
taking into account unrealized profits and unrealized losses on any such
positions) and that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded from such 5%.
The Fund will attempt to determine whether the price fluctuations in
the futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund
or which it expects to purchase. The Fund's futures transactions generally
will be entered into only for traditional hedging purposes, i.e., futures
contracts will be sold to protect against a decline in the price of
securities or currencies and will be purchased to protect the Fund against
an increase in the price of securities it intends to purchase (or the
currencies in which they are denominated). All futures contracts entered
into by the Fund are traded on U.S. exchanges or boards of trade licensed
and regulated by the CFTC or on foreign exchanges.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting or "closing" purchase
or sale transactions, which may result in a profit or a loss. While the
Fund's futures contracts on securities or currencies will usually be
liquidated in this manner, the Fund may make or take delivery of the
underlying securities or currencies whenever it appears economically
advantageous. A clearing corporation associated with the exchange on which
futures on securities or currencies are traded guarantees that, if still
open, the sale or purchase will be performed on the settlement date.
By using futures contracts to hedge its positions, the Fund seeks to
establish more certainty then would otherwise be possible with respect to
the effective price, rate of return or currency exchange rate on portfolio
securities or securities that the Fund proposes to acquire. For example,
when interest rates are rising or securities prices are falling, the Fund
can seek, through the sale of futures contracts, to offset a decline in the
value of its current portfolio securities. When rates are falling or prices
are rising, the Fund, through the purchase of futures contracts, can attempt
to secure better rates or prices than might later be available in the market
with respect to anticipated purchases. Similarly, the Fund can sell futures
contracts on a specified currency to protect against a decline in the value
of such currency and its portfolio securities which are denominated in such
currency. The Fund can purchase futures contracts on a foreign currency to
fix the price in U.S. dollars of a security denominated in such currency
that the Fund has acquired or expects to acquire. Loss from investing in
futures transactions by the Fund is potentially unlimited.
As part of its hedging strategy, the Fund also may enter into other
types of financial futures contracts if, in the opinion of the Adviser,
there is a sufficient degree of correlation between price trends for the
Fund's portfolio securities and such futures contracts. Although under some
circumstances prices of securities in the Fund's portfolio may be more or
less volatile than prices of such futures contracts, the Adviser will
attempt to estimate the extent of this difference in volatility based on
historical patterns and to compensate for it by having the Fund enter into a
greater or lesser number of futures contracts or by attempting to achieve
only a partial hedge against price changes affecting the Fund's securities
portfolio. When hedging of this character is successful, any depreciation
in the value of portfolio securities can be substantially offset by
appreciation in the value of the futures position. However, any
unanticipated appreciation in the value of the Fund's portfolio securities
could be offset substantially by a decline in the value of the futures
position.
The acquisition of put and call options on futures contracts gives the
Fund the right (but not the obligation), for a specified price, to sell or
purchase the underlying futures contract at any time during the option
period. Purchasing an option on a futures contract gives the Fund the
benefit of the futures position if prices move in a favorable direction, and
limits its risk of loss, in the event of an unfavorable price movement, to
the loss of the premium and transaction costs.
The Fund may terminate its position in an option contract by selling
an offsetting option of the same series. There is no guarantee that such a
closing transaction can be effected. The Fund's ability to establish and
close out positions on such options is dependent upon a liquid market.
The Fund will engage in transactions in futures contracts and related
options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code of 1986, as amended, for
maintaining its qualification as a regulated investment company for federal
income tax purposes.
Currency Transactions. When the Fund needs to convert assets denominated in
one currency to a different currency, it normally conducts foreign currency
exchange transactions on a spot or cash basis at the prevailing rate in the
currency exchange market. In addition, the Fund may engage in the following
strategic currency transactions: (1) entering into privately traded forward
foreign currency exchange contracts, (2) purchasing and selling exchange
traded currency futures contracts and options on futures and (3) purchasing
and writing exchange traded and OTC options on currency. Forward contracts
and futures contracts create an obligation (and corresponding right) to
purchase or sell a specified currency at an agreed price at a future date.
Options on currency futures give the purchaser the right to assume a
position in the underlying futures contract. Call and put options on
currency give the purchaser the right to purchase or sell a specified
currency at a designated exercise price by exercising the option before it
expires.
The Fund will enter into currency contracts for non-speculative
purposes. For example, the Fund may use currency contracts to "lock in" the
U.S. dollar price of a security that the Fund has contracted to purchase or
sell. In addition, the Fund may use contracts involving the sale of
currency to hedge against a decline in the value of portfolio securities
denominated in that currency if the Adviser determines that there is a
pattern of correlation between the two currencies. All forward and futures
contracts involving the purchase of currency and all options written by the
Fund will be covered by maintaining cash or liquid assets in a segregated
account.
The Fund's success in using currency contracts will usually depend on
the Adviser's ability to forecast exchange rate movements correctly. If
exchange rates move in an unexpected direction, the Fund may not achieve the
intended benefits of, or may realize losses on, a currency contract.
Options on Securities, Securities Indices and Currencies. The Fund
may purchase put and call options on securities in which it has invested, on
foreign currencies represented in its portfolio and on any securities index
based in whole or in part on securities in which the Fund may invest. The
Fund also may enter into closing sales transactions in order to realize
gains or minimize losses on options it has purchased.
The Fund normally will purchase call options in anticipation of an
increase in the market value of securities of the type in which it may
invest or a positive change in the currency in which such securities are
denominated. The purchase of a call option would entitle the Fund, in
return for the premium paid, to purchase specified securities or a specified
amount of a foreign currency at a specified price during the option period.
The Fund may purchase and sell options traded on U.S. and foreign
exchanges. Although the Fund will generally purchase only those options for
which there appears to be an active secondary market, there can be no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. For some options, no secondary
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that the
Fund would have to exercise its options in order to realize any profit and
would incur transaction costs upon the purchase or sale of the underlying
securities.
Secondary markets on an exchange may not exist or may not be liquid
for a variety of reasons including: (i) insufficient trading interest in
certain options; (ii) restrictions on opening transactions or closing
transactions imposed by an exchange; (iii) trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or
series of options; (iv) unusual or unforeseen circumstances which interrupt
normal operations on an exchange; (v) inadequate facilities of an exchange
or the Options Clearing Corporation to handle current trading volume at all
times; or (vi) discontinuance in the future by one or more exchanges for
economic or other reasons, of trading of options (or of a particular class
or series of options), in which event the secondary market on that exchange
(or in that class or series of options) would cease to exist, although
outstanding options on that exchange that had been issued by the Options
Clearing Corporation as a result of trades on that exchange would continue
to be exercisable in accordance with their terms.
Although the Fund does not currently intend to do so, it may, in the
future, write (i.e., sell) covered put and call options on securities,
securities indices and currencies in which it may invest. A covered call
option involves the Fund's giving another party, in return for a premium,
the right to buy specified securities owned by the Fund at a specified
future date and price set at the time of the contract. A covered call
option serves as a partial hedge against the price decline of the underlying
security. However, by writing a covered call option, the Fund gives up the
opportunity, while the option is in effect, to realize gain from any price
increase (above the option exercise price) in the underlying security. In
addition, the Fund's ability to sell the underlying security is limited
while the option is in effect unless the Fund effects a closing purchase
transaction.
The Fund also may write covered put options that give the holder of
the option the right to sell the underlying security to the Fund at the
stated exercise price. The Fund will receive a premium for writing a put
option but will be obligated for as long as the option is outstanding to
purchase the underlying security at a price that may be higher than the
market value of that security at the time of exercise. In order to "cover"
put options it has written, the Fund will cause its custodian to segregate
cash, cash equivalents, U.S. Government securities or other liquid
securities with at least the value of the exercise price of the put options.
In segregating such assets, the custodian either deposits such assets in a
segregated account or separately identifies such assets and renders them
unavailable for investment. The Fund will not write put options if the
aggregate value of the obligations underlying the put options exceeds 25% of
the Fund's total assets.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the
facilities of the Options Clearing Corporation inadequate, and result in the
institution by an exchange of special procedures that may interfere with the
timely execution of the Fund's orders.
While transactions in forward contracts, options, futures contracts
and options on futures (i.e., "hedging positions") may reduce certain risks,
such transactions themselves entail certain other risks. Thus, while the
Fund may benefit from the use of hedging positions, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in a
poorer overall performance for the Fund than if it had not entered into any
hedging positions. If the correlation between a hedging position and
portfolio position which is intended to be protected is imperfect, the
desired protection may not be obtained, and the Fund may be exposed to risk
of financial loss.
Perfect correlation between the Fund's hedging positions and portfolio
positions may be difficult to achieve because hedging instruments in many
foreign countries are not yet available. In addition, it is not possible to
hedge fully against currency fluctuations affecting the value of securities
denominated in foreign currencies because the value of such securities is
likely to fluctuate as a result of independent factors not related to
currency fluctuations.
Temporary Investments. As determined by the Adviser, for temporary
defensive purposes when market conditions warrant, the Fund may invest up to
100% of its total assets in the following: (1) high-quality (that is, rated
Prime-1 by Moody's or A-1 or better by S&P or, if unrated, of comparable
quality (as determined by the Adviser), money market securities, denominated
in U.S. dollars or in the currency of any foreign country, issued by
entities organized in the U.S. or any foreign country; (2) short-term (less
than twelve months to maturity) and medium-term (not greater than five years
to maturity) obligations issued or guaranteed by the U.S. Government or the
governments of foreign countries, their agencies or instrumentalities; (3)
finance company and corporate commercial paper, and other short-term
corporate obligations; obligations of banks (including certificates of
deposit, time deposits and bankers' acceptances); and (4) repurchase
agreements with banks and broker-dealers with respect to such securities.
Repurchase Agreements. The Fund may enter into repurchase agreements
with qualified brokers, dealers, banks and other financial institutions
deemed creditworthy by its Adviser. In a repurchase agreement, the Fund
purchases a security and simultaneously commits to resell that security at a
future date to the seller (a qualified bank or securities dealer) at an
agreed upon price plus an agreed upon market rate of interest (itself
unrelated to the coupon rate or date of maturity of the purchased security).
The Fund generally would enter into repurchase transactions to invest cash
reserves and for temporary defensive purposes. Delays or losses could
result if the other party to the agreement defaults or becomes insolvent.
The securities held subject to a repurchase agreement may have stated
maturities exceeding 13 months, but the Adviser currently expects that
repurchase agreements will mature in less than 13 months. The seller under
a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than 101% of the repurchase
price including accrued interest. The Fund's administrator and the Adviser
will mark to market daily the value of the securities purchased, and the
Adviser will, if necessary, require the seller to deposit additional
securities to ensure that the value is in compliance with the 101%
requirement stated above. The Adviser will consider the creditworthiness of
a seller in determining whether the Fund should enter into a repurchase
agreement, and the Fund will only enter into repurchase agreements with
banks and dealers which are determined to present minimal credit risk by the
Adviser under procedures adopted by the Board of Trustees.
In effect, by entering into a repurchase agreement, the Fund is
lending its funds to the seller at the agreed upon interest rate, and
receiving securities as collateral for the loan. Such agreements can be
entered into for periods of one day (overnight repo) or for a fixed term
(term repo). Repurchase agreements are a common way to earn interest income
on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to
repurchase the underlying securities at a time when the value of these
securities has declined, the Fund may incur a loss upon disposition of them.
Default by the seller would also expose the Fund to possible loss because of
delays in connection with the disposition of the underlying obligations. If
the seller of an agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court
may determine that the underlying securities are collateral not within the
control of the Fund and therefore subject to sale by the trustee in
bankruptcy. Further, it is possible that the Fund may not be able to
substantiate its interest in the underlying securities.
Repurchase agreements that do not provide for payment to the Fund
within seven days after notice without taking a reduced price are considered
illiquid securities.
Borrowing and Reverse Repurchase Agreements. The Fund may borrow
money from banks or through reverse repurchase agreements solely for
temporary or emergency (and not for leverage) purposes. The aggregate
amount of such borrowings and reverse repurchase agreements may not exceed
one-third of the Fund's total assets. In a reverse repurchase agreement the
Fund sells a security and simultaneously commits to repurchase that security
at a future date from the buyer. In effect, the Fund is borrowing funds
temporarily at an agreed upon interest rate from the purchaser of the
security, and the sale of the security represents collateral for the loan.
The Fund retains record ownership of the security and the right to receive
interest and principal payments on the security. At an agreed upon future
date, the Fund repurchases the security by remitting an amount equal to the
proceeds previously received, plus interest. In certain types of agreements,
there is no agreed upon repurchase date and interest payments are calculated
daily, often based on the prevailing overnight repurchase rate. These
agreements, which are treated as if reestablished each day, are expected to
provide the Fund with a flexible borrowing tool. Reverse repurchase
agreements are considered to be borrowings by a fund under the Investment
Company Act of 1940, as amended (the "1940 Act").
The Adviser will consider the creditworthiness of the other party in
determining whether the Fund will enter into a reverse repurchase agreement.
Under normal circumstances the Fund will not enter into reverse repurchase
agreements if entering into such agreements would cause, at the time of
entering into such agreements, more than 33 1/3% of the value of its total
assets to be subject to such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Fund at a time
when the value of the securities has increased. Reverse repurchase
agreements also involve the risk that the Fund may not be able to establish
its right to receive the underlying securities.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next
determined after receipt of the purchase order in proper order by the
transfer agent. The Fund and its distributor reserve the right in their
sole discretion (i) to suspend the offering of its shares, (ii) to reject
purchase orders when in the judgment of management such rejection is in the
best interest of the Fund, and (iii) to reduce or waive the minimum for
initial and subsequent investments from time to time.
At the Fund's discretion, shares of the Fund also may be purchased by
exchanging securities acceptable to the Fund. The Fund need not accept any
security offered for exchange unless it is consistent with the Fund's
investment objective and restrictions and is acceptable otherwise to the
Fund. Securities accepted in exchange for shares will be valued in
accordance with the Fund's usual valuation procedures. Investors interested
in making an in-kind purchase of Fund shares must first telephone the
Adviser to advise it of their intended action and obtain instructions for an
in-kind purchase.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange (the
"Exchange") is closed, or trading on the Exchange is restricted as
determined by the Commission, (ii) during any period when an emergency
exists as defined by the rules of the Commission as a result of which it is
not reasonably practicable for the Fund to dispose of securities owned by
it, or fairly to determine the value of its assets, and (iii) for such other
periods as the Commission may permit.
If a shareholder redeems shares of the Fund which have been held
less than six months (including shares to be exchanged), the Fund will
deduct from the proceeds a redemption charge of 1% of the amount of the
redemption. This amount is retained by the Fund to offset the Fund's costs
of purchasing and selling securities. Redemption proceeds may be greater or
less than the shareholder's initial cost depending on the market value of
the securities held by the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Fund will depend upon market
and other conditions and it will not be a limiting factor when the Adviser
believes that portfolio changes are appropriate. Although the portfolio
turnover rate may vary from year to year, the Adviser expects, during normal
market conditions, that the Fund's portfolio turnover rate will not exceed
100%. For the year ended December 31, 1999 and the period April 7, 1998
(commencement of operations) through December 31, 1998, the portfolio
turnover rates were 117% and 91%, respectively.
INVESTMENT LIMITATIONS
The Fund is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the
lesser of: (1) 67% of the voting securities of the Fund present at a meeting
if the holders of more than 50% of the outstanding voting securities of the
Fund are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Fund. The Fund will not:
(1) enter into commodities or commodity contracts, other than financial
and currency futures contracts, options on futures contracts, options on
securities, indices and currency, forward contracts, swaps and other
financial or currency derivative contracts;
(2) purchase or sell real estate (including real estate limited
partnership interests), although it may purchase and sell securities of
companies which deal in real estate and may purchase and sell securities
which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements and money market instruments,
such as bankers acceptances and commercial paper, and selling securities on
a when issued, delayed settlement or forward delivery basis) which are
publicly or privately distributed, (ii) by entering into repurchase
agreements and (iii) through the lending of its portfolio securities;
(4) purchase on margin or sell short except as permitted by the 1940 Act;
(5) with respect to 75% of its total assets, at the time of purchase
invest more than 5% of its total assets or purchase more than 10% of the
outstanding voting securities of the securities of any single issuer (other
than obligations issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities);
(6) issue senior securities, except that the Trust or the Fund may issue
shares of more than one series or class, may borrow money in accordance with
investment limitation (7) below and may enter into reverse repurchase
agreements;
(7) borrow money, except that the Fund may borrow money as a temporary
measure for extraordinary or emergency purposes and may enter into reverse
repurchase agreements in an amount not exceeding 331/3% of its total assets
at the time of the borrowing;
(8) underwrite the securities of other issuers, except to the extent that
the purchase and subsequent disposition of securities may be deemed
underwriting;
(9) acquire any securities of companies within one industry if, as a
result of such acquisition, 25% or more of the value of the Fund's total
assets would be invested in securities of companies within such industry;
other than obligations issued or guaranteed by the U.S. Government, its
agencies, enterprises or instrumentalities.
In addition, as non-fundamental policies, the Fund will not invest
more than 15% of its net assets, at the time of purchase, in illiquid
securities, including repurchase agreements which have maturities of more
than seven days; the Fund will not make additional investments while
borrowings representing more than 5% of the Fund's total assets are
outstanding; and the Fund will not invest for the purpose of exercising
control over management of any company.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of
assets will not constitute a violation of such restriction, except that any
borrowings by the Fund that exceed the limitation set forth in investment
limitation 7 above must be reduced to meet such limitation within the period
required by the 1940 Act (currently three days, not including Sundays and
holidays).
MANAGEMENT OF THE FUND
Board Members and Officers. The business and affairs of the Trust are
managed under the direction of its Board. The Trust's officers, under the
supervision of the Board, manage the day to day operations of the Trust.
The Board Members set broad policies for the Trust and choose its officers.
The following is a list of the Board Members and officers of the Trust and a
brief statement of their principal occupations during the past five years.
Name, Address and Position
Age
Principal Occupation During Past
Five Years
Jean G. Pilloud*, President
and Chairman
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
56
Senior Manager of Pictet & Cie.
Jean-Franois Demole* ,
Trustee
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
38
Partner of Pictet & Cie since
1998; CEO of Pictet (Canada) & Co.
Ltd. From 1994-1997.
Jeffrey P. Somers,* Trustee
Morse, Barnes-Brown &
Pendleton
1601 Trapelo Road
Reservoir Place
Waltham, MA 02154
57
Officer, Director and Stockholder
of Morse, Barnes-Brown & Pendleton
(law firm); Associate lawyer and
Partner, Gadsby & Hannah, prior to
February 1995.
Bruce W. Schnitzer, Trustee
Wand Partners, Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
55
Chairman of the Board of Wand
Partners, Inc.; Director, PennCorp
Financial Group, AMRESCO Inc., and
Nestor, Inc.
David J. Callard, Trustee
Wand Partners, Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
61
President, Wand Partners, Inc.;
Director, Information Management
Associates, Inc., Sky Mall, Inc.
and iGo Corporation.
Gail A. Hanson, Secretary
PFPC Inc.
101 Federal Street
Boston, MA 02110
58
Vice President, PFPC Inc. Ms.
Hanson has been employed by PFPC
Inc. (formerly known as First Data
Investor Services Group, Inc.)
since September 1994. Previously,
she was employed as an Associate at
Bingham, Dana & Gould prior to
1994.
William J. Baltrus,
Treasurer
PFPC Inc.
3200 Horizon Drive
King of Prussia, PA 19406
32
Director Client Services at PFPC
Inc. (financial services) from
September 1998 to present. Manager
Corporate & Blue Sky Compliance at
First Data Investor Services Group,
Inc., formerly FPS Services, Inc.
(financial services) from August
1994 to September 1998. Corporate
Compliance Administrator at FPS
Services, Inc. (financial services)
from April 1994 to August 1994.
Account Manager at FPS Services,
Inc. (financial services) from July
1991 to April 1994.
Remuneration of Board Members. The Trust pays each Board member (except
those employed by the Adviser or its affiliates) an annual fee of $5,000
plus $500 for each Board and committee meeting attended and out-of-pocket
expenses incurred in attending such meetings.
COMPENSATION TABLE
The following table sets forth the compensation paid to the
Trustees for the Trust for the fiscal year ended December 31, 1999.
Compensation is not paid to any officers of the Trust by the Fund. Further,
the Trust does not provide any pension or retirement benefits to its
Trustees and officers.
NAME OF PERSON AND
POSITION
AGGREGATE
COMPENSATION
FROM THE TRUST
TOTAL
COMPENSATION
FROM THE TRUST
AND COMPLEX PAID
TO TRUSTEES
David J. Callard
Trustee
$13,250
$13,250
Jean-Franois
Demole
Trustee
$0
$0
Jean G. Pilloud
Trustee
$0
$0
Bruce W. Schnizter
Trustee
$8,750
$8,750
Jeffrey P. Somers
Trustee
$12,250
$12,250
Control Persons and Principal Holders of Securities
As of April 7, 2000, the following entities owned 5% or more of the
outstanding shares of the Fund:
Richard T. Peery 34.49%
2560 Mission College Blvd #101
Santa Clara, CA 95054
John Arrilliga 22.94%
2560 Mission College Blvd #101
Santa Clara, CA 95054
Bessemer Trust Company 17.24%
100 Woodbridge Center Drive
Woodbridge, NJ 07095
Richard Peery 11.55%
2560 Mission College Blvd
Santa Clara, CA 95054
Mellon Bank (East). 5.73%
610 W. Germantown Pike
Plymouth Meeting, PA 19462
As of April 7, 2000, the Trustees and officers of the Trust owned
4.63% of the outstanding shares of the Fund.
CODE OF ETHICS
The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the 1940 Act. The Funds Code of Ethics permits Fund
personnel to invest in securities for their own accounts, but requires
compliance with the Code's pre-clearance requirements (with certain
exceptions). In addition, the Funds Code of Ethics provides for trading
"blackout periods" that prohibit trading by personnel within periods of
trading by the Fund in the same security. The Funds Code of Ethics also
prohibits short term trading profits. The Code requires prior approval with
respect to purchases of securities in private placements and personal
investment in initial public offerings.
The Funds adviser, Pictet International Management Limited, has also
adopted a Code of Ethics. The Code of Ethics allows personnel to invest in
securities for their own accounts, but requires compliance with the Code's
pre-clearance requirements and other restrictions including "blackout
periods" and minimum holding periods, subject to limited exceptions. The
Code requires prior approval for purchases of securities in private
placements and personal investment in initial public offerings.
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust, on behalf of the Fund, has entered into an investment
advisory agreement with Pictet International Management Limited. Subject to
the control and supervision of the Trust's Board and in conformance with the
stated investment objective and policies of the Fund, the Adviser manages
the investment and reinvestment of the assets of the Fund. The Adviser's
advisory and portfolio transaction services also include making investment
decisions for the Fund, placing purchase and sale orders for portfolio
transactions and employing professional portfolio managers and security
analysts who provide research services to the Fund.
As noted in the Prospectus, the Adviser is entitled to receive a
fee from the Fund for its services, calculated daily and payable monthly, at
the annual rate of 1.50% of the Fund's average daily net assets. Currently,
the Adviser voluntarily has agreed not to impose its fees and to reimburse
expenses as may be necessary to assure that the net operating expenses of
the Fund will not exceed 2.00% of the Fund's average daily net assets. For
the year ended December 31, 1999 and the period April 7, 1998 (commencement
of operations) through December 31, 1998 the Fund incurred $24,313 and
$20,711, respectively, in fees for advisory services. For these periods,
the Adviser waived fees and reimbursed expenses in the amounts as follows:
Year
Ended
December
31, 1999
Period
Ended
December
31, 1998
Fees waived
$24,313
$20,711
Expenses reimbursed
$79,131
$79,127
The Adviser, located at Tower 42, Level 37, 25 Old Broad Street, London,
EC2N 1HQ, United Kingdom, is a wholly-owned subsidiary of Pictet (Canada)
and Company Ltd. ("Pictet Canada"). Pictet Canada is a partnership whose
principal activity is investment accounting, custody and securities
brokerage. Pictet Canada has two general partners, Pictet Advisory Services
Overseas and FINGEST, and eight limited partners, each of whom is also a
partner of Pictet & Cie, a Swiss private bank founded in 1805.
Prior to December 1, 1999, administrative services were provided to the Trust by
First Data Investor Services Group, Inc. (Investor Services Group). Effective
December 1, 1999, Investor Services Group became a majority-owned subsidiary of
PNC Bank Corp. As a result of this transaction, Investor Services Group is now
known as PFPC Inc (PFPC). Pursuant to an administration agreement, for the
year ended December 31, 1999 and the period April 7, 1998 (commencement of
operations) through December 31, 1998, the Fund incurred $2,574 and $8,319,
respectively, in fees to PFPC/Investor Services Group for administration
services rendered.
PORTFOLIO TRANSACTIONS
The investment advisory agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to
all transactions for the Fund. The Adviser, may, however, consistent with
the interests of the Fund, select brokers on the basis of the research,
statistical and pricing services they provide to the Adviser. Information
and research received from such brokers will be in addition to, and not in
lieu of, the services required to be performed by the Adviser under the
investment advisory agreement. A commission paid to such brokers may be
higher than that which another qualified broker would have charged for
effecting the same transaction, provided that such commissions are paid in
compliance with the Securities Exchange Act of 1934, as amended, and that
the Adviser determines in good faith that such commission is reasonable in
terms either of the transaction or the overall responsibility of the Adviser
to the Fund and the Adviser's other clients. Brokerage commissions paid by
the Fund for the year ended December 31, 1999 and the period April 7, 1998
(commencement of operations) through December 31, 1998 were $8,176 and
$15,644, respectively. None of these commissions were paid to an
affiliate.
Some securities considered for investment by the Fund may also be
appropriate for other clients of the Adviser. If the purchase or sale of
securities is consistent with the investment policies of the Fund and one or
more of these other clients served by the Adviser and is considered at or
about the same time, transactions in such securities will be allocated among
the Fund and clients in a manner deemed fair and reasonable by the Adviser.
While in some cases this practice could have a detrimental effect on the
price, value or quantity of the security as far as the Fund is concerned, in
other cases it is believed to be beneficial to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax
considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of
the Fund or its shareholders, and the discussion here and in the Prospectus
is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisers with specific reference to their
own tax situation.
The Fund is treated as a separate taxable entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and has elected to be treated
and intends to qualify each year as a regulated investment company.
Qualification as a regulated investment company under the Code requires,
among other things, that the Fund distribute to its shareholders an amount
equal to at least the sum of 90% of its investment company taxable income
and 90% of its tax-exempt interest income (if any) net of certain deductions
for a taxable year. In addition, the Fund must satisfy certain requirements
with respect to the source of its income for each taxable year. At least
90% of the gross income of the Fund for a taxable year must be derived from
dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies,
and other income (including, but not limited to, gains from forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies. The Treasury Department by regulation may exclude
from qualifying income foreign currency gains which are not related directly
to the Fund's principal business of investing in stock or securities. Any
income derived by the Fund from a partnership or trust is treated for this
purpose as derived with respect to its business of investing in stock,
securities or currencies only to the extent that such income is attributable
to items of income which would have been qualifying income if realized by
the Fund in the same manner as by the partnership or trust.
In order to qualify as a regulated investment company, the Fund must
also diversify its holdings so that, at the close of each quarter of its
taxable year (i) at least 50% of the market value of its total (gross)
assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than
10% of the outstanding voting securities of such issuer and (ii) not more
than 25% of the value of its total assets is invested in the securities of
any one issuer (other than United States Government securities and
securities of other regulated investment companies) or two or more issuers
controlled by the Fund and engaged in the same, similar or related trades or
businesses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as a capital gain,
regardless of how long the shareholder has held the Fund's shares. The Fund
will designate such distributions as capital gain distributions in a written
notice mailed to shareholders within 60 days after the close of the Fund's
taxable year. Capital gain distributions may be subject to tax at different
maximum rates for individual (noncorporate) investors, depending upon each
investors tax bracket, the assets from which the Fund realized the gains,
and the Funds holding periods for those assets.
Redemptions and exchanges are taxable events for shareholders that are subject
to tax. Shareholders should consult their own tax advisers with reference to
their individual circumstances to determine whether any particular transaction
in Fund shares is properly treated as a sale for tax purposes, as the following
discussion assumes, and the character of and tax rate applicable to any gains or
losses recognized in such transactions under the new rate structure for capital
gains and losses that was added to the Code by federal tax legislation enacted
in 1997. Shareholders should note that, upon the sale of Fund shares, if the
shareholder has not held such shares for tax purposes for more than six months,
any loss on the sale of those shares will be treated as a long-term capital loss
to the extent of the capital gain distributions received with respect to the
shares. Losses on a redemption or other sale of shares may also be disallowed
under wash sale rules if other shares of the Fund are acquired (including
dividend reinvestments) within a prescribed period.
An individual's net long-term capital gains are taxable at a maximum
effective rate of 20%. Ordinary income of individuals is taxable at a
maximum nominal rate of 39.6%, but because of limitations on itemized
deductions otherwise allowable and the phase-out of personal exemptions, the
maximum effective marginal rate of tax for some taxpayers may be higher.
For corporations, long-term and short-term capital gains and ordinary income
are both taxable at a maximum nominal rate of 35% (although surtax
provisions apply at certain income levels to result in higher effective
marginal rates).
If the Fund retains net capital gain for reinvestment, the Fund may
elect to treat such amounts as having been distributed to shareholders. As
a result, the shareholders would be subject to tax on undistributed net
capital gain, would be able to claim their proportionate share of the
federal income taxes paid by the Fund on such gain as a credit against their
own federal income tax liabilities and would be entitled to an increase in
their basis in their Fund shares.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of
its taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its
shareholders). In such event, dividend distributions would be taxable as
ordinary income to shareholders to the extent of the Fund's current and
accumulated earnings and profits and would be eligible for the dividends-
received deduction for corporations.
Foreign Taxes. Income (including, in some cases, capital gains)
received from sources within foreign countries may be subject to withholding
and other income or similar taxes imposed by such countries. If more than
50% of the value of the Fund's total assets at the close of its taxable year
consists of stock or securities of foreign corporations, the Fund will be
eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and other qualified foreign taxes paid by it. If this
election is made, each taxable shareholder will be required to include in
gross income (in addition to dividends and distributions actually received)
his pro rata share of the qualified foreign taxes paid by the Fund, and will
be entitled either to deduct (as an itemized deduction) his pro rata share
of foreign taxes in computing his taxable income or to use it as a foreign
tax credit against his U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions, but such a shareholder may be eligible to
claim the foreign tax credit (see below). If the Fund makes this election,
each shareholder will be notified within 60 days after the close of the
Fund's taxable year.
Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his or her
foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the Fund's income flows through to its
shareholders. With respect to the Fund, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency gains,
including currency gains from foreign currency denominated debt securities,
receivables and payables, will be treated as ordinary income derived from
U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income passed
through by the Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the
Fund. Foreign taxes may not be deducted in computing alternative minimum
taxable income and the foreign tax credit can be used to offset only 90% of
the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not
eligible to or does not make the election to "pass through" to its
shareholders its foreign taxes, the foreign taxes it pays will reduce
investment company taxable income and the distributions by the Fund will be
treated as United States source income.
The Fund may invest up to 10% of its total assets in the stock of
foreign investment companies. Such companies are likely to be treated as
"passive foreign investment companies" ("PFICs") under the Code. Certain
other foreign corporations, not operating as investment companies, also may
satisfy the PFIC definition. A portion of the income and gains that the
Fund derives from an equity investment in a PFIC may be subject to a non-
deductible federal income tax (including an interest-equivalent amount) at
the Fund level. In some cases, the Fund may be able to avoid this tax by
electing to be taxed currently on its share of the PFIC's income, whether or
not such income actually is distributed by the PFIC or by making an election
(if available) to mark its PFIC investments to market or by otherwise
managing its PFIC investments. The Fund will endeavor to limit its exposure
to the PFIC tax by any available techniques or elections. Because it is not
always possible to identify a foreign issuer as a PFIC in advance of making
the investment, the Fund may incur the PFIC tax in some instances.
Other Tax Matters. Special rules govern the federal income tax
treatment of certain transactions denominated in terms of a currency other
than the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by
the special rules include transactions in foreign currency denominated debt
instruments, foreign currency denominated payables and receivables, foreign
currencies and foreign currency forward contracts. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any other gain or loss on the underlying
transaction (subject to certain netting rules) and, absent an election that
may be available in some cases, generally is taxable as ordinary gain or
loss. Any gain or loss attributable to the foreign currency component of a
transaction engaged in by the Fund which is not subject to the special
currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction. Mark to
market and other tax rules applicable to certain currency forward contracts
may affect the amount, timing and character of the Fund's income, gain or
loss and hence of its distributions to shareholders. It is anticipated that
some of the non-U.S. dollar denominated investments and foreign currency
contracts the Fund may make or enter into will be subject to the special
currency rules described above.
The Fund is required to recognize income currently each taxable year
for federal income tax purposes under the Code's original issue discount
rules in the amount of the unpaid, accrued interest with respect to bonds
structured as zero coupon or deferred interest bonds or pay-in-kind
securities, even though it receives no cash interest until the security's
maturity or payment date. As discussed above, in order to qualify for
treatment as a regulated investment company, the Fund must distribute
substantially all of its income to shareholders. Thus, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash or leverage itself by borrowing cash, so that it may satisfy
the distribution requirement.
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 year ended December 31, 1999, the Fund has elected to defer
capital losses occurring between November 1, 1999 and December 31, 1999 of
$29,835 under these rules. Such losses will be treated as arising on the first
day of the year ending December 31, 2000.
At December 31, 1999, the Fund had capital loss carryforwards of $521,873
and $59,601, expiring in the years 2006 and 2007, respectively.
Provided that it qualifies as a regulated investment company, the Fund
will not be liable for Massachusetts income taxes or franchise taxes.
Exchange control regulations that may restrict repatriation of
investment income, capital, or the proceeds of securities sales by foreign
investors may limit the Fund's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements described above.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their
tax advisers for more information.
Dividends declared in October, November or December payable to shareholders
of record on a specified date in such a month will be deemed to have been
received by the shareholders on December 31, in the event such dividends are
paid during January of the following year.
A 4% nondeductible excise tax is imposed under the Code on regulated
investment companies that fail to currently distribute for each calendar
year specified percentages of their ordinary taxable income and capital gain
net income (excess of capital gains over capital losses) earned in specified
periods. The Fund expects that it generally will make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income for each calendar year to avoid liability for this
excise tax.
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance
companies, and financial institutions. Dividends, capital gain
distributions, and ownership of or gains realized on the redemption
(including an exchange) of Fund shares also may be subject to state and
local taxes. Shareholders should consult their own tax advisers as to the
Federal, state or local tax consequences of ownership of shares of, and
receipt of distributions from, the Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund is effectively connected will be subject to
U.S. federal income tax treatment that is different from that described
above. These investors may be subject to nonresident alien withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on
amounts treated as ordinary dividends from the Fund and, unless an effective
IRS Form W-8 or authorized substitute is on file, to 31% backup withholding
on certain other payments from the Fund. Non-U.S. investors should consult
their tax advisers regarding such treatment and the application of foreign
taxes to an investment in the Fund.
PERFORMANCE CALCULATIONS
The Fund may advertise its average annual total return. The Fund
computes such return by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to
the ending redeemable value of such investment according to the following
formula:
T = [( ERV )1/n - 1]
P
Where: T = average annual total return. ERV = ending redeemable value at the end
of the period covered by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
The Fund computes its aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain
distributions. The ending redeemable value (variable "ERV" in each formula)
is determined by assuming complete redemption of the hypothetical investment
and the deduction of all nonrecurring charges at the end of the period
covered by the computations. The Fund's average annual total return and
aggregate total return do not reflect any fees charged by Institutions to
their clients.
GENERAL INFORMATION
Dividends and Capital Gain Distributions
The Fund's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in
the amount and at the times that generally will avoid both income and the
federal excise tax on undistributed income and gains (see discussion under
"Dividends, Capital Gain Distributions and Taxes" in the Prospectus). The
amounts of any income dividends or capital gain distributions cannot be
predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Fund by an investor may have the effect of reducing the per share net
asset value of the Fund by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in
effect a return of a portion of the purchase price, are subject to income
taxes as set forth in the Prospectus.
Description of Shares and Voting Rights
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may be held personally liable as partners for its obligations under certain
circumstances. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations. The Trust was organized as a Massachusetts business trust on May
23, 1995. Effective April 30, 2000, the Trusts name changed from Panorama Trust
to Pictet Funds. The Declaration of Trust authorizes the Trustees to classify
and reclassify any unissued shares into one or more series and classes of
shares. Currently, the Trust has five series, one of which is the Fund. Each
series currently has only one class of shares. The Trust offers shares of
beneficial interest, $.001 par value, for sale to the public.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share owned and proportionate, fractional votes for
fractional shares held. As of April 7, 2000, Richard T. Peery, Santa Clara, CA
may be deemed to control the Fund by virtue of owning more than 25% of the
outstanding shares of the Fund. Shares of each series are entitled to vote
separately to approve investment advisory agreements or charges in fundamental
investment policies, but vote together on the election of Trustees or selection
of independent accountants.
Under Massachusetts law and the Declaration of Trust, the Trust is not required
and currently does not intend to hold annual meetings of shareholders for the
election of Trustees except as required under the 1940 Act. Meetings of
shareholders for the purpose of electing Trustees normally will not be held
unless less than a majority of the Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a shareholder
meeting for the election of Trustees. Any Trustee may be removed from office
upon the vote of shareholders holding at least two-thirds of the Trust's
outstanding shares at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders upon the written request of
shareholders holding at least 10% of the Trust's outstanding shares. In
addition, shareholders who meet certain criteria will be assisted by the Trust
in communicating with other shareholders in seeking the holding of such meeting.
Shareholder inquiries should be addressed to the Trust at the address
or telephone number stated on the cover page.
Administrative and Transfer Agent Services
PFPC serves as the Trust's administrator, accounting agent and
transfer agent, and in these capacities, supervises the Trust's day-to-day
operations, other than management of the Fund's investments. PFPC is a
majority-owned subsidiary of PNC Bank Corp. For its services as accounting
agent, PFPC is entitled to receive a fee from the Trust computed daily and
payable monthly at the annual rate of .04% of the aggregate average daily
net assets of the Trust, subject to a $50,000 annual minimum from the Fund.
For administrative services, PFPC is entitled to receive $220,000 per annum
from the Trust, allocated among the Fund and other series of the Trust based
on average daily net assets. In addition, PFPC is paid separate
compensation for its services as transfer agent.
PFPC is located at 3200 Horizon Drive, King of Prussia, Pennsylvaina
19406.
Distributor. Effective December 1, 1999, Provident Distributors, Inc. (PDI)
replaced First Data Distributors, Inc. as the Funds distributor. PDI is the
principal underwriter and distributor of shares of the Fund pursuant to a
distribution agreement with the Trust. PDI is located at Four Falls Corporate
Center, West Conshohocken, Pennsylvania 19428.
Custodian. Brown Brothers Harriman & Co., located at 40 Water Street,
Boston, Massachusetts 02109, serves as the custodian of the Trust's assets.
Independent Accountants. PricewaterhouseCoopers LLP, located at 2400
Eleven Penn Center,
Philadelphia, Pennsylvania 19103, serves as independent accountants for the
Trust and audits the Trust's financial statements annually and reviews the
Funds federal tax returns.
Counsel. Hale and Dorr LLP serves as counsel to the Trust.
FINANCIAL STATEMENTS
The Trust's annual report for the year ended December 31, 1999
accompanies this Statement of Additional Information and the Fund's
financial statements, financial highlights and related notes and the report
of independent accountants contained therein are incorporated by reference
into this Statement of Additional Information.
APPENDIX -- DESCRIPTION OF RATINGS AND U.S. GOVERNMENT SECURITIES
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating: Prime-1
("P-1") --judged to be of the best quality. Issuers rated P-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations.
Description of S&P highest commercial papers ratings: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety
regarding timely payment is either overwhelming or very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
The following summarizes the ratings used by Moody's for corporate and municipal
long-term debt:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the bond ranks in the lower end of its generic rating category. Those bonds
in the Aa, A and Baa categories which Moody's believes possess the strongest
investment attributes, within those categories are designated by the symbols
Aa1, A1 and Baa1, respectively.
II. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States Government,
and by various instrumentalities which have been established or sponsored by
the United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Securities issued or guaranteed by federal
agencies and U.S. Government sponsored enterprises or instrumentalities may
or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, an investor must look principally to the agency, enterprise or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency, enterprise or instrumentality does not meet
its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export Import Bank, Farmers Home
Administration, Federal Financing Bank and others. Certain agencies,
enterprises and instrumentalities, such as the Government National Mortgage
Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service
its debt. Debt from certain other agencies, enterprises and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S.
Treasury to purchase certain amounts of their securities to assist the
institution in meeting its debt obligations. Finally, other agencies,
enterprises and instrumentalities, such as the Farm Credit System and the
Federal Home Loan Mortgage Corporation, are federally chartered institutions
under Government supervision, but their debt securities are backed only by
the creditworthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration,
Small Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision.
Instrumentalities issuing or guaranteeing securities include, among others,
Overseas Private Investment Corporation, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate
Credit Banks and the Federal National Mortgage Association.
PICTET GLOBAL EMERGING MARKETS FUND
STATEMENT OF ADDITIONAL INFORMATION
April 30, 2000
This Statement of Additional Information is not a prospectus but
should be read in conjunction with Pictet Funds (the "Trust") Prospectus
for Pictet Global Emerging Markets Fund (the "Fund") dated April 30, 2000
(the "Prospectus"). The financial statements for the Fund for the fiscal
year ended December 31, 1999, are incorporated herein by reference to the
Annual Report to shareholders for the Fund dated December 31, 1999. A copy
of the Fund's Annual Report or Prospectus may be obtained without charge by
calling the Trust at 1-877-470-0103.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in the
Prospectus.
Table of Contents Page
Investment Objective and Policies 2
Purchase of Shares 10
Redemption of Shares 10
Portfolio Turnover 11
Investment Limitations 11
Management of the Fund 13
Code of Ethics 16
Investment Advisory and Other Services 16
Portfolio Transactions 17
Additional Information Concerning Taxes 17
Performance Calculations 22
General Information 22
Financial Statements 24
Appendix A - Description of Ratings and U.S. Government Securities
A-1
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and policies set
forth in the Prospectus:
Emerging Market Countries include those in Latin America, South East
Asia, Africa, Eastern Europe and the Middle East.
Temporary Investments. As determined by the Adviser when market conditions
warrant, the Fund may invest up to 100% of its total assets in the following
high quality (that is, rated Prime-1 by Moody's or A-1 or better by S&P or,
if unrated, of comparable quality as determined by the Adviser) money market
securities, denominated in U.S. dollars or in the currency of any foreign
country, issued by entities organized in the United States or any foreign
country; short-term (less than twelve months to maturity) and medium-term
(not greater than five years to maturity) obligations issued or guaranteed
by the U.S. Government or the governments of foreign countries, their
agencies or instrumentalities; finance company and corporate commercial
paper, and other short-term corporate obligations; obligations of banks
(including certificates of deposit, time deposits and bankers' acceptances);
and repurchase agreements with banks and broker-dealers with respect to such
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
qualified brokers, dealers, banks and other financial institutions deemed
creditworthy by its Adviser. In a repurchase agreement, the Fund purchases
a security and simultaneously commits to resell that security at a future
date to the seller (a qualified bank or securities dealer) at an agreed upon
price plus an agreed upon market rate of interest (itself unrelated to the
coupon rate or date of maturity of the purchased security). Under normal
circumstances, however, the Fund will not enter into repurchase agreements
if entering into such agreements would cause, at the time of entering into
such agreements, more than 20% of the value of its total assets to be
subject to repurchase agreements. Under the Investment Company Act of 1940,
as amended (the "1940 Act"), repurchase agreements are considered to be
loans collateralized by the underlying securities. The Fund generally would
enter into repurchase transactions to invest cash reserves and for temporary
defensive purposes. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
The securities held subject to a repurchase agreement may have stated
maturities exceeding 13 months, but the Adviser currently expects that
repurchase agreements will mature in less than 13 months. The seller under
a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than 101% of the repurchase
price including accrued interest. The Fund's administrator and the Adviser
will mark to market daily the value of the securities purchased, and the
Adviser will, if necessary, require the seller to deposit additional
securities to ensure that the value is in compliance with the 101%
requirement stated above. The Adviser will consider the creditworthiness of
a seller in determining whether the Fund should enter into a repurchase
agreement, and the Fund will enter into repurchase agreements only with
banks and dealers which are determined to present minimal credit risk by the
Adviser under procedures adopted by the Board of Trustees.
In effect, by entering into a repurchase agreement, the Fund is
lending its funds to the seller at the agreed upon interest rate and
receiving securities as collateral for the loan. Such agreements can be
entered into for periods of one day (overnight repo) or for a fixed term
(term repo). Repurchase agreements are a common way to earn interest income
on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to
repurchase the underlying securities at a time when the value of these
securities has declined, the Fund may incur a loss upon disposition of them.
Default by the seller also would expose the Fund to possible loss because of
delays in connection with the disposition of the underlying obligations. If
the seller of an agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court
may determine that the underlying securities are collateral not within the
control of the Fund and therefore subject to sale by the trustee in
bankruptcy. Further, it is possible that the Fund may not be able to
substantiate its interest in the underlying securities.
Repurchase agreements that do not provide for payment to the Fund
within seven days after notice without taking a reduced price are considered
illiquid securities.
Borowing and Reverse Repurchase Agreements. As a temporary measure for
extraordinary or emergency purposes, the Fund may borrow money from banks.
However, the Fund will not borrow money for speculative purposes. The Fund
may enter into reverse repurchase agreements. In a reverse repurchase
agreement, the Fund sells a security and simultaneously commits to
repurchase that security at a future date from the buyer. In effect, the
Fund is borrowing funds temporarily at an agreed upon interest rate from the
purchaser of the security, and the sale of the security represents
collateral for the loan. The Fund retains record ownership of the security
and the right to receive interest and principal payments on the security. At
an agreed upon future date, the Fund repurchases the security by remitting
the proceeds previously received plus interest. In certain types of
agreements, there is no agreed upon repurchase date and interest payments
are calculated daily, often based on the prevailing overnight repurchase
rate. These agreements, which are treated as if reestablished each day, are
expected to provide the Fund with a flexible borrowing tool. Reverse
repurchase agreements are considered to be borrowings by a fund under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Adviser will consider the creditworthiness of the other party in
determining whether the Fund will enter into a reverse repurchase agreement.
Under normal circumstances, the Fund will not enter into reverse repurchase
agreements if entering into such agreements would cause, at the time of
entering into such agreements, more than 33-1/3% of the value of its total
assets to be subject to such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Fund at a time
when the value of the securities has increased. Reverse repurchase
agreements also involve the risk that the Fund may not be able to establish
its right to receive the underlying securities.
"When Issued," "Delayed Settlement," and "Forward Delivery"
Securities. The Fund may purchase and sell securities on a "when issued,"
"delayed settlement" or "forward delivery" basis. "When issued" or "forward
delivery" refers to securities whose terms and indenture are available and
for which a market exists, but which are not available for immediate
delivery. When issued or forward delivery transactions may be expected to
occur one month or more before delivery is due. Delayed settlement is a
term used to describe settlement of a securities transaction in the
secondary market which will occur sometime in the future. No payment or
delivery is made by the Fund in a when issued, delayed settlement or forward
delivery transaction until the Fund receives payment or delivery from the
other party to the transaction. The Fund will maintain a separate account
of cash or liquid assets at least equal to the value of purchase commitments
until payment is made. Such segregated securities will either mature or, if
necessary, be sold on or before the settlement date. Although the Fund
receives no income from the above described securities prior to delivery,
the market value of such securities is still subject to change.
The Fund will engage in when issued transactions to obtain what is considered to
be an advantageous price and yield at the time of the transaction. When the Fund
engages in when issued, delayed settlement or forward delivery transactions, it
will do so for the purpose of acquiring securities consistent with its
investment objective and policies and not for the purpose of speculation. The
Fund's when issued, delayed settlement and forward delivery commitments are not
expected to exceed 25% of its total assets absent unusual market circumstances,
and the Fund will only sell securities on such a basis to offset securities
purchased on such a basis.
Depositary Receipts. The Fund may purchase American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs") (collectively, "Depositary Receipts"). ADRs typically are
issued by a U.S. bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. EDRs and GDRs typically are
issued by foreign banks or trust companies, although they also may be issued
by U.S. banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a United States corporation.
Generally, Depositary Receipts in registered form are designed for use in
the U.S. securities market and Depositary Receipts in bearer form are
designed for use in securities markets outside the United States.
Depositary Receipts may not necessarily be denominated in the same currency
as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have
its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be involved directly in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs generally are similar, in some cases it may be easier
to obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs
and there may not be a correlation between such information and the market
value of the Depositary Receipts. Depositary Receipts also involve the
risks of other investments in foreign securities, as discussed below. For
purposes of the Fund's investment policies, the Fund's investments in
Depositary Receipts will be deemed to be investments in the underlying
securities.
Foreign Investments. The Fund may purchase international investments, which
are subject to a variety of risks of loss beyond the risks ordinarily
associated with investing in the U.S. and other mature securities markets.
The discussion of risks set forth below refers to the better understood
risks of investing in less developed markets but is not intended, and should
not be assumed, to be a complete list of all possible risks. Although the
Board of Trustees, the Adviser, and the Custodian and sub-custodians each
review and attempt to minimize the risks of which they are aware, and even
if neither the Trustees nor any service provider to the Fund has failed to
fulfill its duties to the Fund, it is entirely possible that the Fund may
lose some or all of its investment in one or more securities in an emerging
or politically unstable market. An example of such a loss may involve a
fraud in a foreign market not reasonably preventable by the service
providers, notwithstanding oversight by the Trustees and procedures of each
service provider generally considered to be adequate to prevent such a
fraud. In any such case, it is likely that the Fund would not be reimbursed
for its loss.
Investing in foreign companies involves certain special risks and considerations
typically not associated with investing in U.S. companies. These risks and
considerations include differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations; political instability
which could affect U.S. investment in foreign countries and potential
restrictions on the flow of international capital. Also, because the stocks of
foreign companies frequently are denominated in foreign currencies, and because
the Fund may hold uninvested reserves in bank deposits in foreign currencies
temporarily, the Fund may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies. The investment policies
of the Fund permit the Fund to enter into forward foreign currency exchange
contracts in order to hedge its holdings and commitments against changes in the
level of future currency rates. Such contracts involve an obligation to purchase
or sell a specific currency at a future date at a price set at the time of the
contract.
In addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United States.
Moreover, the dividend or interest income or gain from the Fund's foreign
portfolio securities may be subject to foreign withholding or other foreign
taxes, thus reducing the net amount of income available for distribution to the
Fund's shareholders. Further, foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable with those applicable to U.S. companies.
There generally is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States. In addition,
there is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect U.S.
investments in foreign countries. Further, the Fund may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
Although the Fund will endeavor to achieve most favorable execution costs in its
portfolio transactions, fixed commissions on many foreign stock exchanges
generally are higher than negotiated commissions on U.S. exchanges. Certain
foreign governments levy withholding taxes on dividend and interest income and,
in some cases, also tax certain capital gains. Although in some countries a
portion of these taxes are reduced under applicable income tax treaties and/or
are recoverable, the non-recovered portion of foreign taxes will reduce the
income received or returned from foreign companies the stock or securities of
which are held by the Fund.
Brokerage commissions, custodial services, and other services relating to
investment in foreign securities markets generally are more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Developing countries also may impose restrictions on
the Fund's ability to repatriate investment income or capital. Even where there
is no outright restriction on repatriation of investment income or capital, the
mechanics of repatriation may affect certain aspects of the operations of the
Fund.
In addition, excess cash invested with depository institutions
domiciled outside the continental United States, as with any offshore
deposits, may be subject to both sovereign actions in the jurisdiction of
the depository institution and sovereign actions in the jurisdiction of the
currency, including but not limited to freeze, seizure, and diminution. The
risk associated with the repayment of principal and payment of interest on
such instruments by the institution with whom the deposit is ultimately
placed will be borne exclusively by the Fund.
Foreign investment risks are often heightened for investments in
certain Eastern European countries as well as other developing or emerging
markets, where the risks include the possibility that such countries may
revert to a centrally planned economy. Securities of many issuers in
emerging markets may be less liquid and more volatile than securities of
comparable issuers in developed markets. Clearance and settlement
procedures are different in some emerging markets and at times settlements
have not kept pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result
in temporary periods when a portion of the assets of the Fund is uninvested
and no return is earned thereon. The inability of the Fund to make intended
security purchases due to settlement problems could cause the Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in the value of those securities, or, if the
Fund had entered into a contract to sell a security, in possible liability
to the purchaser.
Some of the currencies in emerging markets have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies. Devaluations in the currencies in which the
Fund's portfolio securities are denominated may have a detrimental impact on the
Fund. Some countries also may have managed currencies which are not free
floating against the U.S. dollar. In addition, there is a risk that certain
countries may restrict the free conversion of their currencies into other
currencies. Further, certain currencies may not be traded internationally.
Certain developing countries face serious exchange constraints.
Governments of some developing countries exercise substantial influence over
many aspects of the private sector. In some countries, the government owns or
controls many companies, including the largest in the country. As such,
government actions in the future could have a significant effect on economic
conditions in developing countries in these regions, which could affect private
sector companies, the Fund and the value of its securities. Furthermore, certain
developing countries are among the largest debtors to commercial banks and
foreign governments and are dependent on foreign economic assistance. Trading in
debt obligations issued or guaranteed by such governments or their agencies and
instrumentalities involves a high degree of risk.
In many emerging markets, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. The foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid and
subject to greater price volatility than those in the United States.
Throughout the last decade many emerging markets have experienced, and continue
to experience, high rates of inflation. In certain countries, inflation has
accelerated rapidly at times to hyper inflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on the Fund's non-dollar denominated securities.
Securities traded in certain emerging securities markets may be subject to risks
due to the inexperience of financial intermediaries, the lack of modern
technology and the lack of a sufficient capital base to expand business
operations. Furthermore, there can be no assurance that the Fund's investments
in certain developing countries would not be expropriated, nationalized or
otherwise confiscated. Finally, any change in the leadership or policies of
developing countries, or the countries that exercise a significant influence
over those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies and adversely affect existing investment
opportunities.
Convertible Securities. Convertible securities are fixed-income
securities that may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities have general
characteristics similar to both fixed-income and equity securities.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying common stocks and, therefore, also will react to variations in
the general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same
issuer.
As fixed-income securities, convertible securities are investments that provide
for a stable stream of income with generally higher yields than common stocks.
Of course, like all fixed-income securities, there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. There can be
no assurance of capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in the right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Warrants. Because a warrant does not carry with it the right to dividends
or voting rights with respect to the securities that the warrant holder is
entitled to purchase, and because it does not represent any rights to the
assets of the issuer, a warrant may be considered more speculative than
certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying securities and
a warrant ceases to have value if it is not exercised prior to its
expiration date.
Preferred Stock. Preferred stocks, like debt obligations, are
generally fixed-income securities. Shareholders of preferred stocks
normally have the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, but do not participate in other
amounts available for distribution by the issuing corporation. Dividends on
the preferred stock may be cumulative, and all cumulative dividends usually
must be paid prior to common shareholders receiving any dividends.
Preferred stock dividends must be paid before common stock dividends and,
for that reason, preferred stocks generally entail less risk than common
stocks. Upon liquidation, preferred stocks are entitled to a specified
liquidation preference, which is generally the same as the par or stated
value, and are senior in right of payment to common stock. Preferred stocks
are, however, equity securities in the sense that they do not represent a
liability of the issuer and, therefore, do not offer as great a degree of
protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated
in right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of
the same issuer.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies investing in
securities in which the Fund can invest, provided that such investment
companies invest in portfolio securities in a manner consistent with the
Fund's investment objective and policies. Applicable provisions of the 1940
Act require that the Fund limit its investments so that, as determined
immediately after a securities purchase is made, (a) not more than 10% of
the value of the Fund's total assets will be invested in the aggregate in
securities of investment companies as a group, (b) the Fund and any company
or companies controlled by the Fund will not own together more than 3% of
the total outstanding shares of any one investment company at the time of
purchase and (c) the Fund will not invest more than 5% of its total assets
in any one investment company. As a shareholder of another investment
company, the Fund would bear, along with other shareholders, its pro rata
portion of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses that
the Fund bears directly in connection with its own operations.
Privatizations. The Fund may invest in privatizations. The Fund believes
that foreign government programs of selling interests in government-owned or
controlled enterprises ("privatizations") may represent opportunities for
significant capital appreciation. The ability of U.S. entities, such as the
Fund, to participate in privatizations may be limited by local law, or the
terms for participation may be less advantageous than for local investors.
There can be no assurance that privatization programs will be available or
successful.
Illiquid Securities. The Fund may invest up to 15% of its net assets
in illiquid securities. The term "illiquid securities" for this purpose
means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund
has valued the securities and includes, among other securities, repurchase
agreements maturing in more than seven days, certain restricted securities
and securities that are otherwise not freely transferable. Restricted
securities may be sold only in privately negotiated transactions or in
public offerings with respect to which a registration statement is in effect
under the Securities Act of 1933, as amended ("1933 Act"). Illiquid
securities acquired by the Fund may include those that are subject to
restrictions on transferability contained in the securities laws of other
countries. Securities that are freely marketable in the country where they
are principally traded, but that would not be freely marketable in the
United States, will not be considered illiquid. Where registration is
required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
In recent years, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
securities sold in private placements, repurchase agreements, commercial
paper, foreign securities and corporate bonds and notes. These instruments
often are restricted securities because the securities are sold in
transactions not requiring registration. Institutional investors generally
will not seek to sell these instruments to the general public, but instead
will often depend either on an efficient institutional market in which such
unregistered securities can be resold readily or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there are
contractual or legal restrictions on resale to the general public or certain
institutions is not determinative of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a safe harbor from the
registration requirements of the 1933 Act for resales of certain securities
to qualified institutional buyers. Institutional markets for restricted
securities sold pursuant to Rule 144A in many cases provide both readily
ascertainable values for restricted securities and the ability to liquidate
an investment to satisfy share redemption orders. Such markets might
include automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing Rule 144A-
eligible restricted securities, however, could affect adversely the
marketability of such portfolio securities and result in the Fund's
inability to dispose of such securities promptly or at favorable prices.
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines approved
by the Board. The Adviser takes into account a number of factors in
reaching liquidity decisions, including, but not limited to (i) the
frequency of trades for the security, (ii) the number of dealers that quote
prices for the security, (iii) the number of dealers that have undertaken to
make a market in the security, (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how bids are solicited and the
mechanics of transfer). The Adviser monitors the liquidity of restricted
securities in the Fund's portfolio and reports periodically on such
decisions to the Board.
Forward Contracts. The Fund may enter into forward foreign currency
exchange contracts ("forward contracts") to attempt to minimize the risk
from adverse changes in the relationship between the U.S. dollar and foreign
currencies. A forward contract, which is individually negotiated and
privately traded by currency traders and their customers, involves an
obligation to purchase or sell a specific currency for an agreed-upon price
at a future date.
The Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in
a foreign currency or is expecting a dividend or interest payment in order
to "lock in" the U.S. dollar price of a security, dividend or interest
payment. When a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
contract to sell an amount of that foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
contract to buy that currency for a fixed dollar amount.
In connection with the Fund's forward contract purchases, the Fund's
custodian will maintain in a segregated account cash or liquid assets with a
value equal to the amount of the Fund's purchase commitments. Segregated
assets used to cover forward contracts will be marked to market on a daily
basis. While these contracts presently are not regulated by the Commodity
Futures Trading Commission ("CFTC"), the CFTC may regulate them in the
future, and limit the ability of the Fund to achieve potential gains from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance by the Fund than if it had not entered into such
contracts. The Fund generally will not enter into a forward foreign
currency exchange contract with a term greater than one year.
While transactions in forward contracts may reduce certain risks, such
transactions themselves entail certain other risks. Thus, while the Fund
may benefit from the use of hedging positions, unanticipated changes in
currency exchange rates may result in a poorer overall performance for the
Fund than if it had not entered into any hedging positions. If the
correlation between a hedging position and portfolio position which is
intended to be protected is imperfect, the desired protection may not be
obtained, and the Fund may be exposed to risk of financial loss.
Perfect correlation between the Fund's hedging positions and portfolio
positions may be difficult to achieve because hedging instruments in many
foreign countries are not yet available. In addition, it is not possible to
hedge fully against currency fluctuations affecting the value of securities
denominated in foreign currencies because the value of such securities is
likely to fluctuate as a result of independent factors not related to
currency fluctuations.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next
determined after receipt of the purchase order in proper order by the
transfer agent.
The Fund and its distributor reserve the right in their sole
discretion (i) to suspend the offering of its shares, (ii) to reject
purchase orders when in the judgment of management such rejection is in the
best interest of the Fund and (iii) to reduce or waive the minimums for
initial and subsequent investments from time to time.
At the Fund's discretion, shares of Fund also may be purchased by
exchanging securities acceptable to the Fund. The Fund need not accept any
security offered for exchange unless it is consistent with the Fund's
investment objective and restrictions and is acceptable otherwise to the
Fund. Securities accepted in exchange for shares will be valued in
accordance with the Fund's usual valuation procedures. Investors interested
in making an in-kind purchase of Fund shares must first telephone the
Adviser to advise it of their intended action and obtain instructions for an
in-kind purchase.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange (the
"Exchange") is closed, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the Commission);
(ii) during any period when an emergency exists as defined by the rules of
the Commission as a result of which it is not reasonably practicable for the
Fund to dispose of securities owned by it, or fairly to determine the value
of its assets and (iii) for such other periods as the Commission may permit.
If a shareholder redeems shares of the Fund which have been held less
than six months (including shares to be exchanged), the Fund will deduct
from the proceeds a redemption charge of 1% of the amount of the redemption.
This amount is retained by the Fund to offset the Fund's costs of purchasing
and selling securities. Redemption proceeds may be greater or less than the
shareholder's initial cost depending on the market value of the securities
held by the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Fund will depend upon market and
other conditions and it will not be a limiting factor when the Adviser
believes that portfolio changes are appropriate. Although the portfolio
turnover rate may vary from year to year, the Adviser expects, during normal
market conditions, that the Fund's portfolio turnover rate will not exceed
100%. For the years ended December 31, 1999, December 31, 1998 and December
31, 1997, the portfolio turnover rates were 126%, 123% and 77%,
respectively.
INVESTMENT LIMITATIONS
The Fund is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the
lesser of (1) 67% of the voting securities of the Fund present at a meeting
if the holders of more than 50% of the outstanding voting securities of the
Fund are present or represented by proxy or (2) more than 50% of the
outstanding voting securities of the Fund. The Fund will not:
(1) enter into commodities or commodity contracts, other than forward
contracts;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may purchase and sell
securities which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements and money market instruments,
including bankers acceptances and commercial paper, and selling securities
on a when issued, delayed settlement or forward delivery basis) which are
publicly or privately distributed and (ii) by entering into repurchase
agreements;
(4) purchase on margin or sell short except as specified above in
investment limitation (1);
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) with respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed by the U.S. Government, its
agencies, enterprises or instrumentalities);
(7) issue senior securities, except that the Trust or the Fund may issue
shares of more than one series or class, may borrow money in accordance with
investment limitation (8) below, purchase securities on a when issued,
delayed settlement or forward delivery basis and enter into reverse
repurchase agreements;
(8) borrow money, except that the Fund may borrow money as a temporary
measure for extraordinary or emergency purposes and may enter into reverse
repurchase agreements in an amount not exceeding 33-1/3% of its total assets
at the time of the borrowing, provided, however, that the Fund will not make
additional investments while borrowings representing more than 5% of the
Fund's total assets are outstanding;
(9) underwrite the securities of other issuers, except to the extent that
the purchase and subsequent disposition of securities may be deemed
underwriting;
(10) invest for the purpose of exercising control over management of any
company; and
(11) acquire any securities of companies within one industry if, as a
result of such acquisition, 25% or more of the value of the Fund's total
assets would be invested in securities of companies within such industry;
provided, however, that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities.
In addition, as non-fundamental policies, the Fund will not (i) invest
more than 15% of the net assets of the Fund, at the time of purchase, in
securities for which there are no readily available markets, including
repurchase agreements which have maturities of more than seven days; (ii)
pledge, mortgage or hypothecate any of its assets to an extent greater than
15% of its total assets at fair market value, except as described in the
Prospectus and this SAI, but the deposit of assets in a segregated account
in connection with the purchase of securities on a when issued, delayed
settlement or forward delivery basis will not be deemed to be pledges of the
Fund's assets for purposes of this investment policy; (iii) invest its
assets in securities of any investment company, except in connection with
mergers, acquisitions of assets or consolidations and except as may
otherwise be permitted by the 1940 Act; (iv) invest more than 5% of the
value of the Fund's net assets in warrants, valued at the lower of cost or
market, including within that amount up to 2% of the value of the Fund's net
assets warrants which are not listed on the New York or American Stock
Exchange (warrants acquired by the Fund in units or attached to securities
may be deemed to be without value); and (v) write or acquire options or
interests in oil, gas or other mineral exploration or development programs.
With regard to non-fundamental policy (iii), the 1940 Act currently
prohibits an investment company from acquiring securities of another
investment company if, as a result of the transaction, the acquiring company
and any company or companies controlled by it would own in the aggregate (i)
more than 3% of the total outstanding voting stock of the acquired company,
(ii) securities issued by the acquired company having an aggregate value in
excess of 5% of the value of the total assets of the acquiring company or
(iii) securities issued by the acquired company and all other investment
companies (other than treasury stock of the acquired company) having an
aggregate value in excess of 10% of the value of the total assets of the
acquiring company. To the extent that the Fund invests in shares of other
investment companies, the Fund's shareholders will be subject to expenses of
such other investment companies, in addition to expenses of the Fund. With
regard to non-fundamental policy (v), the purchase of securities of a
corporation, a subsidiary of which has an interest in oil, gas or other
mineral exploration or development programs, shall not be prohibited by the
limitation.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of
assets will not constitute a violation of such restriction, except that any
borrowings by the Fund that exceed the limitation set forth in investment
limitation (8) above must be reduced to meet such limitation within the
period required by the 1940 Act (currently three days, not including Sundays
and holidays). In addition, the Fund will limit its aggregate holdings of
illiquid assets to 15% of its net assets.
MANAGEMENT OF THE FUND
Board Members and Officers. The business and affairs of the Trust are
managed under the direction of its Board. The Trust's officers, under the
supervision of the Board, manage the day to day operations of the Trust.
The Board Members set broad policies for the Trust and choose its officers.
The following is a list of the Board Members and officers of the Trust and a
brief statement of their principal occupations during the past five years.
Name, Address and Position
Age
Principal Occupation During Past
Five Years
Jean G. Pilloud*, President
and Chairman
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
56
Senior Manager of Pictet & Cie.
Jean-Franois Demole* ,
Trustee
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
38
Partner of Pictet & Cie since
1998; CEO of Pictet (Canada) & Co.
Ltd. From 1994-1997.
Jeffrey P. Somers,* Trustee
Morse, Barnes-Brown &
Pendleton
1601 Trapelo Road
Reservoir Place
Waltham, MA 02154
57
Officer, Director and Stockholder
of Morse, Barnes-Brown & Pendleton
(law firm); Associate lawyer and
Partner, Gadsby & Hannah, prior to
February 1995.
Bruce W. Schnitzer, Trustee
Wand Partners, Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
55
Chairman of the Board of Wand
Partners, Inc.; Director, PennCorp
Financial Group, AMRESCO Inc., and
Nestor, Inc.
David J. Callard, Trustee
Wand Partners, Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
61
President, Wand Partners, Inc.;
Director, Information Management
Associates, Inc., Sky Mall, Inc.
and iGo Corporation.
Gail A. Hanson, Secretary
PFPC Inc.
101 Federal Street
Boston, MA 02110
58
Vice President, PFPC Inc. Ms.
Hanson has been employed by PFPC
Inc. (formerly known as First Data
Investor Services Group, Inc.)
since September 1994. Previously,
she was employed as an Associate at
Bingham, Dana & Gould prior to
1994.
William J. Baltrus,
Treasurer
PFPC Inc.
3200 Horizon Drive
King of Prussia, PA 19406
32
Director Client Services at PFPC
Inc. (financial services) from
September 1998 to present. Manager
Corporate & Blue Sky Compliance at
First Data Investor Services Group,
Inc., formerly FPS Services, Inc.
(financial services) from August
1994 to September 1998. Corporate
Compliance Administrator at FPS
Services, Inc. (financial services)
from April 1994 to August 1994.
Account Manager at FPS Services,
Inc. (financial services) from July
1991 to April 1994.
Remuneration of Board Members. The Trust pays each Board member (except
those employed by the Adviser or its affiliates) an annual fee of $5,000
plus $500 for each Board and Committee meeting attended and out-of-pocket
expenses incurred in attending such meetings.
Compensation Table
The following table sets forth the compensation paid to the Trustees
of the Trust for the year ended December 31, 1999. Compensation is not paid
to any officers of the Trust by the Fund. Further, the Trust does not
provide any pension or retirement benefits to its Trustees and officers.
NAME OF PERSON AND
POSITION
AGGREGATE
COMPENSATION
FROM THE TRUST
TOTAL
COMPENSATION
FROM THE TRUST
AND COMPLEX PAID
TO TRUSTEES
David J. Callard
Trustee
$13,250
$13,250
Jean-Franois
Demole
Trustee
$0
$0
Jean G. Pilloud
Trustee
$0
$0
Bruce W. Schnizter
Trustee
$8,750
$8,750
Jeffrey P. Somers
Trustee
$12,250
$12,250
Control Persons and Principal Holders of Securities
As of April 7, 2000, the following entities owned 5% or more of the
outstanding shares of the Fund:
Mellon Bank Trustee
Dominion Resources Inc. Ret. Plan 24.55%
Room 3346
One Mellon Bank Center
Pittsburgh, PA 15258
The Salvation Army Eastern Territory 13.64%
440 West Nyack Road
West Nyack, NY 10994
The Salvation Army Southern Territory 12.50%
1424 Northeast Expressway
Atlanta, GA 30329
City of Richmond
Richmond Retirement System12.33%
P.O. Box 10252
Richmond, VA 23240
The Salvation Army Central Territory 10.50%
10 West Algonquin Road
Des Plaines, IL 60016
University of Miami 7.10%
250 Ashe Building
Coral Gables, FL 33146
As of April 7, 2000, the Trustees and officers of the Trust owned less
than 1% of the outstanding shares of the Fund.
CODE OF ETHICS
The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the 1940 Act. The Funds Code of Ethics permits Fund
personnel to invest in securities for their own accounts, but requires
compliance with the Code's pre-clearance requirements (with certain
exceptions). In addition, the Funds Code of Ethics provides for trading
"blackout periods" that prohibit trading by personnel within periods of
trading by the Fund in the same security. The Funds Code of Ethics also
prohibits short term trading profits. The Code requires prior approval with
respect to purchases of securities in private placements and personal
investment in initial public offerings.
The Funds adviser, Pictet International Management Limited, has also
adopted a Code of Ethics. The Code of Ethics allows personnel to invest in
securities for their own accounts, but requires compliance with the Code's
pre-clearance requirements and other restrictions including "blackout
periods" and minimum holding periods, subject to limited exceptions. The
Code requires prior approval for purchases of securities in private
placements and personal investment in initial public offerings.
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust, on behalf of the Fund, has entered into an investment
advisory agreement with Pictet International Management Limited. Subject to
the control and supervision of the Trust's Board and in conformance with the
stated investment objective and policies of the Fund, the Adviser manages
the investment and reinvestment of the assets of the Fund. The Adviser's
advisory and portfolio transaction services also include making investment
decisions for the Fund, placing purchase and sale orders for portfolio
transactions and employing professional portfolio managers and security
analysts who provide research services to the Fund.
As noted in the Prospectus, the Adviser is entitled to receive a fee
from the Fund for its services, calculated daily and payable monthly at the
annual rate of 1.25% of the Fund's average daily net assets. Currently, the
Adviser voluntarily has agreed to waive its fees and reimburse expenses to
the extent necessary to assure that the net operating expenses of the Fund
will not exceed 1.70% of the Fund's average daily net assets. For the years
ended December 31, 1999, December 31, 1998 and December 31, 1997, the Fund
incurred $1,723,832, $1,464,171 and $2,569,857, respectively, in fees for
advisory services. For these periods, the Adviser waived fees in the
amounts as follows:
Year
Ended
December
31, 1999
Year
Ended
December
31, 1998
Year
Ended
December
31, 1997
Fees waived
$309,921
$348,985
$294,489
The Adviser, located at located at Tower 42, Level 37, 25 Old Broad
Street, London, EC2N 1HQ, United Kingdom, is a wholly-owned subsidiary of
Pictet (Canada) and Company Ltd. ("Pictet Canada"). Pictet Canada is a
partnership whose principal activity is investment accounting, custody and
securities brokerage. Pictet Canada has two general partners, Pictet
Advisory Services Overseas and FINGEST, and eight limited partners, each of
whom is also a partner of Pictet & Cie, a Swiss private bank founded in
1805.
Prior to December 1, 1999, administrative services were provided to the Trust by
First Data Investor Services Group, Inc. (Investor Services Group). Effective
December 1, 1999, Investor Services Group became a majority-owned subsidiary of
PNC Bank Corp. As a result of this transaction, Investor Services Group is now
known as PFPC Inc (PFPC). Pursuant to an administration agreement, for the
years ended December 31, 1999, 1998 and 1997, the Fund incurred $209,324,
$209,718 and $277,468, respectively, in fees to PFPC/Investor Services Group for
administration services rendered.
PORTFOLIO TRANSACTIONS
The investment advisory agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to
all transactions for the Fund. The Adviser, may, however, consistent with
the interests of the Fund, select brokers on the basis of the research,
statistical and pricing services they provide to the Fund. Information and
research received from such brokers will be in addition to, and not in lieu
of, the services required to be performed by the Adviser under the
investment advisory agreement. A commission paid to such brokers may be
higher than that which another qualified broker would have charged for
effecting the same transaction, provided that such commissions are paid in
compliance with the Securities Exchange Act of 1934, as amended, and that
the Adviser determines in good faith that such commission is reasonable in
terms either of the transaction or the overall responsibility of the Adviser
to the Fund and the Adviser's other clients. Brokerage commissions paid by
the Fund for the years ended December 31, 1999, 1998 and 1997 were
$1,298,048, $1,381,821 and $1,658,403, respectively. None of these
commissions were paid to an affiliate.
Some securities considered for investment by the Fund may be
appropriate also for other clients of the Adviser. If the purchase or sale
of securities is consistent with the investment policies of the Fund and one
or more of these other clients served by the Adviser and is considered at or
about the same time, transactions in such securities will be allocated among
the Fund and clients in a manner deemed fair and reasonable by the Adviser.
While in some cases this practice could have a detrimental effect on the
price, value or quantity of the security as far as the Fund is concerned, in
other cases it is believed to be beneficial to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax
considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of
the Fund or its shareholders, and the discussion here and in the Prospectus
is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisers with specific reference to their
own tax situation.
The Fund is treated as a separate taxable entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and has elected to be treated
and intends to qualify each year as a regulated investment company.
Qualification as a regulated investment company under the Code requires,
among other things, that the Fund distribute to its shareholders an amount
equal to at least the sum of 90% of its investment company taxable income
and 90% of its tax-exempt interest income (if any) net of certain deductions
for a taxable year. In addition, the Fund must satisfy certain requirements
with respect to the source of its income for each taxable year. At least
90% of the gross income of the Fund for a taxable year must be derived from
dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies,
and other income (including, but not limited to, gains from forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies. The Treasury Department by regulation may exclude
from qualifying income foreign currency gains which are not related directly
to the Fund's principal business of investing in stock or securities. Any
income derived by the Fund from a partnership or trust is treated for this
purpose as derived with respect to its business of investing in stock,
securities or currencies only to the extent that such income is attributable
to items of income which would have been qualifying income if realized by
the Fund in the same manner as by the partnership or trust.
In order to qualify as a regulated investment company, the Fund must
also diversify its holdings so that, at the close of each quarter of its
taxable year (i) at least 50% of the market value of its total (gross)
assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than
10% of the outstanding voting securities of such issuer and (ii) not more
than 25% of the value of its total assets is invested in the securities of
any one issuer (other than United States Government securities and
securities of other regulated investment companies) or two or more issuers
controlled by the Fund and engaged in the same, similar or related trades or
businesses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as a capital gain,
regardless of how long the shareholder has held the Fund's shares. The Fund
will designate such distributions as capital gain distributions in a written
notice mailed to shareholders within 60 days after the close of the Fund's
taxable year. Capital gain distributions may be subject to tax at different
maximum rates for individual (noncorporate) investors, depending upon each
investors tax bracket, the assets from which the Fund realized the gains,
and the Funds holding periods for those assets.
Redemptions and exchanges are taxable events for shareholders that are
subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any
particular transaction in Fund shares is properly treated as a sale for tax
purposes, as the following discussion assumes, and the character of and tax
rate applicable to any gains or losses recognized in such transactions under
the new rate structure for capital gains and losses that was added to the
Code by federal tax legislation enacted in 1997. Shareholders should note
that, upon the sale of Fund shares, if the shareholder has not held such
shares for tax purposes for more than six months, any loss on the sale of
those shares will be treated as a long-term capital loss to the extent of
the capital gain distributions received with respect to the shares. Losses
on a redemption or other sale of shares may also be disallowed under wash
sale rules if other shares of the Fund are acquired (including dividend
reinvestments) within a prescribed period.
An individual's net long-term capital gains are taxable at a maximum
effective rate of 20%. Ordinary income of individuals is taxable at a
maximum nominal rate of 39.6%, but because of limitations on itemized
deductions otherwise allowable and the phase-out of personal exemptions, the
maximum effective marginal rate of tax for some taxpayers may be higher.
For corporations, long-term and short-term capital gains and ordinary income
are both taxable at a maximum nominal rate of 35% (although surtax
provisions apply at certain income levels to result in higher effective
marginal rates).
If the Fund retains net capital gain for reinvestment, the Fund may
elect to treat such amounts as having been distributed to shareholders. As
a result, the shareholders would be subject to tax on undistributed net
capital gain, would be able to claim their proportionate share of the
federal income taxes paid by the Fund on such gain as a credit against their
own federal income tax liabilities and would be entitled to an increase in
their basis in their Fund shares.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of
its taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its
shareholders). In such event, dividend distributions would be taxable as
ordinary income to shareholders to the extent of the Fund's current and
accumulated earnings and profits and would be eligible for the dividends-
received deduction for corporations.
Foreign Taxes. Income (including, in some cases, capital gains)
received from sources within foreign countries may be subject to withholding
and other income or similar taxes imposed by such countries. If more than
50% of the value of the Fund's total assets at the close of its taxable year
consists of stock or securities of foreign corporations, the Fund will be
eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and other qualified foreign taxes paid by it (not in excess
of its actual tax liability). If this election is made, each taxable
shareholder will be required to include in gross income (in addition to
taxable dividends actually received) his pro rata share of the qualified
foreign taxes paid by the Fund, and will be entitled either to deduct (as an
itemized deduction) his pro rata share of foreign taxes in computing his
taxable income or to use it as a foreign tax credit against his U.S. federal
income tax liability, subject to holding period requirements and other
limitations. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions, but such a shareholder may be eligible to
claim the foreign tax credit (see below). If the Fund makes this election,
each shareholder will be notified within 60 days after the close of the
Fund's taxable year.
Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his or her
foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the Fund's income flows through to its
shareholders. With respect to the Fund, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency gains,
including currency gains from foreign currency denominated debt securities,
receivables and payables, will be treated as ordinary income derived from
U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income passed
through by the Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the
Fund. Foreign taxes may not be deducted in computing alternative minimum
taxable income and the foreign tax credit can be used to offset only 90% of
the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not
eligible to or does not make the election to "pass through" to its
shareholders its foreign taxes, the foreign taxes it pays will reduce
investment company taxable income and the distributions by the Fund will be
treated as United States source income.
The Fund may invest up to 10% of its total assets in the stock of
foreign investment companies. Such companies are likely to be treated as
"passive foreign investment companies" ("PFICs") under the Code. Certain
other foreign corporations, not operating as investment companies, also may
satisfy the PFIC definition. A portion of the income and gains that the
Fund derives from an equity investment in a PFIC may be subject to a non-
deductible Federal income tax (including an interest-equivalent amount) at
the Fund level. In some cases, the Fund may be able to avoid this tax by
electing to be taxed currently on its share of the PFIC's income, whether or
not such income actually is distributed by the PFIC or by making an election
to mark its PFIC investments to market or by otherwise managing its PFIC
investments. These elections could require the Fund to recognize taxable
gain or income (subject to tax distribution requirements) without the
receipt of any corresponding amount of cash. Additionally, gains from PFIC
investments will generally be treated as ordinary income rather than capital
gain. The Fund will endeavor to limit its exposure to the PFIC tax by any
available techniques or elections. Because it is not always possible to
identify a foreign issuer as a PFIC in advance of making the investment, or
a PFIC may be the only practicable way to invest in certain countries, the
Fund may incur the PFIC tax in some instances.
Other Tax Matters. Special rules govern the federal income tax
treatment of certain transactions denominated in terms of a currency other
than the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by
the special rules include transactions in foreign currency denominated debt
instruments, foreign currency denominated payables and receivables, foreign
currencies and foreign currency forward contracts. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any other gain or loss on the underlying
transaction (subject to certain netting rules) and, absent an election that
may be available in some cases, generally is taxable as ordinary gain or
loss. Any gain or loss attributable to the foreign currency component of a
transaction engaged in by the Fund which is not subject to the special
currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction. Mark to
market and other tax rules applicable to certain currency forward contracts
may affect the amount, timing and character of the Fund's income, gain or
loss and hence of its distributions to shareholders. It is anticipated that
some of the non-U.S. dollar denominated investments and foreign currency
contracts the Fund may make or enter into will be subject to the special
currency rules described above.
The Fund is required to recognize income currently each taxable year
for federal income tax purposes under the Code's original issue discount
rules in the amount of the unpaid, accrued interest with respect to bonds
structured as zero coupon or deferred interest bonds or pay-in-kind
securities, even though it receives no cash interest until the security's
maturity or payment date. As discussed above, in order to qualify for
treatment as a regulated investment company, the Fund must distribute
substantially all of its income to shareholders. Thus, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash or leverage itself by borrowing cash, so that it may satisfy
the distribution requirement.
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 year ended December 31, 1999, the Fund has
elected to defer currency losses occurring between November 1, 1999 and
December 31, 1999 of $209,993 under these rules. Such losses will be
treated as arising on the first day of the year ending December 31, 2000.
At December 31, 1999, the Fund had a capital loss carryforward of
$48,459,013, expiring in year 2006.
Provided that it qualifies as a regulated investment company, the
Fund will not be liable for Massachusetts income taxes or franchise taxes.
Exchange control regulations that may restrict repatriation of
investment income, capital or the proceeds of securities sales by foreign
investors may limit the Fund's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements described above.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their
tax advisers for more information.
Dividends declared in October, November or December payable to shareholders of
record on a specified date in such a month will be deemed to have been received
by the shareholders on December 31, in the event such dividends are paid during
January of the following year.
A 4% nondeductible excise tax is imposed under the Code on regulated
investment companies that fail to currently distribute for each calendar
year specified percentages of their ordinary taxable income and capital gain
net income (excess of capital gains over capital losses) earned in specified
periods. The Fund expects that it generally will make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income for each calendar year to avoid liability for this
excise tax.
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Dividends, capital gain distributions
and ownership of or gains realized on the redemption (including an exchange)
of Fund shares may also be subject to state and local taxes. Shareholders
should consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from,
the Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund effectively is connected will be subject to
U.S. federal income tax treatment that is different from that described
above. These investors may be subject to nonresident alien withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on
amounts treated as ordinary dividends from the Fund and, unless an effective
IRS Form W-8 or authorized substitute is on file, to 31% backup withholding
on certain other payments from the Fund. Non-U.S. investors should consult
their tax advisers regarding such treatment and the application of foreign
taxes to an investment in the Fund.
PERFORMANCE CALCULATIONS
The Fund may advertise its average annual total return. The Fund
computes such return by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to
the ending redeemable value of such investment according to the following
formula:
T = [( ERV )1/n - 1]
P
Where: T = average annual total return ERV = ending redeemable value at the end
of the period covered by the computation of a hypothetical $1,000 payment made
at the beginning of the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in terms of years
The Fund computes its aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain
distributions. The ending redeemable value (variable "ERV" in each formula)
is determined by assuming complete redemption of the hypothetical investment
and the deduction of all nonrecurring charges at the end of the period
covered by the computations. The Fund's average annual total return and
aggregate total return do not reflect any fees charged by Institutions to
their clients.
GENERAL INFORMATION
Dividends and Capital Gain Distributions
The Fund's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in
the amount and at the times that generally will avoid both income and the
federal excise tax on undistributed income and gains (see discussion under
"Dividends, Capital Gain Distributions and Taxes" in the Prospectus). The
amounts of any income dividends or capital gains distributions cannot be
predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Fund by an investor may have the effect of reducing the per share net
asset value of the Fund by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in
effect a return of a portion of the purchase price, are subject to income
taxes as set forth in the Prospectus.
Description of Shares and Voting Rights
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may be held personally liable as partners for its obligations under certain
circumstances. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations. The Trust was organized as a Massachusetts business trust on May
23, 1995. Effective April 30, 2000, the Trusts name changed from Panorama Trust
to Pictet Funds. The Declaration of Trust authorizes the Trustees to classify
and reclassify any unissued shares into one or more series and classes of
shares. Currently, the Trust has five series, one of which is the Fund. Each
series currently has only one class of shares. The Trust offers shares of
beneficial interest, $.001 par value, for sale to the public.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share owned and proportionate, fractional votes for
fractional shares held. Shares of each series are entitled to vote separately to
approve investment advisory agreements or charges in fundamental investment
policies, but vote together on the election of Trustees or selection of
independent accountants.
Under Massachusetts law and the Declaration of Trust, the Trust is not required
and currently does not intend to hold annual meetings of shareholders for the
election of Trustees except as required under the 1940 Act. Meetings of
shareholders for the purpose of electing Trustees normally will not be held
unless less than a majority of the Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a shareholder
meeting for the election of Trustees. Any Trustee may be removed from office
upon the vote of shareholders holding at least two-thirds of the Trust's
outstanding shares at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders upon the written request of
shareholders holding at least 10% of the Trust's outstanding shares. In
addition, shareholders who meet certain criteria will be assisted by the Trust
in communicating with other shareholders in seeking the holding of such meeting.
Shareholder inquiries should be addressed to the Trust at the address
or telephone number stated on the cover page.
Administrative and Transfer Agent Services
PFPC serves as the Trust's administrator, accounting agent and
transfer agent, and in these capacities, supervises the Trust's day-to-day
operations, other than management of the Fund's investments. PFPC is a
majority-owned subsidiary of PNC Bank Corp. For its services as accounting
agent, PFPC is entitled to receive a fee from the Trust computed daily and
payable monthly at the annual rate of .04% of the aggregate average daily
net assets of the Trust, subject to a $50,000 annual minimum from the Fund.
For administrative services, PFPC is entitled to receive $220,000 per annum
from the Trust, allocated among the Fund and other series of the Trust based
on average daily net assets. In addition, PFPC is paid separate
compensation for its services as transfer agent.
Investor Services Group is located at 3200 Horizon Drive, King of
Prussia, Pennsylvaina 19406.
Distributor. Effective December 1, 1999, Provident Distributors, Inc.
(PDI) replaced First Data Distributors, Inc. as the Funds distributor.
PDI is the principal underwriter and distributor of shares of the Fund
pursuant to a distribution agreement with the Trust. PDI is located at Four
Falls Corporate Center, West Conshohocken, Pennsylvania 19428.
Custodian. Brown Brothers Harriman & Co., located at 40 Water Street,
Boston, Massachusetts 02109, serves as the custodian of the Trust's assets.
Independent Accountants. PricewaterhouseCoopers LLP, located at 2400
Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Trust and audits the Trust's financial statements
annually and reviews the Funds federal tax returns.
Counsel. Hale and Dorr LLP serves as counsel to the Trust.
FINANCIAL STATEMENTS
The Trust's annual report for the year ended December 31, 1999
accompanies this Statement of Additional Information and the Fund's
financial statements, financial highlights and related notes and the report
of independent accountants contained therein are incorporated by reference
into this Statement of Additional Information.
APPENDIX A
DESCRIPTION OF RATINGS AND U.S. GOVERNMENT SECURITIES
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating: Prime-1
("P-1") --judged to be of the best quality. Issuers rated P-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations.
Description of S&P highest commercial papers ratings: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety
regarding timely payment is either overwhelming or very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the ratings used by Moody's for corporate and municipal
long-term debt:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the bond ranks in the lower end of its generic rating category. Those bonds
in the Aa, A and Baa categories which Moody's believes possess the strongest
investment attributes, within those categories are designated by the symbols
Aa1, A1 and Baa1, respectively.
II. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States Government,
and by various instrumentalities which have been established or sponsored by
the United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Securities issued or guaranteed by federal
agencies and U.S. Government sponsored enterprises or instrumentalities may
or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, an investor must look principally to the agency, enterprise or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency, enterprise or instrumentality does not meet
its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export Import Bank, Farmers Home
Administration, Federal Financing Bank and others. Certain agencies,
enterprises and instrumentalities, such as the Government National Mortgage
Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service
its debt. Debt from certain other agencies, enterprises and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S.
Treasury to purchase certain amounts of their securities to assist the
institution in meeting its debt obligations. Finally, other agencies,
enterprises and instrumentalities, such as the Farm Credit System and the
Federal Home Loan Mortgage Corporation, are federally chartered institutions
under Government supervision, but their debt securities are backed only by
the creditworthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration,
Small Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision.
Instrumentalities issuing or guaranteeing securities include, among others,
Overseas Private Investment Corporation, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate
Credit Banks and the Federal National Mortgage Association.
PICTET INTERNATIONAL SMALL COMPANIES FUND
STATEMENT OF ADDITIONAL INFORMATION
April 30, 2000
This Statement of Additional Information is not a prospectus but
should be read in conjunction with Pictet Funds (the "Trust") Prospectus
for Pictet International Small Companies Fund (the "Fund") dated April 30,
2000 (the "Prospectus"). The financial statements for the Fund for the
fiscal year ended December 31, 1999, are incorporated herein by reference to
the Annual Report to shareholders for the Fund dated December 31, 1999. A
copy of the Fund's Annual Report or Prospectus may be obtained without
charge by calling the Trust at 1-877-470-0103.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in the
Prospectus.
Table of Contents Page
Investment Objective and Policies 2
Purchase of Shares 10
Redemption of Shares 10
Portfolio Turnover 10
Investment Limitations 11
Management of the Fund 13
Code of Ethics 15
Investment Advisory and Other Services 15
Portfolio Transactions 16
Additional Information Concerning Taxes 17
Performance Calculations 20
General Information 21
Financial Statements 22
Appendix - Description of Ratings and U.S. Government Securities A-1
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and
policies set forth in the Prospectus:
Temporary Investments. As determined by the Adviser when market
conditions warrant, the Fund may invest up to 100% of its total assets in
the following high-quality (that is, rated Prime-1 by Moody's or A-1 or
better by S&P or, if unrated, of comparable quality as determined by the
Adviser) money market securities, denominated in U.S. dollars or in the
currency of any foreign country, issued by entities organized in the United
States or any foreign country; short-term (less than twelve months to
maturity) and medium-term (not greater than five years to maturity)
obligations issued or guaranteed by the U.S. Government or the governments
of foreign countries, their agencies or instrumentalities; finance company
and corporate commercial paper and other short-term corporate obligations;
obligations of banks (including certificates of deposit, time deposits and
bankers' acceptances); and repurchase agreements with banks and broker-
dealers with respect to such securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
qualified brokers, dealers, banks and other financial institutions deemed
creditworthy by its Adviser. In a repurchase agreement, the Fund purchases
a security and simultaneously commits to resell that security at a future
date to the seller (a qualified bank or securities dealer) at an agreed upon
price plus an agreed upon market rate of interest (itself unrelated to the
coupon rate or date of maturity of the purchased security). Under normal
circumstances, however, the Fund will not enter into repurchase agreements
if entering into such agreements would cause, at the time of entering into
such agreements, more than 20% of the value of its total assets to be
subject to repurchase agreements. Under the Investment Company Act of 1940,
as amended (the "1940 Act"), repurchase agreements are considered to be
loans collateralized by the underlying securities. The Fund generally would
enter into repurchase transactions to invest cash reserves and for temporary
defensive purposes. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
The securities held subject to a repurchase agreement may have stated
maturities exceeding 13 months, but the Adviser currently expects that
repurchase agreements will mature in less than 13 months. The seller under
a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than 101% of the repurchase
price including accrued interest. The Fund's administrator and the Adviser
will mark to market daily the value of the securities purchased, and the
Adviser will, if necessary, require the seller to deposit additional
securities to ensure that the value is in compliance with the 101%
requirement stated above. The Adviser will consider the creditworthiness of
a seller in determining whether the Fund should enter into a repurchase
agreement, and the Fund will enter into repurchase agreements with banks and
dealers which are determined to present minimal credit risk by the Adviser
under procedures adopted by the Board of Trustees.
In effect, by entering into a repurchase agreement, the Fund is
lending its funds to the seller at the agreed upon interest rate, and
receiving securities as collateral for the loan. Such agreements can be
entered into for periods of one day (overnight repo) or for a fixed term
(term repo). Repurchase agreements are a common way to earn interest income
on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to
repurchase the underlying securities at a time when the value of these
securities has declined, the Fund may incur a loss upon disposition of them.
Default by the seller also would expose the Fund to possible loss because of
delays in connection with the disposition of the underlying obligations. If
the seller of an agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court
may determine that the underlying securities are collateral not within the
control of the Fund and therefore subject to sale by the trustee in
bankruptcy. Further, it is possible that the Fund may not be able to
substantiate its interest in the underlying securities.
Repurchase agreements that do not provide for payment to the Fund
within seven days after notice without taking a reduced price are considered
illiquid securities.
Borrowing and Reverse Repurchase Agreements. As a temporary measure
for extraordinary or emergency purposes, the Fund may borrow money from
banks. However, the Fund will not borrow money for speculative purposes.
The Fund may enter into reverse repurchase agreements. In a reverse
repurchase agreement, the Fund sells a security and simultaneously commits
to repurchase that security at a future date from the buyer. In effect, the
Fund is borrowing funds temporarily at an agreed upon interest rate from the
purchaser of the security, and the sale of the security represents
collateral for the loan. The Fund retains record ownership of the security
and the right to receive interest and principal payments on the security. At
an agreed upon future date, the Fund repurchases the security by remitting
the proceeds previously received plus interest. In certain types of
agreements, there is no agreed upon repurchase date and interest payments
are calculated daily, often based on the prevailing overnight repurchase
rate. These agreements, which are treated as if reestablished each day, are
expected to provide the Fund with a flexible borrowing tool. Reverse
repurchase agreements are considered to be borrowings by a fund under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Adviser will consider the creditworthiness of the other party in
determining whether the Fund will enter into a reverse repurchase agreement.
Under normal circumstances, the Fund will not enter into reverse repurchase
agreements if entering into such agreements would cause, at the time of
entering into such agreements, more than 33-1/3% of the value of its total
assets to be subject to such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Fund at a time
when the value of the securities has increased. Reverse repurchase
agreements also involve the risk that the Fund may not be able to establish
its right to receive the underlying securities.
"When Issued," "Delayed Settlement," and "Forward Delivery"
Securities. The Fund may purchase and sell securities on a "when issued,"
"delayed settlement" or "forward delivery" basis. "When issued" or "forward
delivery" refers to securities whose terms and indenture are available and
for which a market exists, but which are not available for immediate
delivery. When issued or forward delivery transactions may be expected to
occur one month or more before delivery is due. Delayed settlement is a
term used to describe settlement of a securities transaction in the
secondary market which will occur sometime in the future. No payment or
delivery is made by the Fund in a when issued, delayed settlement or forward
delivery transaction until the Fund receives payment or delivery from the
other party to the transaction. The Fund will maintain a separate account
of cash or liquid securities at least equal to the value of purchase
commitments until payment is made. Such segregated securities will either
mature or, if necessary, be sold on or before the settlement date. Although
the Fund receives no income from the above described securities prior to
delivery, the market value of such securities is still subject to change.
The Fund will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the
transaction. When the Fund engages in when issued, delayed settlement or
forward delivery transactions, it will do so for the purpose of acquiring
securities consistent with its investment objective and policies and not for
the purposes of speculation. The Fund's when issued, delayed settlement and
forward delivery commitments are not expected to exceed 25% of its total
assets absent unusual market circumstances, and the Fund will only sell
securities on such a basis to offset securities purchased on such a basis.
Depositary Receipts. The Fund may purchase American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs") (collectively, "Depositary Receipts"). ADRs typically are
issued by a U.S. bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. EDRs and GDRs typically are
issued by foreign banks or trust companies, although they also may be issued
by U.S. banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a United States corporation.
Generally, Depositary Receipts in registered form are designed for use in
the U.S. securities market and Depositary Receipts in bearer form are
designed for use in securities markets outside the United States.
Depositary Receipts may not necessarily be denominated in the same currency
as the underlying securities into which they may be converted.
Depositary Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have
its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be involved directly in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs generally are similar, in some cases it may be easier
to obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs
and there may not be a correlation between such information and the market
value of the Depositary Receipts. Depositary Receipts also involve the
risks of other investments in foreign securities, as discussed below. For
purposes of the Fund's investment policies, the Fund's investments in
Depositary Receipts will be deemed to be investments in the underlying
securities.
Foreign Investments. The Fund may purchase international investments, which
are subject to a variety of risks of loss beyond the risks ordinarily
associated with investing in the U.S. and other mature securities markets.
The discussion of risks set forth below refers to the better understood
risks of investing in less developed markets but is not intended, and should
not be assumed, to be a complete list of all possible risks. Although the
Board of Trustees, the Adviser, and the Custodian and sub-custodians each
review and attempt to minimize the risks of which they are aware, and even
if neither the Trustees nor any service provider to the Fund has failed to
fulfill its duties to the Fund, it is entirely possible that the Fund may
lose some or all of its investment in one or more securities in an emerging
or politically unstable market. An example of such a loss may involve a
fraud in a foreign market not reasonably preventable by the service
providers, notwithstanding oversight by the Trustees and procedures of each
service provider generally considered to be adequate to prevent such a
fraud. In any such case, it is likely that the Fund would not be reimbursed
for its loss.
Investing in foreign companies involves certain special risks and considerations
typically not associated with investing in U.S. companies. These risks and
considerations include differences in accounting, auditing and financial
reporting standards; generally higher commission rates on foreign portfolio
transactions; the possibility of expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations; political instability
which could affect U.S. investment in foreign countries and potential
restrictions on the flow of international capital. Also, because the stocks of
foreign companies frequently are denominated in foreign currencies, and because
the Fund may hold uninvested reserves in bank deposits in foreign currencies
temporarily, the Fund may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations, and may incur costs in
connection with conversions between various currencies. The investment policies
of the Fund permit the Fund to enter into forward foreign currency exchange
contracts in order to hedge its holdings and commitments against changes in the
level of future currency rates. Such contracts involve an obligation to purchase
or sell a specific currency at a future date at a price set at the time of the
contract.
In addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United States.
Moreover, the dividend or interest income or gain from the Fund's foreign
portfolio securities may be subject to foreign withholding or other foreign
taxes, thus reducing the net amount of income available for distribution to the
Fund's shareholders. Further, foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable with those applicable to U.S. companies.
There generally is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States. In addition,
there is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect U.S.
investments in foreign countries. Further, the Fund may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
Although the Fund will endeavor to achieve most favorable execution costs in its
portfolio transactions, fixed commissions on many foreign stock exchanges
generally are higher than negotiated commissions on U.S. exchanges. Certain
foreign governments levy withholding taxes on dividend and interest income and,
in some cases, also tax certain capital gains. Although in some countries a
portion of these taxes are reduced under applicable income tax treaties and/or
are recoverable, the non-recovered portion of foreign taxes will reduce the
income received or returned from foreign companies the stock or securities of
which are held by the Fund.
Brokerage commissions, custodial services, and other services relating to
investment in foreign securities markets generally are more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Developing countries also may impose restrictions on
the Fund's ability to repatriate investment income or capital. Even where there
is no outright restriction on repatriation of investment income or capital, the
mechanics of repatriation may affect certain aspects of the operations of the
Fund.
In addition, excess cash invested with depository institutions
domiciled outside the continental United States, as with any offshore
deposits, may be subject to both sovereign actions in the jurisdiction of
the depository institution and sovereign actions in the jurisdiction of the
currency, including but not limited to freeze, seizure, and diminution. The
risk associated with the repayment of principal and payment of interest on
such instruments by the institution with whom the deposit is ultimately
placed will be borne exclusively by the Fund.
Foreign investment risks are often heightened for investments in
certain Eastern European countries as well as other developing or emerging
markets, where the risks include the possibility that such countries may
revert to a centrally planned economy. Securities of many issuers in
emerging markets may be less liquid and more volatile than securities of
comparable issuers in developed markets. Clearance and settlement
procedures are different in some emerging markets and at times settlements
have not kept pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result
in temporary periods when a portion of the assets of the Fund is uninvested
and no return is earned thereon. The inability of the Fund to make intended
security purchases due to settlement problems could cause the Fund to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Fund due to subsequent declines in the value of those securities, or, if the
Fund had entered into a contract to sell a security, in possible liability
to the purchaser.
Some of the currencies in emerging markets have experienced devaluations
relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies. Devaluations in the currencies in which the
Fund's portfolio securities are denominated may have a detrimental impact on the
Fund. Some countries also may have managed currencies which are not free
floating against the U.S. dollar. In addition, there is a risk that certain
countries may restrict the free conversion of their currencies into other
currencies. Further, certain currencies may not be traded internationally.
Certain developing countries face serious exchange constraints.
Governments of some developing countries exercise substantial influence over
many aspects of the private sector. In some countries, the government owns or
controls many companies, including the largest in the country. As such,
government actions in the future could have a significant effect on economic
conditions in developing countries in these regions, which could affect private
sector companies, the Fund and the value of its securities. Furthermore, certain
developing countries are among the largest debtors to commercial banks and
foreign governments and are dependent on foreign economic assistance. Trading in
debt obligations issued or guaranteed by such governments or their agencies and
instrumentalities involves a high degree of risk.
In many emerging markets, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States. The foreign securities markets of many of the
countries in which the Fund may invest may also be smaller, less liquid and
subject to greater price volatility than those in the United States.
Throughout the last decade many emerging markets have experienced, and continue
to experience, high rates of inflation. In certain countries, inflation has
accelerated rapidly at times to hyper inflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on the Fund's non-dollar denominated securities.
Securities traded in certain emerging securities markets may be subject to risks
due to the inexperience of financial intermediaries, the lack of modern
technology and the lack of a sufficient capital base to expand business
operations. Furthermore, there can be no assurance that the Fund's investments
in certain developing countries would not be expropriated, nationalized or
otherwise confiscated. Finally, any change in the leadership or policies of
developing countries, or the countries that exercise a significant influence
over those countries, may halt the expansion of or reverse the liberalization of
foreign investment policies and adversely affect existing investment
opportunities.
Convertible Securities. Convertible securities are fixed-income
securities that may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities have general
characteristics similar to both fixed-income and equity securities.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying common stocks and, therefore, also will react to variations in
the general market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield
basis, and so may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same
issuer.
As fixed-income securities, convertible securities are investments that provide
for a stable stream of income with generally higher yields than common stocks.
Of course, like all fixed-income securities, there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. There can be
no assurance of capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in the right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Warrants. Because a warrant does not carry with it the right to dividends
or voting rights with respect to the securities that the warrant holder is
entitled to purchase, and because it does not represent any rights to the
assets of the issuer, a warrant may be considered more speculative than
certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying securities and
a warrant ceases to have value if it is not exercised prior to its
expiration date.
Preferred Stock. Preferred stocks, like debt obligations, are
generally fixed-income securities. Shareholders of preferred stocks
normally have the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, but do not participate in other
amounts available for distribution by the issuing corporation. Dividends on
the preferred stock may be cumulative, and all cumulative dividends usually
must be paid prior to common shareholders receiving any dividends.
Preferred stock dividends must be paid before common stock dividends and,
for that reason, preferred stocks generally entail less risk than common
stocks. Upon liquidation, preferred stocks are entitled to a specified
liquidation preference, which is generally the same as the par or stated
value, and are senior in right of payment to common stock. Preferred stocks
are, however, equity securities in the sense that they do not represent a
liability of the issuer and, therefore, do not offer as great a degree of
protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated
in right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of
the same issuer.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies investing in
securities in which the Fund can invest, provided that such investment
companies invest in portfolio securities in a manner consistent with the
Fund's investment objective and policies. Applicable provisions of the 1940
Act require that the Fund limit its investments so that, as determined
immediately after a securities purchase is made, (a) not more than 10% of
the value of the Fund's total assets will be invested in the aggregate in
securities of investment companies as a group, (b) the Fund and any company
or companies controlled by the Fund will not own together more than 3% of
the total outstanding shares of any one investment company at the time of
purchase and (c) the Fund will not invest more than 5% of its total assets
in any one investment company. As a shareholder of another investment
company, the Fund would bear, along with other shareholders, its pro rata
portion of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses that
the Fund bears directly in connection with its own operations.
Privatizations. The Fund may invest in privatizations. The Fund
believes that foreign government programs of selling interests in
government-owned or controlled enterprises ("privatizations") may represent
opportunities for significant capital appreciation. The ability of U.S.
entities, such as the Fund, to participate in privatizations may be limited
by local law, or the terms for participation may be less advantageous than
for local investors. There can be no assurance that privatization programs
will be available or successful.
Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued
the securities and includes, among other securities, repurchase agreements
maturing in more than seven days, certain restricted securities and
securities that are otherwise not freely transferable. Restricted
securities may be sold only in privately negotiated transactions or in
public offerings with respect to which a registration statement is in effect
under the Securities Act of 1933, as amended ("1933 Act"). Illiquid
securities acquired by the Fund may include those that are subject to
restrictions on transferability contained in the securities laws of other
countries. Securities that are freely marketable in the country where they
are principally traded, but that would not be freely marketable in the
United States, will not be considered illiquid. Where registration is
required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
In recent years, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
securities sold in private placements, repurchase agreements, commercial
paper, foreign securities and corporate bonds and notes. These instruments
often are restricted securities because the securities are sold in
transactions not requiring registration. Institutional investors generally
will not seek to sell these instruments to the general public, but instead
will often depend either on an efficient institutional market in which such
unregistered securities can be resold readily or on an issuer's ability to
honor a demand for repayment. Therefore, the fact that there are
contractual or legal restrictions on resale to the general public or certain
institutions is not determinative of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a safe harbor from the
registration requirements of the 1933 Act for resales of certain securities
to qualified institutional buyers. Institutional markets for restricted
securities sold pursuant to Rule 144A in many cases provide both readily
ascertainable values for restricted securities and the ability to liquidate
an investment to satisfy share redemption orders. Such markets might
include automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing Rule 144A-
eligible restricted securities, however, could affect adversely the
marketability of such portfolio securities and result in the Fund's
inability to dispose of such securities promptly or at favorable prices.
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines approved
by the Board. The Adviser takes into account a number of factors in
reaching liquidity decisions, including, but not limited to, (i) the
frequency of trades for the security, (ii) the number of dealers that quote
prices for the security, (iii) the number of dealers that have undertaken to
make a market in the security, (iv) the number of other potential purchasers
and (v) the nature of the security and how trading is effected (e.g., the
time needed to sell the security, how bids are solicited and the mechanics
of transfer). The Adviser monitors the liquidity of restricted securities
in the Fund's portfolio and reports periodically on such decisions to the
Board.
Forward Contracts. The Fund may enter into forward foreign currency
exchange contracts ("forward contracts") to attempt to minimize the risk
from adverse changes in the relationship between the U.S. dollar and foreign
currencies. A forward contract, which is individually negotiated and
privately traded by currency traders and their customers, involves an
obligation to purchase or sell a specific currency for an agreed-upon price
at a future date.
The Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in
a foreign currency or is expecting a dividend or interest payment in order
to "lock in" the U.S. dollar price of a security, dividend or interest
payment. When a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
contract to sell an amount of that foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
contract to buy that currency for a fixed dollar amount.
In connection with the Fund's forward contract purchases, the Fund's
custodian will maintain in a segregated account cash or liquid assets with a
value equal to the amount of the Fund's purchase commitments. Segregated
assets used to cover forward contracts will be marked to market on a daily
basis. While these contracts presently are not regulated by the Commodity
Futures Trading Commission ("CFTC"), the CFTC may regulate them in the
future and limit the ability of the Fund to achieve potential gains from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance by the Fund than if it had not entered into such
contracts. The Fund generally will not enter into a forward foreign
currency exchange contract with a term greater than one year.
While transactions in forward contracts may reduce certain risks, such
transactions themselves entail certain other risks. Thus, while the Fund
may benefit from the use of hedging positions, unanticipated changes in
currency exchange rates may result in a poorer overall performance for the
Fund than if it had not entered into any hedging positions. If the
correlation between a hedging position and portfolio position which is
intended to be protected is imperfect, the desired protection may not be
obtained, and the Fund may be exposed to risk of financial loss.
Perfect correlation between the Fund's hedging positions and portfolio
positions may be difficult to achieve because hedging instruments in many
foreign countries are not yet available. In addition, it is not possible to
hedge fully against currency fluctuations affecting the value of securities
denominated in foreign currencies because the value of such securities is
likely to fluctuate as a result of independent factors not related to
currency fluctuations.
Small Companies. While small companies may present greater opportunities
for capital appreciation, they may also involve greater risks than larger,
more mature issuers. The securities of small market capitalization companies
may be more sensitive to market changes than the securities of large
companies. In addition, smaller companies may have limited product lines,
markets or financial resources and they may be dependent on one-person
management. Further, their securities may trade less frequently and in more
limited volume than those of larger, more mature companies. As a result, the
prices of the securities of such smaller companies may fluctuate to a
greater degree than the prices of the securities of other issuers.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next
determined after receipt of the purchase order in proper order by the
transfer agent.
The Fund and its distributor reserve the right in their sole
discretion (i) to suspend the offering of its shares, (ii) to reject
purchase orders when in the judgment of management such rejection is in the
best interest of the Fund and (iii) to reduce or waive the minimums for
initial and subsequent investments from time to time.
At the Fund's discretion, shares of Fund also may be purchased by
exchanging securities acceptable to the Fund. The Fund need not accept any
security offered for exchange unless it is consistent with the Fund's
investment objective and restrictions and is acceptable otherwise to the
Fund. Securities accepted in exchange for shares will be valued in
accordance with the Fund's usual valuation procedures. Investors interested
in making an in-kind purchase of Fund shares must first telephone the
Adviser to advise it of their intended action and obtain instructions for an
in-kind purchase.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange (the
"Exchange") is closed, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission (the Commission);
(ii) during any period when an emergency exists as defined by the rules of
the Commission as a result of which it is not reasonably practicable for the
Fund to dispose of securities owned by it, or fairly to determine the value
of its assets; and (iii) for such other periods as the Commission may
permit.
If a shareholder redeems shares of the Fund which have been held less
than six months (including shares to be exchanged), the Fund will deduct
from the proceeds a redemption charge of 1% of the amount of the redemption.
This amount is retained by the Fund to offset the Fund's costs of purchasing
and selling securities. Redemption proceeds may be greater or less than the
shareholder's initial cost depending on the market value of the securities
held by the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Fund will depend upon market and
other conditions and it will not be a limiting factor when the Adviser
believes that portfolio changes are appropriate. Although the portfolio
turnover rate may vary from year to year, the Adviser expects, during normal
market conditions, that the Fund's portfolio turnover rate will not exceed
100%. For the years ended December 31, 1999, December 31, 1998 and December
31, 1997, the portfolio turnover rates were 166%, 132% and 90%,
respectively.
INVESTMENT LIMITATIONS
The Fund is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the
lesser of (1) 67% of the voting securities of the Fund present at a meeting
if the holders of more than 50% of the outstanding voting securities of the
Fund are present or represented by proxy or (2) more than 50% of the
outstanding voting securities of the Fund. The Fund will not:
(1) enter into commodities or commodity contracts, other than forward
contracts;
(2) purchase or sell real estate (including real estate limited
partnership interests), although it may purchase and sell securities of
companies which deal in real estate and may purchase and sell securities
which are secured by interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements and money market instruments,
including bankers acceptances and commercial paper, and selling securities
on a when issued, delayed settlement or forward delivery basis) which are
publicly or privately distributed and (ii) by entering into repurchase
agreements;
(4) purchase on margin or sell short except as specified above in
investment limitation (1);
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) with respect to 75% of its total assets, invest more than 5% of its
total assets at the time of purchase in the securities of any single issuer
(other than obligations issued or guaranteed by the U.S. Government, its
agencies, enterprises or instrumentalities);
(7) issue senior securities, except that the Trust or the Fund may issue
shares of more than one series or class, may borrow money in accordance with
investment limitation (8) below, purchase securities on a when issued,
delayed settlement or forward delivery basis and enter into reverse
repurchase agreements;
(8) borrow money, except that the Fund may borrow money as a temporary
measure for extraordinary or emergency purposes and may enter into reverse
repurchase agreements in an amount not exceeding 33-1/3% of its total assets
at the time of the borrowing, provided, however, that the Fund will not make
additional investments while borrowings representing more than 5% of the
Fund's total assets are outstanding;
(9) underwrite the securities of other issuers, except to the extent that
the purchase and subsequent disposition of securities may be deemed
underwriting;
(10) invest for the purpose of exercising control over management of any
company; and
(11) acquire any securities of companies within one industry if, as a
result of such acquisition, 25% or more of the value of the Fund's total
assets would be invested in securities of companies within such industry;
provided, however, that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities.
In addition, as non-fundamental policies, the Fund will not (i) invest
more than 15% of the net assets of the Fund, at the time of purchase, in
securities for which there are no readily available markets, including
repurchase agreements which have maturities of more than seven days; (ii)
pledge, mortgage or hypothecate any of its assets to an extent greater than
15% of its total assets at fair market value, except as described in the
Prospectus and this SAI, but the deposit of assets in a segregated account
in connection with the purchase of securities on a when issued, delayed
settlement or forward delivery basis will not be deemed to be pledges of the
Fund's assets for purposes of this investment policy; (iii) invest its
assets in securities of any investment company, except in connection with
mergers, acquisitions of assets or consolidations and except as may
otherwise be permitted by the 1940 Act; (iv) invest more than 5% of the
value of the Fund's net assets in warrants, valued at the lower of cost or
market, including within that amount up to 2% of the value of the Fund's net
assets warrants which are not listed on the New York or American Stock
Exchange (warrants acquired by the Fund in units or attached to securities
may be deemed to be without value); and (v) write or acquire options or
interests in oil, gas or other mineral leases.
With regard to non-fundamental policy (iii), the 1940 Act currently
prohibits an investment company from acquiring securities of another
investment company if, as a result of the transaction, the acquiring company
and any company or companies controlled by it would own in the aggregate (i)
more than 3% of the total outstanding voting stock of the acquired company,
(ii) securities issued by the acquired company having an aggregate value in
excess of 5% of the value of the total assets of the acquiring company or
(iii) securities issued by the acquired company and all other investment
companies (other than treasury stock of the acquired company) having an
aggregate value in excess of 10% of the value of the total assets of the
acquiring company. To the extent that the Fund invests in shares of other
investment companies, the Fund's shareholders will be subject to expenses of
such other investment companies, in addition to expenses of the Fund. With
regard to non-fundamental policy (v), the purchase of securities of a
corporation, a subsidiary of which has an interest in oil, gas or other
mineral leases, shall not be prohibited by the limitation.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of
assets will not constitute a violation of such restriction, except that any
borrowings by the Fund that exceed the limitation set forth in investment
limitation (8) above must be reduced to meet such limitation within the
period required by the 1940 Act (currently three days, not including Sundays
and holidays). In addition, the Fund will limit its aggregate holdings of
illiquid assets to 15% of its net assets.
MANAGEMENT OF THE FUND
Board Members and Officers. The business and affairs of the Trust are
managed under the direction of its Board. The Trust's officers, under the
supervision of the Board, manage the day to day operations of the Trust.
The Board Members set broad policies for the Trust and choose its officers.
The following is a list of the Board Members and officers of the Trust and a
brief statement of their principal occupations during the past five years.
Name, Address and Position
Age
Principal Occupation During Past
Five Years
Jean G. Pilloud*, President
and Chairman
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
56
Senior Manager of Pictet & Cie.
Jean-Franois Demole* ,
Trustee
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
38
Partner of Pictet & Cie since
1998; CEO of Pictet (Canada) & Co.
Ltd. From 1994-1997.
Jeffrey P. Somers,* Trustee
Morse, Barnes-Brown &
Pendleton
1601 Trapelo Road
Reservoir Place
Waltham, MA 02154
57
Officer, Director and Stockholder
of Morse, Barnes-Brown & Pendleton
(law firm); Associate lawyer and
Partner, Gadsby & Hannah, prior to
February 1995.
Bruce W. Schnitzer, Trustee
Wand Partners, Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
55
Chairman of the Board of Wand
Partners, Inc.; Director, PennCorp
Financial Group, AMRESCO Inc., and
Nestor, Inc.
David J. Callard, Trustee
Wand Partners, Inc.
630 Fifth Avenue, Suite
2435
New York, NY 10111
61
President, Wand Partners, Inc.;
Director, Information Management
Associates, Inc., Sky Mall, Inc.
and iGo Corporation.
Gail A. Hanson, Secretary
PFPC Inc.
101 Federal Street
Boston, MA 02110
58
Vice President, PFPC Inc. Ms.
Hanson has been employed by PFPC
Inc. (formerly known as First Data
Investor Services Group, Inc.)
since September 1994. Previously,
she was employed as an Associate at
Bingham, Dana & Gould prior to
1994.
William J. Baltrus,
Treasurer
PFPC Inc.
3200 Horizon Drive
King of Prussia, PA 19406
32
Director Client Services at PFPC
Inc. (financial services) from
September 1998 to present. Manager
Corporate & Blue Sky Compliance at
First Data Investor Services Group,
Inc., formerly FPS Services, Inc.
(financial services) from August
1994 to September 1998. Corporate
Compliance Administrator at FPS
Services, Inc. (financial services)
from April 1994 to August 1994.
Account Manager at FPS Services,
Inc. (financial services) from July
1991 to April 1994.
Remuneration of Board Members. The Trust pays each Board member (except
those employed by the Adviser or its affiliates) an annual fee of $5,000
plus $500 for each Board and Committee meeting attended and out-of-pocket
expenses incurred in attending such meetings.
Compensation Table
The following table sets forth the compensation paid to the
Trustees of the Trust for the year ended December 31, 1999. Compensation is
not paid to any officers of the Trust by the Fund. Further, the Trust does
not provide any pension or retirement benefits to its Trustees and officers.
NAME OF PERSON AND
POSITION
AGGREGATE
COMPENSATION
FROM THE TRUST
TOTAL
COMPENSATION
FROM THE TRUST
AND COMPLEX PAID
TO TRUSTEES
David J. Callard
Trustee
$13,250
$13,250
Jean-Franois
Demole
Trustee
$0
$0
Jean G. Pilloud
Trustee
$0
$0
Bruce W. Schnizter
Trustee
$8,750
$8,750
Jeffrey P. Somers
Trustee
$12,250
$12,250
Control Persons and Principal Holders of Securities
As of April 7, 2000, the following entity owned 5% or more of the
outstanding shares of the Fund:
Fox & Co. 88.70%
P.O. Box 976
New York, NY 10268
Wippi Investment Ltd. 5.55%
2395 Route 143
Ayers Cliff
Quebec, Canada
As of April 7, 2000, the Trustees and officers of the Trust owned
2.63% of the outstanding shares of the Fund.
CODE OF ETHICS
The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the 1940 Act. The Funds Code of Ethics permits Fund
personnel to invest in securities for their own accounts, but requires
compliance with the Code's pre-clearance requirements (with certain
exceptions). In addition, the Funds Code of Ethics provides for trading
"blackout periods" that prohibit trading by personnel within periods of
trading by the Fund in the same security. The Funds Code of Ethics also
prohibits short term trading profits. The Code requires prior approval with
respect to purchases of securities in private placements and personal
investment in initial public offerings.
The Funds adviser, Pictet International Management Limited, has also
adopted a Code of Ethics. The Code of Ethics allows personnel to invest in
securities for their own accounts, but requires compliance with the Code's
pre-clearance requirements and other restrictions including "blackout
periods" and minimum holding periods, subject to limited exceptions. The
Code requires prior approval for purchases of securities in private
placements and personal investment in initial public offerings.
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust, on behalf of the Fund, has entered into an investment
advisory agreement with Pictet International Management Limited. Subject to
the control and supervision of the Trust's Board and in conformance with the
stated investment objective and policies of the Fund, the Adviser manages
the investment and reinvestment of the assets of the Fund. The Adviser's
advisory and portfolio transaction services also include making investment
decisions for the Fund, placing purchase and sale orders for portfolio
transactions and employing professional portfolio managers and security
analysts who provide research services to the Fund.
As noted in the Prospectus, the Adviser is entitled to receive a fee
from the Fund for its services calculated daily and payable monthly at the
annual rate of 1.00% of the Fund's average daily net assets. Currently, the
Adviser voluntarily has agreed to waive its fees and reimburse expenses to
the extent necessary to assure that the net operating expenses of the Fund
will not exceed 1.20% of the Fund's average daily net assets. For the years
ended December 31, 1999, December 31, 1998 and December 31, 1997, the Fund
incurred $50,263, $160,128 and $256,059, respectively, in fees for advisory
services. For these periods, the Adviser waived fees and reimbursed
expenses in the amounts as follows:
Year
Ended
December
31, 1999
Year
Ended
December
31, 1998
Year
Ended
December
31, 1997
Fees Waived
$50,
263
$160
,128
$210
,536
Expenses Reimbursed
$75,
736
$17,
265
$
47,315
The Adviser, located at Tower 42, Level 37, 25 Old Broad Street,
London, EC2N 1HQ, United Kingdom, is the wholly-owned subsidiary of Pictet
(Canada) and Company Ltd. ("Pictet Canada"). Pictet Canada is a partnership
whose principal activity is investment accounting, custody and securities
brokerage. Pictet Canada has two general partners, Pictet Advisory Services
Overseas and FINGEST, and eight limited partners, each of whom is also a
partner of Pictet & Cie, a Swiss private bank founded in 1805.
Prior to December 1, 1999, administrative services were provided to the Trust by
First Data Investor Services Group, Inc. (Investor Services Group). Effective
December 1, 1999, Investor Services Group became a majority-owned subsidiary of
PNC Bank Corp. As a result of this transaction, Investor Services Group is now
known as PFPC Inc (PFPC). Pursuant to an administration agreement, for the
years ended December 31, 1999, December 31, 1998 and December 31, 1997, the Fund
incurred $8,102, $32,127 and $74,782, respectively, in fees to PFPC/Investor
Services Group for administration services rendered.
PORTFOLIO TRANSACTIONS
The investment advisory agreement authorizes the Adviser to select
the brokers or dealers that will execute the purchases and sales of
investment securities for the Fund and directs the Adviser to use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions for the Fund. The Adviser, may, however,
consistent with the interests of the Fund, select brokers on the basis of
the research, statistical and pricing services they provide to the Fund.
Information and research received from such brokers will be in addition to,
and not in lieu of, the services required to be performed by the Adviser
under the investment advisory agreement. A commission paid to such brokers
may be higher than that which another qualified broker would have charged
for effecting the same transaction, provided that such commissions are paid
in compliance with the Securities Exchange Act of 1934, as amended, and that
the Adviser determines in good faith that such commission is reasonable in
terms either of the transaction or the overall responsibility of the Adviser
to the Fund and the Adviser's other clients. Brokerage commissions paid by
the Fund for the years ended December 31, 1999, December 31, 1998 and
December 31, 1997 were $59,075, $188,921 and $158,477, respectively. None
of these commissions were paid to an affiliate.
Some securities considered for investment by the Fund may be
appropriate also for other clients of the Adviser. If the purchase or sale
of securities is consistent with the investment policies of the Fund and one
or more of these other clients served by the Adviser and is considered at or
about the same time, transactions in such securities will be allocated among
the Fund and clients in a manner deemed fair and reasonable by the Adviser.
While in some cases this practice could have a detrimental effect on the
price, value or quantity of the security as far as the Fund is concerned, in
other cases it is believed to be beneficial to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax
considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of
the Fund or its shareholders, and the discussion here and in the Prospectus
is not intended as a substitute for careful tax planning. Potential
investors should consult their tax advisers with specific reference to their
own tax situation.
The Fund is treated as a separate taxable entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and has elected to be treated
and intends to qualify each year as a regulated investment company.
Qualification as a regulated investment company under the Code requires,
among other things, that the Fund distribute to its shareholders an amount
equal to at least the sum of 90% of its investment company taxable income
and 90% of its tax-exempt interest income (if any) net of certain deductions
for a taxable year. In addition, the Fund must satisfy certain requirements
with respect to the source of its income for each taxable year. At least
90% of the gross income of the Fund for a taxable year must be derived from
dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies,
and other income (including, but not limited to, gains from forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies. The Treasury Department by regulation may exclude
from qualifying income foreign currency gains which are not related directly
to the Fund's principal business of investing in stock or securities. Any
income derived by the Fund from a partnership or trust is treated for this
purpose as derived with respect to its business of investing in stock,
securities or currencies only to the extent that such income is attributable
to items of income which would have been qualifying income if realized by
the Fund in the same manner as by the partnership or trust.
In order to qualify as a regulated investment company, the Fund must
also diversify its holdings so that, at the close of each quarter of its
taxable year (i) at least 50% of the market value of its total (gross)
assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than
10% of the outstanding voting securities of such issuer and (ii) not more
than 25% of the value of its total assets is invested in the securities of
any one issuer (other than United States Government securities and
securities of other regulated investment companies) or two or more issuers
controlled by the Fund and engaged in the same, similar or related trades or
businesses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as a capital gain,
regardless of how long the shareholder has held the Fund's shares. The Fund
will designate such distributions as capital gain distributions in a written
notice mailed to shareholders within 60 days after the close of the Fund's
taxable year. Capital gain distributions may be subject to tax at different
maximum rates for individual (noncorporate) investors, depending upon each
investors tax bracket, the assets from which the Fund realized the gains,
and the Funds holding periods for those assets.
Redemptions and exchanges are taxable events for shareholders that are
subject to tax. Shareholders should consult their own tax advisers with
reference to their individual circumstances to determine whether any
particular transaction in Fund shares is properly treated as a sale for tax
purposes, as the following discussion assumes, and the character of and tax
rate applicable to any gains or losses recognized in such transactions under
the new rate structure for capital gains and losses that was added to the
Code by federal tax legislation enacted in 1997. Shareholders should note
that, upon the sale of Fund shares, if the shareholder has not held such
shares for tax purposes for more than six months, any loss on the sale of
those shares will be treated as a long-term capital loss to the extent of
the capital gain distributions received with respect to the shares. Losses
on a redemption or other sale of shares may also be disallowed under wash
sale rules if other shares of the Fund are acquired (including dividend
reinvestments) within a prescribed period.
An individual's net long-term capital gains are taxable at a maximum effective
rate of 20%. Ordinary income of individuals is taxable at a maximum nominal rate
of 39.6%, but because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate of
tax for some taxpayers may be higher. For corporations, long-term and short-term
capital gains and ordinary income are both taxable at a maximum nominal rate of
35% (although surtax provisions apply at certain income levels to result in
higher effective marginal rates).
If the Fund retains net capital gain for reinvestment, the Fund may
elect to treat such amounts as having been distributed to shareholders. As
a result, the shareholders would be subject to tax on undistributed net
capital gain, would be able to claim their proportionate share of the
federal income taxes paid by the Fund on such gain as a credit against their
own federal income tax liabilities and would be entitled to an increase in
their basis in their Fund shares.
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of
its taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its
shareholders). In such event, dividend distributions would be taxable as
ordinary income to shareholders to the extent of the Fund's current and
accumulated earnings and profits and would be eligible for the dividends-
received deduction for corporations.
Foreign Taxes. Income (including, in some cases, capital gains)
received from sources within foreign countries may be subject to withholding
and other income or similar taxes imposed by such countries. If more than
50% of the value of the Fund's total assets at the close of its taxable year
consists of stock or securities of foreign corporations, the Fund will be
eligible and may elect to "pass-through" to its shareholders the amount of
foreign income and other qualified foreign taxes paid by it (not in excess
of its actual tax liability). If this election is made, each taxable
shareholder will be required to include in gross income (in addition to
taxable dividends actually received) his pro rata share of the qualified
foreign taxes paid by the Fund, and will be entitled either to deduct (as an
itemized deduction) his pro rata share of foreign taxes in computing his
taxable income or to use it as a foreign tax credit against his U.S. federal
income tax liability, subject to holding period requirements and other
limitations. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions, but such a shareholder may be eligible to
claim the foreign tax credit (see below). If the Fund makes this election,
each shareholder will be notified within 60 days after the close of the
Fund's taxable year.
Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his or her
foreign source taxable income. For this purpose, if the pass-through
election is made, the source of the Fund's income flows through to its
shareholders. With respect to the Fund, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency gains,
including currency gains from foreign currency denominated debt securities,
receivables and payables, will be treated as ordinary income derived from
U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit), including the foreign source passive income passed
through by the Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the
Fund. Foreign taxes may not be deducted in computing alternative minimum
taxable income and the foreign tax credit can be used to offset only 90% of
the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not
eligible to or does not make the election to "pass through" to its
shareholders its foreign taxes, the foreign taxes it pays will reduce
investment company taxable income and the distributions by the Fund will be
treated as United States source income.
The Fund may invest up to 10% of its total assets in the stock of
foreign investment companies. Such companies are likely to be treated as
"passive foreign investment companies" ("PFICs") under the Code. Certain
other foreign corporations, not operating as investment companies, also may
satisfy the PFIC definition. A portion of the income and gains that the
Fund derives from an equity investment in a PFIC may be subject to a non-
deductible Federal income tax (including an interest-equivalent amount) at
the Fund level. In some cases, the Fund may be able to avoid this tax by
electing to be taxed currently on its share of the PFIC's income, whether or
not such income actually is distributed by the PFIC or by making an election
to mark its PFIC investments to market or by otherwise managing its PFIC
investments. These elections could require the Fund to recognize taxable
gain or income (subject to tax distribution requirements) without the
receipt of any corresponding amount of cash. Additionally, gains from PFIC
investments will generally be treated as ordinary income rather than capital
gain. The Fund will endeavor to limit its exposure to the PFIC tax by any
available techniques or elections. Because it is not always possible to
identify a foreign issuer as a PFIC in advance of making the investment, or
a PFIC may be the only practicable way to invest in certain countries, the
Fund may incur the PFIC tax in some instances.
Other Tax Matters. Special rules govern the federal income tax
treatment of certain transactions denominated in terms of a currency other
than the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by
the special rules include transactions in foreign currency denominated debt
instruments, foreign currency denominated payables and receivables, foreign
currencies and foreign currency forward contracts. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any other gain or loss on the underlying
transaction (subject to certain netting rules) and, absent an election that
may be available in some cases, generally is taxable as ordinary gain or
loss. Any gain or loss attributable to the foreign currency component of a
transaction engaged in by the Fund which is not subject to the special
currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction. Mark to
market and other tax rules applicable to certain currency forward contracts
may affect the amount, timing and character of the Fund's income, gain or
loss and hence of its distributions to shareholders. It is anticipated that
some of the non-U.S. dollar denominated investments and foreign currency
contracts the Fund may make or enter into will be subject to the special
currency rules described above.
The Fund is required to recognize income currently each taxable year
for federal income tax purposes under the Code's original issue discount
rules in the amount of the unpaid, accrued interest with respect to bonds
structured as zero coupon or deferred interest bonds or pay-in-kind
securities, even though it receives no cash interest until the security's
maturity or payment date. As discussed above, in order to qualify for
treatment as a regulated investment company, the Fund must distribute
substantially all of its income to shareholders. Thus, the Fund may have to
dispose of its portfolio securities under disadvantageous circumstances to
generate cash or leverage itself by borrowing cash, so that it may satisfy
the distribution requirement.
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 year ended December 31, 1999, the
Fund has elected to defer currency losses occurring between November 1, 1999
and December 31, 1999 of $13,674 under these rules. Such losses will be
treated as arising on the first day of the year ending December 31,
2000.
Provided that it qualifies as a regulated investment company, the
Fund will not be liable for Massachusetts income taxes or franchise taxes.
Exchange control regulations that may restrict repatriation of
investment income, capital or the proceeds of securities sales by foreign
investors may limit the Fund's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements described above.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their
tax advisers for more information.
Dividends declared in October, November or December payable to shareholders
of record on a specified date in such a month will be deemed to have been
received by the shareholders on December 31, in the event such dividends are
paid during January of the following year.
A 4% nondeductible excise tax is imposed under the Code on regulated
investment companies that fail to currently distribute for each calendar
year specified percentages of their ordinary taxable income and capital gain
net income (excess of capital gains over capital losses) earned in specified
periods. The Fund expects that it generally will make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income for each calendar year to avoid liability for this
excise tax.
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance
companies and financial institutions. Dividends, capital gain distributions
and ownership of or gains realized on the redemption (including an exchange)
of Fund shares also may be subject to state and local taxes. Shareholders
should consult their own tax advisers as to the Federal, state or local tax
consequences of ownership of shares of, and receipt of distributions from,
the Fund in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund effectively is connected will be subject to
U.S. federal income tax treatment that is different from that described
above. These investors may be subject to nonresident alien withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on
amounts treated as ordinary dividends from the Fund and, unless an effective
IRS Form W-8 or authorized substitute is on file, to 31% backup withholding
on certain other payments from the Fund. Non-U.S. investors should consult
their tax advisers regarding such treatment and the application of foreign
taxes to an investment in the Fund.
PERFORMANCE CALCULATIONS
The Fund may advertise its average annual total return. The Fund
computes such return by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to
the ending redeemable value of such investment according to the following
formula:
T = [( ERV )1/n - 1]
P
Where: T = average annual total return ERV = ending redeemable value at the end
of the period covered by the computation of a hypothetical $1,000 payment made
at the beginning of the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in terms of years
The Fund computes its aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment.
The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain
distributions. The ending redeemable value (variable "ERV" in each formula)
is determined by assuming complete redemption of the hypothetical investment
and the deduction of all nonrecurring charges at the end of the period
covered by the computations. The Fund's average annual total return and
aggregate total return do not reflect any fees charged by Institutions to
their clients.
GENERAL INFORMATION
Dividends and Capital Gain Distributions
The Fund's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in
the amount and at the times that generally will avoid both income and the
federal excise tax on undistributed income and gains (see discussion under
"Dividends, Capital Gain Distributions and Taxes" in the Prospectus). The
amounts of any income dividends or capital gain distributions cannot be
predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Fund by an investor may have the effect of reducing the per share net
asset value of the Fund by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in
effect a return of a portion of the purchase price, are subject to income
taxes as set forth in the Prospectus.
Description of Shares and Voting Rights
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of
such a business trust
may be held personally liable as partners for its obligations under certain
circumstances. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations. The Trust was organized as a Massachusetts business trust on May
23, 1995. Effective April 30, 2000, the Trusts name changed from Panorama Trust
to Pictet Funds. The Declaration of Trust authorizes the Trustees to classify
and reclassify any unissued shares into one or more series and classes of
shares. Currently, the Trust has five series, one of which is the Fund. Each
series currently has only one class of shares. The Trust offers shares of
beneficial interest, $.001 par value, for sale to the public.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share owned and proportionate, fractional votes for
fractional shares held. As of April 7, 2000, Fox & Co., New York, NY may be
deemed to control the Fund by virtue of owning more than 25% of the outstanding
shares of the Fund. Shares of each series are entitled to vote separately to
approve investment advisory agreements or charges in fundamental investment
policies, but vote together on the election of Trustees or selection of
independent accountants.
Under Massachusetts law and the Declaration of Trust, the Trust is not required
and currently does not intend to hold annual meetings of shareholders for the
election of Trustees except as required under the 1940 Act. Meetings of
shareholders for the purpose of electing Trustees normally will not be held
unless less than a majority of the Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a shareholder
meeting for the election of Trustees. Any Trustee may be removed from office
upon the vote of shareholders holding at least two-thirds of the Trust's
outstanding shares at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders upon the written request of
shareholders holding at least 10% of the Trust's outstanding shares. In
addition, shareholders who meet certain criteria will be assisted by the Trust
in communicating with other shareholders in seeking the holding of such meeting.
Shareholder inquiries should be addressed to the Trust at the address
or telephone number stated on the cover page.
Administrative and Transfer Agent Services
PFPC serves as the Trust's administrator, accounting agent and
transfer agent, and in these capacities, supervises the Trust's day-to-day
operations, other than management of the Fund's investments. PFPC is a
majority-owned subsidiary of PNC Bank Corp. For its services as accounting
agent, PFPC is entitled to receive a fee from the Trust computed daily and
payable monthly at the annual rate of .04% of the aggregate average daily
net assets of the Trust, subject to a $50,000 annual minimum from the Fund.
For administrative services, PFPC is entitled to receive $220,000 per annum
from the Trust, allocated among the Fund and other series of the Trust based
on average daily net assets. In addition, PFPC is paid separate
compensation for its services as transfer agent.
PFPC is located at 3200 Horizon Drive, King of Prussia, Pennsylvaina
19406.
Distributor. Effective December 1, 1999, Provident Distributors, Inc. (PDI)
replaced First Data Distributors, Inc. as the Funds distributor. PDI is the
principal underwriter and distributor of shares of the Fund pursuant to a
distribution agreement with the Trust. PDI is located at Four Falls Corporate
Center, West Conshohocken, Pennsylvania 19428.
Custodian. Brown Brothers Harriman & Co., located at 40 Water Street,
Boston, Massachusetts 02109, serves as the custodian of the Trust's assets.
Independent Accountants. PricewaterhouseCoopers LLP, located at 2400
Eleven Penn Center,
Philadelphia, Pennsylvania 19103, serves as independent accountants for the
Trust and audits the Trust's financial statements annually and reviews the
Funds federal tax returns.
Counsel. Hale and Dorr LLP serves as counsel to the Trust.
FINANCIAL STATEMENTS
The Trust's annual report for the year ended December 31, 1999
accompanies this Statement of Additional Information and the Fund's
financial statements, financial highlights and related notes and the report
of independent accountants contained therein are incorporated by reference
in to this Statement of Additional Information.
APPENDIX
DESCRIPTION OF RATINGS AND U.S. GOVERNMENT SECURITIES
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating:
Prime-1 ("P-1") --judged to be of the best quality. Issuers rated P-1 (or
related supporting institutions) are considered to have a superior capacity
for repayment of short-term promissory obligations.
Description of S&P highest commercial papers ratings:
A-1+ -- this designation indicates the degree of safety regarding timely
payment is overwhelming.
A-1 -- this designation indicates the degree of safety regarding timely
payment is either overwhelming or very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what generally are known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate
bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category, the
modifier 2 indicates a mid-range ranking and the modifier 3 indicates that
the bond ranks in the lower end of its generic rating category. Those
bonds in the Aa, A and Baa categories which Moody's believes possess the
strongest investment attributes, within those categories are designated by
the symbols Aa1, A1 and Baa1, respectively.
II. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States Government
and by various instrumentalities which have been established or sponsored by
the United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Securities issued or guaranteed by federal
agencies and U.S. Government-sponsored enterprises or instrumentalities may
or may not be backed by the full faith and credit of the United States. In
the case of securities not backed by the full faith and credit of the United
States, an investor must look principally to the agency, enterprise or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency, enterprise or instrumentality does not meet
its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home
Administration and Federal Financing Bank. Certain agencies, enterprises and
instrumentalities, such as the Government National Mortgage Association, are
backed, in effect, by the full faith and credit of the U.S. through
provisions in their charters that they may make "indefinite and unlimited"
drawings on the Treasury, if needed to service its debt. Debt from certain
other agencies, enterprises and instrumentalities, including the Federal
Home Loan Bank and Federal National Mortgage Association, are not guaranteed
by the U.S., but those institutions are protected by the discretionary
authority for the U.S. Treasury to purchase certain amounts of their
securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally-
chartered institutions under government supervision, but their debt
securities are backed only by the creditworthiness of those institutions,
not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration,
Small Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. government is a government agency
organized under Federal charter with government supervision.
Instrumentalities issuing or guaranteeing securities include, among others,
Overseas Private Investment Corporation, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate
Credit Banks and the Federal National Mortgage Association.
* The performance of the IFC Global Eastern Europe Index and the Barings Eastern
Europe Index is calculated from March 31, 1998. 1 Please see Redeeming Fund
Shares on page 20. ** The performance of the IFC Global Composite Index is
calculated from September 30, 1995. 1 Please see Redeeming Fund Shares on page
20. *** The performance of the HSBC James Capel World excluding U.S. Smaller
Companies Index and the Financial Times/S&P World ex-U.S. Medium-Small Cap Index
is calculated from January 31, 1996. 1 Please see Redeeming Fund Shares on
page 20. * Board Members Pilloud, Demole and Somers are "interested persons" of
the Trust as defined in the 1940 Act.
* Board Members Pilloud, Demole and Somers are "interested persons" of the Trust
as defined in the 1940 Act.
* Board Members Pilloud, Demole and Somers are "interested persons" of the Trust
as defined in the 1940 Act.
C: OTHER INFORMATION
Item 23. Exhibits
Exhibits:
a(1) Declaration of Trust dated May 23, 1995 is incorporated by reference to
Post-Effective No. 3 as filed with the Securities and Exchange Commission
January 2, 1996 ("Post-Effective Amendment No. 3").
a(2) Amendment to the Declaration of Trust dated June 8, 1995 is incorporated by
reference to Post-Effective Amendment No. 3.
a(3) Amendment to the Declaration of Trust dated December 28, 1995 is
incorporated by reference to Post-Effective Amendment No. 3.
a(4) Amendment to the Declaration of Trust dated March 1, 1996 is incorporated
by reference to Post-Effective Amendment No. 4 as filed with the Securities and
Exchange Commission April 1, 1996 ("Post-Effective Amendment No. 4").
a(5) Amendment to the Declaration of Trust dated April 17, 1997 is incorporated
by reference to Post-Effective Amendment No. 8 as filed with the Securities and
Exchange Commission April 30, 1998 (Post-Effective Amendment No. 8).
a(6) Amendment to the Declaration of Trust dated April 13, 1999 is incorporated
by reference to Post-Effective Amendment No. 12.
b By-Laws dated May 23, 1995 is incorporated by reference to Post-Effective
Amendment No. 3.
c Not Applicable.
d(1) Investment Advisory Agreement between Registrant and Pictet International
Management Limited dated October 3, 1995 with respect to Pictet Global Emerging
Markets Fund is incorporated by reference to Post-Effective Amendment No. 3
d(2) Supplement dated January 2, 1996 to the Investment Advisory Agreement with
respect to Pictet International Small Companies Fund is incorporated by
reference to Post-Effective Amendment No. 4.
d(3) Supplement dated March 12, 1997 to the Investment Advisory Agreement with
respect to Pictet Eastern European Fund is incorporated by reference to
Post-Effective Amendment No. 8.
d(4) Supplement to the Investment Advisory Agreement with respect to Pictet
European Equity Fund is incorporated by reference to Post-Effective Amendment
No. 10.
e Distribution Agreement between Registrant and Provident Distributors, Inc.
dated September 24, 1999 with respect to Pictet Global Emerging Markets Fund,
Pictet International Small Companies Fund, Pictet Eastern European Fund and
Pictet European Equity Fund is incorporated by reference to Post-Effective
Amendment No. 13.
f Not Applicable.
g(1) Custodian Agreement between Registrant and Brown Brothers Harriman & Co.
dated September 15, 1995 with respect to Pictet Global Emerging Markets Fund is
incorporated by reference to Post-Effective Amendment No. 3.
g(2) Amendment to Custodian Agreement dated January 10, 1996 with respect to
Pictet International Small Companies Fund is incorporated by reference to
Post-Effective Amendment No. 4
g(3) Amendment to Custodian Agreement dated September 13, 1996 is incorporated
by reference to Post-Effective Amendment No. 6 filed with the Securities and
Exchange Commission February 17, 1997.
g(4) Amendment to Custodian Agreement dated September 16, 1997 with respect to
Pictet Eastern European Fund is incorporated by reference to Post-Effective
Amendment No. 8.
g(5) Amendment to Custodian Agreement with respect to Pictet European Equity
Fund is incorporated by reference to Post-Effective Amendment No. 10.
h(1) Transfer Agency and Services Agreement between Registrant and The
Shareholder Services Group, Inc. (now known as PFPC Inc.) dated October 3, 1995
with respect to Pictet Global Emerging Markets Fund is incorporated by reference
to Post-Effective Amendment No. 3.
h(2) Supplement dated January 2, 1996 to the Transfer Agency and Services
Agreement with respect to Pictet International Small Companies Fund is
incorporated by reference to Post-Effective Amendment No. 4.
h(3) Supplement dated March 12, 1997 to the Transfer Agency and Services
Agreement with respect to Pictet Eastern European Fund is incorporated by
reference to Post-Effective Amendment No. 8.
h(4) Supplement to the Transfer Agency and Services Agreement with respect to
Pictet European Equity Fund is incorporated by reference to Post-Effective
Amendment No. 10.
h(5) Administration Agreement dated October 3, 1995 between Registrant and The
Shareholder Services Group, Inc. (now known as PFPC Inc.) with respect to Pictet
Global Emerging Markets Fund is incorporated by reference to Post-Effective
Amendment No. 3.
h(6) Amendment dated September 24, 1999 to the Administration Agreement dated
October 3, 1995 is incorporated by reference to Post-Effective Amendment No. 13.
h(7) Supplement dated January 2, 1996 to the Administration Agreement dated
October 3, 1995 with respect to Pictet International Small Companies Fund is
incorporated by reference to Post-Effective Amendment No. 4.
h(8) Supplement dated March 12, 1997 to the Administration Agreement with
respect to Pictet Eastern European Fund is incorporated by reference to
Post-Effective Amendment No. 8.
h(9) Supplement to the Administration Agreement with respect to Pictet European
Equity Fund is incorporated by reference to Post-Effective Amendment No. 10.
i Not Applicable.
j(1) Power of Attorney is incorporated by reference to Post- Effective Amendment
No. 13.
j(2) Consent of Independent Auditors is filed herein as Exhibit j(2).
k Not Applicable.
l(1) Purchase Agreement dated October 2, 1995 with respect to Pictet Global
Emerging Markets Fund is incorporated by reference to Post-Effective Amendment
No. 3.
l(2) Purchase Agreement dated February 1, 1996 with respect to Pictet
International Small Companies is incorporated by reference to Post-Effective
Amendment No. 4.
l(3) Purchase Agreement dated March 12, 1997 with respect to Pictet Eastern
European Fund is incorporated by reference to Post-Effective Amendment No. 8.
m Not Applicable.
n Not Applicable.
o(1) Code of Ethics for the Trust is incorporated by reference to
Post-Effective Amendment No. 14.
o(2) Code of Ethics for Pictet International Management Limited is
incorporated by reference to Post-Effective Amendment No. 14.
Item 24. Persons Controlled by or Under Common Control with Registrant
Registrant is not controlled by or under common control with any person.
Item 25. Indemnification
Under Section 4.3 of Registrant's Declaration of Trust, any past or present
Trustee or officer of Registrant (hereinafter referred to as a "Covered Person")
is indemnified to the fullest extent permitted by law against all liability and
all expenses reasonably incurred by him or her in connection with any claim,
action, suit, or proceeding to which he or she may be a party or otherwise
involved by reason of his or her being or having been a Covered Person. This
provision does not authorize indemnification when it is determined, in the
manner specified in the Declaration of Trust, as amended, that such Covered
Person has not acted in good faith in the reasonable belief that his or her
actions were in or not opposed to the best interests of Registrant. Moreover,
this provision does not authorize indemnification when it is determined, in the
manner specified in the Declaration of Trust, as amended, that such Covered
Person would otherwise be liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his or
her duties. Expenses may be paid by Registrant in advance of the final
disposition of any claim, action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay such expenses to
Registrant in the event that it is ultimately determined that indemnification of
such expenses is not authorized under the Declaration of Trust, as amended, and
the Covered Person either provides security for such undertaking or insures
Registrant against losses from such advances or the disinterested Trustees or
independent legal counsel determines, in the manner specified in the Declaration
of Trust, as amended, that there is reason to believe the Covered Person will be
found to be entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act"), may be permitted to Trustees, officers,
and controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and therefore, is unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer, or
controlling person of the Registrant in connection with the successful defense
of any claim, action, suit or proceeding) is asserted against the Registrant by
such Trustee, officer, or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Pictet International Management Limited (the "Adviser") is an affiliate of
Pictet & Cie (the "Bank"), a Swiss private bank which was founded in 1805. The
Bank manages the accounts for institutional and private clients and is owned by
eight partners. The Adviser, established in 1980, manages the investment needs
of clients seeking to invest in the international fixed revenue and equity
markets.
The list required by this Item 26 of officers and directors of Pictet
International Management Limited, together with the information as to any other
business, profession, vocation, or employment of substantial nature engaged in
by such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Pictet International
Management Limited pursuant to the Investment Advisers Act of 1940, as amended
(SEC File No. 801-15143).
Item 27. Principal Underwriters
(a) In addition to Panorama Trust, Provident Distributors, Inc. (the
"Distributor") act as principal underwriter for the following investment
companies as of 2/1/00: International Dollar Reserve Fund I, Ltd., Provident
Institutional Funds Trust, Pacific Innovations Trust, Columbia Common Stock
Fund, Inc., Columbia Growth Fund, Inc., Columbia International Stock Fund, Inc.,
Columbia Special Fund, Inc., Columbia Small Cap Fund, Inc., Columbia Real Estate
Equity Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company,
Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities
Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc.,
Columbia National Municipal Bond Fund, Inc., GAMNA Series Funds, Inc., WT
Investment Trust, Kalmar Pooled Investment Trust, The RBB Fund, Inc., Robertson
Stephens Investment Trust, HT Insight Funds, Inc., Harris Insight Funds Trust,
Hilliard-Lyons Government Fund, Inc., Hilliard-Lyons Growth Fund, Inc.,
Hilliard-Lyons Research Trust, Senbanc Fund, Warburg Pincus Trust, ABN AMRO
Funds, BT Insurance Funds Trust, Alleghany Funds, First Choice Funds Trust, LKCM
Funds, The Galaxy Fund, The Galaxy VIP Fund, Galaxy Fund II, IBJ Funds Trust,
Wilshire Target Funds, Inc., Undiscovered Managers Fund, New Covenant Funds,
Forward Funds, Inc., Light Index Funds, Inc. Weiss Peck & Greer Funds Trust,
Weiss Peck & Greer International Fund, WPG Growth Fund, WPG Growth & Income
Fund, WPG Tudor Fund, RWB/WPG U..S. Large Stock Fund, Tomorrow Funds Retirement
Trust, The Govett Funds, Inc., IAA Trust Growth Fund, Inc., IAA Trust Asset
Allocation Fund, Inc., IAA Trust Tax Exempt Bond Fund, Inc., IAA Trust Taxable
Fixed Income Series Fund, Inc., Matthews International Funds, MCM Funds,
Metropolitan West Funds, Smith Breeden Series Fund, Smith Breeden Trust,
Stratton Growth Fund, Inc., Stratton Monthly Dividend REIT Shares, Inc., The
Stratton Funds, Inc., Trainer, Wortham First Mutual Funds and The BlackRock
Funds, Inc. (Distributed by BlackRock Distributors, Inc. a wholly owned
subsidiary of Provident Distributors, Inc.), Northern Funds Trust and Northern
Institutional Funds Trust (Distributed by Northern Funds Distributors, LLC. a
wholly owned subsidiary of Provident Distributors, Inc.) The Offit Variable
Insurance Fund, Inc. (Distributed by Offit Funds Distributor, Inc. a wholly
owned subsidiary of Provident Distributors, Inc., and The Offit Investment Fund,
Inc. (Distributed by Offit Funds Distributor, Inc. a wholly owned subsidiary of
Provident Distributors, Inc.). Provident Distributors, Inc. is registered with
the Securities and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers. Provident Distributors, Inc. is
located at Four Falls Corporate Center, Suite 600, West Conshohocken,
Pennsylvania 19428-2961.
(b) The information required by this Item 27(b) with respect to each director,
officer or partner of Provident Distributors, Inc. ("PDI") is incorporated by
reference to Schedule A of Form BD filed by PDI with the SEC pursuant to the
Securities Act of 1934 (File No. 8-46564). No director, officer, or partner of
PDI holds a position or office with the Registrant.
(c) Not Applicable.
Item 28. Location of Accounts and Records
All accounts books and other documents required to be maintained by Registrant
by Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules thereunder will be maintained at the offices of:
Pictet International Management Limited
Cutlers Gardens
5 Devonshire Square
London, England EC2M 4LD
(records relating to its functions as investment adviser)
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
(records relating to its functions as custodian)
PFPC Inc.
101 Federal Street
BOS 610
Boston, Massachusetts 02110
(records relating to its functions as administrator)
PFPC Inc.
4400 Computer Drive
Westboro, Massachusetts 01581-5120
(records relating to its functions as transfer agent)
Provident Distributors, Inc.
3200 Horizon Drive
King of Prussia, PA 19406
(records relating to its functions as distributor)
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable
EXHIBIT INDEX
Exhibit
Number Description
j(2) Consent of Independent Auditors
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, Panorama Trust certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933, and the Registrant has
duly caused this Post-Effective Amendment No. 15 to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, and Commonwealth of Massachusetts, on the 28th day of April2000.
PANORAMA TRUST
By *
Jean G. Pilloud
Chairman, President and Trustee
* By:
/s/Andrew M. Goldberg
Andrew M. Goldberg
as Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 15 to the Registration Statement of Panorama Trust
has been signed by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
* Chairman, President April 28, 2000
(Jean G. Pilloud) and Trustee
(principal executive officer)
* Treasurer April 28, 2000
(William J. Baltrus) (principal financial and
accounting officer)
* Trustee April 28, 2000
(Jean-Franois Demole)
* Trustee April 28, 2000
(Jeffrey P. Somers, Esq.)
* Trustee April 28, 2000
(Bruce W. Schnitzer)
* Trustee April 28, 2000
(David J. Callard)
* By:
/s/Andrew M. Goldberg
Andrew M. Goldberg
as Attorney-in-Fact
</TABLE>
Exhibit j(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A (File No. 33-92712)
of our report dated February 11, 2000, relating to the financial statements and
financial highlights which appears in the December 31, 1999 Annual Report to
Shareholders of Panorama Trust, which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights", "Independent Accountants" and "Financial
Statements" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 26, 2000
