As filed with the Securities and Exchange Commission on March 1, 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 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 13 X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 17 X
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)
on April 30, 2000 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
_X_ on April 30, 2000 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a)(2) of Rule 485
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
X
Investment goal
X
Principal investments and strategies
X
Principal investment risks
X
Total return
X
Fees and expenses
X
Portfolio management
X
RISK/RETURN SUMMARY GLOBAL EMERGING MARKETS FUND
X
Investment goal
X
Principal investments and strategies
X
Principal investment risks
X
Total return
X
Fees and Expenses
X
Portfolio management
X
RISK/RETURN SUMMARY INTERNATIONAL SMALL COMPANIES FUND
X
Investment goal
X
Principal investments and strategies
X
Principal investment risks
X
Total return
X
Fees and Expenses
X
Portfolio management
X
THE FUNDS INVESTMENTS
X
INVESTMENT ADVISER
X
INVESTMENT AND ACCOUNT POLICIES
X
Calculation of net asset value
X
Purchasing fund shares
X
Year 2000
X
Exchanges between Pictet funds
X
Redeeming fund shares
X
Dividends, distributions and taxes
X
FINANCIAL HIGHLIGHTS
X
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, interests
in government owned or
controlled enterprises 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
fund's
investments
The adviser uses a "bottom-up"
approach in managing the fund's
portfolio. This means that the
particular stocks selected for
the portfolio will determine the
amount of the fund's investment
in each Eastern European
country. However, the adviser
will consider country-specific
risks and the fund's 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,
such as "current" ratios,
"quick" ratios and net worth.
? 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 fund's investments.
? Negative developments in
Eastern Europe
disproportionately hurt the
companies in the fund's
portfolio.
? An adverse event, such as
an unfavorable earnings report,
depresses the value of a
particular company's stock.
? The adviser's judgment
about country allocations or the
attractiveness, value or
potential appreciation of a
particular stock proves to be
incorrect.
Investments in Eastern European
companies involve the 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 fund's
performance from year to year.
Past performance does not
necessarily indicate how the fund
will perform in the future.
Eastern European Fund
Highest: [ ]% in [ ] quarter
199[]
Lowest: [ ]% in [ ] quarter
199[]
[bar chart]
Year ended
12/31/99
[ ]%
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 unmanaged
index of stocks traded in [ ]
countries and the Barings Eastern
Europe Index, an unmanaged index
of stocks traded in [ ]
countries.
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
[ ]%
[ ]%
Barings Eastern Europe Index
[ ]%
[ ]%
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 months#
None
1.00%
Annual fund operating expenses (deducted
from fund assets)1
Management fees
1.50%
Other expenses
10.04%
Total annual fund operating expenses
11.54%
1 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 fund's 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
$[ ]
$[ ]
$[ ]
$[ ]
PORTFOLIO
MANAGEMENT
Name of manager
Positions during last five years
Jura Ostrowsky
(since 1994)
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 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.
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, interests in
government owned or controlled
enterprises 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
fund's
investments
In allocating the fund's 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.
? 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 fund's investments.
? An adverse event, such as
an unfavorable earnings report,
depresses the value of a
particular company's stock.
The adviser's 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 fund's performance
from year to year. Past
performance does not necessarily
indicate how the fund will perform
in the future.
Global Emerging Markets Fund
Highest: [ ]% in [ ] quarter
199[]
Lowest: [ ]% in [ ] quarter
199[]
[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% [ ]%
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
unmanaged index of stocks traded
in 27 different countries.
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
[ ]%
[ ]%
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 months#
None
1.00%
Annual fund operating expenses (deducted
from fund assets)1
Management fees
1.25%
Other expenses
0.67%
Total annual fund operating expenses
1.92%
1 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 fund's 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
$[ ]
$[ ]
$[ ]
$[ ]
RISK/RETURN SUMMARY GLOBAL EMERGING MARKETS FUND (continued)
PORTFOLIO
MANAGEMENT
Names of managers
Positions during last five years
Douglas Polunin
(since 1989)
Senior investment manager of the adviser,
with responsibility for emerging market
investments.
Richard Ormond
(since 1990)
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 1994)
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, an Asia
fund portfolio manager for Invesco MIM.
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, interests
in government owned or
controlled enterprises 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
fund's
investments
In allocating the fund's 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
company's market or sector.
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 company's stock.
? The adviser's 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 fund's
performance from year to year.
Past performance does not
necessarily indicate how the fund
will perform in the future.
International Small Companies Fund
Highest: [ ]% in [ ] quarter
199[]
Lowest: [ ]% in [ ] quarter
199[]
[bar chart]
Year ended Year ended
Year ended
12/31/97 12/31/98
12/31/99
- -7.68% 5.35%
[ ]%
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 two
unmanaged indices of small and
medium cap stocks of non-U.S.
companies.
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 (ex-U.S.)
Smaller Companies Index
[ ]%
[ ]%
Financial Times/S&P World (ex-U.S.)
Medium-Small Cap Index
[ ]%
[ ]%
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 months#
None
1.00%
Annual fund operating expenses (deducted
from fund assets)1
Management fees
1.00%
Other expenses
3.76%
Total annual fund operating expenses
4.76%
1 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 fund's 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
$[ ]
$[ ]
$[ ]
$[ ]
RISK/RETURN SUMMARY INTERNATIONAL SMALL COMPANIES FUND (continued)
PORTFOLIO
MANAGEMENT
Names of managers
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 1994)
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 1995)
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.
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.
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 fund's 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 fund's 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 fund's 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 fund's
performance.
EACH FUNDS
INVESTMENT
GOAL
Each fund's board of trustees
may change the fund's investment
goal without obtaining the
approval of the fund's
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 each fund's
board of trustees, the adviser
makes each fund's 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 fund's
average daily net assets. The
adviser has agreed to cap each
fund's 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 at
any time.
Established in 1980, the
adviser currently manages
approximately $9.2 billion of
assets for more than 130
accounts. The adviser focuses
on managing international fixed
income and equity portfolios for
U.S. and international
institutional clients. Its
address is Cutlers Gardens, 5
Devonshire Square, London,
United Kingdom EC2M 4WB. 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.
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
fund's 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 fund's board. A
fund that uses fair value to
price securities may value those
securities higher or lower than
another fund using market
quotations 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 fund's
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
such investment advisers or
financial planners who place
trades for their own accounts if
the accounts are linked to the
master account of such
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 fund's NAV next
calculated after the order has
been received in proper form by
either the fund's 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 1-800-[XXX-XXXX] 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 [ ]. 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-
800-[XXX-XXXX] 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 1-800-[XXX-XXXX], 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.
YEAR 2000
Each fund's securities trades, pricing and accounting services and
other operations could be disrupted if the computer systems of a
fund's adviser, distributor, custodian or transfer agent were
unable to recognize dates after 1999. The adviser and other
service providers have told the fund that they have taken action to
prevent, and do not expect the fund to suffer from, significant
year 2000 problems. In addition, the companies in which the fund
invests may have year 2000 problems. Foreign issuers may be
especially susceptible. The value of their securities could go
down if they cannot fix these problems in time or if fixing these
problems is very expensive.
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
funds 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.
REDEEMING
FUND SHARES
The Pictet funds strongly
discourage market timers and
short-term traders from
investing in the funds. If you
redeem shares of a fund
(including shares to be
exchanged), which have been held
for less than six months, the
fund will deduct from the
proceeds a redemption fee 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.
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 fund's 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
subsequently arranged such
privilege in writing, you may
call 1-800-[XXX-XXXX] 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 help ensure
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
subsequently arranged in
writing, you may request the
funds to wire your proceeds to a
predesignated bank account.
Call 1-800-[XXX-XXXX]
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.
Withdrawals are drawn from share
redemptions and must be a
minimum of $500 per payment.
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 fund's distributions are
expected to be capital gains.
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.
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 fund's 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
fund's 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: 1-800-[XXX-XXXX]
Investors can review the fund's 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 Commission's 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"). To obtain the Prospectus, please call the Trust at 1-800-
561-6286.
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
Risk Factors 12
Purchase of Shares 14
Redemption of Shares 14
Portfolio Turnover 14
Investment Limitations 15
Management of the Fund 16
Investment Advisory and Other Services 19
Portfolio Transactions 20
Additional Information Concerning Taxes 20
Performance Calculations 24
General Information 25
Financial Statements 26
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. International investments are subject to a
variety of risks of loss beyond the risks ordinarily associated with
investing in the U.S. and other mature securities markets. The discussion
of risks set forth below refers to the better understood risks of
investing in less developed markets but is not intended, and should not be
assumed, to be a complete list of all possible risks. Although the Board
of Trustees, the Adviser, and the Custodian and 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
considerations which typically are not associated with investing in U.S.
companies. 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.
Because foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards and may have
policies that are not comparable with those of domestic companies, there
may be less information available about certain foreign companies than
about domestic companies. Securities of some foreign companies generally
are less liquid and more volatile than securities of comparable domestic
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.
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.
In addition, excess cash invested with depository institutions
domiciled outside the continental United States, as with any offshore
deposits, may be subject to both sovereign actions in the jurisdiction of
the depository institution and sovereign actions in the jurisdiction of
the currency, including but not limited to freeze, seizure, and
diminution. The risk associated with the repayment of principal and
payment of interest on such instruments by the institution with whom the
deposit is ultimately placed will be borne exclusively by the Fund.
Other Investment Companies. The Fund may invest up to 10% of its
total assets in securities issued by other investment companies investing
in securities in which the Fund can invest, provided that such investment
companies invest in portfolio securities in a manner consistent with the
Fund's investment objective and policies. Applicable provisions of the
1940 Act require that the Fund limit its investments so that, as
determined immediately after a securities purchase is made: (a) not more
than 10% of the value of the Fund's total assets will be invested in the
aggregate in securities of investment companies as a group; (b) the Fund
and any company or companies controlled by the Fund will not own together
more than 3% of the total outstanding shares of any one investment company
at the time of purchase; and (c) the Fund will not invest more than 5% of
its total assets in any one investment company. As a shareholder of
another investment company, the Fund would bear its pro rata portion,
along with other shareholders, of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection
with its own operations.
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
might be excluded from such 5%.
The Fund will attempt to determine whether the price fluctuations in
the futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund
or which it expects to purchase. The Fund's futures transactions
generally will be entered into only for traditional hedging purposes,
i.e., futures contracts will be sold to protect against a decline in the
price of securities or currencies and will be purchased to protect the
Fund against an increase in the price of securities it intends to purchase
(or the currencies in which they are denominated). All futures contracts
entered into by the Fund are traded on U.S. exchanges or boards of trade
licensed and regulated by the CFTC or on foreign exchanges.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting or "closing"
purchase or sale transactions, which may result in a profit or a loss.
While the Fund's futures contracts on securities or currencies will
usually be liquidated in this manner, the Fund may make or take delivery
of the underlying securities or currencies whenever it appears
economically advantageous. A clearing corporation associated with the
exchange on which futures on securities or currencies are traded
guarantees that, if still open, the sale or purchase will be performed on
the settlement date.
By using futures contracts to hedge its positions, the Fund seeks to
establish more certainty then would otherwise be possible with respect to
the effective price, rate of return or currency exchange rate on portfolio
securities or securities that the Fund proposes to acquire. For example,
when interest rates are rising or securities prices are falling, the Fund
can seek, through the sale of futures contracts, to offset a decline in
the value of its current portfolio securities. When rates are falling or
prices are rising, the Fund, through the purchase of futures contracts,
can attempt to secure better rates or prices than might later be available
in the market with respect to anticipated purchases. Similarly, the Fund
can sell futures contracts on a specified currency to protect against a
decline in the value of such currency and its portfolio securities which
are denominated in such currency. The Fund can purchase futures contracts
on a foreign currency to fix the price in U.S. dollars of a security
denominated in such currency that the Fund has acquired or expects to
acquire. Loss from investing in futures transactions by the Fund is
potentially unlimited.
As part of its hedging strategy, the Fund also may enter into other
types of financial futures contracts if, in the opinion of the Adviser,
there is a sufficient degree of correlation between price trends for the
Fund's portfolio securities and such futures contracts. Although under
some circumstances prices of securities in the Fund's portfolio may be
more or less volatile than prices of such futures contracts, the Adviser
will attempt to estimate the extent of this difference in volatility based
on historical patterns and to compensate for it by having the Fund enter
into a greater or lesser number of futures contracts or by attempting to
achieve only a partial hedge against price changes affecting the Fund's
securities portfolio. When hedging of this character is successful, any
depreciation in the value of portfolio securities can be substantially
offset by appreciation in the value of the futures position. However, any
unanticipated appreciation in the value of the Fund's portfolio securities
could be offset substantially by a decline in the value of the futures
position.
The acquisition of put and call options on futures contracts gives
the Fund the right (but not the obligation), for a specified price, to
sell or purchase the underlying futures contract at any time during the
option period. Purchasing an option on a futures contract gives the Fund
the benefit of the futures position if prices move in a favorable
direction, and limits its risk of loss, in the event of an unfavorable
price movement, to the loss of the premium and transaction costs.
The Fund may terminate its position in an option contract by selling
an offsetting option on the same series. There is no guarantee that such
a closing transaction can be effected. The Fund's ability to establish
and close out positions on such options is dependent upon a liquid market.
The Fund will engage in transactions in futures contracts and
related options only to the extent such transactions are consistent with
the requirements of the Internal Revenue Code of 1986, as amended, for
maintaining their qualification as a regulated investment company for
Federal income tax purposes.
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.
RISK FACTORS
All investments involve risk and there can be no guarantee against
loss resulting from an investment in the Fund, nor can there be any
assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment
in the Fund can decrease as well as increase, depending on a variety of
factors which may affect the values and income generated by the Fund's
securities, including general economic conditions, market factors and
currency exchange rates. An investment in the Fund is not intended as a
complete investment program.
Foreign Securities. The Fund may purchase securities of issuers
located in any foreign country, consistent with its investment objective.
Investing in securities issued by companies and governments of foreign
nations involves special risks and considerations typically not associated
with investing in U.S. companies. These risks and considerations include
differences in accounting, auditing and financial reporting standards,
generally higher, non-negotiable commission rates on foreign portfolio
transactions, longer settlement periods, the possibility of expropriation
or confiscatory taxation, adverse changes in investment or exchange
control regulations, political instability which could affect U.S.
investment in foreign countries and potential restrictions on the flow of
international capital. Also, changes in foreign exchange rates will
affect, favorably or unfavorably, the value of those securities in the
Fund's portfolio which are denominated or quoted in currencies other than
the U.S. dollar. In addition, in many countries there is less publicly
available information about issuers than is available in reports about
companies in the United States. Moreover, the dividend or interest income
or gain from the Fund's foreign portfolio securities may be subject to
foreign withholding or other foreign taxes, thus reducing the net amount
of income available for distribution to the Fund's shareholders. Further,
foreign securities often trade with less frequency and volume than
domestic securities and, therefore, may exhibit greater price volatility.
Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S. companies.
Further, the Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts.
These risks are often heightened for investments in certain Eastern
European countries as well as other developing or emerging markets, where
the risks include the possibility that such countries may revert to a
centrally planned economy. 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.
Costs associated with transactions in foreign securities generally
are higher than costs associated with transactions in U.S. securities.
Such transactions also involve additional costs for the purchase or sale
of foreign currency. 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.
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.
Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment, resources, self-
sufficiency and balance of payments position. The securities markets,
values of securities, yields and risks associated with securities markets
in different countries may change independently of each other.
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.
For more information regarding Risk Factors see Appendix.
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 2% of the amount of the
redemption. This amount is retained by the Fund to offset the Fund's
costs of purchasing and selling securities. Redemption proceeds may be
greater or less than the shareholder's initial cost depending on the
market value of the securities held by the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Fund will depend upon market
and other conditions and it will not be a limiting factor when the Adviser
believes that portfolio changes are appropriate. Although the portfolio
turnover rate may vary from year to year, the Adviser expects, during
normal market conditions, that the Fund's portfolio turnover rate will not
exceed 100%. 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 [ ]% 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
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, Chartwell Re Corporation,
and Information Management Associates,
Inc.
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
$[ ]
$[ ]
Jean-Franois Demole
Trustee
$0
$0
Jean G. Pilloud
Trustee
$0
$0
Bruce W. Schnizter
Trustee
$[ ]
$[ ]
Jeffrey P. Somers
Trustee
$[ ]
$[ ]
Control Persons and Principal Holders of Securities
As of [ ], 2000, the following entities owned 5% or more of
the outstanding shares of the Fund:
[ ]
As of [ ], 2000, the Trustees and officers of the Trust owned [
]% of the outstanding shares of the Fund.
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
$[ ] 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
$[ ]
$20,711
Expenses reimbursed
$[ ]
$79,127
The Adviser, located at Cutlers Garden, 5 Devonshire Square, London,
England EC2M 4WB, 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 $[ ] and $8,319, respectively, in
fees to PFPC/Investor Services Group for administration services rendered.
For the year ended December 31, 1999, $[ ] of fees were waived
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 $[ ] 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 currency losses occurring between November 1, 1999
and
December 31, 1999 of $[
] 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 $[ ],
expiring in the 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 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. 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 four 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 [ ], 2000, [ ] 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"). To obtain the Prospectus, please call the Trust at 1-
800-561-6286.
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
Risk Factors 8
Purchase of Shares 10
Redemption of Shares 10
Portfolio Turnover 11
Investment Limitations 11
Management of the Fund 13
Investment Advisory and Other Services 16
Portfolio Transactions 16
Additional Information Concerning Taxes 17
Performance Calculations 21
General Information 22
Financial Statements 23
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:
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. International investments are subject to a
variety of risks of loss beyond the risks ordinarily associated with
investing in the U.S. and other mature securities markets. The discussion
of risks set forth below refers to the better understood risks of
investing in less developed markets but is not intended, and should not be
assumed, to be a complete list of all possible risks. Although the Board
of Trustees, the Adviser, and the Custodian and sub-custodians each review
and attempt to minimize the risks of which they are aware, and even if
neither the Trustees nor any service provided 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.
Investors should recognize that investing in foreign companies
involves certain special considerations which typically are not associated
with investing in U.S. companies. 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.
As foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards and may have
policies that are not comparable with those of domestic companies, there
may be less information available about certain foreign companies than
about domestic companies. Securities of some foreign companies generally
are less liquid and more volatile than securities of comparable domestic
companies. There is generally less government supervision and regulation
of stock exchanges, brokers and listed companies than in the United
States. In addition, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in foreign countries.
Although the Fund will endeavor to achieve most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign
stock exchanges 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 costs 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.
In addition, excess cash invested with depository institutions
domiciled outside the continental U.S., 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 ultimately is placed
will be exclusively for the Fund's account.
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.
RISK FACTORS
All investments involve risk and there can be no guarantee against
loss resulting from an investment in the Fund, nor can there be any
assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment
in the Fund can decrease as well as increase depending on a variety of
factors which may affect the values and income generated by the Fund's
securities, including general economic conditions, market factors and
currency exchange rates. An investment in the Fund is not intended as a
complete investment program.
Foreign Securities. Investing in the securities of foreign
companies involves 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, changes in foreign exchange rates will affect, favorably
or unfavorably, the value of those securities in the Fund's portfolio
which are denominated or quoted in currencies other than the U.S. dollar.
In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in
the United States. Moreover, the dividend or interest income or gain from
the Fund's foreign portfolio securities may be subject to foreign
withholding or other foreign taxes, thus reducing the net amount of income
available for distribution to the Fund's shareholders. Further, foreign
securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility. Foreign
companies 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. Further, the
Fund may encounter difficulties or be unable to pursue legal remedies and
obtain judgments in foreign courts.
Investing in Emerging Markets. The risks of foreign securities
often are heightened for investments in developing or emerging markets,
including certain Eastern European countries 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.
Costs associated with transactions in foreign securities generally
are higher than costs associated with transactions in U.S. securities.
Such transactions also involve additional costs for the purchase or sale
of foreign currency. 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. For example, funds may be withdrawn from the
People's Republic of China only in U.S. dollars or local currency and only
at the exchange rate established by the government once each week.
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.
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.
Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment, resources, self-
sufficiency and balance of payments position. The securities markets,
values of securities, yields and risks associated with securities markets
in different countries may change independently of each other.
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.
There are further risk factors, including possible losses through
the holding of securities in domestic and foreign custodian banks and
depositories, described elsewhere in the Prospectus. See those sections
entitled "Repurchase Agreements," "Reverse Repurchase Agreements," "When
Issued," "Delayed Settlement" and "Forward Delivery Securities" and
"Forward Foreign Currency Exchange Contracts" under "Investment
Techniques" in the Prospectus. Additional information on these topics is
contained in the SAI. Supplementary information regarding the risks of
investment in Russian and other foreign securities is contained in
Appendix A of the SAI.
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.
No charge is made by the Fund for redemptions. 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 [ ]%, 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
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, Chartwell Re Corporation,
and Information Management Associates,
Inc.
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
$[ ]
$[ ]
Jean-Franois Demole
Trustee
$0
$0
Jean G. Pilloud
Trustee
$0
$0
Bruce W. Schnizter
Trustee
$[ ]
$[ ]
Jeffrey P. Somers
Trustee
$[ ]
$[ ]
Control Persons and Principal Holders of Securities
As of [ ], 2000, the following entities owned 5% or more of the
outstanding shares of the Fund:
[ ]
As of [ ], 2000, the Trustees and officers of the Trust owned
less than 1% of the outstanding shares of the Fund.
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 $[ ], $1,464,171 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
$[ ]
$348,985
$294,489
The Adviser, located at Cutlers Gardens, 5 Devonshire Square,
London, England EC2M 4WB, 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 $[ ], $209,718 and $277,468,
respectively, in fees to PFPC/Investor Services Group for administration
services rendered. For the year ended December 31, 1999, $[ ] of fees
were waived.
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 $[ ], $1,381,821 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 capital losses and currency losses occurring
between November 1, 1999 and December 31, 1999 of $[ ] and $[ ],
respectively, 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 $[
], 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. 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 four 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 [ ], 2000, [ ] 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.
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"). To obtain the Prospectus, please call the Trust
at 1-800-561-6286.
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
Risk Factors 7
Purchase of Shares 8
Redemption of Shares 8
Portfolio Turnover 9
Investment Limitations 9
Management of the Fund 11
Investment Advisory and Other Services 13
Portfolio Transactions 14
Additional Information Concerning Taxes 14
Performance Calculations 18
General Information 19
Financial Statements 20
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. International investments are subject to a
variety of risks of loss beyond the risks ordinarily associated with
investing in the U.S. and other mature securities markets. The discussion
of risks set forth below refers to the better understood risks of
investing in less developed markets but is not intended, and should not be
assumed, to be a complete list of all possible risks. Although the Board
of Trustees, the Adviser, and the Custodian and 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.
Investors should recognize that investing in foreign companies
involves certain special considerations which typically are not associated
with investing in U.S. companies. 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.
As foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards and may have
policies that are not comparable with those of domestic companies, there
may be less information available about certain foreign companies than
about domestic companies. Securities of some foreign companies generally
are less liquid and more volatile than securities of comparable domestic
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.
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 costs 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.
In addition, excess cash invested with depository institutions
domiciled outside the continental U.S., 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 ultimately is placed
will be exclusively for the Fund's account.
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.
RISK FACTORS
All investments involve risk and there can be no guarantee against
loss resulting from an investment in the Fund, nor can there be any
assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of and income from an investment
in the Fund can decrease as well as increase depending on a variety of
factors which may affect the values and income generated by the Fund's
securities, including general economic conditions, market factors and
currency exchange rates. An investment in the Fund is not intended as a
complete investment program.
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.
Foreign Securities. Investing in the securities of foreign
companies involves 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, changes in foreign exchange rates will affect, favorably or
unfavorably, the value of those securities in the Fund's portfolio which
are denominated or quoted in currencies other than the U.S. dollar. In
addition, in many countries there is less publicly available information
about issuers than is available in reports about companies in the United
States. Moreover, the dividend or interest income or gain from the Fund's
foreign portfolio securities may be subject to foreign withholding or
other foreign taxes, thus reducing the net amount of income available for
distribution to the Fund's shareholders. Further, foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may exhibit greater price volatility. Foreign companies
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. Further, the Fund may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts.
There are additional risk factors, including possible losses through
the holding of securities in domestic and foreign custodian banks and
depositories, described elsewhere. For additional information refer to
"Repurchase Agreements," "Reverse Repurchase Agreements," "When Issued,"
"Delayed Settlement" and "Forward Delivery Securities" and "Forward
Foreign Currency Exchange Contracts" under "Investment Techniques" in the
Prospectus and under "Foreign Investments" in the SAI.
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.
No charge is made by the Fund for redemptions. 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 [ ]%, 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
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, Chartwell Re Corporation,
and Information Management Associates,
Inc.
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
$[ ]
$[ ]
Jean-Franois Demole
Trustee
$0
$0
Jean G. Pilloud
Trustee
$0
$0
Bruce W. Schnizter
Trustee
$[ ]
$[ ]
Jeffrey P. Somers
Trustee
$[ ]
$[ ]
Control Persons and Principal Holders of Securities
As of [ ], 2000, the following entity owned 5% or more of the
outstanding shares of the Fund:
[ ]
As of [ ], 2000, the Trustees and officers of the Trust owned [
]% of the outstanding shares of the Fund.
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 $[ ], $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
$[
]
$160
,128
$210
,536
Expenses Reimbursed
$[
]
$17,
265
$
47,315
The Adviser, located at Cutlers Gardens, 5 Devonshire Square,
London, England EC2M 4WB, 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 $[ ],
$32,127 and $74,782, respectively, in fees to PFPC/Investor Services Group
for administration services rendered. For the year ended December 31,
1999, $[ ] of fees were waived
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 $[ ], $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 capital losses and currency losses occurring
between November 1, 1999 and December 31, 1999 of $[ ] and $[ ],
respectively, 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. 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 four 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 [ ], 2000, [ ] 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.
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 filed herein as
Exhibit e.
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 filed herein as Exhibit h(6).
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 Power of Attorney is filed herein as Exhibit j.
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.
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.
Four Falls Corporate Center
West Conshohocken, Pennsylvania 19428
(records relating to its functions as distributor)
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable
EXHIBIT INDEX
Exhibit
Number Description
e Distribution Agreement
h(6) Amendment to Administration Agreement
j(2) Power of Attorney
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Panorama Trust has
duly caused this Post-Effective Amendment No. 13 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 1st day of March 2000.
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. 13 to the Registration Statement of
Panorama Trust has been signed by the following persons in the capacities
and on the dates indicated:
Signature Title Date
* Chairman, President
March 1, 2000
(Jean G. Pilloud) and Trustee
(principal executive officer)
* Treasurer March 1,
2000
(William J. Baltrus) (principal financial and
accounting officer)
* Trustee
March 1, 2000
(Jean-Franois Demole)
* Trustee
March 1, 2000
(Jeffrey P. Somers, Esq.)
* Trustee
March 1, 2000
(Bruce W. Schnitzer)
* Trustee March 1,
2000
(David J. Callard)
* By:
/s/Andrew M. Goldberg
Andrew M. Goldberg
as Attorney-in-Fact
Exhibit e
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 24th day of September, 1999 by and
between Panorama Trust (the "Trust") and Provident Distributors, Inc. (the
"Distributor"), a corporation organized under the laws of State of
Delaware, having its principal place of business atFour Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428-2961.
WHEREAS, the Trust is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act") and is currently offering units of beneficial
interest (such units of all series are hereinafter called the "Shares"),
representing interests in investment portfolios of the Trust identified on
Schedule A hereto (the "Funds") which are registered with the Securities
and Exchange Commission ("SEC") pursuant to the Trust's Registration
Statement on Form N-1A (the "Registration Statement"); and
WHEREAS, the Trust desires to retain the Distributor as distributor
for the Fund to provide for the sale and distribution of the Shares of the
Funds identified on Schedule A, and for such additional classes or series
as the Trust may issue, and the Distributor is prepared to provide such
services commencing on the Effective Date as such term is defined in
Section 2 hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein and intending to be legally bound hereby the parties
hereto agree as follows:
1. Service as Distributor
1.1 The Distributor will act on behalf of the Trust for the distribution
of the Shares covered by the Registration Statement under the Securities
Act of 1933, as amended (the "1933 Act"). The Distributor will have no
liability for payment for the purchase of Shares sold pursuant to this
Agreement or with respect to redemptions or repurchases of Shares.
1.2 The Distributor agrees to use efforts deemed appropriate by the
Distributor to solicit orders for the sale of the Shares and will
undertake such advertising and promotion as it believes reasonable in
connection with such solicitation. The Trust understands that the
Distributor is now, and may in the future be, the distributor of the
shares of several investment companies or series (collectively, the
"Companies") including Companies having investment objectives similar to
those of the Trust. The Trust further understands that investors and
potential investors in the Trust may invest in shares of such other
Companies. The Trust agrees that the Distributor's duties to such
Companies shall not be deemed in conflict with its duties to the Trust
under this paragraph 1.2.
1.3 The Distributor shall, at its own expense, finance appropriate
agreed upon activities which it deems reasonable which are primarily
intended to result in the sale of the Shares, including, but not limited
to, the printing and mailing of prospectuses to other than current
shareholders.
1.4 All activities by the Distributor and its employees, as distributor
of the Shares, shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made
or adopted pursuant to the 1940 Act by the SEC or the National Association
of Securities Dealers.
1.5 The Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent for the Trust.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, the Trust may decline to accept
any orders for, or make any sales of, the Shares until such time as those
officers deem it advisable to accept such orders and to make such sales
and the Trust advises the Distributor promptly of such determination.
1.7 The Trust agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions
that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as the Distributor may designate. The
Trust shall notify the Distributor in writing of the states in which the
Shares may be sold and shall notify the Distributor in writing of any
changes to the information contained in the previous notifications.
1.8 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Trust
and the Shares as the Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall
fairly show or represent what they purport to show or represent. The
Trust shall also furnish the Distributor upon request with: (a) audited
annual statements and unaudited semi-annual statements of a Fund's books
and accounts prepared by the Trust, (b) quarterly earnings statements
prepared by the Trust, (c) a monthly itemized list of the securities in
the Funds, (d) monthly balance sheets as soon as practicable after the end
of each month, and (e) from time to time such additional information
regarding the financial condition of the Trust as the Distributor may
reasonably request.
1.9 The Trust represents to the Distributor that all Registration
Statements and prospectuses filed by the Trust with the SEC under the 1933
Act with respect to the Shares have been prepared in conformity with the
requirements of said Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the term "Registration Statement"
shall mean any Registration Statement and any prospectus and any statement
of additional information relating to the Trust filed with the SEC and any
amendments or supplements thereto at any time filed with said Commission.
The Trust represents and warrants to the Distributor that any Registration
Statement, when such Registration Statement becomes effective, will
contain statements required to be stated therein in conformity with the
1933 Act and the rules and regulations of the SEC; that all statements of
fact contained in any such Registration Statement will be true and correct
when such Registration Statement becomes effective; and that no
Registration Statement when such Registration Statement becomes effective
will include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares. The
Distributor may but shall not be obligated to propose from time to time
such amendment or amendments to any Registration Statement and such
supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Distributor's counsel, be
necessary or advisable. The Distributor shall promptly notify the Trust
of any advice given to it by its counsel regarding the necessity or
advisability of amending or supplementing such Registration Statement. If
the Trust shall not propose such amendment or amendments and/or supplement
or supplements within fifteen days after receipt by the Trust of a written
request from the Distributor to do so, the Distributor may, at its option,
terminate this Agreement. The Trust shall not file any amendment to any
Registration Statement or supplement to any prospectus without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's
right to file at any time such amendments to any Registration Statements
and/or supplements to any prospectus, of whatever character, as the Trust
may deem advisable, such right being in all respects absolute and
unconditional.
1.10 The Trust authorizes the Distributor to use any prospectus or
statement of additional information in the form furnished from time to
time in connection with the sale of the Shares. The Trust agrees to
indemnify and hold harmless the Distributor, its officers, directors, and
employees, and any person who controls the Distributor within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
legal fees incurred in connection therewith) which the Distributor, its
officers, directors, employees or any such controlling person may incur
under the 1933 Act, under any other statute, at common law or otherwise,
arising out of or based upon:
(a) any untrue statement, or alleged untrue statement, of a material
fact contained in the Trust's Registration Statement, prospectus,
statement of additional information, or sales literature (including
amendments and supplements thereto), or
(b) any omission, or alleged omission, to state a material fact required
to be stated in the Trust's Registration Statement, prospectus, statement
of additional information or sales literature (including amendments or
supplements thereto), necessary to make the statements therein not
misleading, provided, however, that insofar as losses, claims, damages,
liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information furnished to the Trust by
the Distributor or its affiliated persons for use in the Trust's
Registration Statement, prospectus, or statement of additional information
or sales literature (including amendments or supplements thereto), such
indemnification is not applicable.
The Distributor, its officers, directors, and employees, and any
such controlling person, as aforesaid, shall notify the Trust of any
action brought against the Distributor, its officers, directors or
employees, or any such controlling person, such notification to be given
by letter or by telegram addressed to the Trust at its principal office in
Boston, Massachusetts and sent to the Trust by the person against whom
such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to notify the Trust of
any such action shall not relieve the Trust from any liability which the
Trust may have to the person against whom such action is brought by reason
of any such untrue, or allegedly untrue, statement or omission, or alleged
omission, otherwise than on account of the Trust's indemnity agreement
contained in this paragraph 1.10. The Trust will be entitled to assume
the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel
of good standing chosen by the Trust and approved by the Distributor,
which approval shall not unreasonably be withheld. In the event the Trust
elects to assume the defense of any such suit and retain counsel of good
standing approved by the Distributor, the defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained
by any of them; but in case the Trust does not elect to assume the defense
of any such suit, or in case the Distributor reasonably does not approve
of counsel chosen by the Trust, or in case there is a conflict of interest
between the Trust or the Distributor, the Trust will reimburse the
Distributor, its officers, directors and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the
fees and expenses of any counsel retained by the Distributor or them. The
Trust's indemnification agreement contained in this paragraph 1.10 and the
Trust's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation
made by or on behalf of the Distributor, its officers, directors and
employees, or any controlling person, and shall survive the delivery of
any Shares. This agreement of indemnity will inure exclusively to the
Distributor's benefit, to the benefit of its several officers, directors
and employees, and their respective estates, and to the benefit of the
controlling persons and their successors. The Trust agrees promptly to
notify the Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or trustees in
connection with the issue and sale of any Shares.
1.11 The Distributor agrees to indemnify and hold harmless the Trust, its
several officers and trustees and each person, if any, who controls a Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any reasonable
legal fees incurred in connection therewith) which the Trust, its
officers, trustees or any such controlling person may incur under the 1933
Act, under any other statute, at common law or otherwise, but only to the
extent that such liability or expense incurred by the Trust, its officers
or trustees, or any controlling person resulting from such claims or
demands arose out of the acquisition of any Shares by any person which may
be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Trust's Registration Statement, prospectus
or statement of additional information (including amendments and
supplements thereto), or any omission, or alleged omission, to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance upon information furnished or confirmed in writing to the
Trust by the Distributor or its affiliated persons (as defined in the 1940
Act).
The agreement of the Distributor to indemnify the Trust, its
officers and trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon the Distributor being notified of any action
brought against the Trust, its officers or trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to the Distributor at its principal office in West Conshohocken,
Pennsylvania, and sent to the Distributor by the person against whom such
action is brought, within 10 days after the summons or other first legal
process shall have been served. The Distributor shall have the right of
first control of the defense of such action, with counsel of its own
choosing, satisfactory to the Trust, if such action is based solely upon
such alleged misstatement or omission on the Distributor's part, and in
any other event the Trust, it officers or trustees or such controlling
person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify
the Distributor of any such action shall not relieve the Distributor from
any liability that the Distributor may have to the Trust, its officers or
trustees, or to such controlling person by reason of any such untrue, or
alleged untrue, statement or omission, or alleged omission, otherwise than
on account of the Distributor's indemnity agreement contained in this
paragraph 1.11.
1.12 No Shares shall be offered by either the Distributor or the Trust
under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust if and
so long as effectiveness of the Registration Statement then in effect or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act, or if and so long as a current prospectus as
required by Section 5(b)(2) of said Act is not on file with the SEC;
provided, however, that nothing contained in this paragraph 1.12 shall in
any way restrict or have any application to or bearing upon the Trust's
obligation to repurchase Shares from any shareholder in accordance with
the provisions of the Trust's Registration Statement, Declaration of
Trust, or bylaws.
1.13 The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the SEC for amendments to the Registration
Statement, prospectus or statement of additional information then in
effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement, prospectus or statement
of additional information then in effect or the initiation by service of
process on the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement, prospectus or statement
of additional information then in effect or that requires the making of a
change in such Registration Statement, prospectus or statement of
additional information in order to make the statements therein not
misleading; and
(d) of all actions of the SEC with respect to any amendments to any
Registration Statement, prospectus or statement of additional information
which may from time to time be filed with the SEC.
For purposes of this section, informal requests by or acts of the
Staff of the SEC shall not be deemed actions of or requests by the SEC.
1.14 The Distributor agrees on behalf of itself and its directors,
officers and employees to treat confidentially and as proprietary
information of the Trust all records and other information relative to the
Trust and its prior, present or potential shareholders, and not to use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Distributor may be exposed to
civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
2. Term
This Agreement shall become effective immediately upon the
consummation of the acquistion of First Data Investor Services Group, Inc.
by a subsidiary of PNC Bank Corp., which the parties anticipate to occur
on or about December 1, 1999 (the Effective Date) and, unless sooner
terminated as provided herein, shall continue for an initial two-year term
and thereafter shall be renewed for successive one-year terms, provided
such continuance is specifically approved at least annually by (i) the
Trust's Board of Trustees or (ii) by a vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Trust, provided
that in either event the continuance is also approved by a majority of the
Trustees who are not parties to this Agreement and who are not interested
persons (as defined in the 1940 Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable with respect to the Trust without
penalty, on at least sixty days' written notice, by the Trust's Board of
Trustees, by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Trust, or by the Distributor. This
Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act).
3. Limitation of Liability
(a) The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with
the performance of its obligations and duties under this Agreement, except
a loss resulting from the Distributor's willful misfeasance, bad faith or
negligence in the performance of such obligations and duties, or by reason
of its reckless disregard thereof. The Trust will indemnify the
Distributor against and hold it harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit not resulting
from the willful misfeasance, bad faith or negligence of the Distributor
in the performance of such obligations and duties or by reason of its
reckless disregard thereof; provided, however, that as to any matter
disposed of by a compromise payment by the Distributor, pursuant to a
consent decree or otherwise, no indemnification either for such payment or
for any other expenses shall be provided unless there has been a
determination that the Distributor did not engage in willful misfeasance,
bad faith or negligence or reckless disregard of the performance of its
obligations and duties (i) by the court or other body approving the
settlement or other disposition; or (ii) based upon a review of readily
available facts (as opposed to a full trial-type inquiry), by written
opinion from independent legal counsel approved by the Board of Trustees;
or (iii) by a majority of the Board of Trustees who are neither interested
persons of the Trust (as defined in the 1940 Act) nor parties to the
matter, based upon a review of readily available facts (as opposed to a
full trial-type inquiry).
(b) In no event and under no circumstances shall either party to this
Agreement be liable to the other party for consequential or indirect loss
of profits, reputation or business or any other special damages under any
provision of this Agreement or for any act or failure to act hereunder.
4. Notices
All notices and other communications (collectively referred to as a
"Notice" or "Notices" in this paragraph) hereunder shall be in writing or
by telegram, cable, telex or facsimile sending device. Notices shall be
addressed (a) if to the Distributor at its address,Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19482-2961; (b) if to
the Trust, at its principal place of business or (c) if to neither of the
foregoing, at such other address as to which the sender shall have been
notified by any such Notice or other communication. The Notice may be
sent by first-class mail, in which case it shall be deemed to have been
given three days after it is sent, or if sent by telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given
immediately.
5. Further Actions
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
6. Amendments
This Agreement or any part hereof may be changed or waived only by
an instrument in writing signed by the party against which enforcement of
such change or waiver is sought.
7. Governing State Law
This Agreement shall be governed by and its provisions shall be
construed in accordance with the laws of theState of Delaware.
8. Matters Relating to the Trust as a Massachusetts Business Trust
The names "Panorama Trust" and "Trustees of Panorama Trust" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration
of Trust dated as of May 23, 1995 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations
of "Panorama Trust" entered into in the name or on behalf thereof by any
of the Trustees, representatives or agents are made not individually, but
in such capacities, and are not binding upon any of the Trustees,
Shareholders or representatives of the Trust personally, but bind only the
assets of the Trust, and all persons dealing with a Fund must look solely
to the assets of the Trust belonging to such Fund for the enforcement of
any claims against the Trust.
9. Miscellaneous
This Agreement embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter thereof. The captions in
this Agreement are included for convenience of reference only and in no
way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement
shall be binding and shall inure to the benefit of the parties hereto and
their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed all as of the day and year first above written.
PANORAMA TRUST
By:/s/Jean Pilloud
Title:________________________
PROVIDENT DISTRIBUTORS, INC.
By:/s/Philip H. Rinnander
Title:President
SCHEDULE A
to the Distribution Agreement
between Panorama Trust and
Provident Distributors, Inc.
Name of Series
Pictet Global Emerging Markets Fund
Pictet International Small Companies Fund
Pictet Eastern European Fund
Pictet European Equity Fund
Exhibit h(6)
AMENDMENT TO
ADMINISTRATION AGREEMENT
This Amendment dated as of September 24, 1999, is entered into by
PANORAMA TRUST (the Company) and FIRST DATA INVESTOR SERVICES GROUP,
INC. (formerly known as The Shareholder Services Group, Inc.) (Investor
Services Group).
WHEREAS, the Company and Investor Services Group have entered into
an Administration Agreement dated as of October 3, 1995 (as amended or
supplemented, the Agreement); and
WHEREAS, the Company and Investor Services Group wish to amend the
Agreement to revise the description of services to be provided by Investor
Services Group to the Company and related matters;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
I. The following is hereby added to Section 3 of the Agreement:
(o) Performing the following sales support services:
Sales literature review and recommendations for compliance with NASD and
SEC rules and regulations
Preparation of training materials for use by personnel of the Company or
the Adviser
Preparation of ongoing compliance updates
Provision of advice and counsel to the Company with respect to regulatory
matters, including monitoring regulatory and legislative developments that
may affect the Company
Assistance in the preparation of quarterly board materials with regard to
sales and other distribution related data reasonably requested by the
board
II. This Amendment shall become effective immediately upon the consummation of
the acquisition of
Investor Services Group by a subsidiary of PNC Bank Corp., which the parties
anticipate to occur on or about
December 1, 1999.
III. Except to the extent amended hereby, the Agreement shall
remain unchanged and in full force and effect and is hereby ratified and
confirmed in all respects as amended hereby.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the date and year first written above.
PANORAMA TRUST
By:/s/Jean Pilloud
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By:/s/James L. Fox
President
Exhibit j(2)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned,
being a Trustee or Officer of Pictet Funds, a Massachusetts
business trust (the "Trust"), does hereby make, constitute
and appoint Gail A. Hanson and Andrew M. Goldberg, and each
of them, attorneys-in-fact and agents of the undersigned with
full power and authority of substitution and resubstitution,
in any and all capacities, to execute for and on behalf of
the undersigned any and all amendments to the Registration
Statement on Form N-1A relating to the shares of the Trust
and any other documents and instruments incidental thereto,
and to deliver and file the same, with all exhibits thereto,
and all documents and instruments in connection therewith,
with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing that said attorneys-in-fact and agents, and each of
them, deem advisable or necessary to enable the Trust to
effectuate the intents and purposes hereof, and the
undersigned hereby fully ratifies and confirms all that said
attorneys-in-fact and agents, or any of them, or their or his
or her substitute or substitutes, shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed his
name this 1st day of March, 2000.
/s/Jean G. Pilloud /s/Bruce W. Schnitzer
Jean G. Pilloud Bruce W. Schnitzer
/s/Jean- Franois Demole /s/David J. Callard
Jean-Franois Demole David J. Callard
/s/Jeffrey P. Somers /s/William J. Baltrus
Jeffrey P. Somers William J. Baltrus
