Dear Shareholder:
Thank you for investing in the Winthrop Opportunity Funds. The following is a
review of the international markets, the Funds' performance and our market
outlook.
MARKET PERSPECTIVE
Two main factors define the present economic environment: slow growth and low
inflation. Even in developing markets, restrictive monetary policies initiated
at the beginning of 1995 have slowed the pace of economic activity. Nonetheless,
Asian economies continue to grow at a rate of 7% to 10%, paving the way for
healthy corporate profits in 1996.
A soft landing will ultimately be positive for the markets; however slow growth
during the brief period since the Funds' inception has been detrimental to
equity investments.
In Europe, all the markets have experienced a sharp and rapid consolidation,
following downward revisions of profit by financial analysts. Furthermore,
discussions surrounding the preparation of a single European currency, still
expected in 1999, have led to tensions in currency markets. Some weaker
currencies, like the Italian lira and the Spanish peseta, have been under
pressure, whereas the deutsche mark and Swiss franc have been stronger than
ever. In contrast, the French franc remains relatively stable.
In Japan, the market has consolidated, a normal and even necessary correction
following the sharp recovery this summer. The main focus has been the evolution
of the banking crisis, which will determine the ability of the Japanese economy
to recover in 1996, and beyond. Losses and non-performing loans are huge but
manageable given the size and the accumulated aggregate savings of the Japanese
economy. The recent Daiwa "affair" is a good example of the mismanagement which
led to the current situation in the Japanese financial sector. Important reforms
will have to be implemented to restructure the entire banking system and public
financing will be needed to offset past losses. However, the depth of the crisis
will require intervention sooner rather than later.
Elsewhere in Asia, the markets were down across the board, sharply in some
countries (in dollar terms, Malaysia: -5.32%, Philippines: -10.18%, India:
- -2.71%), reflecting restrictive monetary policies designed to slow the
overheating of local economies.
This same factor has negatively affected Latin American markets (in dollar
terms, Brazil: -11.5%, Mexico: -19.97%, Chile: -3.96%). The Mexican peso has
come under attack again due to particularly poor economic figures and lack of
confidence in the ability of the current government to manage the economic
crisis. The recession has been severe, with the real GDP for 1995 estimated to
drop 5.5% and inflation expected to exceed 50% forcing authorities to increase
short-term rates which will further slow recovery.
INVESTMENT PERFORMANCE
In this difficult environment, the Opportunity Funds produced negative returns
for the fiscal year from the Funds' inception, September 13, 1995 to October 31,
1995.
WINTHROP INTERNATIONAL EQUITY FUND
For the fiscal year, the International Equity Fund's returns were -4.20% for
Class A shares and -4.30% for Class B shares, versus -2.35% for the Morgan
Stanley EAFE (Europe, Australia, Far East) GDP Weighted benchmark.
The lag between the index and the performance of your Fund occurred in the first
10 days of the Fund's operation, at the moment of the building of the portfolio.
Between September 15th and September 22nd, the dollar experienced a sudden and
sharp setback (-4.3% against the deutsche mark, -3.7% against the yen) following
publication of US current account deficit figures for the month of July, which
showed a larger than expected increase ($11.5 billion, after $11.3 billion in
June). Having hedged these two currencies, we were not able to benefit from this
move. Since then, we have performed slightly better than the index.
WINTHROP DEVELOPING MARKETS FUND
For the fiscal year, the Fund returned -4.70% for Class A shares and -4.80% for
Class B shares, versus -5.38% for the Morgan Stanley Emerging Markets Free
Index. During a time of continued market corrections, we benefited from the fact
that we were not fully invested, especially in Latin America, where we have
13.3% of our funds compared to 31.4% in the benchmark.
MARKET OUTLOOK
International stock markets should benefit in the coming months from policies of
reflation, which will have to be implemented to avoid recession in leading
economies. This policy has already been adopted in Japan, where we are
overweighted (37.9% versus 34.9% for the Index). Japanese economic growth could
show a stronger recovery than generally expected, which would be very positive
for corporate profits and the stock market. Europe, particularly Germany, is
also in need of further short-term interest rate cuts.
World financial liquidity has been literally siphoned off by the rise of US
financial markets, which is particularly negative for smaller developing
markets. However, the developing markets are poised for a rebound given the
historically low level at which they currently stand. Still, in order to rise
strongly, they will need to attract a new wave of liquidity, which will come
partly from US investors. The Funds currently have a fair amount of cash, which
will be invested in the following weeks under conditions that appear attractive
on a medium-to long-term basis.
The Trustees and Officers wish to take this opportunity to convey their
gratitude for your support as well as their hopes for a rewarding New Year in
international markets.
Sincerely,
/S/ G. Moffett Cochran
G. Moffett Cochran
President December, 1995
<PAGE>
OPPORTUNITY FUND HIGHLIGHTS
WINTHROP INTERNATIONAL EQUITY FUND
ASSET ALLOCATION BY COUNTRY October 31, 1995 (unaudited)
[CHART]
Finland 1.5
Spain 2.5
Hong Kong 2.9
Switzerland 4.1
Netherlands 4.1
United Kingdom 5.3
Italy 5.8
Cash & Other
Assets/Liabilities 9.1
France 12.5
Denmark 1.0
Japan 37.9
Germany 13.3
TEN LARGEST HOLDINGS October 31, 1995 (unaudited)
PERCENT OF
COUNTRY US$ VALUE NET ASSETS
--------------- ----------- ------------
Air Liquide............... France $ 611,715 2.0%
Royal Dutch Petroleum..... Netherlands 595,139 1.9
Assicurazioni Generali.... Italy 559,299 1.8
Bayer AG.................. Germany 550,354 1.8
Siemens AG................ Germany 550,277 1.8
Danone.................... France 545,908 1.8
Veba AG................... Germany 541,704 1.8
Mannesman AG.............. Germany 525,834 1.7
Dresdner Bank AG.......... Germany 523,335 1.7
Grand Metropolitan........ United Kingdom 504,561 1.7
----------- ---
$ 5,508,126 18.0%
=========== ====
INVESTMENT RESULTS For Periods Ended October 31, 1995 (unaudited)
WINTHROP
INTERNATIONAL
EQUITY FUND
-------------------- MSCI EAFE
CLASS A CLASS B GDP WEIGHTED INDEX*
------- ------- --------------------
From Inception
9/13/95................... -4.20% -4.30% -2.35%
The performance data quoted represents past performance, which is no
indication of future performance. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. No adjustment has been made for any income
taxes payable by shareholders on dividends or capital gains, but the returns
calculated above have been computed after deduction of all fund expenses
including advisory fees. Investors may be subject to an initial sales charge
when purchasing Class A shares of up to 5.75% and when redeeming Class B
shares a contingent deferred sales charge may apply as follows: 4% in year
1, 3% in year 2, 2% in year 3 and 1% in year 4. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total return shown above. Total return calculated for a period of less than
one year is not annualized.
* Morgan Stanley Capital International ("MSCI") Europe, Australia, Far East
Index.
<PAGE>
OPPORTUNITY FUND HIGHLIGHTS
WINTHROP DEVELOPING MARKETS FUND
ASSET ALLOCATION BY COUNTRY October 31, 1995 (unaudited)
[CHART]
China 1.3
Taiwan 2.3
Chile 2.2
Argentina 2.3
Phllippines 2.4
Indonesia 3.5
Brazil 4.3
India 4.4
Mexico 4.5
South Africa 4.6
Korea 4.8
Malaysia 8.1
Hong Kong 8.8
Thailand 12.9
Cash & Other
Assets/Liabilites 33.4
Portugal .2
TEN LARGEST EQUITY HOLDINGS October 31, 1995 (unaudited)
PERCENT OF
COUNTRY US$ VALUE NET ASSETS
---------- ---------- ----------
Korea Fund........................ Korea $ 432,500 2.8%
ROC Taiwan Fund................... Taiwan 356,125 2.3
Korea Equity Fund................. Korea 319,375 2.0
Shinawatra Co. ................... Thailand 269,317 1.7
International Engineering Co. .... Thailand 262,322 1.7
Phatra Thanakit Public............ Thailand 260,414 1.7
Arab Malaysian Merchant........... Malaysia 260,136 1.7
Bangkok Bank Public Co. .......... Thailand 253,817 1.6
Edaran Otomobil NSNL.............. Malaysia 251,681 1.6
Telefonica de Argentina ADR....... Argentina 249,000 1.6
---------- ---
$2,914,687 18.7%
========== ====
INVESTMENT RESULTS For Periods Ended October 31, 1995 (unaudited)
WINTROP DEVELOPING
MARKETS FUND
-------------------- MSCI EMERGING
CLASS A CLASS B MARKETS FREE INDEX*
------- ------- -------------------
From Inception
9/13/95...................... -4.70% -4.80% -5.38%
The performance data quoted represents past performance, which is no
indication of future performance. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. No adjustment has been made for any income
taxes payable by shareholders on dividends or capital gains, but the returns
calculated above have been computed after deduction of all fund expenses
including advisory fees. Investors may be subject to an initial sales charge
when purchasing Class A shares of up to 5.75% and when redeeming Class B
shares a contingent deferred sales charge may apply as follows: 4% in year
1, 3% in year 2, 2% in year 3 and 1% in year 4. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total return shown above. Total return calculated for a period of less than
one year is not annualized.
* A Morgan Stanley Capital International ("MSCI") Index.
<PAGE>
WINTHROP OPPORTUNITY FUNDS--STATEMENT OF INVESTMENTS October 31, 1995
- -------------------------------------------------------------------------------
WINTHROP INTERNATIONAL EQUITY FUND
COMMON STOCKS--90.9%
SHARES U.S. $ VALUE
----------- ------------
DENMARK--1.0%
Unidanmark........... 6,400 $ 293,863
------------
FINLAND--1.5%
Nokia (AB) Ser 'A'... 7,900 452,013
------------
FRANCE--12.5%
Air Liquide.......... 3,650 611,715
Carrefour............ 500 293,492
Danone............... 3,420 545,908
LaFarge Coppee....... 5,600 370,945
L'Oreal.............. 1,700 415,202
LVMH................. 1,800 357,955
Lyonnaise Des Eaux... 3,200 311,969
Schneider............ 11,850 456,775
Societe Generale..... 4,100 469,261
------------
3,833,222
------------
GERMANY--13.3%
Bayer AG............. 2,070 550,354
Bifinger Berger Bau
AG.................... 1,050 386,238
Deutsch Bank AG...... 11,000 497,351
Dresdner Bank AG..... 19,600 523,335
Mannesman AG......... 1,600 525,834
Schering AG.......... 7,100 495,114
Siemens AG........... 1,050 550,277
Veba AG.............. 13,200 541,704
------------
4,070,207
------------
HONG KONG--2.9%
Amoy Properties...... 300,000 289,069
China Light & Power.. 60,000 319,723
Hong Kong Shanghai
Bank.................. 20,000 291,010
------------
899,802
------------
ITALY--5.8%
Assicurazioni
Generali.............. 24,000 559,299
Instituto Mobilaire
Italiano.............. 72,000 393,391
Telecom Italia
Mobile*............... 260,000 436,285
Telecom Italia Spa
Ord................... 265,000 402,286
------------
1,791,261
------------
SHARES U.S. $ VALUE
----------- ------------
JAPAN--37.9%
Chugai
Pharmaceuticals....... 40,000 $ 365,415
Chiyoca
Corporation........... 45,000 418,574
Daiichi
Pharmaceutical........ 30,000 419,601
Daiwa Securities..... 35,000 410,798
Furukawa Electric.... 80,000 359,155
Kokosai Denshin
Denwa................. 5,000 403,462
Izumiya.............. 25,000 376,565
Makita Corporation... 25,000 388,791
Marui................ 25,000 432,805
Matsushita
Electric.............. 30,000 425,469
New Oji Paper........ 45,000 413,292
Nichii Co............ 35,000 410,798
Nikko Securities..... 40,000 373,239
Nippon Express....... 50,000 405,908
Nissan Motor......... 60,000 404,930
Nomura Securities.... 20,000 365,806
Ono Pharmaceutical... 10,000 396,127
Sanwa Bank........... 20,000 340,376
Sega Enterprises..... 8,000 424,100
Sony Music
Entertainment......... 10,000 428,404
Sumitomo Heavy
Industries............ 140,000 390,258
Sumitomo Osaka
Cement................ 100,000 403,951
Sumitomo Trust and
Bk.................... 30,000 346,244
Taisei Corporation... 60,000 358,568
Tokyo Electric
Power................. 15,000 393,192
Tokyo Steel.......... 22,000 408,842
Toshiba
Corporation........... 60,000 434,859
Tosoh Corporation.... 100,000 439,163
Tostem Corporation... 15,000 460,681
------------
11,599,373
------------
See notes to financial statements.
<PAGE>
WINTHROP OPPORTUNITY FUNDS--STATEMENT OF INVESTMENTS October 31, 1995
(continued)
- -------------------------------------------------------------------------------
WINTHROP INTERNATIONAL EQUITY FUND
SHARES U.S. $ VALUE
----------- ------------
NETHERLANDS--4.1%
Elsevier NV.......... 13,930 $ 179,856
Polygram NV NTLF..... 2,900 180,791
Royal Dutch
Petroleum............. 4,800 595,139
Ver Ned
Uitgeversbedr......... 2,200 308,000
------------
1,263,786
------------
SPAIN--2.5%
BBV Banco Bilbao
Vizcaya............... 9,200 280,703
Empresa Nacional de
Electricid............ 4,300 213,505
Repsol SA............ 9,500 283,252
------------
777,460
------------
SWITZERLAND--4.1%
Credit Suisse
Holding............... 3,400 346,313
Nestle SA............ 280 292,960
Roche Holding AG..... 40 290,039
Sandoz AG............ 375 311,840
------------
1,241,152
------------
SHARES U.S. $ VALUE
----------- ------------
UNITED KINGDOM--5.3%
BPB Industries....... 56,000 $ 246,552
Grand Metropolitan... 73,000 504,561
Reuters Holdings..... 32,000 296,923
RTZ Corp............. 20,000 276,156
Siebe................ 25,000 296,868
------------
1,621,060
------------
TOTAL INVESTMENTS--90.9%
(cost $28,612,248)............. 27,843,199
------------
CASH AND OTHER ASSETS
NET OF LIABILITIES--9.1%....... 2,778,713
------------
NET ASSETS--100%................. $ 30,621,912
============
* Non-income producing
See notes to financial statements.
<PAGE>
WINTHROP OPPORTUNITY FUNDS--STATEMENT OF INVESTMENTS October 31, 1995
- --------------------------------------------------------------------------------
WINTHROP DEVELOPING MARKETS FUND
COMMON STOCKS--66.6%
SHARES U.S. $ VALUE
----------- ------------
[S] [C] [C]
ARGENTINA--2.3%
Astra Cia Argentina
de Petroeo............ 73,000 $ 106,602
Telefonica de
Argentina ADR......... 12,000 249,000
------------
355,602
------------
BRAZIL--4.3%
Electrobras ADR Pfd.
B..................... 16,000 228,000
Companhia Vale Rio... 5,000 198,900
Usiminas ADR......... 25,000 239,000
------------
665,900
------------
CHILE--2.2%
Compania de Telefono
Chile ADR............. 1,800 129,600
Empresa Nacional de
Electricidad.......... 6,800 146,200
Madeco............... 2,900 72,138
------------
347,938
------------
CHINA--1.3%
China Yuchai Int'l
Ltd................... 20,000 200,000
------------
HONG KONG--8.8%
Bank of East Asia.... 42,000 148,028
Chengdu Telecom
Cable................. 502,000 107,131
China Light & Power
Co. Ltd............... 30,000 159,861
Citic Pacific Ltd.... 67,000 209,275
Great Eagle Holding
Ltd................... 83,000 227,583
Qingling Motors Co.
Ltd................... 552,000 120,656
Shangria--la Asia
Ltd................... 130,000 143,759
Shanghai
Petrochemicals Ltd.... 418,000 120,290
Television Broadcasts
Ltd................... 37,000 148,350
------------
1,384,933
------------
SHARES U.S. $ VALUE
----------- ------------
INDIA--4.4%
Grasim Industries
Ltd.*................. 6,700 $ 139,025
Indian Hotels GDR*... 7,000 128,240
Reliance Industries
Ltd.*................. 13,000 206,375
Tata Engineering and
Loco.................. 10,000 209,500
------------
683,140
------------
INDONESIA--3.5%
Hero Supermarket..... 76,000 155,614
PT Astra Int'l....... 120,000 240,423
Mulia Industrindo.... 55,000 162,263
------------
558,300
------------
KOREA--4.8%
Korea Equity Fund.... 35,000 319,375
Korea Fund........... 20,000 432,500
------------
751,875
------------
MALAYSIA--8.1%
Arab Malaysian
Merchant.............. 21,000 260,136
Edaran Otomobil
NSNL.................. 32,000 251,681
Hong Leong Properties
Berhad................ 220,000 237,052
Resort World Berhad.. 50,000 243,816
Shungei Way.......... 39,000 131,130
Technology
Resources............. 55,000 139,506
------------
1,263,321
------------
MEXICO--4.5%
Apasco............... 44,000 163,308
Cifra................ 200,000 203,364
Empresa ICA Soc.
Controladora ADR...... 10,000 95,000
Hylsamex BCP......... 25,000 73,530
Telefonos de Mexico
ADR................... 6,000 165,000
------------
700,202
------------
PHILIPPINES--2.4%
Metro Pacific........ 1,137,000 163,927
South East Asia
Cement Holding*....... 1,600,000 209,150
------------
373,077
------------
PORTUGAL--0.2%
Portugal Telecom..... 2,000 37,853
------------
See notes to financial statements.
<PAGE>
WINTHROP OPPORTUNITY FUNDS--STATEMENT OF INVESTMENTS October 31, 1995
(continued)
- --------------------------------------------------------------------------------
WINTHROP DEVELOPING MARKETS FUND
SOUTH AFRICA--4.6%
DeBeers Centenary.... 5,175 $ 142,264
Iscor................ 135,900 136,023
Liberty Life
Assoc................. 5,750 147,428
Pick N Pay Stores.... 42,000 149,724
South African Brews.. 4,500 146,845
------------
722,284
------------
TAIWAN--2.3%
ROC Taiwan Fund...... 37,000 356,125
------------
THAILAND--12.9%
Bangkok Bank Public
Co.................... 31,000 253,817
Finance One Public
Co.................... 26,000 145,708
International
Engineering Co........ 55,000 262,322
Land and House Public
Co.................... 17,000 243,244
Nava Finance and
Security.............. 87,000 240,323
Phatra Thanakit
Public Co............. 36,000 260,414
Shinawatra Co........ 11,000 269,317
SHARES U.S. $ VALUE
----------- ------------
TPI Polene Co........ 34,000 $ 229,731
Union Asia Finance
Public Co............. 27,000 110,533
------------
2,015,409
------------
TOTAL COMMON STOCKS
(cost $11,094,573)... 10,415,959
------------
PRINCIPAL
AMOUNT
-----------
US GOVERNMENT OBLIGATIONS--19.1%
(amortized cost $2,980,919)
U.S. Treasury Bill
5.325%, 12/14/95...... $ 3,000,000 2,980,919
------------
TOTAL INVESTMENTS--85.7%
(cost $14,075,492) 13,396,878
------------
CASH AND OTHER ASSETS
NET OF LIABILITIES--14.3% 2,229,808
------------
NET ASSETS--100% $ 15,626,686
============
* Non-income producing
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL DEVELOPING
EQUITY FUND MARKETS FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $28,612,248 and
$14,075,492, respectively)................................. $27,843,199 $13,396,878
Cash, at value (cost $3,214,160 and $1,862,200,
respectively).............................................. 3,214,501 1,862,198
Receivable for capital stock sold............................ 221,688 429,922
Dividends and interest receivable............................ 40,924 7,013
Deferred organization costs (Note A)......................... 110,494 110,494
Net unrealized appreciation on foward exchange currency
contracts.................................................. 176,554 --
------------ ------------
Total assets................................................. 31,607,360 15,806,505
------------ ------------
LIABILITIES:
Payable to investment advisor................................ 145,443 129,248
Payable for investment securities purchased.................. 821,704 46,969
Accrued expenses and other liabilities....................... 18,301 3,602
------------ ------------
Total liabilities............................................ 985,448 179,819
------------ ------------
NET ASSETS..................................................... $30,621,912 $15,626,686
============ ============
NET ASSETS CONSIST OF:
Capital paid-in.............................................. $31,886,471 $16,318,548
Accumulated net investment income (loss)..................... (2,433) 5,389
Accumulated net realized loss on investments and foreign
currency transactions...................................... (671,763) (18,635)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities................ (590,363) (678,616)
------------ ------------
$30,621,912 $15,626,686
============ ============
CLASS A SHARES:
Net assets................................................... $28,819,147 $14,622,431
------------ ------------
Shares outstanding........................................... 3,008,828 1,534,021
------------ ------------
Net asset value and redemption value per share............... $9.58 $9.53
Maximum offering price per share (net asset value plus sales ===== =====
charge of 5.75% of offering price)......................... $10.16 $10.11
====== ======
CLASS B SHARES:
Net assets................................................... $1,802,765 $1,004,255
------------ ------------
Shares outstanding........................................... 188,380 105,443
------------ ------------
Net asset value and offering price per share................. $9.57 $9.52
===== =====
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS for the Period Ended October 31, 1995*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEVELOPING
INTERNATIONAL MARKETS
EQUITY FUND FUND
----------- ---------
<S> <C> <C>
INVESTMENT INCOME
Dividends......................................................... $ 29,702 $ 1,299
Interest.......................................................... 59,613 46,351
----------- ---------
89,315 47,650
Less withholding tax on foreign source dividends................ (4,455) --
----------- ---------
Total investment income......................................... 84,860 47,650
----------- ---------
EXPENSES:
Investment advisory fees (Note B)................................. $ 50,310 $ 24,317
Distribution fees--Class A........................................ 9,809 4,718
Distribution fees--Class B........................................ 1,013 581
Legal fees........................................................ 10,000 4,500
Transfer agent fees............................................... 9,000 9,000
Custodian fees.................................................... 18,000 14,000
Auditing fees..................................................... 6,000 3,000
Printing fees..................................................... 6,000 3,000
Trustees' fees.................................................... 4,000 2,000
Miscellaneous..................................................... 8,888 3,888
Amortization of organization costs (Note A)....................... 3,112 3,112
----------- ---------
126,132 72,116
Less fees waived/reimbursed by investment advisor and
subadvisor.................................................... (38,839) (29,855)
----------- ---------
Net expenses.................................................... 87,293 42,261
----------- ---------
NET INVESTMENT INCOME (LOSS)........................................ (2,433) 5,389
----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS--Note C:
Net realized gain on investments.................................. 1,404 307
Net realized loss on foreign currency transactions................ (673,167) (18,942)
Net change in unrealized appreciation on investments.............. (769,049) (678,614)
Net change in unrealized appreciation on translation of foreign
currency denominated assets and liabilities..................... 178,686 (2)
----------- ---------
Net realized and unrealized loss on investments and foreign
currency transactions........................................... (1,262,126) (697,251)
----------- ---------
DECREASE IN NET ASSETS FROM OPERATIONS.............................. $(1,264,559) $(691,862)
=========== =========
</TABLE>
* Commencement of operations was September 8, 1995.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
- ----------------------------------------------------------------------------------------------
DEVELOPING
INTERNATIONAL MARKETS
EQUITY FUND FUND
----------- -----------
PERIOD PERIOD
ENDED ENDED
10/31/95* 10/31/95*
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).................................... $ (2,433) $ 5,389
Net realized loss on investments and foreign currency
transactions.................................................. (671,763) (18,635)
Net change in unrealized appreciation on investments and foreign
currency denominated assets and liabilities................... (590,363) (678,616)
----------- -----------
Decrease in net assets from operations.......................... (1,264,559) (691,862)
CAPITAL STOCK TRANSACTIONS--(NET) NOTE D.......................... 31,836,471 16,268,548
----------- -----------
Total increase in net assets.................................... 30,571,912 15,576,686
NET ASSETS:
Beginning of period............................................. 50,000 50,000
----------- -----------
End of period (including undistributed net investment income
of $5,389 for the Developing Markets Fund) ................... $30,621,912 $15,626,686
=========== ===========
</TABLE>
* Commencement of operations was September 8, 1995.
See notes to financial statements.
<PAGE>
WINTHROP OPPORTUNITY FUNDS--NOTES TO FINANCIAL STATEMENTS October 31, 1995
- --------------------------------------------------------------------------------
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES. Winthrop Opportunity Funds (the "Fund"
or "Funds") operates as a series company currently consisting of two portfolios
(the "Portfolios"): Winthrop International Equity Fund and Winthrop Developing
Markets Fund. The Fund constitutes a diversified, open-end investment company
which is registered under the Investment Company Act of 1940, as amended.
The Fund was organized as a Delaware business trust under the laws of Delaware
on May 31, 1995. Prior to commencing operations on September 8, 1995, the Fund
had no operations other than the sale and issuance to each of Wood, Struthers &
Winthrop Management Corp. (the "Advisor") and AXA Asset Management Europe, an
affiliate of AXA Asset Management Partenaires (the "Subadvisor"), of 1,250 Class
A shares and 1,250 Class B shares of beneficial interest in each of the two
Portfolios.
Each Portfolio offers two classes of shares, Class A shares are sold with a
front-end sales charge of up to 5.75%. Class B shares are sold with a contingent
deferred sales charge which declines from 4% to zero depending on the period of
time the shares are held. Both classes have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The Adviser is a wholly-owned subsidiary of Donaldson, Lufkin
and Jenrette, Inc. which is an indirect subsidiary of the Equitable Life
Assurance Society of the United States, (the "Equitable"). The following is a
summary of significant accounting policies consistently followed by Winthrop.
(1) SECURITY VALUATION: All securities for which current market quotations are
readily available are valued at the last sale price prior to the time of
determination, or, if there is no sales price on such date, and if bid and ask
quotations are available, at the mean between the last current bid and asked
prices. Securities that are traded over-the-counter, if bid and asked
quotations are available, are valued at the mean between the current bid and
asked prices, or, if quotations are not available, are valued as determined in
good faith by the Board of Trustees of the Fund. Short-term investments having
a maturity of 60 days or less are valued at amortized cost. Securities and
assets for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Board of Trustees of
the Fund.
(2) FOREIGN CURRENCY TRANSLATIONS: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at the bid prices of such currencies against the U.S. dollar as of the date of
valuation. Purchases and sales of portfolio securities, commitments under
forward foreign currency contracts, income receipts and expense accruals are
translated at the prevailing exchange rate on the date of each transaction.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
(3) FEDERAL INCOME TAXES: The Funds intend to be treated as "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and to
distribute substantially all of their net taxable income. Accordingly, no
provisions for Federal income or excise taxes have been made in the
accompanying financial statements.
(4) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is recorded
on the ex-dividend date or as soon as the Fund is informed of the dividend.
Interest income is accrued
<PAGE>
WINTHROP OPPORTUNITY FUNDS--NOTES TO FINANCIAL STATEMENTS October 31, 1995
(continued)
- --------------------------------------------------------------------------------
daily. Security transactions are accounted for on the date securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis.
(5) DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions to shareholders
are recorded on the ex-dividend date. Income dividends and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles.
(6) DEFERRED ORGANIZATION COSTS: The Funds will reimburse the Advisor and
Subadvisor for costs incurred in connection with the Fund's organization. The
costs are being amortized on a straight-line basis over five years commencing
with the Fund's operation.
NOTE (B) ADVISORY AND DISTRIBUTION SERVICES AGREEMENT: Under the terms of an
Advisory Agreement with the Advisor, for the investment management services
furnished to each Portfolio, such portfolio will pay the Advisor an advisory
fee, on a graduated basis at an annual rate of 1.25% of the first $100 million
of average daily net assets, 1.15% of the next $100 million and 1% of average
daily net assets over $200 million. Such fee will be accrued daily and paid
monthly. Under a Subadvisory Agreement between the Advisory and Subadvisor, the
Advisor pays the Subadvisor for its services, out of the Advisor's own
resources, at the following annual percentage rates of the average daily net
assets of each Portfolio: .625 of 1% of each Portfolio's first $100 million,
.575 of 1% of the next $100 million and .50 of 1% of the balance.
The Advisory Agreement provides that the Advisor will reimburse the Funds for
its expenses (exclusive of interest, taxes, brokerage, distribution services
fees and extraordinary expenses, all to the extent permitted by applicable state
securities law and regulations) which in any year exceed the limits prescribed
by any state in which shares of the Fund are qualified for sale. The Fund
believes that presently the most restrictive applicable expense ratio limitation
imposed on the Fund by any state is 2 1/2% of average net assets of the first
$30 million, 2% of average net assets of the next $70 million and 1 1/2% of
average net assets in excess of $100 million. As a result of this limitation the
Advisor reimbursed the Developing Markets Fund $5,538.
Commencing at the inception of each Fund and through October 31, 1996, the
Adviser and Subadviser may voluntarily reduce their management fees by the
amount that total fund operating expenses exceed 2.15% and 2.90% of the average
daily net assets of the Class A and Class B shares, respectively, of each Fund.
Any such reduction will be borne equally between the Advisor and Subadvisor.
After October 31, 1996, the Advisor and Subadvisor may, in their sole
discretion, determine to discontinue this practice with respect to either Fund.
As a result of the voluntary waiver, the Advisor and Subadvisor waived fees
amounting to $38,839 and $24,317 for the International Equity Fund and
Developing Markets Fund, respectively.
The Fund has entered into a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A and
Class B shares with Donaldson, Lufkin & Jenrette Securities Corporation, the
Fund's Distributor. Under the Agreement, each Portfolio will pay a distribution
services fee to the Distributor at an annual rate of up to .25 of 1% of the
average daily net assets attributable to Class A shares and 1% of the average
daily net assets attributable to Class B shares. The fees are accrued daily and
paid monthly. The Agreement provides that the Distributor will use such payments
in their entirety for distribution assistance and promotional activities. The
Agreement also provides that the Adviser may use its own resources to finance
the distribution of the Fund's shares.
Each Trustee who is not an affiliated person receives an attendance fee of
$2,000 per meeting. In addition, each unaffiliated Trustee who is a member of
the audit committee receives an attendance fee of $1,000 per meeting.
NOTE (C) INVESTMENT TRANSACTIONS: Purchases and sales of investment securities
(excluding short-term securities and forward currency exchange contracts) during
the period from inception through the year ended October 31, 1995, aggregated
$28,612,249 and $0 for the International Equity Fund; and $11,094,573 and $0 for
the Developing Markets Fund, respectively.
<PAGE>
WINTHROP OPPORTUNITY FUNDS--NOTES TO FINANCIAL STATEMENTS October 31, 1995
(continued)
- --------------------------------------------------------------------------------
The Fund's may enter into forward exchange currency contracts in order to hedge
exposure to changes in foreign currency exchange rates on their foreign
portfolio holdings. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gain or
loss from foreign currency transactions.
Fluctuations in the value of forward exchange currency contracts are recorded
for financial reporting purposes as net change in unrealized appreciation
(depreciation) of foreign currency denominated assets and liabilities.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of a foreign
currency relative to the US. dollar. The contract amount in the following table
reflects the exposure the International Equity Fund had in that particular
currency contract.
At October 31, 1995, the International Equity Fund had outstanding forward
exchange currency contracts, as follows:
<TABLE>
<CAPTION>
CONTRACT COST ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
FOREIGN CURRENCY SELL CONTRACTS (000) DATE VALUE APPRECIATION
- ------------------------------------------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Deutsche Marks expiring 11/06/95................. 6,200 $ 4,457,225 $4,403,753 $ 53,472
French Francs expiring 11/15/95.................. 17,520 3,593,846 3,579,838 14,008
Japanese Yen expiring 11/06/95................... 491,000 4,914,915 4,805,841 109,074
------------
$176,554
============
</TABLE>
At October 31, 1995, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At October 31, 1995, the
components of net unrealized depreciation of investments were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL DEVELOPING
EQUITY FUND MARKETS FUND
------------- ------------
<S> <C> <C>
Gross appreciation (investments having an excess of value over
cost)............................................................. $ 360,330 $ 118,513
Gross depreciation (investments having an excess of cost over
value)............................................................ (1,129,379) (797,127)
------------- ------------
Net unrealized depreciation of investments.......................... $ (769,049) $ (678,614)
============= ============
</TABLE>
NOTE (D) SHARES OF BENEFICIAL INTEREST: There is an unlimited number of shares
of beneficial interest authorized, divided into two classes, designated Class A
and Class B Shares. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 8, 1995* THROUGH OCTOBER 31, 1995
------------------------------------------------------
INTERNATIONAL EQUITY FUND DEVELOPING MARKETS FUND
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold.................................. 3,006,328 $30,025,797 1,531,521 $15,261,869
Shares redeemed.............................. -- -- -- --
---------- ----------- ---------- -----------
Net increase................................. 3,006,328 $30,025,797 1,531,521 $15,261,869
========== =========== ========== ===========
CLASS B
Shares sold.................................. 185,880 $ 1,810,674 102,943 $ 1,006,679
Shares redeemed.............................. -- -- -- --
---------- ----------- ---------- -----------
Net increase................................. 185,880 $ 1,810,674 102,943 $ 1,006,679
========== =========== ========== ===========
</TABLE>
* Commencement of Operations.
<PAGE>
FINANCIAL HIGHLIGHTS September 8, 1995* through October 31, 1995
- --------------------------------------------------------------------------------
The table below sets forth financial data for a share of capital stock
outstanding throughout the period presented. This information has been derived
from information provided in the financial statements.
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY DEVELOPING MARKETS
FUND FUND
---------------------- ----------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period... $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- ------- ------- -------
Net investment income (loss)(1)........ .00 (.02) .00 (.01)
Net realized and unrealized gain(loss)
on investments and foreign currency
transactions......................... (.42) (.41) (.47) (.47)
------- ------- ------- -------
Net decrease in net asset value from
operations........................... (.42) (.43) (.47) (.48)
------- ------- ------- -------
Net asset value, end of period......... $ 9.58 $ 9.57 $ 9.53 $ 9.52
======= ======= ======= =======
Total Return(2)........................ (4.20)% (4.30)% (4.70)% (4.80)%
Ratio of expenses to average net
assets(3)+........................... 2.15% 2.90% 2.15% 2.90%
Ratio of net investment income (loss)
to average net assets(3)............... (.02)% (1.77)% .32% (1.00)%
Portfolio turnover rate................ 0% 0% 0% 0%
Net assets, end of period (000
omitted)............................. $28,819 $ 1,803 $14,622 $ 1,004
</TABLE>
* Commencement of Operations.
(1) Based on average shares outstanding
(2) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividends
and distributions at net asset value during the period, and redemption on
the last day of the period. Initial sales charge or contingent deferred
sales charge is not reflected in the calculation of total return. Total
return calculated for a period of less than one year is not annualized.
(3) Annualized
+ Net of voluntary reduction of management fees by Adviser and Subadviser
amounting to .60% of average daily net assets of both Class A and Class B
shares of each of the International Equity Fund and Developing Markets Fund.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of Winthrop Opportunity Funds
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Winthrop Opportunity Funds (comprising,
respectively, Winthrop Developing Markets Fund and Winthrop International Equity
Fund) as of October 31, 1995, and the related statements of operations and
changes in net assets, and financial highlights for the period from September 8,
1995 (commencement of operations) to October 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31, 1995 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting Winthrop Opportunity Funds at October 31,
1995 and the results of their operations, the changes in their net assets and
financial highlights for the period from September 8, 1995 to October 31, 1995,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 8, 1995
<PAGE>
WINTHROP OPPORTUNITY FUNDS [WINTHROP LOGO]
(800) 225-8011 [MAP]
TRUSTEES
G. MOFFETT COCHRAN, V ROBERT E. FISCHER
WILMOT H. KIDD, III MARTIN JAFFE
JOHN W. WALLER, III
OFFICERS
G. MOFFETT COCHRAN, V. Chairman and President
JAMES A. ENGLE, VICE PRESIDENT
MARTIN JAFFE, Vice President , Secretary and Treasurer Annual Report
CHARLES E. HUGHES, Assistant Secretary October 31, 1995
BRIAN A. KAMMERER, Assistant Treasurer
INVESTMENT ADVISER
WOOD STRUTHERS & WINTHROP MANAGEMENT CORPORATION
As Investment Management Subsidiary of
Donaldson, Lufkin & Jenrette
140 Broadway, New York, NY 10005
SUB-ADVISER
AXA Asset Management
Partenaires
40 rue du Colisee
Paris, France 75008
CUSTODIAN
CITIBANK, N.A.
111 Wall Street, New York, NY 10043
TRANSFER AGENT
Fund/Plan Services, Inc.
P.O. Box 874(#2 Elm Street), Consbobocken, PA 19428
DISTRIBUTOR
DONALDSON, LUFKIN & JENREETE SECURITIES CORPORATION
140 Broadway, New York, NY 10005
AUDITORS
ERNEST & YOUNG LLP
787 Seventh Avenue, New York, NY 10019
LEGAL COUNSEL
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 Third Avenue, New York, NY 10022
This report is submitted for the general information of the stockholders of
the Fund. It is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an affective prospectus which
should be read carefully before investing.
WOOD, STRUTHERS & WINTHROP
ESTABLISHED 1871
[LOGO]
INVESTMENT MANAGEMENT SUBSIDIARY OF
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
(THE FUND DISTRIBUTOR )
13216F 12/95
