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WINTHROP OPPORTUNITY FUNDS
277 Park Avenue, New York, NY 10172.
Toll Free (800) 225-8011.
Winthrop Opportunity Funds, a Delaware business trust registered as a management
investment company (the 'Opportunity Funds'), is currently comprised of four
series: the Winthrop Municipal Money Fund (the 'Municipal Fund') and the
Winthrop U.S. Government Money Fund (the 'Government Fund' and together with the
Municipal Fund, the 'Money Funds'), and the Winthrop Developing Markets Fund and
the Winthrop International Equity Fund (the 'Equity Funds'), which are offered
in a separate prospectus. Each of the Money Funds is open-end and diversified.
The Money Funds are designed to afford investors the opportunity to choose
between the separately managed funds described below which have differing
investment objectives and policies.
A DIVERSIFIED SELECTION OF INVESTMENT ALTERNATIVES
WINTHROP MUNICIPAL MONEY FUND -- Seeks maximum current income, consistent with
liquidity and safety of principal, that is exempt from Federal income taxes by
investing principally in a diversified portfolio of municipal securities.
WINTHROP U.S. GOVERNMENT MONEY FUND -- Seeks maximum current income, consistent
with liquidity and safety of principal, by investing in a portfolio of U.S.
Government securities.
There can, of course, be no assurance that the Money Funds will achieve their
respective investment objectives.
See 'Investment Objectives, Policies and Risk Considerations' for a more
detailed description of the investment objectives and policies of the Municipal
Fund and Government Fund.
PURCHASE INFORMATION
Shares of the Money Funds may be purchased directly from the Money Funds by
using the Share Purchase Application found in this Prospectus, through the
Funds' Distributor, Donaldson, Lufkin & Jenrette Securities Corporation, or by
contacting your securities dealer.
The minimum initial investment in shares of each Money Fund is $250 and the
minimum for subsequent investments is $25. Shareholder accounts established on
behalf of the following types of plans will be exempt from the Funds' minimum
initial investment and minimum subsequent investment requirements: (i)
retirement plans qualified under section 401(k) of the Internal Revenue Code of
1986, as amended (the 'Code'); (ii) plans described in section 403(b) of the
Code; (iii) deferred compensation plans described in section 457 of the Code;
(iv) simplified employee pension (SEP) plans; and (v) savings incentive match
plans for employees (SIMPLE). Further information can be obtained from the Money
Funds at the address and telephone number shown above. See 'Purchases,
Redemptions and Shareholder Services.'
Shares of each Money Fund may be purchased at a price equal to the net asset
value of the Money Fund which is expected to be $1.00 per share. See 'Net Asset
Value.'
ADDITIONAL INFORMATION
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Money Funds. A 'Statement of Additional
Information' dated January 24, 1997, which provides a further discussion of
certain topics in this Prospectus and other matters which may be of interest to
some investors, has been filed with the Securities and Exchange Commission
('SEC') and is incorporated herein by reference. For a free copy, write or call
the Money Funds at the address or telephone number shown above. In addition, the
SEC maintains an Internet Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference and
other information regarding the Money Funds.
An investment in the Winthrop Opportunity Funds is (i) neither insured nor
guaranteed by the U.S. Government; (ii) not a deposit or obligation of, or
guaranteed or endorsed by, any bank; and (iii) not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. There can be no assurance that the Money Funds will be able to maintain
a stable net asset value of $1.00 per share.
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THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTUS DATED JANUARY 24, 1997
Investors are advised to read this Prospectus and to retain it for future
reference.
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SUMMARY OF MONEY FUND EXPENSES
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MUNICIPAL GOVERNMENT
SHAREHOLDER TRANSACTION EXPENSES FUND FUND
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Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... 0% 0%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... 0% 0%
Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable).................................................................................. 0% 0%
Redemption Fees (as a percentage of amount redeemed)........................................... 0% 0%
Exchange Fee................................................................................... 0% 0%
ANNUAL FUND OPERATING EXPENSES (estimated as a percentage of average daily net assets)
Management Fees*........................................................................... .40% .40%
12b-1 Fees**............................................................................... .25% .25%
Other Expenses, after expense reimbursement................................................ .25%`D' .25%`D'
-- --
Total Fund Operating Expenses.............................................................. .90%`D' .90%`D'
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* Management Fees with respect to the Money Funds are reduced to .35% on net
assets in excess of $1 billion.
** The Money Funds have entered into a Distribution Agreement and a Rule 12b-1
Plan pursuant to which each Money Fund pays a distribution fee each month at
an annual rate of up to .25 of 1% of the average daily net assets of each
Money Fund. Amounts paid under the Distribution Agreement are used in their
entirety to reimburse the Money Funds' distributor for actual expenses
incurred. Long-term shareholders may, over time, pay more in 12b-1 Fees than
the economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealers, Inc. See 'Expenses of the
Money Funds -- Distribution Agreement.'
`D' As of the date of this Prospectus, the Money Funds have not commenced
operations. Accordingly, these percentages are estimates. 'Other Expenses'
includes fees paid to the Money Funds' independent auditor, legal counsel
and Trustees as well as expenses associated with registration fees, reports
to shareholders and other miscellaneous expenses. Such fees are not based
on a percentage of each Money Fund's average net assets, but a fixed dollar
cost. The percentages for other fixed cost expenses are the maximum allowed
to be charged to the Money Funds as total operating expenses are capped at
the percentages stated above. Commencing at the inception of each Money
Fund and through October 31, 1997, the Adviser has agreed to reduce its
management fees and the Adviser or its affiliates have agreed to reimburse
operating expenses by the amount that Total Fund Operating Expenses exceed
.90% of the average daily net assets of each Money Fund. After October 31,
1997, the Adviser or its affiliates may, in their discretion, determine to
discontinue this practice with respect to either Money Fund.
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EXAMPLES 1 YEAR 3 YEARS
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MUNICIPAL FUND
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return
(cumulatively through the end of each time period) and (2) redemption at the end of each time
period................................................................................................ $9 $29
GOVERNMENT FUND
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return
(cumulatively through the end of each time period) and (2) redemption at the end of each time
period................................................................................................ $9 $29
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The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of each Money Fund bear directly
or indirectly. See also 'Expenses of the Money Funds' and 'Purchases,
Redemptions and Shareholder Services.' The example should not be considered a
representation of future expenses and actual expenses may be greater or lesser
than those shown.
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INTRODUCTION
Winthrop Opportunity Funds is a Delaware business trust whose shares are
offered in four separate portfolios: the Winthrop Municipal Money Fund (the
'Municipal Fund') and the Winthrop U.S. Government Money Fund (the 'Government
Fund' and together with the Municipal Fund, the 'Money Funds'), and the Winthrop
Developing Markets Fund and the Winthrop International Equity Fund (the 'Equity
Funds'), which are offered in a separate prospectus. Because Winthrop
Opportunity Funds offers multiple funds, it is known as a 'series fund.'
Winthrop Opportunity Funds may in the future establish additional series with
different investment objectives and policies and offer additional classes of
shares.
Each portfolio of the Winthrop Opportunity Funds is a separate pool of
assets constituting, in effect, a separate fund with its own investment
objective and policies. (See 'Investment Objectives, Policies and Risk
Considerations.') A shareholder may utilize the Money Funds' exchange privilege
to transfer such shareholder's assets to the Equity Funds or for shares of the
Winthrop Growth Fund, Winthrop Fixed Income Fund, Winthrop Small Company Value
Fund, Winthrop Growth and Income Fund or the Winthrop Municipal Trust Fund
(collectively, the 'Focus Funds') in accordance with the shareholder's changing
perceptions of the relative investment potential of each investment alternative.
A shareholder will pay a higher 12b-1 Fee when exchanging shares of the Money
Funds (.25 of 1% annually) for Class A shares of the Focus Funds (.30 of 1%
annually) or Class B shares of the Equity Funds or Focus Funds (1% annually).
(See 'Purchases, Redemptions and Shareholder Services.') In addition, a
shareholder may be subject to sales charges upon exchanging shares of the Money
Funds for shares of the Equity Funds or Focus Funds. (See 'Additional
Shareholder Services -- Exchange Privilege.') Shareholders of the Money Funds
are entitled to their pro rata share of any dividends and distributions arising
from that Money Fund's assets (See 'Daily Dividends, Distributions and Taxes.')
Upon redeeming shares of a Money Fund, the shareholder will receive the
next-determined net asset value of that Fund represented by the redeemed shares
which is expected to remain constant at $1.00 per share. (See 'Purchases,
Redemptions and Shareholder Services.')
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objectives and policies of each Money Fund are set forth
below. There can be, of course, no assurance that either Money Fund will achieve
its respective investment objective.
The investment objectives of each Money Fund are fundamental policies of
that Money Fund and may not be changed without the approval of that Money Fund's
shareholders. Except as set forth in 'Investment Policies and Restrictions' in
the Statement of Additional Information, or as otherwise indicated below, the
investment policies of each Money Fund are not fundamental policies and may be
changed by the Board of Trustees without a shareholder vote. A more detailed
explanation of the Money Funds' policies and the securities and instruments they
may buy or use is contained in the Money Funds' Statement of Additional
Information, which is available upon request.
THE WINTHROP MUNICIPAL MONEY FUND
The Municipal Fund's investment objectives are to seek maximum current
income, consistent with liquidity and safety of principal, that is exempt from
income taxation to the extent described below. As a matter of fundamental
policy, the Municipal Fund pursues its objectives by investing in high quality
municipal securities having remaining maturities of one year or less, which
maturities may extend to 397 days, and at least 80% of the Municipal Fund's
total assets will be invested in such securities (as opposed to the taxable
investments described below). However, the Municipal Fund reserves the right to
lower the percentage to 65%
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if economic or political conditions warrant. To increase the Municipal Fund's
ability to reach its investment objectives, the dollar weighted average maturity
of its portfolio securities is always 90 days or less. In general, securities
with longer maturities are more vulnerable to price changes, although they may
provide higher yields. It is possible that a major change in interest rates or
a default on the Municipal Fund's investments could cause their share prices to
change. There can be no assurance, as is true with all investment companies,
that the Municipal Fund's investment objectives will be achieved.
Normally, substantially all the Municipal Fund's income will be tax-exempt
as described below. Such income may be subject to state or local income taxes.
The municipal securities in which the Municipal Fund invests include
municipal notes and short-term municipal bonds. Municipal notes are generally
used to provide for short-term capital needs and generally have maturities of
one year or less. Examples include tax anticipation and revenue anticipation
notes, which are generally issued in anticipation of various seasonal revenues,
bond anticipation notes, and tax-exempt commercial paper. Short-term municipal
bonds may include general obligation bonds, which are secured by the issuer's
pledge of its faith, credit and taxing power for payment of principal and
interest, and revenue bonds, which are generally paid from the revenues of a
particular facility or a specific excise or other source.
The Municipal Fund may invest in variable rate obligations whose interest
rates are adjusted either at predesignated periodic intervals or whenever there
is a change in the market rate to which the security's interest rate is tied.
Such adjustments minimize changes in the market value of the obligation and,
accordingly, enhance the ability of the Municipal Fund to maintain a stable net
asset value. Variable rate securities purchased may include participation
interests in industrial development bonds which may be backed by letters of
credit from banking or other financial institutions. The letters of credit of
any single of such institutions in respect of all variable rate obligations will
not cover more than 5% of the Municipal Fund's total assets in accordance with
Rule 2a-7 of the Investment Company Act of 1940.
The Municipal Fund may invest without limitation in tax-exempt municipal
securities subject to the alternative minimum tax (the 'AMT'). Under current
Federal income tax law, (1) interest on tax-exempt municipal securities issued
after August 7, 1986 which are 'specified private activity bonds,' and the
proportionate share of any exempt-interest dividends paid by a regulated
investment company which receives interest from such specified private activity
bonds, will be treated as an item of tax preference for purposes of the AMT
imposed on individuals and corporations, though for regular Federal income tax
purposes such interest will remain fully tax-exempt, and (2) interest on all
tax-exempt obligations will be included in 'adjusted current earnings' of
corporations for AMT purposes. Such bonds have provided, and may continue to
provide, somewhat higher yields than other comparable municipal securities.
While the Municipal Fund may invest without limitation in securities subject to
AMT, the AMT affects only a small percentage of all tax paying investors. (See
'Daily Dividends, Other Distributions and Taxes.')
All of the Municipal Fund's municipal securities at the time of purchase
are rated within the two highest quality ratings of Moody's Investors Service,
Inc. (Aaa and Aa, MIG 1 and MIG 2 or VMIG1 and VMIG2) or Standard & Poor's
Corporation (AAA and AA or SP-1 and SP-2), or judged by the Adviser (as defined
under 'Management') to be of comparable quality.
To maintain portfolio diversification and reduce investment risk, the
Municipal Fund may not: (1) borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements to be used exclusively to
facilitate the orderly maturation and sale of portfolio securities during any
periods of abnormally heavy redemption requests, if they should occur; such
borrowings may not be used to purchase investments; or (2) pledge, hypothecate
or in any manner transfer, as security for indebtedness, its assets except to
secure such borrowings.
The Municipal Fund may also invest in stand-by commitments,
delayed-delivery and when-issued securities, which may involve certain expenses
and risks. The Municipal Fund's custodian will maintain a segregated account
containing liquid securities having value equal
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to, or greater than, such securities. The price of such securities, which is
generally expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for such securities takes place at a
later time. Normally the settlement date occurs from within ten days to one
month after the purchase of the issue. The value of such securities may
fluctuate prior to their settlement, thereby creating an unrealized gain or loss
to the Municipal Fund. Such securities are examples of what the Securities and
Exchange Commission (the 'SEC') considers 'illiquid securities' because their
settlement date occurs more than seven days after their purchase. The SEC limits
money market funds to hold only up to 10% of their net assets for securities
which settle more than seven days after purchase.
The Municipal Fund may also invest in municipal leases, which are leases or
installment purchases used by state and local governments as a means to acquire
property, equipment or facilities without involving debt issuance limitations.
It is possible that more than 5% of the Municipal Fund's net assets will be
invested in municipal leases which have been determined to be liquid securities
by the Municipal Fund's adviser.
The taxable investments in which the Municipal Fund may invest include
obligations of the U.S. Government and its agencies, high quality certificates
of deposit and bankers' acceptances, prime commercial paper, and repurchase
agreements.
To seek to reduce investment risk, the Municipal Fund may not invest in the
securities of any one issuer, except the U.S. Government, in excess of the
percentage of the Municipal Fund's total assets allowed under Rule 2a-7 of the
Investment Company Act of 1940.
The Municipal Fund earns income at current money market rates and its yield
will vary from day to day and generally reflects current short-term interest
rates and other market conditions. It is important to note that neither the
Municipal Fund nor its yields are insured or guaranteed by the U.S. Government.
THE WINTHROP U.S. GOVERNMENT MONEY FUND
The Winthrop U.S. Government Money Fund (the 'Government Fund') investment
objectives are to seek maximum current income, consistent with liquidity and
safety of principal. As a matter of fundamental policy, the Government Fund
pursues its objectives by maintaining a portfolio of high quality money market
securities, including the types described in the succeeding paragraph, which at
the time of investment generally have remaining maturities of one year or less,
although maturities may extend to 397 days. The dollar weighted average maturity
of the Government Fund's portfolio securities will vary, but will always be 90
days or less. In general, securities with longer maturities are more vulnerable
to price changes, although they may provide higher yields. It is possible that a
major change in interest rates or a default on the Government Fund's investments
could cause their share prices to change. There can be no assurance, as is true
with all investment companies, that the Government Fund's objectives will be
achieved.
The securities in which the Government Fund invests are: (1) marketable
obligations of, or guaranteed by, the United States Government, its agencies or
instrumentalities (collectively, the 'U.S. Government'), including issues of the
United States Treasury, such as bills, certificates of indebtedness, notes and
bonds, and issues of agencies and instrumentalities established under the
authority of an act of Congress, including variable rate obligations such as
floating rate notes; and (2) repurchase agreements that are collateralized in
full each day by the types of securities listed above. These agreements are
entered into with 'primary dealers' (as designated by the Federal Reserve Bank
of New York) in U.S. Government securities and would create a loss to the
Government Fund if, in the event of a dealer default, the proceeds from the sale
of the collateral were less than the repurchase price. In addition, if the
seller of repurchase agreements becomes insolvent, the Government Fund's right
to dispose of the securities might be restricted.
The Government Fund may commit up to 10% of its net assets to the purchase
of illiquid securities, which includes when-issued U.S. Government securities,
whose value may fluctuate prior to their settlement, thereby creating an
unrealized gain or loss to the Government Fund.
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The Government Fund earns income at current money market rates and its
yield will vary from day to day and generally reflects current short-term
interest rates and other market conditions. It is important to note that neither
the Government Fund nor its yield is insured or guaranteed by the U.S.
Government.
To maintain portfolio diversification and reduce investment risk, the
Government Fund may not: (1) borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements to be used exclusively to
facilitate the orderly maturation and sale of portfolio securities during any
periods of abnormally heavy redemption requests, if they should occur; such
borrowings may not be used to purchase investments; or (2) pledge, hypothecate
or in any manner transfer, as security for indebtedness, its assets except to
secure such borrowings.
In addition to the above referenced securities, the Money Funds reserve the
right as a defensive measure to hold temporarily other types of securities which
are permitted by Rule 2a-7 of the Investment Company Act of 1940. See
'Investment Objectives' in the Statement of Additional Information for a more
complete description of the Money Funds' objectives, strategies, instruments to
be used in connection therewith and risks associated therewith.
MANAGEMENT
The Money Funds' Board of Trustees (who, with its officers, are described
in the Statement of Additional Information) has overall responsibility for the
management of the Funds.
DLJ Investment Management Corp. (the 'Adviser'), a Delaware corporation
with principal offices at 277 Park Avenue, New York, New York 10172, has been
retained under an investment advisory agreement to provide investment advice and
to supervise the management and investment programs of the Money Funds, subject
to the general supervision and control of the Trustees of the Funds.
The Adviser is a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette
Securities Corporation, which is a member of the New York Stock Exchange and a
wholly-owned subsidiary of Donaldson, Lufkin & Jenrette, Inc. ('DLJ'), a major
international supplier of financial services. DLJ is an independently operated,
indirect subsidiary of The Equitable Companies Incorporated, a holding company
controlled by AXA, a member of a large French insurance group. AXA is indirectly
controlled by a group of five French mutual insurance companies. The Adviser was
formed in November, 1995 for the initial purpose of acting as investment adviser
to a select group of individual and institutional investors, and hence, as an
entity, has not acted as an adviser to other investment companies in the past.
The Adviser, however, has hired personnel from both within and outside of DLJ
who have experience in the investment company industry, specifically the
operation and management of money market funds.
Marybeth B. Leithead is the portfolio manager of the Municipal Fund and is
also a Vice President of the Opportunity Funds and the Adviser. A tax-exempt
fixed income specialist, Ms. Leithead is responsible for short and long
municipal bond investment management for clients of the Adviser and its
affiliate, Wood Struthers and Winthrop Management Corp. In addition, Ms.
Leithead is the portfolio manager of the Winthrop Municipal Trust Fund, a series
of the Focus Funds and has been an employee of an affiliate of the Adviser since
1989.
Richard L. Glessmann is the portfolio manager of the Government Fund and
has been an employee of an affiliate of the Adviser since 1995. Prior to his
current position, Mr. Glessmann was employed for seven years at Wells Fargo Bank
where he was a Vice President and Senior Portfolio Manager responsible for the
management of over $2 billion of client assets. He also managed several mutual
funds that invested in a broad variety of government and mortgage backed
securities. Before Wells Fargo, Mr. Glessmann spent one year at
Citibank's Private Bank and four years at Chase Investors Management
Corporation.
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Under its Advisory Agreement with the Money Funds, the Adviser or its
affiliates (i) provide investment advisory services and order placement
facilities for each of the Money Funds and pays all compensation of Trustees of
the Money Funds who are affiliated persons of the Adviser and (ii) furnish the
Money Funds' management supervision and assistance and office facilities in
addition to administrative and other nonadvisory services for which it may be
reimbursed. The Money Funds pay a fee of .40% of the average daily net assets of
each Money Fund to the Adviser which is reduced to .35% of each Money Fund's
average daily net assets in excess of $1 billion. The advisory fees to be paid
by the Money Funds are similar to those paid by other money market mutual funds.
As of the date of this Prospectus, the Money Funds have not commenced operations
and, accordingly, have not paid the Adviser a fee.
EXPENSES OF THE MONEY FUNDS
GENERAL
In addition to the payments to the Adviser under the investment advisory
agreement described above, the Money Funds pay the other expenses incurred in
the Money Funds' organization and operations, including the costs of printing
prospectuses and other reports to existing shareholders; all expenses and fees
related to registration and filing with the SEC and with state regulatory
authorities; custody, transfer and dividend disbursing expenses; legal and
auditing costs; clerical, accounting, and other office costs; fees and expenses
of Trustees who are not affiliated with the Adviser; costs of maintenance of
existence; and interest charges, taxes, brokerage fees, and commissions.
The investment advisory agreement provides that the Adviser will reimburse
the Money Funds up to the amount of its advisory fee for the expenses of any
Money Fund (exclusive of interest, taxes, brokerage, expenditures pursuant to
the distribution services agreement described below, and extraordinary expenses,
all to the extent permitted by applicable state law and regulations) which in
any year exceed the limits prescribed by any state in which shares of such Money
Fund are qualified for sale.
DISTRIBUTION AGREEMENT
Rule 12b-1 adopted by the SEC under the Investment Company Act of 1940
permits an investment company directly or indirectly to pay expenses associated
with the distribution of its shares. Under SEC regulations, some of the payments
described below to be made by the Money Funds could be deemed to be distribution
expenses within the meaning of such rule. Thus, pursuant to Rule 12b-1, the
Money Funds' Trustees, including a majority of its disinterested Trustees, have
adopted separate 12b-1 Plans for the expenses to be incurred in distributing
each Money Fund's shares (the 'Rule 12b-1 Plans') and the Money Funds have
entered into a Distribution Agreement (the 'Agreement') with Donaldson, Lufkin &
Jenrette Securities Corporation, the Funds' distributor (the 'Distributor'). The
Distributor may enter into service agreements with other entities. The
Distributor is located at 277 Park Avenue, New York, New York 10172.
With respect to each Money Fund, the maximum amount payable by the Money
Funds under the Rule 12b-1 Plans for distributing shares is .40 of 1% of the
average daily net assets of each Fund during the year. The current amount
payable by the Money Funds under the Rule 12b-1 Plans to the Distributor is .25
of 1% of the average daily net assets of each Fund during the year. Pursuant to
the Agreements, the Trustees can raise the distribution fees up to the maximum
amount by a majority vote if the Trustees, in their opinion, feel that the raise
is in the best interest of the Money Funds and their shareholders. The Agreement
but not the Rule 12b-1 Plans terminate in the event of assignment of the
Agreement.
An initial concession or ongoing maintenance fee may be paid to
broker-dealers on sales of both Money Funds' shares. Pursuant to the Rule 12b-1
Plans, the Distributor is then reimbursed for such payments with amounts paid
from the assets of such Money Fund. The payments to the broker-dealer, although
a Money Fund
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expense which is paid by all shareholders, will only directly benefit investors
who purchase theirshares through a broker-dealer rather than directly from the
Money Funds. Broker-dealers who sell shares of the Money Funds may provide
services to their customers that are not available to investors who purchase
their shares directly from the Money Funds. The payments to the broker-dealers
will continue to be paid for as long as the related assets remain in the Money
Funds.
Amounts paid under the Rule 12b-1 Plans and the Agreement are used in their
entirety to reimburse the Distributor for actual expenses incurred to (i)
promote the sale of shares of each Money Fund by, for example, paying for the
preparation, printing and distribution of prospectuses, sales brochures and
other promotional materials sent to prospective shareholders, by directly or
indirectly purchasing radio, television, newspaper and other advertising or by
compensating the Distributor's employees or employees of the Distributor's
affiliates for their distribution assistance, (ii) make payments to the
Distributor to compensate broker-dealers or other persons for providing
distribution assistance and (iii) make payments to compensate financial
intermediaries for providing administrative and accounting services with respect
to the Money Funds' shareholders. In addition to the concession or maintenance
fee which may be paid to dealers or agents, the Distributor will from time to
time pay additional compensation to dealers or agents in connection with the
sale of shares. Such additional amounts may be utilized, in whole or in part, in
some cases together with other revenues of such dealers or agents, to provide
additional compensation to registered representatives of such dealers or agents
who sell shares of a Money Fund. On some occasions, such compensation will be
conditioned on the sale of a specified minimum dollar amount of the shares of
the Money Funds during a specific period of time. Such incentives may take the
form of payment for meals, entertainment, or attendance at educational seminars
and associated expenses such as travel and lodging. Such dealer or agent may
elect to receive cash incentives of equivalent amounts in lieu of such payments.
The Rule 12b-1 Plans permit payments to be made in subsequent years for expenses
incurred in prior years if the Money Funds' Trustees specifically authorize such
payment.
As of the date of this Prospectus, the Money Funds have not commenced
operations and, accordingly, have not made payments under the Rule 12b-1 Plans
or the Agreement.
PURCHASES, REDEMPTIONS AND SHAREHOLDER SERVICES
PURCHASES
Shares of each of the Money Funds will be offered on a continuous basis
directly by the Money Funds and by the Distributor, acting as agent for the
Money Funds, at the respective net asset value per share determined as of the
close of the regular trading session of the New York Stock Exchange (the
'NYSE'), currently 4:00 p.m., New York City time, following receipt of a
purchase order in proper form. (See 'Net Asset Value.') The investor should send
a completed Share Purchase Application (found in this Prospectus) and enclose a
check in the amount of the initial investment to the Transfer Agent, FPS
Services, Inc., P.O. Box 61503, King of Prussia, PA 19406-0903, Attn: Winthrop
Mutual Funds. (For overnight courier deliveries, replace P.O. Box 61503 on
the address label with 3200 Horizon Drive.) The account will be established once
the application and check are received in good order. Checks should be made
payable to 'Winthrop Mutual Funds.' Checks made payable to the shareholder or
another third party (third party checks) will not be accepted by the Money Funds
or the Transfer Agent for investment. To open a new account by wire, first call
Winthrop Opportunity Funds at 1-800-225-8011 (option #2) to obtain an account
number. A representative will instruct you to send a completed, signed
application to
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WINTHROP MONEY FUNDS
SHARE PURCHASE APPLICATION
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WINTHROP MONEY FUNDS FOR ASSISTANCE IN FILLING OUT THIS APPLICATION CALL:
C/O FPS SERVICES, INC. (800) 225-8011 (OPTION #2)
P.O. BOX 61503
(3200 HORIZON DR.)
KING OF PRUSSIA, PA 19406-0903
</TABLE>
(1) TYPE OF ACCOUNT DATE __________________, 199_______
[ ] New Account [ ] Existing Account #______________________________
(2) INVESTMENT SELECTION -- Please make checks payable to Winthrop Mutual Funds.
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<S> <C> <C>
WINTHROP FUND NAME AMOUNT Initial Investment Minimum per Money Fund: $250;
Municipal Money Fund (042) $___________ Subsequent Investment Minimum: $25.
U.S. Government Money Fund (043) $___________ Minimums are waived for SEP, SIMPLE, 401K,
Total $___________ 403B and 457 plans.
</TABLE>
<TABLE>
<C> <S>
(3) SHARE REGISTRATION
[ ] Individual__________________________________ _________________________________________________________________
Name *Joint Owner, if any
[ ] Gift to Minor_______________________________ as custodian for_________________________________________________
Name of Custodian Name of minor
under the_______________ Uniform Gift to Minors Act. (Reference social security #
State of minor in space provided below)
[ ] Other____________________________________________________________________________________________________________
Name of corporation, organization, trust, etc.
Address______________________________________________________________________________________________________________
Street
______________________________________________________________________________________________________________
City State Zip Code
Phone Number (________) _____________Social Security or Taxpayer ID #**______________________________________________
* In the event of co-owners, a joint tenancy with right of survivorship will be assumed unless otherwise indicated.
** Required to open an account.
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<TABLE>
<C> <S>
(4) CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER -- Required by
federal tax law to avoid 31% backup withholding: By signing, I
certify under penalties of perjury that the social security or
taxpayer identification number entered above is correct and that I
have not been notified by the IRS that I am subject to backup
withholding unless I have checked the box below.
[ ] I am subject to backup withholding.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED
TO AVOID BACKUP WITHHOLDING.
______________________________________________ __________________________________________________________________
Signature Date
(5) SHAREHOLDER AUTHORIZATION (MUST BE SIGNED BY APPLICANT)
TELEPHONE EXCHANGE PRIVILEGE -- I understand that unless I have
checked the box below, this privilege will automatically apply.
[ ] I do not elect the telephone exchange privilege.
(NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations)
If I choose to use Winthrop's telephone exchange privilege, please
direct my exchange into the following share class:
[ ] A or [ ] B (check one).
TELEPHONE REDEMPTION PRIVILEGE -- I hereby authorize the Money
Funds or its transfer agent to effect the redemption of Fund shares
for my account according to my telephone instructions or telephone
instructions from my Broker/Agent as follows:
[ ] Mail Redemption proceeds to the name and address in which my
Fund Account is registered.
[ ] Deposit via automated clearing house to the commercial bank
referenced in Section 11.
[ ] Wire Redemption proceeds to the Bank referenced in Section 11
and charge my Fund account the applicable wire fee.
(NOTE: The maximum telephone redemption amount is $50,000.
Telephone redemption checks will only be mailed to the name and
address of record; and the address must not have changed within the
last 30 days).
By selecting any of the above telephone privileges, I agree that
neither the Money Funds, the Equity Funds, the Adviser, the Focus
Funds, nor any transfer agent for any of the foregoing will be
liable for any loss, injury, damage or expense as a result of
acting upon telephone instructions purporting to be on my behalf,
that the Money Funds reasonably believe to be genuine, and that
neither the Money Funds nor any such party will be responsible for
the authenticity of such telephone instructions. I understand that
any or all of these privileges may be discontinued by me or the
Money Funds at any time. I understand and agree that the Money
Funds reserve the right to refuse any telephone instructions and
that my investment dealer or agent reserves the right to refuse to
issue any telephone instructions I may request.
I am of legal age and capacity and have received and read the
Prospectus and agree to its terms.
The person(s), if any, signing on behalf of the investor (i.e.
corporation, organization, trust, etc.) represent and warrant that
they are authorized to sign this application and purchase, redeem,
or exchange shares on behalf of such investor.
______________________________________________ __________________________________________________________________
Signature Date
______________________________________________ __________________________________________________________________
Signature Date
(If an institution, please include documentation establishing
authorized signatories).
(6) FOR DEALER USE ONLY -- We guarantee the signature(s) set forth in Section 5, as
well as the legal capacity of the shareholder.
Dealer Name_________________________________________ Dealer No.____________________________________________________
Branch Office Name__________________________________ Branch Office No._____________________________________________
Branch Office Address________________________________________________________________________________________________
Representative's Name_______________________________ Representative's No.__________________________________________
Representative's Phone No. (_________) __________ Authorized Signature_____________________________________________
------------
FOR DIVIDEND INSTRUCTIONS AND OTHER ACCOUNT OPTIONS, PLEASE COMPLETE THE REVERSE
SIDE OF THIS PURCHASE APPLICATION.
- ----------------------------------------------------------------------------------------------------------------------------
(7) CHECKWRITING APPLICATION / SIGNATURE CARD
Check the Winthrop Money Fund(s) that are to have checkwriting
privileges. Minimum check amount: $100.
[ ] Municipal Money Fund [ ] U.S. Government Money Fund
_________________________________________ ________________________________________________________________
Fund or Brokerage Account Number (if applicable) Fund or Brokerage Account Number (if applicable)
Checkwriting is available only for accounts holding shares not
subject to Winthrop's contingent deferred sales charge.
By signing this checkwriting privilege authorization, the
undersigned agree(s): (1) the use of the Money Funds' checkwriting
privilege shall be subject to all of the terms and conditions
contained in the Money Funds' prospectus in effect at the time each
check is presented, and to the rules and regulations as set forth
on the reverse side of this form; and (2) each signatory guarantees
the genuineness of the other's signature.
All registered owner(s) of the Fund(s) must sign below:
____________________________________________________________________________________________________________________________
Account Name(s) as Registered Social Security Number Authorized Signature(s)*
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________
* For joint accounts, all owners, or their legal representatives must sign this card.
[ ] Check here if all signatures are required on checks.
[ ] Check here if all signatures are not required on checks and indicate number of signatures required___________ .
</TABLE>
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WINTHROP MONEY FUNDS
SHARE PURCHASE APPLICATION
<TABLE>
- --------------------------------------------------------------------------------
<C> <S>
(8) DIVIDEND OPTIONS -- If no instructions are given, all distributions will be reinvested.
INCOME DIVIDENDS: (select one)
</TABLE>
<TABLE>
<C> <S> <C> <C>
[ ] Reinvest dividends [ ] Pay dividends in cash [ ] Use Dividend Direction Option
CAPITAL GAINS DISTRIBUTION: (select one)
[ ] Reinvest capital gains [ ] Pay capital gains in cash [ ] Use Dividend Direction Option
[ ] DIVIDEND DIRECTION OPTION -- I/we hereby authorize and request that my/our
distributions be either (a) paid to the person and/or address designated below or (b)
reinvested into my/our account which we currently maintain in another Winthrop Fund:
a) Name____________________________________________ b) Winthrop Fund_______________________________________________
Account or Policy #________________________________ Existing Acct. #_______________________________________________
(if applicable)
Address____________________________________________ Existing Share Class: [ ] A or [ ] B (check one)*
City, State, Zip___________________________________ * Dividends directed between Funds must be within the same
share class.
(NOTE: Dividend checks that are returned 'not forwardable' will be reinvested in
additional shares of the Fund at the current net asset value on the date the check is
received.)
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<TABLE>
<S> <C>
(9) [ ]AUTOMATIC MONTHLY INVESTMENT PLAN* -- I/we hereby authorize you to draw on my/our bank account an
amount of $_______ ($25 minimum) for an investment in the Money Funds beginning on the
10th, 15th or 20th (circle one) day and continuing on that same day each month.
____________________________________________________ _______________________________________________________________
Fund Name(s) Bank Account Number
_____________________________________________________________________________________________________________________
Branch Name and Address of Bank
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
The Fund requires signatures of bank account owners exactly as they appear on bank records:
___________________________________________ ______________ _____________________________ __________________
Individual Account Owner Date Joint Account Owner Date
*(ATTACH VOIDED CHECK -- Include a blank check from the bank account from which your investment will be made. Write
'VOID' across the face of the check, and attach it to this form.)
(10) AUTOMATIC EXCHANGE PLAN OR SYSTEMATIC CASH WITHDRAWAL PLAN -- ($50 minimum). The undersigned requests that Winthrop or
any transfer agent of Winthrop (as their agent) make regular exchanges and/or withdrawals beginning the 5th, 10th, 15th
or 25th (circle one) day of _________ 19___.
(month)
CHECK THE BOX(ES) BELOW INDICATING THE PLAN(S) YOU WOULD LIKE TO PARTICIPATE IN:
[ ] AUTOMATIC EXCHANGE PLAN
FROM TO
Share Class* Frequency
Fund Name Fund Name (Circle One) Amount (Circle One)**
__________ _________ ____________ ________ ______________
__________________________________ _________________________________ A or B _____________ M Q S A
__________________________________ _________________________________ A or B _____________ M Q S A
__________________________________ _________________________________ A or B _____________ M Q S A
__________________________________ _________________________________ A or B _____________ M Q S A
* If your account in the Winthrop Money Funds has been established pursuant to a previous exchange from another
Winthrop Fund your automatic exchange selection must be directed to the same class as your initial investment in
Winthrop.
** Monthly, Quarterly, Semi-Annual, or Annual processing.
(Note: Winthrop's Automatic Exchange Plan may be directed to multiple funds within the Winthrop Focus Funds or
Winthrop Opportunity Funds. Automatic Exchanges will only be available for participating accounts with identical
registrations.)
[ ]SYSTEMATIC CASH WITHDRAWAL PLAN -- (Minimum initial purchase $10,000).
MONEY FUND NAME AMOUNT
--------------- ------
______________________________________ _______________ [ ] monthly [ ] quarterly [ ] semi-annually [ ] annually
______________________________________ _______________ [ ] monthly [ ] quarterly [ ] semi-annually [ ] annually
Payments under this plan should be sent:
[ ] by check to the name and address in which my/our fund account is registered.
[ ] by automated clearing house 'ACH' deposits to my Bank account referenced in Section 11.
[ ] by wire to the Bank and account referenced in Section 11 and charge my Money Fund account the
applicable wire fee.
[ ] by check to the Special Payee referenced below:
Name of Payee_______________________________________ Account or Policy# ____________________________________________
(if applicable)
Address________________________________________________________________________________________________________________
(NOTE: Systematic withdrawals selected on a semi-annual or annual basis are not eligible for Winthrop's CDSC waiver)
(11) BANK ACCOUNT INFORMATION* (To be completed if applicable under Sections 5 or 10).
____________________________________________________ _______________________________________________________________
Name of Bank Branch (if applicable)
____________________________________________________ _______________________________________________________________
Name in which Bank Account is Established Bank Account Number
*(ATTACH VOIDED CHECK -- Include a blank check from your bank account. Write 'VOID' across the face
of the check, and attach it to this form).
(12) CONSOLIDATED ACCOUNT STATEMENTS -- If you prefer to receive one quarterly combined statement instead of
individual account statements please reference the Winthrop Fund name (include share
class) and account numbers that you would like consolidated.
____________________________________________________ _______________________________________________________________
Fund Name/Class/Account Number Fund Name/Class/Account Number
____________________________________________________ _______________________________________________________________
Fund Name/Class/Account Number Fund Name/Class/Account Number
- ----------------------------------------------------------------------------------------------------------------------------
CHECKWRITING TERMS AND CONDITIONS
1. REDEMPTION AUTHORIZATION: The Signatory(s) whose signature(s) appear on the reverse side, intending to be legally bound,
hereby agree each with the other and with United Missouri Bank N.A. ('Bank') that the Bank is appointed agent for such
person(s) and, as such agent, is directed to request FPS Services, Inc., the Transfer Agent of the Winthrop Money Funds
(each a 'Fund' and collectively the 'Funds'), to redeem shares of the Fund registered in the name of such Signatory(s)
upon receipt of, and in the amount of, checks drawn upon the above numbered account. The Fund or its Transfer Agent shall
deposit the proceeds of such redemptions in said account or otherwise arrange for application of such proceeds to payments
of said checks. The Bank and the Transfer Agent are expressly authorized to commingle such proceeds in this account with
the proceeds of the redemption of the shareholders of the Fund. The Signatory(s) understand that the Bank may also act
as an agent and custodian for the Fund. The Bank and Transfer Agent are expressly authorized to honor checks as redemption
instructions hereunder and may require signature guarantees in accordance with the policies stated in the Prospectus, but
neither the Fund's Transfer Agent, the Bank, the Funds, the Funds' Adviser nor any clearing agent of the foregoing shall
be liable for any loss or liability resulting from the absence of any such guarantee.
2. CHECK PAYMENT: The Signatory(s) authorize and direct the Bank to pay each check presented hereunder, subject to all laws
and Bank rules and regulations pertaining to checking accounts. In addition, the Signatory(s) agree that: (a) No check
shall be issued or honored, or any redemption effected, in an amount less than stated in the Prospectus; (b) No check
shall be issued or honored, or redemption effected, for any amounts represented by shares unless payment for such shares
has been made in full and any checks given in such payment have been collected through normal banking channels; (c) No
check shall be honored unless the Fund has provided the Bank, from the proceeds of redemption or otherwise, collected
funds for the payment of such check; (d) Checks issued hereunder cannot be cashed over the counter at the Bank; and (e)
Checks shall be subject to any further limitations set forth in the Prospectus issued by the Fund including without
limitation any additions, amendments and supplements thereto.
3. DUAL OWNERSHIP: If more than one person is indicated as a registered owner of the shares of the Fund, such as by joint
ownership ownership in common or tenants by the entirety, then (a) each registered owner must sign the signature card,
(b) each registered owner must sign each check issued hereunder unless the parties have indicated on the front of this
card that not all Signatory(s) need sign, in which case the Bank and the Transfer Agent are authorized to act upon the
indicated number of signatures, and (c) each Signatory guarantees to Bank and Transfer Agent the genuineness and accuracy
of the signature of the other Signatory(s).
4. TERMINATION: The Bank may at any time terminate this account, related share redemption service and Bank's agency for the
Signatory(s) hereto without prior notice by Bank to any of the Signatory(s). The Funds may terminate this checkwriting
privilege in accordance with the procedures stated in the Prospectus.
5. HEIRS AND ASSIGNS: These terms and conditions shall bind the respective heirs, executors, administrators and assigns of
the Signatory(s).
</TABLE>
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the Transfer Agent. Accounts cannot be opened without a completed, signed
application and a fund account number. Contact your bank to arrange a wire
transfer to:
United Missouri Bank KC NA
ABA #10-10-00695
For: FPS Services, Inc.
A/C #98-7037-0719
Attn: Winthrop Mutual Funds
Your wire instructions must also include:
-- the name of the Fund in which the money is to be invested,
-- your account number at the Fund, and
-- the name(s) of the account holder(s).
Investors who purchase shares of the Money Funds through a wire transfer will be
eligible to receive the daily dividend declared on the date of purchase if the
Transfer Agent is notified of such purchase by 12:00 Noon and wired funds are
received by the Transfer Agent by 4:00 p.m. (See 'Daily Dividends, Distributions
and Taxes.')
Investors may also open accounts via their securities dealer. In addition,
securities dealers may offer an automatic sweep for the shares of the Money
Funds in the operation of cash accounts for its customers. Shares of the Money
Funds purchased through an automatic sweep by 1:00 p.m. are eligible to receive
that day's daily dividend. Contact your securities dealer to determine if a
sweep is available and what the sweep parameters are.
The minimum initial and subsequent investment in each Money Fund is $250
and $25, respectively. (For example, an investor wishing to make an initial
investment in shares of both Money Funds would be required to invest at least
$250 in each Money Fund.) Full and fractional shares will be credited to an
investor's account in the amount of the investment. Share certificates will not
be issued for full or fractional shares of the Money Funds. Each Money Fund
reserves the right to reject any initial or subsequent investment in its sole
discretion. Shareholder accounts established on behalf of the following types of
plans will be exempt from the Money Fund's minimum initial investment and
minimum subsequent investment requirements: (i) retirement plans qualified under
section 401(k) of the Code; (ii) plans described in section 403(b) of the Code;
(iii) deferred compensation plans described in section 457 of the Code; (iv)
simplified employee pension (SEP) plans; and (v) savings incentive match plans
for employees (SIMPLE).
Existing shareholders wishing to purchase additional shares of a Money Fund
may use an investment stub found at the bottom of the Money Fund's Shareholder
Statement form or, if one is not available, they may send a check payable to
such Money Fund (with Fund Account information referenced) directly to the
Transfer Agent, FPS Services, Inc., P.O. Box 61503, King of Prussia, PA
19406-0903, Attn: Winthrop Mutual Funds. (For overnight courier deliveries,
replace P.O. Box 61503 on the address label with 3200 Horizon Drive.) Existing
shareholders may also purchase additional shares via wire by contacting and
providing the Fund Account information to the Transfer Agent and following the
wire instructions above.
Further information and assistance is available by contacting the Money
Funds at the address or telephone number listed on the cover page of this
Prospectus.
REDEMPTIONS
Shares of the Money Funds may be redeemed at a redemption price equal to
the net asset value per share, as next computed as of the close of the regular
trading session of the NYSE, currently 4:00 p.m., New York City time, following
the receipt in proper form by the Money Fund of shares tendered for redemption.
(See 'Net Asset Value.')
The value of a shareholder's shares on redemption though expected to remain
at $1.00 per share may be more or less than the cost of such shares to the
shareholder, depending upon the value of a Money Fund's portfolio securities at
the time of such redemption or repurchase. Shares do not earn dividends on the
day a redemption is effected. (See 'Daily Dividends, Distributions and Taxes'
for a discussion of the tax consequences of a redemption.)
To redeem shares, the registered owner or owners should forward a letter to
the Money Funds containing a request for redemption of such shares at the next
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determined net asset value per share. Alternatively, the shareholder may elect
the right to redeem shares by telephone. If you wish to have Federal funds wired
the same day as your telephone redemption request, make sure that your request
will be received by the Money Funds prior to 12:00 Noon. (See 'Additional
Shareholder Services -- Telephone Redemption and Exchange Privilege.') If a
shareholder's securities dealer offers an automatic sweep service, the sweep
will automatically transfer from the Money Fund account sufficient cash to cover
any debt balance that may occur in your cash account. Shares of the Money Funds
redeemed prior to 1:00 p.m. through an automatic sweep service will be eligible
for same day federal funds wiring.
If the total value of the shares being redeemed exceeds $50,000 or a
redemption request directs proceeds to a party other than the registered account
owner(s), the signature or signatures on the letter or the endorsement must be
guaranteed by an 'eligible guarantor institution' as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934. Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
A broker-dealer guaranteeing signatures must be a member of a clearing
corporation or maintain net capital of at least $100,000. Credit unions must be
authorized to issue signature guarantees. Signature guarantees will be accepted
from any eligible guarantor institution which participates in a signature
guarantee program. Additional documents may be required for redemption of
corporate, partnership or fiduciary accounts.
The requirement for a guaranteed signature is for the protection of the
shareholder in that it is intended to prevent an unauthorized person from
redeeming shares and obtaining the redemption proceeds.
A Money Fund may request in writing that a shareholder whose account in a
Money Fund has an aggregate balance less than $250 increase his account to at
least that amount within 60 days. If the shareholder fails to do so, such Money
Fund reserves the right to close such account and send the proceeds to the
shareholder. A Money Fund will not redeem involuntarily any shareholder account
based solely on the market movement of such Money Fund's shares.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after shares are tendered in
proper form, except for any period during which the NYSE is closed (other than
customary weekend and holiday closings) or during which trading on the exchange
is deemed to be restricted under rules of the SEC, or for any period during
which an emergency (as determined by the SEC) exists as a result of which
disposal by a Money Fund of its portfolio securities is not reasonably
practicable, or as a result of which it is not reasonably practicable for a
Money Fund to determine the value of its net assets, or for such other period as
the SEC may by order permit for the protection of shareholders. Generally,
redemption will be made by payment in cash or by check. For information
concerning circumstances in which redemptions may be effected through the
delivery of in kind portfolio securities, see the Statement of Additional
Information.
ADDITIONAL SHAREHOLDER SERVICES
Exchange Privilege. Shares of each Money Fund can be exchanged for shares
of the other Money Fund. Shareholders whose initial investment was directly into
a Money Fund may exchange such shares into either class of the Equity Funds or
the Focus Funds. Shares of each Money Fund established pursuant to Winthrop's
exchange privilege will be eligible for exchange into the Equity Funds or Focus
Funds provided that the exchange is directed into the same class of shares upon
which the initial investment was made. Exchanges may be made by mail or
telephone (see 'Additional Shareholder Services -- Telephone Redemption and
Exchange Privilege'). Unless otherwise indicated in the initial Share Purchase
Application or by written notice to the Money Funds or its Transfer Agent,
shareholders whose initial investment was invested directly into a Money Fund
will, upon an exchange request, automatically be exchanged into Class A shares
of the requested Equity Funds or Focus Funds. The exchange privilege for the
Equity Funds and the Focus Funds is available only in states in which shares of
the relevant Equity Fund or Focus Fund may be legally sold. Prospectuses for
each
10
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of the Equity Funds and the Focus Funds may be obtained from the address or
telephone number listed on the cover page of this Prospectus. An exchange is
effected on the basis of each Money Fund's relative net asset value per share
next computed following receipt of an order for such exchange from the
shareholder.
The Money Funds impose no separate charge for exchanges. A shareholder will
not be assessed any contingent deferred sales charge at the time of an exchange
between any of the Money Funds, Equity Funds or Focus Funds. However, shares of
the Money Funds established through an exchange of shares subject to a
contingent deferred sales charge will be charged at the time of redemption. The
period of time during which a shareholder owns shares in any of the Money Funds,
Equity Funds or Focus Funds will be used to determine the applicable contingent
deferred sales charge. A shareholder will pay a higher 12b-1 Fee when exchanging
shares of the Money Funds (.25 of 1% annually) for Class A shares of the Focus
Funds (.30 of 1% annually) or Class B shares of the Equity Funds or Focus Funds
(1% annually).
There is no sales load associated with the purchase and sale of shares of
the Money Funds. However, a shareholder may be subject to sales charges upon
exchanging shares of the Money Funds for Class A shares of the Equity Funds and
Focus Funds. Currently, Class A shares of the Equity Funds and Focus Funds have
initial sales loads of 5.75% and 4.75%, respectively, while Class B shares of
the Equity Funds and Focus Funds are subject to a contingent deferred sales
charge which declines from 4% during the first year of investment to zero after
four years. A Prospectus describing the sales charges associated with either the
Equity Funds or Focus Funds can be obtained from the address or phone number at
the beginning of this Prospectus.
The exchange privilege is intended to provide shareholders with a
convenient way to switch their investments when their objectives or perceived
market conditions suggest a change. The exchange privilege is not meant to
afford shareholders an investment vehicle to play short term swings in the stock
market by engaging in frequent transactions in and out of the Money Funds,
Equity Funds and Focus Funds. Shareholders who engage in such frequent
transactions may be prohibited from or restricted in placing future exchange
orders.
Shareholders should be aware that an exchange is treated for federal income
tax purposes as a sale and purchase of shares which may result in realization of
a gain or loss.
Exchanges of shares are subject to the other requirements of the applicable
fund into which exchanges are made. Annual fund operating expenses for such
other fund may be higher than the funds exchanged from.
Automatic Monthly Investment Plan. Any shareholder may elect on the Share
Purchase Application to make additional investments in a Money Fund
automatically, by authorizing the Money Funds to draw on the shareholder's
account regularly by check.
A shareholder may change the date (either the 10th, 15th or 20th of each
month) or amount (subject to a minimum of $25) of the shareholder's monthly
investment at any time by letter to the Money Funds at least three business days
before the change becomes effective. The plan may be terminated at any time
without penalty by the shareholder or the Money Funds.
Automatic Exchange Plan. Shareholders may authorize Winthrop to exchange an
amount established in advance automatically for shares of the other Money Fund
or shares of the Equity Funds or Focus Funds on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum
exchange into another Winthrop Fund under the Automatic Exchange Plan is $50.
These exchanges are subject to the terms of the Exchange Privilege described
above (see 'Additional Shareholder Services -- Exchange Privilege').
Dividend Direction Option. Shareholders may elect on the Share Purchase
Application to have their dividends paid to another individual or directed for
reinvestment into the other Money Fund or into the Equity Funds or Focus Funds
provided that an existing account in such other fund is maintained by the
shareholder.
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Systematic Withdrawal Plan. Any shareholder who owns or purchases shares of
a Money Fund having a current net asset value of at least $10,000 may establish
a systematic withdrawal plan under which the shareholder or a third party will
receive payment by check in a stated amount of not less than $50 on a monthly,
quarterly, semi-annual or annual basis. A contingent deferred sales charge which
may otherwise be imposed on a withdrawal redemption (via an exchange from the
Equity Funds or Focus Funds) will be waived in connection with redemptions made
pursuant to Winthrop's systematic withdrawal plan up to 1% monthly or 3%
quarterly of an account (excluding dividend reinvestment) not to exceed 10% over
any 12-month rolling period. Systematic withdrawals elected on a semi-annual or
annual basis are not eligible for the waiver.
Checkwriting Privileges. Shareholders may redeem shares by writing checks
against their account balance for at least $100. Investments in the Money Funds
will continue to earn dividends until a shareholder's check is presented to the
Money Funds for payment. Checks will be returned by the Money Funds' Transfer
Agent if there are insufficient shares to meet the withdrawal amount.
Shareholders should not attempt to close an account by check because the exact
balance at the time the check clears will not be known when the check is
written. There is currently no charge to shareholders for checkwriting, but the
Money Funds reserve the right to impose a charge in the future. The Money Funds
may modify, suspend or terminate checkwriting privileges at any time upon notice
to shareholders and will terminate checkwriting privileges without notice for
accounts whose assets are exchanged completely out of the Money Funds. In
addition, United Missouri Bank N.A., as agent for the Transfer Agent in
processing redemptions via the checkwriting privilege, reserves the right to
terminate checkwriting privileges at any time without notice to shareholders.
Checkwriting privileges will not be available for accounts whose shares are
subject to a contingent deferred sales charge.
Telephone Redemption and Exchange Privilege. A shareholder is eligible to
withdraw up to $50,000 per day from such shareholder's account, via telephone
orders (toll free) (800) 225-8011 given to the Money Funds by the shareholder or
the shareholder's investment dealer of record. A shareholder may also exchange
assets via telephone from such shareholder's account to the Class A or Class B
shares of the Equity Funds and Focus Funds. Each Money Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Such procedures include the requirement that redemption or exchange
orders must include the account name and the account number as registered with
the Money Funds. The minimum amount for a wire transfer is $1,000. Proceeds of
telephone redemptions may also be sent by automated clearing house funds to a
shareholder's designated bank account. Neither the Money Funds, the Adviser, the
Equity Funds, the Focus Funds, nor any transfer agent for any of the foregoing
will be responsible for following instructions communicated by telephone that
are reasonably believed to be genuine and, accordingly, investors bear the risk
of loss. The Telephone Exchange Privilege will be offered automatically unless a
shareholder declines such option on the Share Purchase Application or by writing
to the Money Funds' Transfer Agent at the address listed in the back of this
Prospectus.
Timing of Redemptions and Exchanges. If a redemption or exchange order for
a Money Fund is received on a Money Fund Business Day prior to the close of the
regular session of the NYSE, which is generally 4:00 p.m. New York City time,
the proceeds will be transferred as soon as possible, normally on the next Money
Fund Business Day, and shares of each Money Fund will be priced that Money Fund
Business Day. If the redemption or exchange order is received after the close of
the regular session of the NYSE, shares of each Money Fund will be priced the
next Money Fund Business Day and the proceeds will be transferred the next Money
Fund Business Day after pricing. A shareholder also may request that proceeds be
sent by check to a designated bank. Exchanges are made without any charge by the
Money Funds.
Purchases by check may not be redeemed by a Money Fund until after a
reasonable time necessary to verify that the purchase check has been paid
(approximately ten Money Fund Business Days from receipt of the purchase check).
When a purchase is made by wire and subsequently redeemed, the proceeds from
such
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redemption normally will not be transmitted until two Money Fund Business Days
after the purchase by wire. Bank acknowledgment of payment initialed by the
shareholder may shorten delays.
Additional information concerning these Additional Shareholder Services may
be obtained by contacting the Money Funds' Transfer Agent at the address or
telephone number listed on the cover page of this Prospectus.
NET ASSET VALUE
The net asset value per share for purchases and redemptions of shares of
each Money Fund is determined as of the close of the regular session of the
NYSE, which is generally 4:00 p.m., New York City time, on each day that trading
is conducted during such session on the NYSE. In accordance with the Money
Funds' Agreement and Declaration of Trust and By-Laws, net asset value for each
Money Fund is determined separately by dividing the value of each Money Fund's
net assets less its liabilities, by the total number of each Fund's shares then
outstanding. The Net Asset Value is expected to be maintained at a constant at
$1.00 per share although this price is not guaranteed. For purposes of this
computation, the securities in each Money Fund's portfolio are valued at
amortized cost, which minimizes the effect of changes in a security's market
value and helps maintain a stable $1.00 per share price. All expenses, including
the fees payable to the Adviser, are accrued daily.
Events affecting the values of investments that occur between the time
their prices are determined and 4:00 p.m. on each day that the NYSE is open will
not be reflected in the net asset value of a Money Fund's shares unless the
Adviser, under the supervision of such Fund's Board of Trustees, determines that
the particular event would materially affect net asset value. As a result, the
net asset value of a Money Fund's shares may be significantly affected by such
trading on days when a shareholder has no access to such Money Fund.
DAILY DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from net investment income are declared daily and paid monthly.
Net investment income consists of all accrued interest income on Money Fund
assets less the Money Fund's expenses applicable to that dividend period. There
is no fixed dividend rate and there can be no assurance that a Money Fund will
distribute any net investment income. The amount of any distribution paid by
each Money Fund depends upon the realization by the Money Fund of income from
that Money Fund's investments. All distributions will be made to shareholders of
a Money Fund solely from assets of that Money Fund.
Distributions by the Money Funds may also be subject to certain state and
local taxes. Each year, by January 31, the Money Funds will send tax information
stating amount and type of all its distributions for the year just ended.
Each Money Fund intends to qualify as a regulated investment company under
Subchapter M of the Code, so that it will not be liable for federal income taxes
to the extent that its net taxable income and net capital gains are distributed.
RETIREMENT PLANS
Each of the Money Funds may be a suitable investment vehicle for part or
all of the assets held in various tax-sheltered retirement plans, such as those
listed below. Semper Trust Company serves as custo-
13
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<PAGE>
dian under the Individual Retirement Account ('IRA') prototype and under the
prototype retirement plan and charges an annual account maintenance fee of $15
per participant, regardless of the number of Winthrop Funds selected. Persons
desiring information concerning these plans should write or telephone the Money
Funds or the Money Funds' Transfer Agent. While the Money Funds reserve the
right to suspend sales of their shares in response to conditions in the
securities markets or for other reasons, it is anticipated that any such
suspension of sales would not apply to the types of plans listed below.
INDIVIDUAL RETIREMENT ACCOUNTS
The Adviser has available a prototype form of IRA for investment in shares
of any one or more Money Funds. An individual with a non-working spouse may
deduct a contribution to an IRA of up to $2,250, provided that no more than
$2,000 may be contributed for either spouse. The deduction for a contribution to
an IRA is phased out if an unmarried individual has adjusted gross income in
excess of $25,000, a married couple filing jointly in excess of $40,000 or for
any adjusted gross income of a married taxpayer filing separately.
As with tax-deductible contributions, taxes on the income earned from
nondeductible IRA contributions will be deferred until properly distributed from
the IRA.
SIMPLIFIED EMPLOYEE PENSION PLAN ('SEP/IRA')
A SEP/IRA is available for investment and may be established on a group
basis by an employer who wishes to sponsor a tax-sheltered retirement program by
making IRA contributions on behalf of all eligible employees.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES
(SIMPLE) -- SIMPLE IRA AND SIMPLE 401(K)
SIMPLE plans offer employers with 100 or fewer eligible employees the
ability to establish a retirement plan that permits employee contributions. An
employer may also elect to make additional contributions to these Plans. Please
telephone the Money Funds' shareholder servicing representatives at (800)
225-8011 for more information.
EMPLOYER-SPONSORED RETIREMENT PLANS
The Adviser has a prototype retirement plan available which provides for
investment of plan assets in shares of any one of the Money Funds. The prototype
retirement plan may be used by sole proprietors and partnerships as well as
corporations to establish a tax qualified profit sharing plan or money purchase
pension plan (or both) of their own.
Under the prototype retirement plan, an employer may make annual
tax-deductible contributions for allocation to the accounts of the plan
participants to the maximum extent permitted by the federal tax law for the type
of plan implemented. The Adviser has received favorable opinion letters from the
IRS that the prototype retirement plan is acceptable by qualified employers.
SELF-DIRECTED RETIREMENT PLANS
Shares of the Money Funds may be suitable for self-directed IRA accounts
and prototype retirement plans such as those developed by Donaldson, Lufkin &
Jenrette Securities Corporation, the parent of the Adviser and the Money Funds'
Distributor.
GENERAL INFORMATION
CAPITALIZATION
The Opportunity Funds were organized as a Delaware business trust under the
laws of Delaware on May 31, 1995. The Opportunity Funds have an unlimited number
of authorized shares of beneficial interest, which may, without shareholder
approval, be divided into an unlimited number of series, and an unlimited number
of classes. The Opportunity Funds are currently divided into the Money Funds and
the Equity Funds, each of which are divided into two series.
14
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Each share of each Money Fund is normally entitled to one vote (with
proportional voting for fractional shares). Generally, shares of both Money
Funds vote as a single series on matters that affect all Money Funds in
substantially the same manner. As to matters affecting each Money Fund
separately, such as approval of the investment advisory agreement, shares of
each Money Fund would vote as separate series. The Money Funds will not have
annual meetings of shareholders so long as at least two-thirds of the Trustees
then in office have been elected by the shareholders. Section 16(c) of the 1940
Act provides certain rights to shareholders which the Money Funds will honor
regarding the calling of meetings of shareholders and other communications with
shareholders. Trustees may also call meetings of shareholders from time to time
as the Trustees deem necessary or desirable.
Shares of a Money Fund are freely transferable, are entitled to dividends
as determined by the Trustees and, in liquidation of a Money Fund, are entitled
to receive the net assets of that Money Fund. Shareholders have no preemptive
rights.
DISTRIBUTOR
Donaldson, Lufkin & Jenrette Securities Corporation, an affiliate of the
Adviser, serves as the Money Funds' Distributor.
CUSTODIAN, DIVIDEND DISBURSING AGENT AND TRANSFER AGENT
Citibank, N.A. acts as Custodian for the securities and cash of the Money
Funds, but plays no part in deciding on the purchase or sale of portfolio
securities. FPS Services, Inc. acts as dividend disbursing agent, registrar and
transfer agent.
INFORMATION FOR SHAREHOLDERS
Any shareholder inquiry regarding the Money Funds or the status of the
shareholder's account can be made to the Money Funds by mail or by telephone at
the address or telephone number listed in front of this Prospectus or to FPS
Services, Inc. at the address on the cover of this Prospectus.
Following any purchase or redemption, a shareholder will receive a
statement confirming the transaction. Annual audited and semi-annual unaudited
financial statements, which include a list of investments held by the Money
Funds, will be sent to shareholders.
15
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WINTHROP MONEY FUNDS
(800) 225-8011
DLJ Investment Management Corp.
277 Park Avenue, New York, New York 10172
DISTRIBUTOR
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue, New York, New York 10019
CUSTODIAN
Citibank, N.A.
111 Wall Street, New York, New York 10043
TRANSFER AGENT
FPS Services, Inc.
P.O. Box 61503
(3200 Horizon Drive)
King of Prussia, PA 19406-0903
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue, New York, New York 10022
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Money Fund Expenses 2
Introduction 3
Investment Objectives, Policies and Risk Considerations 3
Management 6
Expenses of the Money Funds 7
Purchases, Redemptions and Sharehodlder Services 8
Net Asset Value 13
Daily, Dividends, Distributions and Taxes 13
Retirement Plans 13
General Information 14
</TABLE>
This Prospectus does not
constitute an offering in any
state in which such offering
may not lawfully be made.
WMF-1
WINTHROP
MONEY
FUNDS
------------------------
WINTHROP MUNICIPAL
MONEY FUND
WINTHROP U.S.
GOVERNMENT MONEY
FUND
PROSPECTUS
JANUARY 24, 1997
[LOGO]
WINTHROP
OPPORTUNITY
FUNDS
<PAGE>
<PAGE>
WINTHROP OPPORTUNITY FUNDS
277 PARK AVENUE, NEW YORK, NEW YORK 10172
Toll Free (800) 225-8011
STATEMENT OF ADDITIONAL INFORMATION
January 24, 1997
This Statement of Additional Information relates to the Winthrop Municipal Money
Fund (the "Municipal Fund") and the Winthrop U.S. Government Money Fund (the
"Government Fund" and together with the Municipal Fund, the "Money Funds"), each
of which is a series of the Winthrop Opportunity Funds, and is not a prospectus
and should be read in conjunction with the Funds' current Prospectus dated
January 24, 1997, as supplemented from time to time, which is incorporated
herein by reference. A copy of the Prospectus may be obtained by contacting the
Money Funds at the address or telephone number listed above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Policies and Restrictions................................1
Management..........................................................9
Expenses of the Money Funds........................................13
Purchases, Redemptions, Exchanges and
Systematic Withdrawal Plan.................................15
Net Asset Value....................................................17
Daily Dividends, Distributions and Taxes...........................18
Portfolio Transactions.............................................22
Investment Performance Information.................................23
General Information................................................26
Appendix A -- Securities Ratings..................................A-1
Appendix B -- Description of Municipal Securities.................B-1
</TABLE>
INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions supplement
should be read in conjunction with the information set forth under the heading
"Investment Objectives, Policies and Risk Considerations" in the Money Funds'
Prospectus. Except as noted in the Prospectus and this Statement of Additional
Information, the Money Funds' investment policies are not fundamental and may be
changed by the Trustees of the Money Funds without shareholder approval;
however, shareholders will be notified prior to a significant change in such
policies. The Money Funds' investment restrictions which are fundamental and may
not be changed without shareholder approval are indicated under "Fundamental
Investment Restrictions" in this Statement of Additional Information.
It is the policy of the Municipal Fund to seek maximum
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current income, consistent with liquidity and safety of principal, that is
exempt from Federal income taxes by investing principally in a diversified
portfolio of municipal securities; it is the policy of the Government Fund to
seek maximum current income, consistent with liquidity and safety of principal,
by investing in a portfolio of U.S. Government securities. It is the policy of
both Money Funds to declare the net investment income associated with their
investments as a daily dividend to maintain the net asset value of the Funds at
$1.00. (See "Net Asset Value" and "Daily Dividends, Distributions and Taxes.")
In addition, one or both of the Money Funds may invest in the securities
described below. The Prospectus indicates which particular Money Fund is
permitted to invest in, or may be limited in investing in, the following
securities.
Securities
U.S. Government Obligations. The Money Funds may purchase
marketable obligations of, or guaranteed by, the United States Government, its
agencies or instrumentalities. These include issues of the United States
Treasury, such as bills, certificates of indebtedness, notes and bonds, and
issues of agencies and instrumentalities established under the authority of an
act of Congress, including variable rate obligations such as floating rate
notes. The latter issues include, but are not limited to, obligations of the
Bank for Cooperatives, Federal Financing Bank, Federal Home Loan Bank, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Some of these securities are
supported by the full faith and credit of the United States Treasury, others are
supported by the right of the issuer to borrow from the Treasury, and still
others are supported only by the credit of the agency or instrumentality.
Repurchase Agreements. The Money Funds may enter into "repurchase
agreements" with member banks of the Federal Reserve System, "primary dealers"
(as designated by the Federal Reserve Bank of New York) in such securities or
with any domestic or foreign broker/dealer which is recognized as a reporting
government securities dealer. Repurchase agreements permit the Money Funds to
keep all of their assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. The Money Funds require
continual maintenance of collateral with an approved custodian in an amount
equal to, or in excess of, the market value of the securities which are the
subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, the Money Funds might suffer a loss to the extent that
the proceeds from the sale of the collateral were less than the repurchase
price. If the vendor becomes the subject of bankruptcy proceedings, the Money
Funds might be delayed in selling the collateral. Pursuant to Rule 2a-7 of the
Investment Company Act of 1940, as amended (the "Act") (as described later), a
repurchase agreement is deemed to be an acquisition of the underlying securities
provided that the obligation of the seller to repurchase the securities from the
Money Funds is collateralized fully (as defined in such Rule). Accordingly, the
vendor of a fully collateralized repurchase agreement is deemed to be the issuer
of the underlying securities.
Reverse Repurchase Agreements. The Money Funds may also enter
into reverse repurchase agreements. Under a reverse repurchase agreement, the
Money Funds would sell securities and agree to repurchase them at a mutually
agreed upon date and price. At the time the Money Funds enter into a reverse
repurchase agreement, they would establish and maintain with an approved
custodian a segregated account containing
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liquid securities having a value not less than the repurchase price. Reverse
repurchase agreements involve the risk that the market value of the securities
subject to such agreement could decline below the repurchase price to be paid by
the Money Funds for such securities. In the event the buyer of securities under
a reverse repurchase agreement filed for bankruptcy or became insolvent, such
buyer or receiver would receive an extension of time to determine whether to
enforce the Money Funds' obligations to repurchase the securities and the Money
Funds' use of the proceeds of the reverse repurchase could effectively be
restricted pending such decision. Reverse repurchase agreements create leverage,
a speculative factor, but are not considered senior securities by the Money
Funds or the Securities and Exchange Commission to the extent liquid debt
securities are segregated in an amount at least equal to the amount of the
liability.
When-Issued and Delayed-Delivery Securities. The Money Funds may,
to the extent consistent with their other investment policies and restrictions,
enter into forward commitments for the purchase or sale of securities, including
on a "when-issued" or "delayed-delivery" basis in excess of customary settlement
periods for the type of security involved. In some cases, a forward commitment
may be conditioned upon the occurrence of a subsequent event, such as approval
and consummation of a merger, corporate reorganization or debt restructuring,
i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the
time of the commitment, with payment and delivery taking place in the future,
generally ten days to a month, or more, after the date of the commitment. While
the Money Funds will only enter into a forward commitment with the intention of
actually acquiring the security, the Money Funds may sell the security before
the settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to
market fluctuation, and no interest (or dividends) accrues to the Money Funds
prior to the settlement date. The Money Funds will segregate with their
custodian cash or liquid debt securities in an aggregate amount at least equal
to the amount of their respective outstanding forward commitments.
Standby Commitments. The Municipal Fund may purchase municipal
securities together with the right to resell them to the seller at an
agreed-upon price or yield within specified periods prior to their maturity
dates. Such a right to resell is commonly known as a "standby commitment," and
the aggregate price which the Municipal Fund pays for securities with a standby
commitment may be higher than the price which otherwise would be paid. The
primary purpose of this practice is to permit the Municipal Fund to be as fully
invested as practicable in municipal securities while preserving the necessary
flexibility and liquidity to meet unanticipated redemptions. In this regard, the
Municipal Fund acquires standby commitments solely to facilitate liquidity and
does not exercise its rights thereunder for trading purposes. Since the value of
a standby commitment is dependent on the ability of the standby commitment
writer to meet its obligation to repurchase, the Municipal Fund's policy is to
enter into standby commitment transactions only with municipal securities
dealers which are determined to present minimal credit risks.
The acquisition of a standby commitment does not affect
<PAGE>
<PAGE>
the valuation or maturity of the underlying municipal securities which continue
to be valued in accordance with the amortized cost method. Standby commitments
acquired by the Municipal Fund are valued at zero in determining net asset
value. Where a Municipal Fund pays directly or indirectly for a standby
commitment, its cost is reflected as unrealized depreciation for the period
during which the commitment is held. Standby commitments do not affect the
average weighted maturity of the Municipal Fund's portfolio of securities.
Municipal Securities. The term "municipal securities," as used in
the Prospectus and this Statement of Additional Information, means obligations
issued by or on behalf of states, territories, and possessions of the United
States or their political subdivisions, agencies and instrumentalities, the
interest from which is exempt (subject to the alternative minimum tax - as later
described) from Federal income taxes. The municipal securities in which the
Municipal Fund invests are limited to those obligations which at the time of
purchase are:
1. Backed by the full faith and credit of the United States;
or
2. Municipal notes rated MIG-1 or MIG-2 and VMIG-1 or VMIG-2,
by Moody's Investors Service, Inc. ("Moody's") or SP-1 or
SP-2 by Standard and Poor's Corporation ("S&P"), or, if
not rated, are of equivalent investment quality as
determined by the Municipal Fund's adviser; or
3. Municipal bonds rated Aa or higher by Moody's, AA-or
higher by S&P or, if not rated, are of equivalent
investment quality as determined by the Municipal Funds'
adviser; or
4. Other types of municipal securities, provided that such
obligations are rated Prime-1 by Moody's, A-1 or higher by S&P
or, if not rated, are of equivalent investment quality as
determined by the Municipal Fund's adviser.
See Appendix A for a description of municipal ratings and
Appendix B for a description of municipal securities.
Alternative Minimum Tax. The Municipal Fund may invest without
limitation in tax-exempt municipal securities subject to the alternative minimum
tax (the "AMT"). Under current Federal income tax law, (1) interest on
tax-exempt municipal securities issued after August 7, 1986 which are "specified
private activity bonds," and the proportionate share of any exempt-interest
dividend paid by a regulated investment company which receives interest from
such specified private activity bonds, will be treated as an item of tax
preference for purposes of the AMT imposed on individuals and corporations,
though for regular Federal income tax purposes such interest will remain fully
tax-exempt, and (2) interest on all tax-exempt obligations will be included in
"adjusted current earnings" for corporation for AMT purposes. Such private
activity bonds ("AMT-Subject Bonds") have provided, and may continue to provide,
somewhat higher yields than other comparable municipal securities.
Investors should consider that, in most instances, no state,
municipality or other governmental unit with taxing power will be
<PAGE>
<PAGE>
obligated with respect to AMT-Subject Bonds. AMT-Subject Bonds are in most cases
revenue bonds and do not generally have the pledge of the credit or the taxing
power, if any, of the issuer of such bonds. AMT-Subject Bonds are generally
limited obligations of the issuer supported by payments from private business
entities and not by the full faith and credit of a state or any governmental
subdivision. Typically the obligation of the issuer of an AMT-Subject Bond is to
make payments to bond holders only out of, and to the extent of, payments made
by the private business entity for whose benefit the AMT-Subject Bonds were
issued. Payment of the principal and interest on such revenue bonds depends
solely on the ability of the user of the facilities financed by the bonds to
meet its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. It is not possible to provide
specific detail on each of these obligations in which Municipal Fund assets may
be invested.
While the Municipal Fund may invest without limitation in
securities subject to AMT, the AMT affects only a small percentage of all
taxpaying investors.
Taxable Securities for the Municipal Fund. The Municipal Fund is,
and expects to be, largely invested in municipal securities, but may elect to
invest up to 20% of its total assets in taxable money market securities when
such action is deemed to be in the best interests of shareholders. Such taxable
money market securities also are limited to remaining maturities of 397 days or
less at the time of the Municipal Fund's investment, and the Municipal Fund's
municipal and taxable securities are maintained at a dollar-weighted average of
90 days or less.
Variable Rate Obligations. The interest rate payable on certain
municipal securities in which the Municipal Fund may invest, called "variable
rate" obligations, is not fixed and may fluctuate based upon changes in market
rates. The interest rate payable on a variable rate municipal security is
adjusted either at pre-designated periodic intervals or whenever there is a
change in the market rate to which the security's interest rate is tied. Other
features may include the right of the Municipal Fund to demand prepayment of the
principal amount of the obligation prior to its stated maturity and the right of
the issuer to prepay the principal amount prior to maturity. The main benefit of
a variable rate municipal security is that the interest rate adjustment
minimizes changes in the market value of the obligation. As a result, the
purchase of variable rate municipal securities enhances the ability of the
Municipal Fund to maintain a stable net asset value per share and to sell an
obligation prior to maturity at a price approximating the full principal amount.
The payment of principal and interest by issuers of certain municipal securities
purchased by the Municipal Fund may be guaranteed by letters of credit or other
credit facilities offered by banking or other financial institutions. Such
guarantees will be considered in determining whether a municipal security meets
the Municipal Fund's investment quality requirements.
Variable rate obligations purchased by the Municipal Fund may
include participation interests in variable rate industrial development bonds.
Purchase of a participation interest gives the Municipal Fund an undivided
interest in certain such bonds. The Municipal Fund can exercise the right, on
not more than 30 days' notice, to sell such an instrument back to the financial
institution from which it purchased the instrument and, if applicable, draw on
the letter of credit
<PAGE>
<PAGE>
for all or any part of the principal amount of the Municipal Fund's
participation interest in the instrument, plus accrued interest, but will do so
only (i) as required to provide liquidity to the Municipal Fund, (ii) to
maintain a high quality investment portfolio, or (iii) upon a default under the
terms of the demand instrument. Financial institutions retain portions of the
interest paid on such variable rate industrial development bonds as their fees
for servicing such instruments and the issuance of related letters of credit and
repurchase commitments. No single financial institution will issue its letters
of credit with respect to variable rate obligations or participation interests
therein covering more than 5% of the total assets of the Municipal Fund. The
Municipal Fund will not purchase participation interests in variable rate
industrial development bonds unless it receives an opinion of counsel or a
ruling of the Internal Revenue Service that interest earned by the Municipal
Fund from the bonds in which it holds participation interests is exempt from
Federal income taxes. The Municipal Fund's adviser will monitor the pricing,
quality and liquidity of variable rate demand obligations and participation
interests therein held by the Municipal Fund on the basis of published financial
information, rating agency reports and other research services to which the
adviser may subscribe.
Municipal Leases and Participations Therein. These are
obligations in the form of a lease or installment purchase which is issued by
state and local governments to acquire equipment and facilities. Income from
such obligations is exempt from local and state taxes in the state of issuance.
"Participations" in such leases are undivided interests in a portion of the
total obligation. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. The constitutions and
statutes of all states contain requirements that the state or a municipality
must meet to incur debt. These often include voter referenda, interest rate
limits and public sale requirements. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations are deemed to be inapplicable because of the inclusion
in many leases or contracts of "non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis.
In addition to the "non-appropriation" risk, municipal leases
have additional risk aspects because they represent a relatively new type of
financing that has not yet developed in many cases the depth of marketability
and liquidity associated with conventional bonds; moreover, although the
obligations will be secured by the leased equipment, the disposition of the
equipment in the event of non-appropriation or foreclosure might, in some cases,
prove difficult. In addition, in certain instances the tax-exempt status of the
obligations will not be subject to the legal opinion of a nationally recognized
"bond counsel," as is customarily required in larger issues of municipal
obligations. However, in all cases the Municipal Fund will require that a
municipal lease purchased by the Municipal Fund be covered by a legal opinion
(typically from the issuer's counsel) to the effect that, as of the effective
date of such lease, the lease is the valid and binding obligation of the
governmental issuer.
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Municipal leases and participations will be purchased pursuant to
analysis and review procedures which the Municipal Fund's adviser believes will
minimize risks to shareholders. It is possible that more than 5% of the Fund's
net assets will be invested in municipal leases which have been determined by
the Municipal Fund's adviser to be liquid securities. When evaluating the
liquidity of a municipal lease, the investment adviser considers all relevant
factors including frequency of trading, availability of quotations, the number
of dealers and their willingness to make markets, the nature of trading activity
and the assurance that liquidity will be maintained. With respect to unrated
municipal leases, credit quality is also evaluated.
General. Net income to shareholders is aided both by the Money
Funds' ability to make investments in large denominations and by its
efficiencies of scale. Also, the Money Funds may seek to improve its income by
selling certain portfolio securities prior to maturity in order to take
advantage of yield disparities that occur in money markets. The market value of
the Money Funds' investments tends to decrease during periods of rising interest
rates and to increase during intervals of falling rates.
Rule 2a-7 Under the Investment Company Act of 1940
The Money Funds will comply with Rule 2a-7 under the Act, as
amended from time to time, including the diversity, quality and maturity
limitations imposed by the Rule.
Currently, pursuant to Rule 2a-7, the Money Funds may invest only
in "eligible securities," as that term is defined in the Rule. Generally, an
eligible security is a security that (i) is denominated in U.S. Dollars and has
a remaining maturity of 397 days or less; (ii) is rated, or is issued by an
issuer with short-term debt outstanding that is rated, in one of the two highest
rating categories by two nationally recognized statistical rating organizations
("Rating Organizations") or, if only one has issued a rating, by that Rating
Organization; and (iii) has been determined by the Money Funds' adviser to
present minimal credit risks. A security that originally had a maturity of
greater than 397 days is an eligible security if its remaining maturity at the
time of purchase is 397 calendar days or less and the issuer has outstanding
short-term debt that would be an eligible security. Unrated securities may also
be eligible securities if the Money Funds' adviser determines that they are of
comparable quality to a rated eligible security pursuant to guidelines approved
by the Trustees. A description of the ratings of some Rating Organizations
appears in Appendix A attached hereto.
Under Rule 2a-7, the Money Funds may not invest more than five
percent of its assets in the securities of any one issuer other than the United
States Government, its agencies and instrumentalities. In addition, the Money
Funds may not invest in a security that has received, or is deemed comparable in
quality to a security that has received, the second highest rating by the
requisite number of Rating Organizations (a "second tier security") if
immediately after the acquisition thereof the Money Funds would have invested
more than (A) the greater of one percent of its total assets or one million
dollars in securities issued by that issuer which are second tier securities, or
(B) five percent of its total assets in second tier securities.
Securities with a settlement of more than seven days from
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<PAGE>
the date of purchase, as calculated pursuant to Rule 2a-7, are considered by the
Securities and Exchange Commission to be illiquid securities in an open-end
investment company. The Money Funds are restricted to invest no more than 10% of
their net assets in illiquid securities.
Other General Information About the Municipal Fund
Yields on municipal securities are dependent on a variety of
factors, including the general condition of the money market and of the
municipal bond and municipal note market, the size of a particular offer, the
maturity of the obligation and the rating of the issue. Municipal securities
with longer maturities tend to produce higher yields and are generally subject
to greater price movements than obligations with shorter maturities. (An
increase in interest rates will generally reduce the market value of portfolio
investments, and a decline in interest rates will generally increase the value
of portfolio investments.) The achievement of the Municipal Fund's investment
objectives is dependent in part on the continuing ability of the issuers of
municipal securities in which the Municipal Fund invests to meet their
obligations for the payment of principal and interest when due. Municipal
securities historically have not been subject to registration with the
Securities and Exchange Commission, although there have been proposals which
would require registration in the future. The Municipal Fund may seek to improve
income by selling certain securities prior to maturity in order to take
advantage of yield disparities that occur in securities markets.
Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Code. In addition, the obligations
of such issuers may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. There is also
the possibility that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest on, its municipal
securities may be materially affected.
Fundamental Investment Restrictions
The following fundamental investment restrictions are applicable
to each of the Money Funds and may not be changed with respect to a Money Fund
without the approval of a majority of the shareholders of that Money Fund, which
means the affirmative vote of the holders of (a) 67% or more of the shares of
that Money Fund represented at a meeting at which more than 50% of the
outstanding shares of the Money Fund are represented or (b) more than 50% of the
outstanding shares of that Money Fund, whichever is less. Except as set forth in
the Prospectus and this Statement of Additional Information, all other
investment policies or practices are considered by each Money Fund not to be
fundamental and accordingly may be changed without shareholder approval. If a
percentage restriction is adhered to at the time of investment, a later increase
or decrease in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
Briefly, these fundamental restrictions provide that each Money
Fund may not:
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(1) Invest 25% or more of the value of its total assets in
any one industry, other than the United States Government, or any
of its agencies or instrumentalities, provided that, for purposes
of this policy, consumer finance companies, industrial finance
companies and gas, electric, water and telephone utility
companies are each considered to be separate industries;
(2) Issue senior securities, except as permitted
under the Investment Company Act of 1940;
(3) Make loans of money or property to any person, except
through loans of portfolio securities, the purchase of fixed
income securities consistent with the Money Funds' investment
objective and policies or the acquisition of securities subject
to repurchase agreements;
(4) Underwrite the securities of other issuers, except to
the extent that in connection with the disposition of portfolio
securities the Money Funds may be deemed to be an underwriter;
(5) Purchase real estate or interests therein unless
acquired as a result of ownership from investing in securities or
other instruments (but this shall not prevent the Money Funds
from investing in securities or other interests backed by real
estate or securities of companies engaged in the real estate
business);
(6) Purchase or sell commodities or commodities contracts
except for purposes, and only to the extent, permitted by
applicable law without the Money Funds becoming subject to
registration with the Commodity and Futures Trading Commission as
a commodity pool;
(7) Make any short sale of securities except in conformity
with applicable laws, rules and regulations and unless, giving
effect to such sale, the market value of all securities sold
short does not exceed 25% of the value of the Money Fund's total
assets and the Money Fund's aggregate short sales of a particular
class of securities does not exceed 25% of then outstanding
securities of that class; and
(8) Borrow money, except that the Money Funds may (i)
borrow money for temporary or emergency purposes (not for
leveraging or investment) and (ii) engage in reverse repurchase
agreements for any purpose; provided that (i) and (ii) in
combination do not exceed 33 1/3% of the Money Fund's total
assets (including the amount borrowed) less liabilities (other
than borrowings). Any borrowings that come to exceed this amount
will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/3%
limitation.
MANAGEMENT
The Trustees and principal officers of the Money Funds,
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their ages and their primary occupations during the past five years are set
forth below. Unless otherwise specified, the address of each such person is 277
Park Avenue, New York, New York 10172. Those Trustees whose names are preceded
by an asterisk are "interested persons" of the Funds as defined by Section
2(a)(19) of the Act.
*G. Moffett Cochran, 46, Chairman of the Board of Trustees and
President of the Opportunity Funds is President and Chairman of the Adviser. He
has been associated with affiliates of the Adviser since 1992. Prior to his
association with the Money Funds and the Adviser, Mr. Cochran was a Senior Vice
President with Bessemer Trust Companies.
Robert E. Fischer, 66, Trustee of the Opportunity Funds, has been
Member at the law firm Lowenthal, Landau, Fischer & Bring, P.C., since prior to
1991.
Martin Jaffe, 50, Trustee, Vice President, Secretary and
Treasurer of the Opportunity Funds, is a Managing Director, the Chief Operating
Officer and Treasurer of the Adviser. He has been associated with affiliates of
the Adviser since prior to 1991.
Wilmot H. Kidd, III, 55, Trustee of the Opportunity Funds, has
been President of Central Securities Corporation since prior to 1991.
John W. Waller, III, 45, Trustee of the Opportunity Funds, has
been Chairman of Waller Capital Corporation, an investment banking firm, since
prior to 1991.
James A. Engle, 38, Vice President of the Opportunity Funds, has
been associated with affiliates of the Adviser since prior to 1991.
Richard L. Glessmann, 35, Vice President of the Opportunity
Funds, has been associated with affiliates of the Adviser since 1995.
Previously, he was a senior portfolio manager at Wells Fargo Bank since prior to
1991.
Marybeth B. Leithead, 33, Vice President of the Opportunity
Funds, has been associated with affiliates of the Adviser since prior to 1991.
Brian A. Kammerer, 39, Assistant Treasurer of the Opportunity
Funds, has been associated with affiliates of the Adviser since prior to 1991.
The following table sets forth certain information regarding compensation of the
Money Funds' Trustees and officers. No executive officer or person affiliated
with the Money Funds received compensation from the Funds for the calendar year
ended December 31, 1996 in excess of $60,000.
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<TABLE>
<CAPTION>
Compensation Table
Total
Pension or Compensation
Retirement From Trust
Aggregate Benefits Accrued Estimated Annual and Fund
Compensation as Part of Trust Benefits Upon Complex Paid
Name and Position From Trust(1) Expenses Retirement to Trustees(2)
<S> <C> <C> <C> <C>
G. Moffett Cochran $0 None None $0 (9)
Trustee
Robert E. Fischer $10,000 None None $10,000 (4)
Trustee
Martin Jaffe $0 None None $0 (4)
Trustee
Wilmot H. Kidd, III $10,000 None None $10,000 (4)
Trustee
John W. Waller, III $7,000 None None $7,000 (4)
Trustee
</TABLE>
The Trustees of the Opportunity Funds who are officers or
employees of the Money Funds' adviser or any of its affiliates receive no
remuneration from the Opportunity Funds. Each of the Trustees who are not
affiliated with the Adviser will be paid a $2,000 fee for each Opportunity Fund
board meeting attended. Messrs. Cochran and Jaffe are members of the Executive
Committee. Messrs. Fisher, Kidd and Waller are members of the Audit Committee
and are paid a $1,000 fee for each Audit Committee meeting attended.
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1 The Opportunity Funds anticipate paying each independent Trustee
approximately $10,000 in each calendar year.
2 Represents the total compensation paid to such persons during the
calendar year ending December 31, 1996. The parenthetical number
represents the number of portfolios (including the Money Funds), for
which such person acts as a Trustee, that are considered part of the
same fund complex as the Money Funds.
Adviser
DLJ Investment Management Corp. (the "Adviser"), a Delaware
corporation with principal offices at 277 Park Avenue, New York, New York 10172,
has been retained under an Investment Advisory Agreement as the Money Funds'
investment adviser (see "Management" in the Prospectus). The Adviser was
established in 1996 to serve a select group of individual and institutional
investors.
The Adviser is a wholly-owned subsidiary of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ Securities" or the "Distributor"), the
distributor of the Funds' shares, which is a wholly-owned subsidiary of
Donaldson, Lufkin & Jenrette, Inc., which is in turn an independently operated,
indirect subsidiary of The Equitable Companies, Incorporated ("ECI"), a holding
company controlled by AXA, a French insurance holding company. The Adviser along
with its affiliates are an integral part of the DLJ Securities family, and as
one of the oldest money management firms in the country, they maintain a
tradition of personalized service and performance. The address of Donaldson,
Lufkin & Jenrette, Inc. is 277 Park Avenue, New York, New York 10172. The
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address of ECI is 787 Seventh Avenue, New York, New York 10019.
As of September 10, 1996, AXA owns 60.5% of the outstanding
shares of the common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services companies. AXA's
insurance operations are comprised of activities in life insurance, property and
casualty insurance and reinsurance. The insurance operations are diverse
geographically with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also engaged in asset
management, investment banking and brokerage, real estate and other financial
services activities in the United States and Europe. Based on information
provided by AXA, on September 10, 1996, 35.6% of the issued ordinary shares
(representing 48.6% of the voting power) of AXA were directly or indirectly
owned by Finaxa, a French holding company ("Finaxa"). Such percentage of
interest includes the interest of Colisee Vendome, a wholly-owned subsidiary of
Finaxa, which owned 5.3% of the issued ordinary shares (representing 4.3% of the
voting power) of AXA and the interest of les Ateliers de construction du Nord de
la France-ANF ("ANF"), a 95.4% owned subsidiary of Finaxa, which owned 0.3% of
the issued ordinary shares (representing 0.4% of the voting power) of AXA. As of
September 10, 1996, 61.3% of the issued ordinary shares (representing 73.5% of
the voting power) of Finaxa were owned by five French mutual insurance companies
(the "Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned
34.8% of the issued ordinary shares (representing 40.6% of the voting power) and
23.7% of the issued ordinary shares (representing 15.0% of the voting power) of
Finaxa were owned by Banque Paribas, a French bank ("Paribas"). Including the
ordinary shares owned by Finaxa and its subsidiaries on September 10, 1996, the
Mutuelles AXA directly and indirectly owned 41.3% of the issued ordinary shares
of AXA (representing 56.3% of the voting power). Acting as a group, the
Mutuelles AXA will continue to control AXA and Finaxa.
The Investment Advisory Agreement dated October 22, 1996, (the
"Investment Advisory Agreement") was approved by the Board of Trustees of the
Winthrop Opportunity Funds on October 22, 1996 and by the then shareholders on
January 24, 1997 and became effective on the same date. The Investment Advisory
Agreement continues in force for successive twelve month periods computed from
the first day of each fiscal year of each Money Fund provided that such
continuation is specifically approved at least annually by a majority vote of
the Trustees who neither are interested persons of the Funds nor have any direct
or indirect financial interest in the Investment Advisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. Under the
Investment Advisory Agreement, the Adviser is paid a management fee equal to .40
of 1% of the average daily net assets of the Money Funds which are reduced to
.35% of the average daily net assets in excess of $1 billion. As of the date of
this Statement of Additional Information, the Money Funds have not commenced
operations and, accordingly, have not paid the Adviser a fee.
Pursuant to the terms of the Investment Advisory Agreement, the
Adviser may retain, at its own expense, a subadviser to assist in the
performance of its services to the Money Funds.
EXPENSES OF THE FUNDS
General
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In addition to the payments to the Adviser under the Investment
Advisory Agreement, each Money Fund pays the other expenses incurred in its
organization and operations, including the costs of printing prospectuses and
other reports to existing shareholders; all expenses and fees related to
registration and filing with the Securities and Exchange Commission and with
state regulatory authorities; custody, transfer and dividend disbursing
expenses; legal and auditing costs; clerical, accounting and other office costs;
fees and expenses of Trustees who are not affiliated with the Adviser; costs of
maintenance of existence; and interest charges, taxes, brokerage fees and
commissions.
As to the obtaining of clerical and accounting services not
required to be provided to the Money Funds by the Adviser under the Investment
Advisory Agreement, the Money Funds may employ their own personnel. For such
services, they also may utilize personnel employed by the Adviser or their
affiliates. In such event, the services shall be provided to the Money Funds at
cost and the payments therefor must be specifically approved in advance by the
Money Funds' Trustees, including a majority of its disinterested Trustees.
Distribution Agreement
Pursuant to Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act, the Money Funds have adopted a Distribution Agreement
(the "Distribution Agreement") and a Rule 12b-1 Plan for each Money Fund (the
"12b-1 Plans") to permit such Money Fund directly or indirectly to pay expenses
associated with the distribution of shares.
Pursuant to the Distribution Agreement and the 12b-1 Plans, the
Treasurer of the Money Funds reports the amounts expended under the Distribution
Agreement and the purposes for which such expenditures were made to the Trustees
of the Money Funds on a quarterly basis. Also, the 12b-1 Plans provide that the
selection and nomination of disinterested Trustees (as defined in the Act) are
committed to the discretion of the disinterested Trustees then in office. The
Distribution Agreement and 12b-1 Plans may be continued annually if approved by
a majority vote of the Trustees, including a majority of the Trustees who
neither are interested persons of the Money Funds nor have any direct or
indirect financial interest in the Distribution Agreement, the 12b-1 Plans or in
any other agreements related to the 12b-1 Plans, cast in person at a meeting
called for the purpose of voting on such approval. The Distribution Agreement
was initially approved by each Money Fund's Trustees on October 22, 1996 and by
the then shareholders on January 24, 1997. All material amendments to the 12b-1
Plans must be approved by a vote of the Trustees, including a majority of the
Trustees who neither are interested persons of the Money Funds nor have any
direct or indirect financial interest in the 12b-1 Plans or any related
agreement, cast in person at a meeting called for the purpose of voting on such
approval. Each Money Fund's 12b-1 Plan may be terminated without penalty at any
time by a majority vote of the disinterested Trustees, by a majority vote of the
outstanding shares of a Money Fund or by the Adviser. Any agreement related to
the 12b-1 Plans may be terminated at any time, without payment of any penalty,
by a majority vote of the independent Trustees or by majority vote of the
outstanding shares of a Money Fund on not more than 60 days notice to any other
party to the agreement, and any agreement, but not the 12b-1 Plans, will
terminate automatically in the event of assignment.
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An initial concession or ongoing maintenance fee may be paid to
broker-dealers on sales of both Money Funds' shares. Pursuant to the Money
Funds' Rule 12b-1 Plans, if such fee is paid, the Distributor is then reimbursed
for such payments with amounts paid from the assets of such Money Fund. The
payments to the broker-dealer, although a Money Fund expense which is paid by
all shareholders, will only directly benefit investors who purchase their shares
through a broker-dealer rather than from the Money Funds. Broker-dealers who
sell shares of the Money Funds may provide services to their customers that are
not available to investors who purchase their shares directly from the Money
Funds. Investors who purchase their shares directly from a Money Fund will pay a
pro rata share of such Money Fund's expenses of encouraging broker-dealers to
provide such services but not receive any of the direct benefits of such
services. The payments to the broker-dealers will continue to be paid for as
long as the related assets remain in the Money Funds.
Pursuant to the provisions of the 12b-1 Plans and the
Distribution Agreement, the maximum amount payable by the Money Funds under the
Rule 12b-1 Plan for distributing shares is .40 of 1% of the average daily net
assets during the fiscal year. Currently, each Money Fund pays a distribution
services fee each month to the Distributor, with respect to shares of each Money
Fund, at an annual rate of up to .25 of 1% of the aggregate average daily net
assets attributable to each Money Fund.
PURCHASES, REDEMPTIONS AND EXCHANGES
The following information supplements that set forth in the Money
Funds' Prospectus under the heading "Purchases, Redemptions and Shareholder
Services".
Purchases
Shares of the Money Funds are offered at the respective net asset
value per share next determined following receipt of a purchase order in proper
form by the Money Funds, the Money Funds' transfer agent, FPS Services, Inc.
(the "Transfer Agent"), or by the Distributor. The Money Funds calculate net
asset value per share as of the close of the regular session of the New York
Stock Exchange, which is generally 4:00 p.m. New York City time on each day that
trading is conducted on the New York Stock Exchange (the "NYSE") (see "Net Asset
Value").
Orders for the purchase of shares of a Money Fund become
effective at the next transaction time (as stated in the Prospectus) after
Federal funds or bank wire monies become available to the Transfer Agent for a
shareholder's investment. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve wire from the
account of one member bank to that of another member bank on the same day and
are considered to be immediately available funds. Investors should note that
their banks may impose a charge for this service. Money transmitted by a check
drawn on a member of the Federal Reserve System is converted to Federal funds in
one business day following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments (including checks
from individual investors) must be in United States dollars. All shares
purchased are confirmed to each shareholder and are
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credited to such shareholder's account at net asset value. To avoid unnecessary
expense to the Money Funds, share certificates representing shares of the Money
Fund purchased are not issued for full or fractional shares.
Redemptions
Shares of the Money Funds may be redeemed at a redemption price
equal to the net asset value per share, as next completed as of the closing of
the regular trading session of the NYSE following the receipt in proper form by
the Money Fund of the shares tendered for redemption.
Payment of the redemption price may be made either in cash or in
portfolio securities (selected in the discretion of the Trustees and taken at
their value used in determining the redemption price), or partly in cash and
partly in portfolio securities. However, payments will be made wholly in cash
unless the Trustees believe that an appropriate situation exists which would
make such a practice detrimental to the best interest of the Money Funds or its
shareholders. If payment for shares redeemed is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the investor in
converting the securities to cash.
To redeem shares, the registered owner or owners should forward a
letter to the Money Funds containing a request for redemption of such shares at
the next determined net asset value per share. Alternatively, the shareholder
may elect the right to redeem shares by telephone as described in the
Prospectus. The signature or signatures in the redemption letter must be
guaranteed in the manner described below.
If the total value of the shares being redeemed exceeds $50,000
or a redemption request directs proceeds to a party other than the registered
account owner(s), the signature or signatures on the letter or the endorsement
must be guaranteed by an "eligible guarantor institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. A broker-dealer guaranteeing signatures must be a member of a
clearing corporation or maintain net capital of at least $100,000. Credit unions
must be authorized to issue signature guarantees. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program. Additional documents may be required for redemption
of corporate, partnership or fiduciary accounts.
The requirement for a guaranteed signature is for the protection
of the shareholder in that it is intended to prevent an unauthorized person from
redeeming his shares and obtaining the redemption proceeds.
Exchanges
Exchange Privilege. Shares of each Money Fund can be exchanged
for shares of the other Money Fund. Shareholders whose initial investment was
directly into a Money Fund may exchange such shares into either class of the (i)
Winthrop Developing Markets Fund or the Winthrop International Equity Fund, both
series of the Winthrop Opportunity Funds (the "Equity Funds") or (ii) Winthrop
Growth Fund, Winthrop Fixed Income Fund, Winthrop Aggressive Growth Fund,
Winthrop Growth and Income Fund
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and Winthrop Municipal Trust Fund (collectively, the "Focus Funds"). Shares of
each Money Fund established pursuant to Winthrop's exchange privilege will be
eligible for exchange into the Equity Funds or Focus Funds provided that the
exchange is directed into the same class of shares upon which the initial
investment was made. Shareholders may exchange shares by mail. Shareholders or
the shareholders' investment dealer of record may exchange shares by telephone.
In the case of the Equity Funds or the Focus Funds, the exchange
privilege is available only in those jurisdictions where shares of such fund may
be legally sold and is subject to the restrictions stated under "Additional
Shareholder Services-Exchange Privilege" in the Prospectus. In addition, the
exchange privilege is available only when payment for the shares to be redeemed
has been made.
Only those shareholders who have had shares in a Money Fund for
at least seven days may exchange all or part of those shares for shares of the
Equity Funds or the Focus Funds, and no partial exchange may be made if, as a
result, the shareholders' interest in a Money Fund would be reduced to less than
$250. The minimum initial exchange into the Equity Funds or Focus Funds is $250.
All exchanges are subject to the minimum investment requirements
and any other applicable terms set forth in the Prospectus for the relevant fund
or class whose shares are being acquired. If for these or other reasons the
exchange cannot be effected, the shareholder will be so notified.
The exchange privilege is intended to provide shareholders with a
convenient way to switch their investments when their objectives or perceived
market conditions suggest a change. The exchange privilege is not meant to
afford shareholders an investment vehicle to play short term swings in the stock
market by engaging in frequent transactions in and out of the Equity Funds and
the Focus Funds. Shareholders who engage in such frequent transactions may be
prohibited from or restricted in placing future exchange orders.
Exchanges of shares are subject to the other requirements of the
fund into which exchanges are made. Annual fund operating expenses and
distribution fees for such fund may be higher and a sales charge differential
may apply. See "Additional Shareholder Services - Exchange Privilege" in the
Prospectus for a description of these expense differences.
NET ASSET VALUE
Shares of the Money Funds will be priced at the net asset value
per share as computed each Money Fund Business Day in accordance with the
Agreement and Declaration of Trust and By-Laws. For this purpose, a Money Fund
Business Day is any day on which the NYSE is open for business, typically,
Monday through Friday exclusive of New Year's Day, Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
Good Friday.
The net asset value of the shares of each Money Fund is
determined as of the close of the regular session on the NYSE, which is
generally at 4:00 p.m., New York City time, on each day that trading is
conducted on the NYSE. The net asset value per share is calculated by
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taking the sum of the value of each Money Fund's investments and any cash or
other assets, subtracting liabilities, and dividing by the total number of
shares outstanding. All expenses, including the fees payable to the Adviser, are
accrued daily. For purposes of this computation, the securities in each Money
Fund's portfolio are valued at their amortized cost, which does not take into
account unrealized securities gains or losses as measured by market valuations.
The amortized cost method involves valuing an instrument at its cost and
thereafter applying a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. During periods of declining interest rates, the daily
yield on shares of the Money Fund may be higher than that of a fund with
identical investments utilizing a method of valuation based upon market prices
for its portfolio instruments; the converse would apply in a period of rising
interest rates.
The valuation at amortized cost is in accordance with the
provisions of Rule 2a-7 under the Act. Pursuant to such rule, the Money Funds
maintain a dollar-weighted average portfolio maturity of 90 days or less and
invests only in securities of high quality (as defined by the Rule). The Money
Funds also purchase instruments which, at the time of investment, have remaining
maturities of no more than one year which maturities may extend to 397 days. The
Money Funds maintain procedures designed to stabilize, to the extent reasonably
possible, the price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Money Funds'
portfolio holdings by the Adviser at such intervals as the Adviser deems
appropriate to determine whether and to what extent the net asset value of the
Money Funds calculated by using available market quotations or market
equivalents deviates from net asset value based on amortized cost. If such
deviation exceeds 1/2 of 1%, the Adviser will promptly consider what action, if
any, should be initiated. In the event the Adviser determines that such a
deviation may result in material dilution or other unfair results to new
investors or existing shareholders, they will consider corrective action which
might include (1) selling instruments prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, (2) withholding dividends of
net income on shares, or (3) establishing a net asset value per share using
available market quotations or equivalents. There can be no assurance, however,
that the Money Funds' net asset value per share will remain constant at $1.00.
DAILY DIVIDENDS, DISTRIBUTIONS AND TAXES
Daily Dividend. The net investment income of the Money Funds is
declared daily as a dividend to holders of record, after giving effect to
redemptions received during the day, following the determination of net asset
value as of the close of business of regular sessions of the NYSE. Net
investment income consists of all accrued interest income on the Money Funds'
portfolio assets less the Money Funds' actual and accrued expenses applicable to
that dividend period. Realized gains and losses are reflected in net asset value
and are not included in net investment income.
Because the net investment income of each Money Fund is declared
as a dividend each time the net investment income of the Fund is determined and
is expressed by an increase in the number of shares held at a $1.00 price, the
net asset value per share of each Money Fund (i.e., the value of the net assets
of the Fund divided by the number of shares
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of the Money Fund outstanding) is expected to remain at $1.00 per share
immediately after each such determination and dividend declaration, unless (i)
there are unusual or extended fluctuations in short-term interest rates or other
factors, such as unfavorable changes in the creditworthiness of issuers
affecting the value of securities in the Money Fund's portfolio, or (ii) net
income is a negative amount. Normally, each Money Fund will have a positive net
investment income at the time of each determination thereof. Net investment
income may be negative if an unexpected liability must be accrued or a loss
realized. If the net investment income of a Money Fund determined at any time is
a negative amount, the net asset value per share will be reduced below $1.00
unless one or more of the following steps are taken: the Adviser has the
authority (i) to reduce the number of shares in each shareholder's account, (ii)
to offset each shareholder's pro rata portion of negative net investment income
from the shareholder's accrued dividend account or from future dividends, or
(iii) to combine these methods in order to seek to maintain the net asset value
per share at $1.00. Each Money Fund may endeavor to restore the net asset value
per share to $1.00 by not declaring dividends from net investment income on
subsequent days until restoration, with the result that the net asset value per
share will increase to the extent of positive net investment income which is not
declared as a dividend.
Should the Money Funds incur or anticipate any unusual or
unexpected significant expense or loss which would affect disproportionately the
Money Funds' income for a particular period, the Adviser would at that time
consider whether to adhere to the dividend policy described above or to revise
it in light of the then prevailing circumstances in order to ameliorate to the
extent possible the disproportionate effect of such expense, loss or
depreciation on then existing shareholders. Such expenses or losses may
nevertheless result in a shareholder's receiving no dividends for the period
during which the shares are held and in receiving upon redemption a price per
share lower than that which was paid.
The Money Funds do not anticipate realizing any long-term capital
gains. Distributions of realized capital gains, if any, would normally be paid
in November or December. The Money Funds expect to follow the practice of
distributing any net realized capital gains to shareholders at least annually.
However, if any realized capital gains are retained by the Money Funds for
reinvestment and federal income taxes are paid thereon by the Money Funds, the
Money Funds will elect to treat such capital gains as having been distributed to
shareholders; as a result, shareholders would be able to claim their share of
the taxes paid by the Money Funds on such gains as a credit against their
individual federal income tax liability.
There is no fixed dividend rate and there can be no assurance
that a Money Fund will pay any dividends or realize any gains. The amount of any
dividend or distribution paid by each Money Fund depends upon the realization by
the Money Fund of income and capital gains from that Money Fund's investments.
All dividends and distributions will be made to shareholders of a Money Fund
solely from assets of that Money Fund.
Taxation of Distributions. For shareholders' Federal income tax
purposes, all distributions by the Money Funds out of interest income and net
realized short-term capital gains are treated as ordinary income and
distributions of long-term capital gains, if any, are treated
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as long-term capital gains irrespective of the length of time the shareholder
held shares in the Money Funds. Since the Money Funds derive nearly all of their
gross income in the form of interest income, and not dividends from domestic
corporations, it is expected that for corporate shareholders, none of the Money
Funds' distributions will be eligible for the dividends-received deduction under
current law.
For shareholders' Federal income tax purposes, distributions to
shareholders out of tax-exempt interest income earned by the Municipal Fund
generally are not subject to Federal income tax. However, distributions derived
from interest which is exempt from regular federal income tax may subject
corporate shareholders to or increase their liability under the AMT. A portion
of such distributions may constitute a tax preference item for individual
shareholders and may subject them to or increase their liability under the AMT.
Shareholders of the Money Funds may be subject to state and local
taxes on distributions received from the Money Funds and on redemptions of the
Money Funds' shares. Under the laws of certain states, distributions of
investment company taxable income are taxable to shareholders as dividends, even
though a portion of such distributions may be derived from interest on U.S.
Government obligations which, if received directly by such shareholders, would
be exempt from state income tax.
Shareholders will be advised annually as to the federal (and
state, for the Municipal Fund) tax status of dividends and capital gains
distributions, if any, made by each Money Fund for the preceding year.
Tax Qualification of the Money Funds. Each Money Fund intends to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 (the "Code"), as amended, so that it will not be liable for
federal income taxes to the extent that its net taxable income and net capital
gains are distributed. Accordingly, each Money Fund must, among other things,
(a) derive at least 90% of its gross income from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities or other foreign currencies, or other income (including but
not limited to gains from futures and forward contracts) derived with respect to
its business of investing in stock, securities or currencies; (b) derive less
than 30% of its gross income from the sale or other disposition of stock,
securities, futures or forward contracts held less than three months; and (c)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the Money Fund's assets is represented by cash, U.S.
Government securities and other securities, with such other securities limited,
in respect of any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities). In addition, each Money Fund
will be subject to a nondeductible 4% excise tax on the excess, if any, of
certain required distribution amounts over the amounts actually distributed by
that Money Fund. To the extent possible, each Money Fund intends to make such
distributions as may be necessary to avoid this excise tax.
Subchapter M of the Code also permits the character of tax-exempt
interest distributed by a regulated investment company to
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flow-through as tax-exempt interest to its shareholders, provided that at least
50% of the value of its assets at the end of each quarter of the taxable year is
invested in state, municipal and other obligations the interest on which is
exempt under Section 103(a) of the Code. The Municipal Fund intends to satisfy
this 50% requirement in order to permit distributions of tax-exempt interest to
be treated as such for federal income tax purposes in the hands of their
shareholders. Distributions to shareholders of tax-exempt interest earned by the
Municipal Fund for the taxable year are therefore not subject to regular federal
income tax, although they may be subject to the individual and corporate
alternative minimum taxes described above. Discount from certain stripped
tax-exempt obligations or their coupons, however, may be taxable.
The Revenue Reconciliation Act of 1993 requires that any market
discount recognized on a tax-exempt bond is taxable as ordinary income. This
rule applies only for disposals of bonds purchased after April 30, 1993. A
market discount bond is a bond acquired in the secondary market at a price below
its redemption value. Under prior law, the treatment of market discount as
ordinary income did not apply to tax-exempt obligations. Instead, realized
market discount on tax-exempt obligations was treated as capital gain. Under the
new law, gain on the disposition of a tax-exempt obligation or any other market
discount bond that is acquired for a price less than its principal amount will
be treated as ordinary income (instead of capital gain) to the extent of accrued
market discount. This rule is effective only for bonds purchased after April 30,
1993.
Since the Money Funds are not treated as a single entity for
federal income tax purposes, the performance of one Money Fund will have no
effect on the income tax liability of shareholders of another Money Fund.
Dividend or capital gains distributions with respect to shares of
any Money Fund held by a tax-deferred or qualified retirement plan, such as an
IRA, Keogh Plan or corporate pension or profit sharing plan, will not be taxable
to the plan. Distributions from such plans will be taxable to individual
participants under applicable tax rules without regard to the character of the
income earned by the qualified plan.
Taxation of Investor's Indebtedness. It is unlikely that interest
on indebtedness incurred by shareholders to purchase or carry shares of the
Money Funds will be deductible for Federal income tax purposes. Under rules of
the Internal Revenue Service for determining when borrowed funds are used for
purchasing or carrying particular assets, shares may be considered to have been
purchased or carried with borrowed funds even though those funds are not
directly linked to the shares. Further, persons who are "substantial users" (or
related persons) of facilities financed by private activity bonds (within the
meaning of Section 147(a) of the Code) should consult their tax advisers before
purchasing shares of the Municipal Fund. The Municipal Fund has not undertaken
any investigation as to the users of the facilities financed by bonds in its
portfolio.
Tax Withholding. Each Money Fund is required to withhold and
remit to the U.S. Treasury 31% of the dividends or the proceeds of any
redemptions or exchanges of shares with respect to any shareholder who fails to
furnish the Money Funds with a correct taxpayer identification number, who
under-reports dividend or interest income or who fails to certify to the Money
Funds that he or she is not subject to
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such withholding. An individual's tax identification number is his or her social
security number.
Tax Legislation. Tax legislation in recent years has included
several provisions that may affect the supply of, and the demand for, tax-exempt
bonds, as well as the tax-exempt nature of interest paid thereon. It is not
possible to predict with certainty the effect of these recent tax law changes
upon the tax-exempt bond market, including the availability of obligations
appropriate for investment, nor is it possible to predict any additional
restrictions that may be enacted in the future. The Municipal Fund will monitor
developments in this area and consider whether changes in its objectives or
policies are desirable.
General. The foregoing discussion of U.S. federal income
tax law relates solely to the application of that law to U.S. persons,
i.e., U.S. citizens and residents and U.S. corporations, partnerships,
trusts and estates. Each shareholder who is not a U.S. person should
consider the U.S. and foreign tax consequences of ownership of shares of
the Money Funds, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary
income received by the shareholder, where such amounts are treated as
income from U.S. sources under the Code.
Shareholders should consult their tax advisers about the
application of the provisions of tax law described in this combined Statement of
Additional Information in light of their particular tax situations.
The foregoing discussion is a general summary of certain current
federal income tax laws regarding the Money Funds. The discussion does not
purport to deal with all of the federal income tax consequences applicable to
the Money Funds, or to all categories of investors, some of whom may be subject
to special rules. Each prospective shareholder should consult with his or her
own professional tax adviser regarding federal, state and local tax consequences
of ownership of shares of the Money Funds.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of
the Money Funds, the Adviser is responsible for the investment decisions and the
placing of the orders for portfolio transactions for the Money Funds. Portfolio
transactions for the Money Funds are normally effected by brokers.
The Money Funds have no obligation to enter into transactions in
portfolio securities with any broker, dealer, issuer, underwriter or other
entity. In general, the securities the Money Funds will purchase are in
over-the-counter markets in which purchases and sales are affected directly with
a dealer acting as principal. The dealers impose a mark-up on their cost which
is usually not disclosed to the Money Funds. Therefore, the Money Funds will
generally make purchases based exclusively on best price, although execution may
be a factor in certain circumstances. In placing orders, it is the policy of the
Money Funds to obtain the best price and execution for its transactions.
INVESTMENT PERFORMANCE INFORMATION
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The Money Funds may furnish data about its investment performance
in advertisements, sales literature and reports to shareholders. From time to
time evaluations of performance are made by independent sources that may be used
in advertisements concerning each Money Fund. These sources include Lipper
Analytical Services, Weisenberger Investment Company Service, Barron's, Business
Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune, Money,
Personal Investor, Sylvia Porter's Personal Finance, Bank Rate Monitor,
Morningstar and The Wall Street Journal.
These performance figures may be calculated in the following
manner:
Yield
Yield is the net annualized yield based on a specified 7 calendar
days calculated at simple interest rates. Yield is calculated by determining the
net change; exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, and dividing the difference by the value of the account at the beginning
of the base period to obtain the base period return. The yield is annualized by
multiplying the base period return by 365/7. The yield figure is stated to the
nearest hundredth of one percent. No yield is currently available because the
Money Funds have not commenced operations.
Effective Yield
Effective yield is the net annualized yield for a specified 7
calendar days assuming a reinvestment of the income or compounding. Effective
yield is calculated by the same method as yield except the effective yield
figure is compounded by adding 1, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result, according to the following
formula:
Effective yield = [(Base Period Return + 1) - (365/7)] - 1.
No effective yield is currently available because the Money Funds
have not commenced operations.
Tax-Equivalent Yield
Tax-Equivalent Yield is the net annualized taxable yield needed
to produce a specified tax-exempt yield at a given tax rate based on a specified
7-day period assuming a reinvestment of all dividends paid during such period.
Tax-equivalent yield is calculated by dividing that portion of each Money Fund's
yield (as computed in the yield description above) which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield of the Money Fund that is not tax-exempt.
The following chart will illustrate the effects of tax-exempt
income versus taxable income.
Tax-Exempt Income vs. Taxable Income
Federal income tax rates in effect for the 1996 calendar
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year.
<TABLE>
<CAPTION>
Federal
Tax Rates To Equal Hypothetical Tax-Free Yields
1996 Taxable Individual of 5%, 7% and 9%, a Taxable Investment
Income Brackets Return Would Have To Earn(3)
--------------- ------
5% 7% 9%
-- -- --
<S> <C> <C> <C> <C>
$0 - $24,000 15.0% 5.88 8.24 10.59
$24,001 - $58,150 28.0% 6.94 9.72 12.50
$58,151 - $121,300 31.0% 7.25 10.14 13.04
$121,301 - $263,750 36.0% 7.81 10.95 14.06
Over $263,750 39.6% 8.28 11.59 14.90
<CAPTION>
Joint
Return
-------
<S> <C> <C> <C> <C>
$0 - $40,000 15.0% 5.88 8.24 10.59
$40,001 - $96,900 28.0% 6.94 9.72 12.50
$96,901 - $147,700 31.0% 7.25 10.14 13.04
$147,701 - $263,750 36.0% 7.81 10.95 14.06
Over $263,750 39.6% 8.28 11.59 14.90
</TABLE>
Based on 1996 federal tax rates, a married couple filing a joint
return with two exemptions and taxable income of $50,000 would have to earn a
tax-equivalent yield of 6.94% in order to match a tax-free yield of 5%.
There is no guarantee that a fund will achieve a specific yield.
While most of the income distributed to the shareholders of each Money Fund will
be exempt from federal income taxes, distributions may be subject to state and
local taxes.
Quotations of total return will reflect only the performance of
an investment in any Money Fund during the particular time period shown. Each
Money Fund's total return and current yield may vary from time to time depending
on market conditions, the compositions of its portfolio and operating expenses.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing each Money Fund's current yield to yields
published for other investment companies and other investment vehicles. Total
return and yield should also be considered relative to change in the value of
each Money Fund's shares and the risks associated with each Money Fund's
investment objectives, policies and risk considerations.
In connection with communicating its yield, effective yield or
tax-equivalent yield to current or prospective shareholders, each Money Fund may
also compare these figures to the performance of other mutual funds tracked by
mutual fund rating services or to other unmanaged indexes which may assume
reinvestment of dividends but generally do not reflect deductions for
administrative and management
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costs.
Any quotations of a fund's performance are based on historical
earnings and are not intended to indicate future performance. An investor's
shares when redeemed may be worth more or less than their original cost.
GENERAL INFORMATION
Organization and Capitalization
Winthrop Opportunity Funds was formed on May 31, 1995 as a
"business trust" under the laws of the state of Delaware.
The Agreement and Declaration of Trust provides that no Trustee,
officer, employee or agent of the Opportunity Funds is liable to the Funds or to
a shareholder, nor is any Trustee, officer, employee or agent liable to any
third person in connection with the affairs of the Funds, except as such
liability may arise from his or its own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties. It also provides that all
third parties shall look solely to the property of the appropriate Opportunity
Fund for satisfaction of claims arising in connection with the affairs of an
Opportunity Fund. With the exceptions stated, the Agreement and Declaration of
Trust permits the Trustees to provide for the indemnification of Trustees,
officers, employees or agents of the Opportunity Funds against all liability in
connection with the affairs of the Opportunity Funds.
All shares of the Opportunity Funds when duly issued will be
fully paid and non-assessable. The Trustees are authorized to re-classify and
issue any unissued shares to any number of additional series without shareholder
approval. Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional Opportunity Funds with different
investment objectives, policies, risk considerations or restrictions, may create
additional series or classes of shares. Any issuance of shares of such
additional series would be governed by the Act and the laws of the State of
Delaware.
- --------------
3 These illustrations assume the Federal alternative minimum tax is not
applicable, that an individual is not a "head of household" and claims
one exemption and that taxpayers filing a joint return claim two
exemptions. Note also that these federal income tax brackets and rates do
not take into account the effects of (i) a reduction in the deductibility
of itemized deductions for taxpayers whose federal adjusted gross income
exceeds $117,950 ($58,975 in the case of a married individual filing a
separate return), or of (ii) the gradual phaseout of the personal
exemption amount for taxpayers whose federal adjusted gross income
exceeds $88,495 (for single individuals). The effective federal tax rates
and equivalent yields for such taxpayers would be higher than those shown
above.
Counsel and Independent Auditors
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
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Avenue, New York, New York 10022, serves as legal counsel for the Money Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
have been appointed as independent auditors for the Money Funds.
Additional Information
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the Funds with the
Securities and Exchange Commission under the Securities Act of 1933. Copies of
the Registration Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of the Commission
in Washington, D.C.
APPENDIX A
SECURITIES RATINGS
The following is a description of the ratings given by S&P and
Moody's to U.S. municipal and government securities in which the Money Funds are
permitted to invest in accordance with Rule 2a-7 of the Act.
Rating of Municipal Obligations
S&P:
The two highest ratings of S&P for municipal bonds are AAA
(Prime) and AA (High-grade). Bonds rated AAA have the highest rating assigned by
S&P to a municipal obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a small degree.
The rating may be modified by the addition of a plus (+) or a minus (-) to show
relative standing within the category.
S&P top ratings for municipal notes are SP-1 and SP-2. The
designation SP-1 indicates a very strong capacity to pay principal and interest.
A "+" is added for those issues determined to possess overwhelming safety
characteristics. An "SP-2" designation indicates a satisfactory capacity to pay
principal and interest.
Moody's:
The two highest ratings of Moody's for municipal bonds are Aaa
and Aa. Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds
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. Moody's
states that Aa bonds are rated lower than the best bonds because margins of
protection or other elements make long-term risks appear somewhat larger than
for Aaa municipal bonds. Moody's rates a bond in the Aa category as Aa1 if
Moody's believes the bond possesses strong attributes within the category.
Moody's ratings for municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG) and Variable Rate
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Demand Obligation Moody's Investment Grade (VMIG). This distinction is in
recognition of the differences between short-term and long-term credit risk.
Loans bearing the designation MIG1/VMIG1 are of the best quality, enjoying
strong protection by establishing cash flows of funds for their servicing or by
established and broad-based access to the market for refinancing, or both. Loans
bearing the designation MIG2/VMIG2 are of high quality with margins of
protection ample although not as large as in the preceding group.
Commercial Paper Ratings
S&P:
Commercial paper rated A-1 or better by S&P has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; the issuer has access to at least two additional
channels of borrowing; and basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's industry
is well established and the issuer has a strong position within the industry.
The reliability and quality of management are unquestioned.
Moody's:
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend earnings over a
period of ten years; (7) financial strength of a parent company and the
relationship which exists with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
APPENDIX B
DESCRIPTIONS OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for short-term
capital needs and usually have maturities of one year or less.
They include the following:
1. Project Notes, which carry a U.S. Government
guarantee, are issued by public bodies (called
"local issuing agencies") created under the laws of
a state, territory, or U.S. possession. They have
maturities that range up to one year from the date
of issuance. Project Notes are backed by an
agreement between the local issuing agency and the
Federal Department of Housing and Urban
Development. These Notes provide financing for a
wide range of financial assistance programs for
housing, redevelopment, and related needs (such as
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low-income housing programs and renewal programs).
2. Tax Anticipation Notes are issued to finance working
capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues,
such as income, sales, use and business taxes, and are
payable from those specific future taxes.
3. Revenue Anticipation Notes are issued in expectation of
receipt of other types of revenues, such as Federal
revenues available under the Federal Revenue Sharing
Programs.
4. Bond Anticipation Notes are issued to provide interim
financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for
the repayment of the Notes.
5. Construction Loan Notes are sold to provide construction
financing. After successful completion and acceptance,
many projects receive permanent financing through the
Federal Housing Administration under the Federal National
Mortgage Association or the Government National Mortgage
Association.
6. Tax-Exempt Commercial Paper is a short-term obligation
with a stated maturity of 365 days or less. It is issued
by agencies of state and local governments to finance
seasonal working capital needs or as short-term financing
in anticipation of longer term financing.
Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have three
principal classifications:
1. General Obligation Bonds are issued by such
entities as states, counties, cities, towns, and
regional districts. The proceeds of these
obligations are used to fund a wide range of public
projects, including construction or improvement of
schools, highways, and roads, and water and sewer
systems. The basic security behind General
Obligation bonds is the issuer's pledge of its full
faith and credit and taxing power for the payment
of principal and interest. The taxes that can be
levied for the payment of debt service may be
limited or unlimited as to the rate or amount of
special assessments.
2. Revenue Bonds generally are accrued by the net
revenues derived from a particular facility, group
of facilities, or, in some cases, the proceeds of a
special excise or other specific revenue source.
Revenue Bonds are issued to finance a wide variety
of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels;
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port and airport facilities; colleges and
universities; and hospitals. Many of these Bonds
provide additional security in the form of a debt
service reserve fund to be used to make principal
and interest payments. Housing authorities have a
wide range of security, including partially or
fully insured mortgages, and/or the net revenues
from housing or other public projects. Some
authorities provide further security in the form of
a state's ability (without obligation) to make up
deficiencies in the debt service reserve fund.
3. Industrial Development Bonds are considered
municipal bonds if the interest paid thereon is
exempt from Federal income tax and are issued by or
on behalf of public authorities to raise money to
finance various privately operated facilities for
business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to
finance public facilities such as airports, mass
transit system, ports, and parking. The payment of
the principal and interest on such Bonds is
dependent solely on the ability or the facility's
user to meet its financial obligations and the
pledge, if any, of real and personal property as
security for such payment.
Statement of Differences
The dagger symbol shall be expressed as................................. `D'
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