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As filed with the Securities and Exchange Commission on January 24, 1997
Registration No. 33-92982
Registration No. 811-9054
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 4 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 X
(Check appropriate box or boxes)
WINTHROP OPPORTUNITY FUNDS
(Exact name of registrant as specified in charter)
277 Park Avenue
New York, New York 10172
(Address of Principal Executive Offices)
(212) 892-4000
(Registrant's Telephone Number, Including Area Code)
Brian A. Kammerer
277 Park Avenue
New York, New York 10172
(Name and Address of Agent for Service)
Copy to:
Philip H. Harris, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
It is proposed that this filing will become effective (check
appropriate box)
[X ] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2), or
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
Pursuant to the provisions of Rule 24f-2(a) under the Investment Company Act of
1940, Registrant hereby elects to register an indefinite number of securities
under the Securities Act of 1933. The Registrant will file a Rule 24f-2 Notice
within six months after the close of its current fiscal year.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
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N-1A Item No. Location
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PART A FOR WINTHROP MUNICIPAL MONEY FUND
AND WINTHROP U.S. GOVERNMENT MONEY FUND
Item 1. Cover Page . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . Summary of Money
Fund Expenses
Item 3. Condensed Financial Information . Not Applicable
Item 4. General Description of Registrant Cover Page;
Investment
Objectives, Policies
and Risk Considerations;
General Information
Item 5. Management of the Fund . . . . . Management; General
Information
Item 5A. Management's Discussion of Fund
Performance . . . . . . . . . . . Not Applicable
Item 6. Capital Stock and Other
Securities . . . . . . . . . . . Introduction; General
Information; Purchases,
Redemption and
Shareholder
Services; Daily
Dividends,
Distributions and
Taxes
Item 7. Purchase of Securities Being
Offered . . . . . . . . . . . . . Purchases, Redemptions and
Shareholder
Services; Net Asset
Value; Expenses of
the Money Funds
Item 8. Redemption or Repurchase . . . . Purchases,
Redemptions and
Shareholder Services
Item 9. Pending Legal Proceedings . . . . Not Applicable
PART B FOR WINTHROP MUNICIPAL MONEY FUND
AND WINTHROP U.S. GOVERNMENT MONEY FUND
Item 10. Cover Page . . . . . . . . . . . Cover Page
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Item 11. Table of Contents . . . . . . . . Cover Page
Item 12. General Information and History . General Information
Item 13. Investment Objectives and
Policies . . . . . . . . . . . . Investment Policies and
Restrictions; Portfolio
Transactions
Item 14. Management of the Fund . . . . . Management
Item 15. Control Persons and Principal
Holders of Securities . . . . . . Not Applicable
Item 16. Investment Advisory and Other
Services . . . . . . . . . . . . Management; General
Information
Item 17. Brokerage Allocation and Other
Practices . . . . . . . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other
Securities . . . . . . . . . . . General Information;
Purchases,
Redemption and
Shareholder Services
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered . . . Purchases, Redemptions and
Shareholder
Services; Net Asset
Value
Item 20. Tax Status . . . . . . . . . . . Investment Policies
and Restrictions;
Daily Dividends,
Distributions and
Taxes
Item 21. Underwriters . . . . . . . . . . Expenses of the Money Funds
Item 22. Calculation of Performance Data . Investment
Performance
Information
Item 23. Financial Statements . . . . . . Not Applicable
PART A for the Winthrop Developing Markets Fund and the
Winthrop International Equity Fund
Item 1. Cover Page . . . . . . . . . . . Cover Page
Item 2. Synopsis . . . . . . . . . . . . Summary of Equity Fund
Expenses
Item 3. Condensed Financial Information . Financial Highlights
Item 4. General Description of Registrant Cover Page;
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Investment
Objectives, Policies
and Risk
Considerations;
General Information
Item 5. Management of the Fund . . . . . Management; General
Information
Item 5A. Management's Discussion of Fund
Performance . . . . . . . . . . . Annual Report
Item 6. Capital Stock and Other
Securities . . . . . . . . . . . Introduction; General
Information;
Purchases,
Redemption and
Shareholder
Services; Dividends,
Distributions and
Taxes
Item 7. Purchase of Securities Being
Offered . . . . . . . . . . . . . Purchases, Redemptions and
Shareholder
Services; Net Asset
Value; Expenses of
the Equity Funds
Item 8. Redemption or Repurchase . . . . Purchases,
Redemptions and
Shareholder Services
Item 9. Pending Legal Proceedings . . . . Not Applicable
PART B for the Winthrop Developing Markets Fund and the
Winthrop International Equity Fund
Item 10. Cover Page . . . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . . . Cover Page
Item 12. General Information and History . General Information
Item 13. Investment Objectives and
Policies . . . . . . . . . . . . Investment Policies and
Restrictions; Portfolio
Transactions; Portfolio
Turnover
Item 14. Management of the Fund . . . . . Management
Item 15. Control Persons and Principal
Holders of Securities . . . . . . Shares of Beneficial Interest
Item 16. Investment Advisory and Other
Services . . . . . . . . . . . . Management; General
Information
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Item 17. Brokerage Allocation . . . . . . Portfolio Transactions
Item 18. Capital Stock and Other
Securities . . . . . . . . . . . General Information;
Purchases, Redemption and
Shareholder Services
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered . . . Purchases,
Redemptions, and
Shareholder
Services; Net Asset
Value
Item 20. Tax Status . . . . . . . . . . . Investment Policies
and Restrictions;
Dividends,
Distributions and
Taxes
Item 21. Underwriters . . . . . . . . . . Expenses of the Equity Funds
Item 22. Calculation of Performance Data . Investment
Performance
Information
Item 23. Financial Statements . . . . . . Financial Statements
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PART C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
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Dated January 24, 1997
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
FUND FUND
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SHAREHOLDER TRANSACTION EXPENSES
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'
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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 may voluntarily reduce its
management fees or the Adviser or its affiliates may 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 Aggressive Growth
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 more
than 5% of its total assets in the securities of any one issuer except the U.S.
Government in accordance with 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 Plan 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 Plan 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 their shares 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.' Third party checks will not be accepted by the Money
Funds or the Transfer Agent. 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 the
Transfer Agent. Accounts cannot be opened without a completed, signed
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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 his 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
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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 Winthrop 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's total purchase payments (excluding dividend
reinvestment) not to exceed 10% of total purchase payments 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 Opportunity 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 redemption normally will not be transmitted until two Money Fund Business
Days after the purchase by wire.
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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 custodian 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
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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 its 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)
Offers 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. It is anticipated
that these forms of retirement plans will be available for investment in the
Money Funds shortly after the Money Funds commence operation. Please telephone
the Money Funds' shareholder servicing representative 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, no par value, 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.
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
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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 or to FPS Services, Inc.,
by mail or by telephone at the address or telephone number listed 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.
16
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WINTHROP MONEY FUNDS
SHARE PURCHASE APPLICATION
<TABLE>
<S> <C>
WINTHROP OPPORTUNITY 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
(1) TYPE OF ACCOUNT DATE __________________, 199_______
[ ] New Account [ ] Existing Account #______________________________
(2) INVESTMENT SELECTION -- Please indicate the dollar amount you wish to invest
in each Money Fund and make checks payable to Winthrop Mutual Funds. Please
select the class of shares you wish to purchase. If no class of shares is
selected, Primary shares will be purchased.
WINTHROP FUND NAME AMOUNT Initial Investment Minimum per Money Fund: $250;
------------------ ------
Municipal Money Fund $_____________ Subsequent Investment Minimum $25.
U.S. Government Money Fund $_____________ Minimums are waived for SEP, SIMPLE, 401K,
Total $_____________ 403B and 457 plans.
(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, trusts, 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.
(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 to the right.
[ ] I am subject to backup withholding.
__________________________________ ______________________________
Signature Date
__________________________________ ______________________________
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)
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 10.
[ ] Wire Redemption proceeds to the Bank referenced in Section 10
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 have no change 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
</TABLE>
<TABLE>
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Check the Winthrop Money Fund(s) that are to have checkwriting privileges. Minimum check amount $100.
[ ] Municipal Money Fund [ ] US 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 CDSC.
By signing this checkwriting privilege authorization, the undersigned agree(s): (1) The use of a fund's checkwriting
privilege shall be subject to all of the terms and conditions contained in the applicable fund's 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:
</TABLE>
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<C> <S> <C>
___________________________________________________________________________________________________________________
Account, Name(s) as Registered Social Security Number Authorized Signature(s)*
___________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________
</TABLE>
<TABLE>
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* 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 only one signature is required on checks and indicate number of signatures required ________.
</TABLE>
<PAGE>
<PAGE>
WINTHROP MONEY FUNDS
SHARE PURCHASE APPLICATION
<TABLE>
<C> <S>
(8) DIVIDEND OPTIONS
DIVIDEND INSTRUCTIONS -- If no instructions are given, all distributions will be reinvested.
INCOME DIVIDENDS: (select one)
[ ] 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. No. _________________________
(if applicable)
Address ___________________________________
City, State, Zip __________________________
(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.)
(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
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 -- The undersigned requests that Winthrop or any transfer agent of Winthrop (as their
agent) make regular exchanges ($50 minimum) beginning the 5th, 10th, 15th or 25th (circle one) day of ________ 19__.
(month)
FROM TO
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.
Please 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.
(11) [ ] SYSTEMATIC CASH WITHDRAWAL PLAN -- (Minimum initial purchase
$10,000). The undersigned requests that the Money Funds, or any
transfer agent of the Money Funds, as their agent make
withdrawals beginning the 5th, 10th, 15th or 25th (circle one)
day of ________ 19__.
(month)
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 and
account referenced in Section 10.
[ ] by wire to the Bank and account referenced in Section 10 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 _________________________________________________________________________________
(12) BANK ACCOUNT INFORMATION* (To be completed if applicable under Sections 5 or 11).
__________________________________________________ __________________________________________
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.)
</TABLE>
- --------------------------------------------------------------------------------
(13) CONSOLIDATED ACCOUNT STATEMENTS -- If you prefer to receive one
quarterly combined statement instead of individual account
statements please reference the Winthrop Fund name and account
numbers that you would like consolidated.
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<S> <C>
__________________________________________________ ______________________________________
Fund Name/Account Number Fund Name/Account Number
__________________________________________________ ______________________________________
Fund Name/Account Number Fund Name/Account Number
</TABLE>
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 Plan Services, Inc., the Transfer Agent of the Fund, 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
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,
but neither the Fund's Transfer Agent, the Bank, or the Winthrop Money
Funds 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, as by joint ownership, ownership in
common, or tenants by the entireties, 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 back of
this card that only one need sign, in which case the Bank and the
Transfer Agent are authorized to act upon one signature, 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 or the Money Funds 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).
5. HEIRS AND ASSIGNS: These terms and conditions shall bind the respective
heirs, executors, administrators and assigns of the Signatory(s).
<PAGE>
<PAGE>
WINTHROP MONEY FUNDS
(800) 225-8011
ADVISER
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 4
Investment Objectives, Policies and Risk
Considerations 4
Management 7
Expenses of the Money Funds 8
Purchases, Redemptions and Shareholder Services 9
Net Asset Value 14
Daily Dividends, Distributions and Taxes 14
Retirement Plans 14
General Information 15
</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
<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
PAGE
Investment Policies and Restrictions................................. 1
Management........................................................... 9
Expenses of the Money Funds.......................................... 12
Purchases, Redemptions, Exchanges and
Systematic Withdrawal Plan..................................... 14
Net Asset Value...................................................... 16
Daily Dividends, Distributions and Taxes............................. 17
Portfolio Transactions............................................... 20
Investment Performance Information................................... 21
General Information.................................................. 23
Appendix A -- Securities Ratings..................................... 24
Appendix B -- Description of Municipal Securities.................... 25
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 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
1
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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 to 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 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
2
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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 commit- ments 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 commit-
ments.
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 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
3
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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 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
4
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<PAGE>
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 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
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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.
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
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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 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
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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:
(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 instrumentali- ties, 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;
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(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, 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.
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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.
<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> <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>
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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.
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.
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 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
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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
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.
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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.
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
13<PAGE>
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shares of each Money Fund, at an annual rate of up to .25 of 1% of the
aggregate average daily net assets at- tributable 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 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
14<PAGE>
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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 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.
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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
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
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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 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
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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 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
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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
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
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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 such
withholding. An individual's tax iden- tification 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
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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
The Money Funds may furnish data about its investment
performance in advertise- ments, 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.
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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 year.
Federal To Equal Hypothetical Tax-Free
Tax Rates Yields of 5%, 7% and 9%, a
1996 Taxable Individual Taxable Investment Would Have To
Income Brackets Return Earn(3)
5% 7% 9%
-- -- --
$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
Joint
Return
$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
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
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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 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
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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 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
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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 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
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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 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
26
<PAGE>
<PAGE>
systems; highways, bridges, and tunnels; 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.
27
<PAGE>
<PAGE>
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 Developing Markets Fund (the 'Developing Markets Fund') and
the Winthrop International Equity Fund (the 'International Equity Fund', and
together with the Developing Markets Fund, the 'Equity Funds'), and 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'), which are offered in a separate prospectus. Each of the Equity
Funds is open-end and diversified. The Equity Funds are designed to afford
investors the opportunity to choose between the separately managed Equity Funds
described below which have differing investment objectives and policies.
A DIVERSIFIED SELECTION OF INVESTMENT ALTERNATIVES
WINTHROP DEVELOPING MARKETS FUND -- Seeks long-term growth of capital by
investing primarily in common stocks and other equity securities from developing
countries.
WINTHROP INTERNATIONAL EQUITY FUND -- Seeks long-term growth of capital by
investing primarily in common stocks and other equity securities from
established markets outside the United States.
There can, of course, be no assurance that the Equity 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 Developing Markets Fund and the International Equity Fund.
PURCHASE INFORMATION
Shares of the Equity Funds may be purchased directly from the Equity Funds by
using the Share Purchase Application found in this Prospectus, through the
Equity Funds' Distributor, Donaldson, Lufkin & Jenrette Securities Corporation
or by contacting your securities dealer.
The minimum initial investment in each Equity 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 Equity 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 Equity Funds at
the address and telephone number shown above. See 'Purchases, Redemptions and
Shareholder Services.'
Shares of each Equity Fund may be purchased at a price equal to the net asset
value of the Equity Fund (i) plus, in the case of Class A shares of each Equity
Fund, an initial sales charge imposed at the time of purchase or (ii) in the
case of Class B shares, subject to a contingent deferred sales charge upon
redemption which declines from 4% during the first year of purchase to zero
after four years. See 'Expenses of the Equity Funds.'
See 'Purchases, Redemptions and Shareholder Services.'
ADDITIONAL INFORMATION
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Equity 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 Equity 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 Equity Funds.
------------------
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.
THESE ARE SPECULATIVE SECURITIES.
AN INVESTMENT IN THE FUNDS
INVOLVE SIGNIFICANT RISKS.
PROSPECTUS DATED
January 24, 1997
Investors are advised to read this Prospectus
and to retain it for future reference.
<PAGE>
<PAGE>
SUMMARY OF EQUITY FUND EXPENSES
<TABLE>
<CAPTION>
DEVELOPING INTERNATIONAL
MARKETS FUND EQUITY FUND
-------------------------- --------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)........................ 5.75% 0% 5.75% 0%
Maximum Sales Load Imposed on Reinvested Dividends (as
a percentage of offering price)...................... 0% 0% 0% 0%
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)
Year since Purchase Payment was made
First............................................. 0% 4% 0% 4%
Second............................................ 0% 3% 0% 3%
Third............................................. 0% 2% 0% 2%
Fourth............................................ 0% 1% 0% 1%
Fifth and thereafter.............................. 0% 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed)... 0% 0% 0% 0%
Exchange Fee........................................... 0% 0% 0% 0%
ANNUAL FUND OPERATING EXPENSES (as a percentage of
average daily net assets)
Management Fees*.................................. 1.25% 1.25% 1.25% 1.25%
12b-1 Fees**...................................... .25% 1.00% .25% 1.00%
Other Expenses`D'................................. .65% .65% .65% .65%
Total Fund Operating Expenses`D'.................. 2.15% 2.90% 2.15% 2.90%
</TABLE>
- ------------
The expense ratios for each Class of shares of the Developing Markets Fund and
the International Equity Fund are higher than those paid by most other
investment companies, but Wood, Struthers & Winthrop Management Corp. (the
'Adviser') and AXA Asset Management Partenaires (the 'Subadviser') believe the
fees are comparable to those paid by investment companies of similar investment
orientation.
* Management Fees with respect to the Developing Markets Fund and
International Equity Fund are reduced to 1.15% on net assets in excess of
$100,000,000 and to 1.00% on net assets in excess of $200,000,000.
** The Equity Funds have entered into a Distribution Agreement and a Rule 12b-1
Plan pursuant to which each Equity Fund pays, with respect to Class A
shares, a distribution fee each month at an annual rate of up to .25 of 1%
of the average daily net assets of the Class A shares, and, with respect
to the Class B shares, a distribution fee each month at an annual rate of up
to 1% of the average daily net assets of the Class B shares. Amounts paid
under the Distribution Agreement are used in their entirety to reimburse
the Equity 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. With respect to the Class B shares,
.75 of 1% of the 12b-1 Fees represents an asset-based sales charge and .25
of 1% of the 12b-1 Fees represents a service fee. See 'Expenses of the
Equity Funds -- Distribution Agreement.'
`D' Beginning on the date of each Equity Fund's commencement of operations
through April 30, 1997, the Adviser and Subadviser have agreed to
voluntarily reduce their management fees by the amount that Total Fund
Operating Expenses exceed 2.15% and 2.90% of the average daily net assets
of the Class A and Class B shares, respectively, of each Equity Fund. Such
reductions are borne equally between the Adviser and Subadviser. During the
fiscal year ended October 31, 1996, Total Fund Operating Expenses and Other
Expenses, as so adjusted, reflect a voluntary reduction of the management
fee amounting to .54% for Class A and Class B shares of the Developing
Markets Fund and .27% for Class A and Class B Shares of the International
Equity Fund. Absent such reimbursement, Other Expenses and Total Fund
Operating Expenses for the Developing Markets Fund and International Equity
Fund would have been 1.25% and 2.75% for Class A shares and 1.25% and 3.50%
for Class B shares, respectively. After April 30, 1997, the Adviser and
Subadviser may, in their sole discretion, determine to discontinue this
practice with respect to either Equity Fund.
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS
-------- -------- --------- ---------
<S> <C> <C> <C>
DEVELOPING MARKETS FUND
CLASS A
You would pay the following expenses on a $1,000 investment including the maximum
5.75% initial sales charge and assuming (1) 5% annual return and (2) redemption at
the end of each time period....................................................... $ 78 $ 121 $ 166
CLASS B
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period................... $ 69 $ 110 $ 153
You would pay the following expenses on the same investment, assuming no
redemptions....................................................................... $ 29 $ 90 $ 153
INTERNATIONAL EQUITY FUND
CLASS A
You would pay the following expenses on a $1,000 investment including the maximum
5.75% initial sales charge and assuming (1) 5% annual return and (2) redemption at
the end of each time period....................................................... $ 78 $ 121 $ 166
CLASS B
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period................... $ 69 $ 110 $ 153
You would pay the following expenses on the same investment, assuming no
redemptions....................................................................... $ 29 $ 90 $ 153
<CAPTION>
EXAMPLES 10 YEARS`D'
-------- ----------------
<S> <C>
DEVELOPING MARKETS FUND
CLASS A
You would pay the following expenses on a $1,000 investment including the maximum
5.75% initial sales charge and assuming (1) 5% annual return and (2) redemption at
the end of each time period....................................................... $ 291
CLASS B
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period................... $ 304
You would pay the following expenses on the same investment, assuming no
redemptions....................................................................... $ 304
INTERNATIONAL EQUITY FUND
CLASS A
You would pay the following expenses on a $1,000 investment including the maximum
5.75% initial sales charge and assuming (1) 5% annual return and (2) redemption at
the end of each time period....................................................... $ 291
CLASS B
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period................... $ 304
You would pay the following expenses on the same investment, assuming no
redemptions....................................................................... $ 304
</TABLE>
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of each Equity Fund bear directly
or indirectly. See also 'Expenses of the Equity Funds' and 'Purchases,
Redemptions' and 'Shareholder Services.' The examples should not be considered a
representation of past or future expenses and actual expenses may be greater or
lesser than those shown.
'Other Expenses' includes fees paid to the Equity 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 Equity Fund's average net
assets, but a fixed dollar cost.
- ------------
`D'Assuming Class B Shares will be automatically converted to Class A
Shares after eight years. See 'Purchases, Redemptions and Shareholder
Services -- Automatic Conversion of Class B Shares'
3
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
The information in the following table has been audited by Ernst & Young LLP,
the Equity Funds' independent auditors.
Selected data for a share of capital stock outstanding for each period
indicated below:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
---------------------------------------------------------
CLASS A CLASS B
--------------------------- ---------------------------
FROM FROM
SEPTEMBER 8, FOR THE SEPTEMBER 8, FOR THE
1995* YEAR 1995* YEAR
THROUGH ENDED THROUGH ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period............... $ 10.00 $ 9.58 $10.00 $ 9.57
------------ ------------ ------ ------
Net investment income
(loss)(1)............... 0.00 (0.04) (0.02) (0.13)
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions............ (0.42) 0.84 (0.41) 0.85
------------ ------------ ------ ------
Net increase (decrease) in
net asset value from
operations.............. (0.42) 0.80 (0.43) 0.72
------------ ------------ ------ ------
Net asset value, end of
period.................. $ 9.58 $ 10.38 $ 9.57 $10.29
------------ ------------ ------ ------
------------ ------------ ------ ------
Total Return(2)........... (4.20)% 8.35% (4.30)% 7.52%
Ratio of expenses to
average net assets`D'... 2.15%(3) 2.15% 2.90%(3) 2.90%
Ratio of net investment
income (loss) to average
net assets`D'........... (0.02)%(3) (0.39)% (1.77)%(3) (1.25)%
Portfolio turnover rate... 0% 94.12% 0% 94.12%
Average commission rate
paid(4)................. -- $ 0.041 -- $0.041
Net assets, end of period
(000 omitted)........... $ 28,819 $ 42,170 $1,803 $4,955
<CAPTION>
DEVELOPING MARKETS FUND
------------------------------------------------------
CLASS A CLASS B
------------------------ ---------------------------
FROM FROM
SEPTEMBER 8, FOR THE SEPTEMBER 8, FOR THE
1995* YEAR 1995* YEAR
THROUGH ENDED THROUGH ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1996 1995 1996
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period...............$ 10.00 $ 9.53 $10.00 $ 9.52
---------- ------------ ------ ------
Net investment income
(loss)(1)............... 0.00 (0.01) (0.01) (0.08)
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions............ (0.47) 0.44 (0.47) 0.42
---------- ------------ ------ ------
Net increase (decrease) in
net asset value from
operations.............. (0.48) 0.43 (0.48) 0.34
---------- ------------ ------ ------
Net asset value, end of
period..................$ 9.53 $ 9.96 $ 9.52 $ 9.86
---------- ------------ ------ ------
---------- ------------ ------ ------
Total Return(2)........... (4.70)% 4.51% (4.80)% 3.57%
Ratio of expenses to
average net assets`D'... 2.15%(3) 2.15% 2.90%(3) 2.90%
Ratio of net investment
income (loss) to average
net assets`D'........... (0.32)%(3) (0.14)% (1.00)%(3) (0.83)%
Portfolio turnover rate... 0 % 26.76% 0% 26.76%
Average commission rate
paid(4)................. -- $ 0.028 -- $0.028
Net assets, end of period
(000 omitted)...........$ 14,622 $ 36,918 $1,004 $3,641
</TABLE>
- ------------
* Commencement of operations.
(1) Based on average shares outstanding
(2) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividends
and distributions at net asset value during the period, and redemption on
the last day of the period. Initial sales charge or contingent deferred
sales charge is not reflected in the calculation of total return. Total
return calculated for a period of less than one year is not annualized.
(3) Annualized.
(4) For fiscal years beginning after September 1, 1995, the Equity Funds are
required to disclose its average commission rate paid per share for
purchases and sales of investment securities.
`D' Net of voluntary reduction of management fees by Adviser and Subadviser
amounting to .60% (annualized) of average daily net assets of both Class A
and Class B shares of the International Equity Fund and Developing Markets
Fund for the period from September 8, 1995 through October 31, 1995 and
.27% of average daily net assets of Class A and Class B shares of the
International Equity Fund and .54% of average daily net assets of Class A
and Class B shares of the Developing Markets Fund for the year ended
October 31, 1996.
4
<PAGE>
<PAGE>
INTRODUCTION
Winthrop Opportunity Funds is a Delaware business trust whose shares are
offered in four separate portfolios, the Winthrop Developing Markets Fund (the
'Developing Markets Fund') and the Winthrop International Equity Fund (the
'International Equity Fund', and together with the Developing Markets Fund, the
'Equity Funds'), and 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'), 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' below.) A shareholder may utilize the Equity Funds' exchange
privilege to transfer such shareholder's assets to the same class of another
Equity Fund, either of the Money Funds or for shares of the same class of the
Winthrop Growth Fund, Winthrop Fixed Income Fund, Winthrop Aggressive Growth
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 Class A shares of the
Equity Funds (.25 of 1% annually) for Class A shares of the Focus Funds (.30 of
1% annually). (See 'Purchases, Redemptions and Shareholder Services.')
Shareholders of all classes of an Equity Fund are entitled to their pro rata
share of any dividends and distributions arising from that Equity Fund's assets
except that with respect to each Equity Fund, each class bears different
distribution expenses (See 'Dividends, Distributions and Taxes.') Upon redeeming
shares of an Equity Fund, the shareholder will receive the next-determined net
asset value of that Equity Fund represented by the redeemed shares less the
applicable contingent deferred sales charge, if any. (See 'Purchases,
Redemptions and Shareholder Services.')
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
The investment objectives and policies of each Equity Fund are set forth
below. There can be, of course, no assurance that either Equity Fund will
achieve its respective investment objective.
The investment objectives of each Equity Fund are fundamental policies of
that Equity Fund and may not be changed without the approval of that Equity
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 Equity Fund are not fundamental
policies and may be changed by the Board of Trustees without a shareholder vote.
A more detailed explanation of the Equity Funds' policies and the securities and
instruments they may buy or use is contained in the Equity Funds' Statement of
Additional Information, which is available upon request.
The Winthrop Developing Markets Fund The investment objective of the
Developing Markets Fund is to seek long-term growth of capital by investing
primarily in common stocks and other equity securities from developing
countries. The foregoing investment objective is a fundamental policy of the
Developing Markets Fund and cannot be changed without shareholder approval.
Under normal market conditions, the Developing Markets Fund intends to invest at
least 65% of its total assets in the equity securities of developing countries.
The Developing Markets Fund considers developing countries to be all
countries that are designated as
5
<PAGE>
<PAGE>
developing or emerging countries by the International Bank for Reconstruction
and Development (the World Bank) or the International Finance Corporation, as
well as countries that are classified by the United Nations or otherwise
regarded by their authorities as developing. Currently, the countries not
included in this category are Ireland, Spain, New Zealand, Australia, the
United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada,
Germany, Denmark, the United States, Sweden, Finland, Norway, Japan and
Switzerland. As used in this Prospectus, a company in a developing country
is an entity: (i) for which the principal securities trading market is in a
developing country, as defined above or (ii) organized under the laws of and
with a principal office in a developing country.
As an operating policy, the Developing Markets Fund currently intends to
invest primarily in countries represented within the Morgan Stanley Capital
International ('MSCI') Emerging Market Indices. Those countries currently
include Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela, India,
Indonesia, Korea, Malaysia, Philippines, South Africa, Thailand, Sri Lanka,
Greece, Israel, Jordan, Portugal and Turkey. The Adviser and Subadviser do not
currently intend to invest more than 25% of the Developing Markets Fund's total
assets (at the time of investment) in developing countries not represented
within the MSCI Emerging Market Indices.
The Developing Markets Fund seeks to identify those countries and
industries where economic and political factors are likely to produce
above-average growth rates. The Developing Markets Fund then seeks to invest in
those companies in such countries and industries that are best positioned and
managed to take advantage of these economic and political factors. The assets of
the Developing Markets Fund ordinarily will be invested in the securities of
issuers in at least three different developing countries.
Characteristics of developing countries that may affect investment in their
markets include certain national policies that may restrict investment by
foreigners and the absence of developed legal structures governing private and
foreign investments and private property. The typically small size of the
markets for securities issued by issuers located in developing countries and the
possibility of a low or nonexistent volume of trading in those securities may
also result in a lack of liquidity and in substantial price volatility of those
securities. Shareholders should be aware that investing in developing countries
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability
than those of developed countries.
The Winthrop International Equity Fund The investment objective of the
International Equity Fund is to seek long-term growth of capital by investing
primarily in common stocks and other equity securities from established markets
outside the United States. The foregoing investment objective is a fundamental
policy of the International Equity Fund and cannot be changed without
shareholder approval. Under normal market conditions, the International Equity
Fund intends to invest at least 65% of its total assets in equity securities of
issuers from at least three different countries outside the United States. The
International Equity Fund considers it consistent with this objective to acquire
securities of companies incorporated in the United States and having their
principal activities and interests outside of the United States.
In pursuing its investment objective, the International Equity Fund intends
to diversify its equity investments primarily among countries represented within
the EAFE Index, also known as the Morgan Stanley Capital International Europe,
Australia, Far East index, an unmanaged index of over 1,000 foreign stock
prices. Those countries currently include Germany, the Netherlands, Belgium,
Austria, France, Italy, Spain, the United Kingdom, Switzerland, Japan,
Hong-Kong, Australia, New Zealand, Malaysia, Singapore and the Scandinavian
countries. The Adviser and Subadviser do not currently intend to invest more
than 10% of the International Equity Fund's total assets (at the time of
investment) in countries outside the United States not represented within the
EAFE Index.
Equity Securities 'Equity Securities,' as used in this Prospectus, refers
to common stock, preferred stock (including convertible preferred), bonds
convertible into common or preferred stock, rights and warrants, equity
6
<PAGE>
<PAGE>
interests in trusts and depositary receipts for equity securities.
Convertible Securities Each Equity Fund may invest up to 25% of its assets
in convertible securities. The Adviser and Subadviser currently do not intend to
invest over 5% of each Equity Fund's assets in convertible securities rated
below investment grade by Standard and Poor's Ratings Group ('S&P') and Moody's
Investor Service ('Moody's'), or convertible securities not rated by S&P or
Moody's unless believed by the Adviser or Subadviser to be of comparable quality
to instruments rated investment grade by S&P or Moody's. The Equity Funds will
not invest in convertible securities rated below B by S&P or Moody's, or unrated
convertible securities of comparable quality. See the Appendix to the Statement
of Additional Information for the risks associated with investing in convertible
securities with such ratings. A convertible security is a bond or preferred
stock which may be converted at a stated price within a specified period of time
into a certain quantity of the common or preferred stock of the same or a
different issuer. Convertible securities have characteristics of both bonds and
equity securities.
As a fixed-income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the underlying stock. The price of a
convertible security tends to increase as the market value of the underlying
stock rises, whereas it tends to decrease as the market value of the underlying
stock declines.
Warrants Each Equity Fund may invest up to 5% of its net assets in
warrants. A warrant gives the holder thereof the right to buy equity securities
at a specific price for a specified period of time. Warrants tend to be more
volatile than the underlying security, and if at a warrant's expiration date the
security is trading at a price below the price set in the warrant, the warrant
will expire worthless. Conversely, if at the expiration date the underlying
security is trading at a price higher than the price set in the warrant, then
the Equity Fund holding the warrant can acquire the stock at a price below its
market value.
Depositary Receipts The Equity Funds may purchase sponsored or unsponsored
ADRs, EDRs and GDRs (collectively, 'Depositary Receipts'). ADRs are Depositary
Receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs and
GDRs are Depositary Receipts typically issued by foreign banks or trust
companies, although they also may be issued by U.S. banks or trust companies,
and evidence ownership of underlying securities issued by either a foreign or a
United States corporation.
Additional Investment Strategies of the Equity Funds The Equity Funds
reserve the right as a defensive measure to hold temporarily other types of
securities without limit, including commercial paper, bankers' acceptances,
short-term debt securities (corporate and government) or government and high
quality money market securities of United States and non-United States issuers,
repurchase agreements, time deposits or cash (foreign currencies or United
States dollars), in such proportions as, in the opinion of the Adviser or
Subadviser, prevailing market, economic or political conditions warrant. Each
Equity Fund may also temporarily hold cash and invest in high quality foreign or
domestic money market instruments, up to 35% of its assets, pending investment
of proceeds from new sales of Equity Fund shares or to meet ordinary daily cash
needs.
The Equity Funds may also engage in a variety of transactions including the
use of options, forward foreign currency exchange contracts and futures
contracts and options thereon. Each Equity Fund's ability to use these
strategies may be limited by market conditions, regulatory limits and tax
considerations. There can be no assurance that any of these strategies will
achieve their objectives.
Option Transactions The Equity Funds may purchase and sell put and call
options. The Equity Funds may purchase and sell such options on securities,
currencies, and financial indices that are traded on U.S. or foreign securities
exchanges or in the over-the-counter market. Options traded in the
over-the-counter market are considered illiquid investments. An Equity Fund's
successful transaction with options depends on the ability of the Adviser or
Subadviser to predict the
7
<PAGE>
<PAGE>
direction of the market and is subject to certain additional risks, including
generally greater volatility of options as compared to common stocks and the
risk that an option will expire without value.
Forward Foreign Currency Exchange Contracts The Equity Funds may enter into
forward foreign currency exchange contracts to protect the value of its assets
against future changes in the level of currency exchange rates.
Financial Futures Contracts and Options Thereon The Equity Funds may
purchase and sell financial futures contracts and options thereon which are
traded on a commodities exchange or board of trade for certain hedging, return
enhancement and risk management purposes in accordance with the regulations of
the Commodity Futures Trading Commission.
The Equity Funds may purchase and sell financial futures contracts and
related options, without limitation, for bona fide hedging purposes. Subject to
the foregoing, the value of all financial futures contracts sold will not exceed
the total market value of each Equity Fund's portfolio.
Risks of Options, Currency Exchange Contracts and Financial Futures
Strategies Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction costs to which
the Equity Funds would not be subject absent the use of these strategies. If the
Adviser's or Subadviser's predictions of movements in the direction of the
securities, foreign currency and interest rate markets are inaccurate, the
adverse consequences to the Equity Funds may leave the Equity Funds in a worse
position than if such strategies were not used. The loss from entering into
futures contracts is potentially unlimited. Risks inherent in the use of
options, foreign currency and futures contracts and options on futures contracts
include (1) dependence on the Adviser's or Subadviser's ability to predict
correctly movements in the direction of interest rates, securities prices and
currency markets; (2) imperfect correlation between the price of options and
futures contracts and options thereon and movements in the prices of the
securities or currencies being hedged; (3) skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
(5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences; and (6) the possible inability of an Equity Fund to
purchase or sell a portfolio security at a time that otherwise would be
favorable for it to do so, or the possible need for an Equity Fund to sell a
portfolio security at a disadvantageous time, due to the need for such Equity
Fund to maintain 'cover' or to segregate securities in connection with hedging
transactions. See 'Dividends, Distributions and Taxes' in the Statement of
Additional Information.
Because the markets for certain options and futures contracts in which the
Equity Funds will invest (including markets located in foreign countries) are
relatively new and still developing and may be subject to regulatory restraints,
each Equity Fund's ability to engage in transactions using such investments may
be limited.
Nonconvertible Fixed Income Securities Each Equity Fund may invest up to
35% of its total assets in investment grade fixed income securities. Investment
grade obligations are those obligations rated BBB or better by S&P or Baa or
better by Moody's in the case of long-term obligations and equivalently rated
obligations in the case of short-term obligations, or instruments not rated by
S&P or Moody's believed by the Adviser or Subadviser to be of comparable quality
to instruments rated investment grade by S&P or Moody's. Securities rated BBB by
S&P are regarded by S&P as having an adequate capacity to pay interest and repay
principal; whereas such securities normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely, in the opinion of S&P, to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated categories.
Securities rated Baa by Moody's are considered by Moody's to be medium grade
obligations; they are neither highly protected nor poorly secured; interest
payments and principal security appear to be adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time; in the opinion of Moody's, they lack
outstanding invest-
8
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<PAGE>
ment characteristics and in fact have speculative characteristics as well.
Illiquid Investments Each Equity Fund may invest up to 15% of its net
assets in illiquid investments. In accordance with procedures adopted by the
Trustees, the Adviser and Subadviser determine the liquidity of an Equity Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses, and it may be difficult
or impossible for an Equity Fund to sell them promptly at an acceptable price.
Borrowing Each Equity Fund may borrow up to one-third of the value of its
total assets from banks to increase its holdings of portfolio securities or for
other purposes. Under the Investment Company Act of 1940, as amended (the '1940
Act'), each Equity Fund is required to maintain continuous asset coverage of
300% with respect to such borrowings. Leveraging by means of borrowing may
exaggerate the effect of any increase or decrease in the value of portfolio
securities on an Equity Fund's net asset value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds. The
Adviser and Subadviser do not currently intend to engage in borrowing
transactions.
Other Risk Factors Each Equity Fund's net asset value will fluctuate,
reflecting changes in the market value of its portfolio positions.
There are certain risks involved in investing in foreign securities which
are the usual risks inherent in U.S. investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers and
the lack of uniform accounting, auditing and financial reporting standards or of
other regulatory practices and requirements comparable to those applicable to
domestic companies. Additionally, foreign securities may be adversely affected
by fluctuations in value of one or more currencies relative to the U.S. dollar.
Moreover, securities of many foreign companies may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds or other assets of a foreign issuer, including the
withholding of dividends. Foreign securities may be subject to foreign
government taxes that would reduce the net yield on such securities. To the
extent an Equity Fund invests in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the value of portfolio securities and the appreciation or depreciation of
investments. Investment in foreign securities may also result in higher expenses
due to the cost of converting foreign currency into U.S. dollars, the payment of
fixed brokerage commissions on foreign exchanges, which generally are higher
than commissions on U.S. exchanges, and the expense of maintaining securities
with foreign custodians.
See 'Investment Objectives' in the Statement of Additional Information for
a more complete description of the Equity Funds' objectives, strategies,
instruments to be used in connection therewith and risks associated therewith.
MANAGEMENT
The Equity Funds' Board of Trustees (who, with its officers, are described
in the Statement of Additional Information) has overall responsibility for the
management of the Equity Funds.
Wood, Struthers & Winthrop 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
9
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<PAGE>
agreement to provide investment advice and to supervise the management and
investment programs of the Equity Funds, subject to the general supervision and
control of the Trustees of the Equity Funds. Pursuant to a Subadvisory Agreement
among the Equity Funds, the Adviser and AXA Asset Management Partenaires (the
'Subadviser'), a societe anonyme organized under the laws of France with
principal offices at 40, rue du Colisee, 75008 Paris, France, the Subadviser
furnishes investment advisory services in connection with the management of the
Equity Funds. The Adviser continues to have responsibility for all investment
advisory services pursuant to the investment advisory agreement and supervises
the Subadviser's performance of such services. The Equity Funds are a party to
the Subadvisory Agreement solely for purposes of indemnification and
termination.
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 acts as investment adviser to the following investment
companies with aggregate assets of approximately $523 million:
<TABLE>
<CAPTION>
ASSETS AS OF
10/31/96
-------------
<S> <C>
Winthrop Aggressive Growth
Fund....................... $ 234,021,181
Winthrop Growth & Income
Fund....................... $ 120,348,116
Winthrop Growth Fund......... $ 71,272,801
Winthrop Fixed Income Fund... $ 58,017,352
Winthrop Municipal Trust
Fund....................... $ 39,282,583
-------------
$ 522,942,033
</TABLE>
The Subadviser is an indirect wholly-owned subsidiary of AXA.
The Subadviser does not currently act as an investment adviser to any other
investment companies.
Jean-Patrick Dubrun, an employee of the Subadviser, is the portfolio
manager of the International Equity Fund. Mr. Dubrun has been an asset manager
responsible for international equities for a subsidiary of AXA since 1987.
Robert de Guigne, an employee of the Subadviser, is the portfolio manager of the
Developing Markets Fund. Mr. de Guigne has been an asset manager responsible for
emerging market equities for a subsidiary of AXA since April 1996. Previously,
Mr. de Guigne was a portfolio manager for State Street Bank in Paris.
Under its Advisory Agreement with the Equity Funds, the Adviser provides
investment advisory services and order placement facilities for each of the
Equity Funds and pays all compensation of Trustees of the Equity Funds who are
affiliated persons of the Adviser. The Adviser or its affiliates also furnish
the Equity Funds management supervision and assistance and office facilities in
addition to administrative and other nonadvisory services for which it may be
reimbursed. The Equity Funds pay a fee to the Adviser at the following annual
percentage rates of the average daily net assets of each Equity Fund: 1.25% of
the first $100,000,000, 1.15% of the next $100,000,000 and 1.00% of net assets
in excess of $200,000,000. The advisory fees to be paid by the Equity Funds are
higher than those paid by most other mutual funds.
Under the Subadvisory Agreement, the Adviser pays the Subadviser for its
services, out of the Adviser's own resources, at the following annual percentage
rates of the average daily net assets of each Equity Fund: .625% of each Equity
Fund's first $100,000,000, .575% of the next $100,000,000 and .500% of the
balance.
Through April 30, 1997, the Adviser and Subadviser have agreed to
voluntarily reduce their management fees by the amount that Total Operating
Expenses exceed 2.15% and 2.90% of the average daily net assets of the Class A
and Class B shares, respectively, of each Equity Fund. Any such reduction will
be borne equally between the Adviser and Subadviser. After April 30, 1997, the
Adviser and Subadviser may, in their sole discretion, determine to discontinue
this practice with respect to either Equity Fund.
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<PAGE>
EXPENSES OF THE EQUITY FUNDS
GENERAL
In addition to the payments to the Adviser under the investment advisory
agreement described above, the Equity Funds pay the other expenses incurred in
the Equity 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 or Subadviser; costs of
maintenance of existence; and interest charges, taxes, brokerage fees, and
commissions.
The investment advisory agreement provides that the Adviser will reimburse
the Equity Funds up to the amount of its advisory fee for the expenses of any
Equity 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
Equity Fund are qualified for sale.
DISTRIBUTION AGREEMENT
Rule 12b-1 adopted by the SEC under the 1940 Act 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 Equity Funds could be deemed to be distribution expenses within the
meaning of such rule. Thus, pursuant to Rule 12b-1, the Equity Funds' Trustees,
including a majority of its disinterested Trustees, have adopted separate 12b-1
Plans for the expenses to be incurred in distributing each Fund's Class A shares
(the 'Rule 12b-1 Class A Plans') and Class B shares (the 'Rule 12b-1 Class B
Plans' and collectively, the 'Rule 12b-1 Plans'), and the Equity Funds have
entered into a Distribution Agreement (the 'Agreement') with Donaldson, Lufkin &
Jenrette Securities Corporation, the Equity 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 Equity Fund, the maximum amount payable under the Rule
12b-1 Class A Plans for distributing Class A shares is .25 of 1% of the average
daily net assets of the Class A shares during the year. Under the Rule 12b-1
Class B Plans, the maximum amount payable by an Equity Fund for distributing
Class B shares is 1% of the average daily net assets of the Class B shares
during the year consisting of (i) an asset-based sales charge of up to .75 of 1%
of the average daily net assets of the Class B shares and (ii) a service fee of
up to .25 of 1% of the average daily net assets of the Class B shares. The
Agreement but not the Rule 12b-1 Plans terminate in the event of assignment of
the Agreement.
With respect to sales of an Equity Fund's Class B shares through a
broker-dealer, the Distributor pays the broker-dealer a concession at the time
of sale. In addition, an ongoing maintenance fee may be paid to broker-dealers
on sales of both Class A shares and Class B shares. Pursuant to the Rule 12b-1
Plans, the Distributor is then reimbursed for such payments with amounts paid
from the assets of such Equity Fund. The payments to the broker-dealer, although
an Equity 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 Equity Funds. Broker-dealers who sell shares of the Equity Funds may
provide services to their customers that are not available to investors who
purchase their shares directly from the Equity Funds. Investors who purchase
their shares directly from the Equity Funds will pay a pro rata share of the
Equity 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 Equity Funds.
Amounts paid under the Rule 12b-1 Plans and the Agreement are used in their
entirety to reimburse the
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Distributor for actual expenses incurred to (i) promote the sale of shares of
each Equity 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 Equity Funds' shareholders. In addition
to the concession and maintenance fee 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 an Equity Fund. On some occasions, such
compensation will be conditioned on the sale of a specified minimum dollar
amount of the shares of the Equity 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 Equity Funds'
Trustees specifically authorize such payment. For the year ended October 31,
1996, the amounts eligible for payment in subsequent years were $181,527 and
$112,542 for the Developing Markets Fund and the International Equity Fund,
respectively, which represents .45% and .24% of the Fund's October 31, 1996 net
assets, respectively. For the fiscal year ended October 31, 1996, distribution
costs incurred for the Developing Markets Fund were $77,456 and $25,620 for
Class A and Class B shares, respectively, and $96,395 and $37,341 for Class A
and Class B shares, respectively, of the International Equity Fund.
PURCHASES, REDEMPTIONS AND SHAREHOLDER SERVICES
PURCHASES
Shares of each of the Equity Funds will be offered on a continuous basis
directly by the Equity Funds and by the Distributor, acting as agent for the
Equity 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 plus, in the case of Class A shares of each Equity
Fund, an initial sales charge imposed at the time of purchase or subject to a
contingent deferred sales charge upon redemption in the case of Class B shares
of each Equity Fund and certain redemptions of Class A shares. 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.' Third party checks will not be accepted by
the Equity Funds or the Transfer Agent. 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 the Transfer Agent. Accounts cannot be opened without
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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 may also open accounts via their securities dealer.
The initial minimum investment in each Equity Fund is $250 and $25 for
subsequent investments in an Equity Fund. (For example, an investor wishing to
make an initial investment in shares of both Equity Funds would be required to
invest at least $250 in each Equity Fund.) Full and fractional shares will be
credited to an investor's account in the amount of the investment. Each Equity
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 Equity 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). With respect to Class B shares, an investor's
maximum investment in the Equity Funds is $250,000.
Existing shareholders wishing to purchase additional shares of an Equity
Fund may use an investment stub found at the bottom of the Equity Funds'
Shareholder Statement form or, if one is not available, they may send a check
payable to such Equity Fund (with Equity Fund Account information referenced)
directly to the Transfer Agent, FPS Services, Inc., P.O. Box 61503, King of
Prussia, PA 19406-0903, Attn: Winthrop Opportunity Funds. (For overnight courier
deliveries, replace P.O. Box 61503 on the address label with 3200 Horizon
Drive.)
Further information and assistance is available by contacting the Equity
Funds at the address or telephone number listed on the cover page of this
Prospectus.
REDEMPTIONS
Shares of the Equity Funds may be redeemed at a redemption price equal to
the net asset value per share, as next computed following the receipt in proper
form by the Equity Funds of shares tendered for redemption, less any applicable
contingent deferred sales charge in the case of Class B shares and certain
redemptions of Class A shares.
The value of a shareholder's shares on redemption may be more or less than
the cost of such shares to the shareholder, depending upon the value of an
Equity Fund's portfolio securities at the time of such redemption or repurchase.
(See '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 Equity 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. (See 'Additional Shareholder
Services -- Telephone Redemption and Exchange Privilege.')
If the total value of the shares being redeemed exceeds $50,000 (before
deducting any applicable contingent deferred sales charge) 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
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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.
An Equity Fund may request in writing that a shareholder whose account in
an Equity 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
Equity Fund reserves the right to close such account and send the proceeds to
the shareholder. IRAs and other qualified retirement accounts are not subject to
mandatory redemption. An Equity Fund will not redeem involuntarily any
shareholder account with an aggregate balance of less than $250 based solely on
the market movement of such Equity 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 an Equity Fund of its portfolio securities is not reasonably
practicable, or as a result of which it is not reasonably practicable for an
Equity 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,
payment for redemptions will be made in cash or by check or wire.
For information concerning circumstances in which redemptions may be
effected through the delivery of in kind portfolio securities, see the Statement
of Additional Information.
INITIAL SALES CHARGE
Class A shares of each Equity Fund are offered at net asset value next
determined plus a sales charge, as follows:
<TABLE>
<CAPTION>
INITIAL SALES CHARGE
--------------------------------------
COMMISSION TO
DEALER/AGENT
AS A % OF AS A % OF AS A % OF
NET AMOUNT OFFERING OFFERING
AMOUNT PURCHASED INVESTED PRICE PRICE
- -------------------- ---------- --------- -------------
<S> <C> <C> <C>
Less than $50,000... 6.10% 5.75% 5.00%
$50,000 to less than
$100,000.......... 4.71 4.50 3.75
$100,000 to less
than $250,000..... 3.63 3.50 2.80
$250,000 to less
than $500,000..... 2.56 2.50 2.00
$500,000 to less
than $1,000,000... 2.04 2.00 1.60
$1,000,000 or
more.............. 0 0 0
</TABLE>
On purchases of $1,000,000 or more, there is no initial sales charge; the
Distributor may pay the dealer a fee of up to 1% as follows: 1% on purchases up
to $2 million, plus .80% on the next $1 million up to $3 million, .50% on the
next $47 million up to $50 million, .25% on purchases over $50 million.
SALES AT NET ASSET VALUE
The initial sales charge will be waived for the following shareholders or
transactions:
(1) investment advisory clients of the Adviser;
(2) officers and Trustees of the Equity Funds, directors or trustees
of other investment companies managed by the Adviser, officers, directors
and full-time employees of the Adviser and of its wholly-owned subsidiaries
or parent entities ('Related Entities'); or the spouse, siblings, children
or grandparents (collectively, 'relatives') of any such person, or any
trust or individual retirement account or self-employed retirement plan for
the benefit of any such person or relative; or the estate of any such
person or relative, if such sales are made for investment purposes (such
shares may not be resold except to the Equity Funds);
(3) certain employee benefit plans for employees of the Adviser and
Related Entities;
(4) an agent or broker of a dealer that has a sales agreement with the
Distributor, for their own
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account or an account of a relative of any such person, or any trust or
individual retirement account or self-employed retirement plan for the
benefit of any such person or relative; or the estate of any such person or
relative, if such sales are made for investment purposes (such shares may
not be resold except to the Equity Funds). To qualify, the Distributor or
Transfer Agent must be notified at the time of purchase;
(5) shares purchased by registered investment advisors on behalf of
fee-based accounts or by broker-dealers that have a sales agreement with
the Equity Funds and which shares have been purchased on behalf of wrap fee
client accounts and for which such registered investment advisors or
broker-dealers perform advisory, custodial, recordkeeping or other
services; and
(6) shares purchased for the following types of retirement plan
accounts: (i) retirement plans qualified under section 401(k) of the Code;
(ii) plans described in section 403(b) of the Code and (iii) deferred
compensation plans described in section 457 of the Code.
REDUCED SALES CHARGES
A reduction of sales charge rates in the tables above may be obtained for
participants in any of the following discount programs. These programs allow an
investor to receive a reduced offering price based upon the assets held or
pledged by the investor. The term 'investor' refers to (i) an individual, (ii)
an individual and spouse purchasing shares of the fund for their own account or
for the trust or custodial accounts of their minor children, or (iii) a
fiduciary purchasing for any one trust, estate or fiduciary account, including
employee benefit plans of a single employer.
LETTER OF INTENT
By initially investing $250 and submitting a Letter of Intent (the
'Letter') to the Equity Funds' Distributor or Transfer Agent, an investor may
purchase shares of the portfolio over a 13-month period at the reduced sales
charge applying to the aggregate amount of the intended purchases stated in the
Letter. The Letter may apply to purchases made up to 90 days before the date of
the Letter. However, the reduced sales charge would not apply to such purchases.
It is the investor's responsibility to notify the Transfer Agent at the time the
Letter is submitted that there are prior purchases that may apply.
5% of the total amount to be invested pursuant to the Letter will be held
in escrow by the Transfer Agent until the Letter is completed within the
13-month period. The 13-month period begins on the date of the earliest
purchase. If the intended investment is not completed, the Transfer Agent will
redeem an appropriate number of the escrowed shares in order to realize the
difference between the sales charge on the shares purchased at the reduced rate
and the sales charge applicable to the total shares purchased.
RIGHT OF ACCUMULATION
For investors who already have an account with the Equity Funds, reduced
sales charges based upon the Equity Funds' sales charge schedule are applicable
to subsequent purchases. The sales charge on each additional purchase is
determined by adding the current market value of the shares the investor
currently owns to the amount being invested. The Right of Accumulation is
illustrated by the following example: if a previous purchase currently valued in
the amount of $50,000 had been made subject to a sales charge and the shares are
still held, a current purchase of $50,000 will qualify for a 3.50% sales charge
(i.e. the sales charge on a $100,000 purchase). The reduced sales charge is
applicable only to current purchases. It is the investor's responsibility to
notify the Transfer Agent at the time of subsequent purchases that the account
is eligible for the Right of Accumulation.
To be entitled to a reduced sales charge based upon shares already owned,
the investor must notify the Distributor or the Transfer Agent at the time of
the purchase that he wishes to take advantage of such entitlement, and give the
numbers of his accounts, and those accounts held in the name of his spouse or
for minor children, the age of any such child and the specific relationship of
each such person to the investor.
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CONCURRENT PURCHASES
To qualify for a reduced sales charge, the investor may combine concurrent
purchases of shares purchased within the Equity Funds or shares of the Money
Funds or Focus Funds. For example, if the investor concurrently invests $25,000
in one of such funds and $25,000 in another, the sales charge would be reduced
to reflect a $50,000 purchase. In order to exercise the Concurrent Purchases
privilege the investor must notify the Distributor or Transfer Agent.
COMBINED PURCHASE PRIVILEGE
By combining the investor's holdings of shares within the Equity Funds or
with shares held in the Money Funds or Focus Funds, the investor can reduce the
initial sales charges on any additional purchases of Class A shares. The
investor may also use these combinations under a Letter of Intent. This allows
the investor to make purchases over a 13-month period and qualify the entire
purchase for a reduction in initial sales charges on Class A shares. A combined
purchase of $1,000,000 or more may trigger the payment of a dealer's commission
and the applicability of a Limited CDSC, as defined below.
REINSTATEMENT PRIVILEGE
The Reinstatement Privilege permits shareholders to reinvest the proceeds
of each Equity Fund's Class A shares redeemed, within 120 days from the
redemption, without an initial sales charge. It is the investor's responsibility
to notify the Transfer Agent in order to exercise the Reinstatement Privilege.
CONTINGENT DEFERRED SALES CHARGE
A shareholder can purchase Class B shares at net asset value without an
initial sales charge. However a shareholder may pay a Contingent Deferred Sales
Charge ('CDSC') if such shareholder redeems within four years after purchase.
The CDSC will be assessed on an amount equal to the lesser of the then current
net asset value or the original purchase price of the Class B shares being
redeemed. Accordingly, no Class B CDSC will be imposed on amounts representing
increases in net asset value above the initial purchase price of the shares
identified for redemption. In determining the Class B CDSC, Class B shares are
redeemed in the following order: (i) those acquired pursuant to reinvestment of
dividends or distributions, (ii) those held for over four years, and (iii) those
held longest during the four-year period.
Where the charge is imposed, the amount of the charge will depend on the
number of years since the shareholder made the purchase according to the table
below.
<TABLE>
<CAPTION>
YEAR SINCE PERCENTAGE
PURCHASE CONTINGENT
PAYMENT DEFERRED
WAS MADE SALES CHARGE
-------- ------------
<S> <C>
First............................ 4%
Second........................... 3%
Third............................ 2%
Fourth........................... 1%
Fifth and thereafter............. 0%
</TABLE>
The amount of any contingent deferred sales charge will be paid by the
shareholder to and retained by the Distributor and will not offset the amounts
which may be paid to the Distributor under the Agreement. For federal income tax
purposes, the amount of the CDSC will reduce the gain or increase the loss, as
the case may be, on the amount recognized on the redemption of shares.
The contingent deferred sales charge will be waived for the following
shareholders or transactions:
(1) shares received pursuant to the exchange privilege which are
currently exempt from a contingent deferred sales charge;
(2) redemptions as a result of shareholder death or disability (as
defined in the Internal Revenue Code of 1986, as amended) (the 'Code');
(3) redemptions made pursuant to a Fund's systematic withdrawal plan
up to 1% monthly or 3% quarterly of the account's total market value
(excluding dividend reinvestments) not to exceed 10% of total market value
over any 12 month rolling period (systematic withdrawals elected on a
semi-annual or annual basis are not eligible for the waiver); and
(4) liquidations, distributions or loans from the following types of
retirement plan accounts: (i) retirement plans qualified under section
401(k) of the Code; (ii) plans described in section 403(b) of
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the Code and (iii) deferred compensation plans described in section 457 of
the Code.
Redemptions effected by the Equity Funds pursuant to their right to
liquidate a shareholder's account with a current net asset value of less than
$250 will not be subject to the contingent deferred sales charge.
CONTINGENT DEFERRED SALES CHARGE
FOR CLASS A SHARES
For purchases of Class A shares, a Limited Contingent Deferred Sales Charge
('Limited CDSC') will be imposed by the Equity Funds upon certain redemptions of
Class A shares (or shares into which such Class A shares are exchanged) made
within 12 months of purchase, if such purchases were made at net asset value and
triggered the payment by the Distributor of the dealer's commission described
above (i.e. purchases of $1,000,000 or more).
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of (i) the net asset value at the time of purchase of the Class A
shares being redeemed or (ii) the net asset value of such Class A shares at the
time of redemption. For purposes of this formula, the 'net asset value at the
time of purchase' will be the net asset value at purchase of the Class A shares
even if those shares are later exchanged and, in the event of an exchange of
Class A shares, the 'net asset value of such shares at the time of redemption'
will be the net asset value of the shares into which the Class A shares have
been exchanged.
Redemptions of such Class A shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A shares will not
trigger the imposition of the Limited CDSC at the time of such exchange. The
period a shareholder owns shares into which Class A shares are exchanged will
count towards satisfying the 12-month holding period. The Equity Funds will
assess the Limited CDSC if such 12-month period is not satisfied irrespective of
whether the redemption triggering its payment is of the Class A shares of the
Equity Funds or shares into which the Class A shares have been exchanged.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by other
shares held for the longest period of time. The Limited CDSC will not be imposed
upon shares representing reinvested dividends or upon amounts representing share
appreciation. All investments made during a calendar month, regardless of when
during the month the investment occurred, will age one month on the last day of
that month and each subsequent month.
The Limited CDSC will be waived for the shareholders and transactions
described above in 'Contingent Deferred Sales Charge' and 'Sales at Net Asset
Value.'
AUTOMATIC CONVERSION OF CLASS B SHARES
Class B shares held for eight years after purchase will be automatically
converted into Class A shares. The Equity Funds will effect conversions of Class
B shares into Class A shares only four times in any calendar year, on the last
business day of the second full week of March, June, September and December
(each, a 'Conversion Date'). If the eighth anniversary after a purchase of Class
B shares falls on a Conversion Date, an investor's Class B shares will be
converted on that date. If the eighth anniversary occurs between Conversion
Dates, an investor's Class B shares will be converted on the next Conversion
Date after such anniversary. Consequently, if a shareholder's eighth anniversary
falls on the day after a Conversion Date, that shareholder will have to hold
Class B shares for as long as an additional three months after the eighth
anniversary after purchase before the shares will automatically convert into
Class A shares.
All such automatic conversions of Class B shares will constitute a tax-free
exchange for federal income tax purposes.
ADDITIONAL SHAREHOLDER SERVICES
Exchange Privilege Shares of one Class of an Equity Fund can be exchanged
for the same class of another Equity Fund, shares of each of the Money Funds or
shares of the same class of the Focus Funds. Exchanges may be made by mail or
telephone (see 'Telephone Redemption and Exchange Privilege'). The Class B
Shares are subject to a contingent deferred sales
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<PAGE>
charge which declines from 4% during the first year of investment to zero after
four years. The exchange privilege for the Money Funds and the Focus Funds are
available only in states in which shares of the relevant Money Fund or Focus
Fund may be legally sold. Prospectuses for each of the Focus Funds or the Money
Funds may be obtained by calling the telephone number listed on the cover page
of this Prospectus. An exchange is effected on the basis of each fund's relative
net asset value per share next computed following receipt of an order for such
exchange from the shareholder.
Prior to the commencement of operations of the Money Funds in February
1997, shares of the Equity Funds were eligible for exchange into shares of the
Alliance Government Reserves or Alliance Municipal Trust (collectively, the
'Alliance Money Market Funds'). The Alliance Money Market Funds are no-load
money market funds which retain Alliance Capital Management Company, Inc. as
investment adviser. Exchanges to the Alliance Money Market Funds are no longer
eligible for exchange pursuant to the Equity Fund's exchange privilege. Alliance
Money Market Fund shares, however, maintained within an account previously
established under the Equity Fund's exchange privilege may be exchanged into a
Money Fund or back into an Equity Fund or Focus Fund, provided that the exchange
is directed to the same class of shares previously held when the initial
exchange was made.
The Equity 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 the Equity Funds, Focus Funds or Money Funds. Any applicable
contingent deferred sales charge will be assessed when the shareholder redeems
shares of an Equity Fund, Focus Fund or Money Fund. The period of time during
which a shareholder owns shares in any of the Equity Funds, Money 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 Class A shares of the
Equity Funds (.25 of 1% annually) for Class A shares of the Focus Funds (.30 of
1% annually).
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,
Money Funds or Focus Funds. Shareholders who engage in such frequent transaction
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 Fund into
which exchanges are made. Annual fund operating expenses for such Fund may be
higher and a sales charge differential may apply.
Automatic Monthly Investment Plan A shareholder may elect on the Share
Purchase Application to make additional investments in an Equity Fund
automatically, by authorizing the Equity 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 Equity 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 Equity Funds.
Automatic Exchange Plan. Shareholders may authorize Winthrop to exchange an
amount established in advance automatically for shares of the other Equity Fund
or shares of the Money 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').
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Dividend Direction Option A shareholder may elect on the Share Purchase
Application to have his or her dividends paid to another individual or directed
for reinvestment within the same class of another series of the Equity Funds or
into the Money Funds or Focus Funds, provided that an existing account in such
other fund is maintained by the shareholder.
Systematic Withdrawal Plan Any shareholder who owns or purchases shares of
an Equity 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 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's total purchase payments
(excluding dividend reinvestment) not to exceed 10% of total purchase payments
over any 12-month rolling period. Systematic withdrawals elected on a
semi-annual or annual basis are not eligible for the waiver. See 'Purchases,
Redemptions and Shareholder Services.'
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 Equity Funds by the
shareholder or the shareholder's investment dealer of record. A shareholder
may also transfer assets via telephone from such shareholder's account to
the same class of another Equity Fund, shares of the Money Funds or shares
of the same class of the Focus Funds. Each Equity Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Such procedures include the requirement that redemption or transfer orders
must include the account name and the account number as registered with the
Opportunity 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 Equity Funds, the Adviser,
the Subadviser, the Focus Funds, the Money 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 Equity Funds' Transfer
Agent at the address listed in the back of this Prospectus.
Timing of Redemptions and Exchanges If a redemption or transfer order for
an Equity Fund is received on an Equity Fund Business Day prior to the close of
the regular session of the New York Stock Exchange, which is generally 4:00 p.m.
New York City time, the proceeds will be transferred as soon as possible,
normally on the next Equity Fund Business Day, and shares of each Equity Fund
will be priced that Equity Fund Business Day. If the redemption or transfer
order is received after the close of the regular session of the New York Stock
Exchange, shares of each Equity Fund will be priced the next Equity Fund
Business Day and the proceeds will be transferred the next Equity Fund Business
Day after pricing. A shareholder also may request that proceeds be sent by check
to a designated bank. Transfers are made without any charge by the Equity Funds.
Purchases by check may not be redeemed by an Equity Fund until after a
reasonable time necessary to verify that the purchase check has been paid
(approximately ten Equity Fund Business Days from receipt of the purchase
check). When a purchase is made by wire and subsequently redeemed, the proceeds
from such redemption normally will not be transmitted until two Equity Fund
Business Days after the purchase by wire. Bank acknowledgment of payment
initialled by the shareholder may shorten delays.
Additional information concerning these Additional Shareholder Services may
be obtained by contacting the Equity Funds' Transfer Agent at the telephone
number listed on the cover page of this Prospectus.
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NET ASSET VALUE
The net asset value per share for purchases and redemptions of shares of
each Equity 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 Equity
Funds' Agreement and Declaration of Trust and By-Laws, net asset value for each
Equity Fund is determined separately for each class by dividing the value of
each class's net assets allocable to such class, less its liabilities, by the
total number of each class's shares then outstanding. For net asset value
determination purposes, the value of a foreign security is determined as of the
close of trading on the foreign exchange on which it is traded and that value is
then converted into U.S. dollars at the foreign exchange rate in effect as of
the close of trading (4:00 p.m.) London time, on the day the value of the
foreign security is determined. As a result, to the extent an Equity Fund holds
securities quoted or denominated in a foreign currency, fluctuations in the
value of such currencies in relation to the U.S. dollar will affect the net
asset value of such Equity Fund's shares even though there has not been any
change in the value of such securities as quoted in the foreign currency. For
purposes of this computation, the securities in each Equity Fund's portfolio
are, except as described below, valued at their current market value determined
on the basis of market quotations or, if such quotations are not readily
available, such other method as the Trustees believe would accurately reflect
their fair value.
Foreign securities trading may not take place on all days on which the NYSE
is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Accordingly, the determination of the net asset
value of an Equity Fund's shares may not take place contemporaneously with the
determination of the prices of investments held by such Equity Fund. 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 an Equity Fund's shares unless the Adviser or
Subadviser, under the supervision of such Equity Fund's Board of Trustees,
determines that the particular event would materially affect net asset value. As
a result, the net asset value of an Equity Fund's shares may be significantly
affected by such trading on days when a shareholder has no access to such Equity
Fund.
Short-term securities which mature in more than 60 days are valued based on
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their original maturity was 60 days or less, or
by amortizing their value on the 61st day prior to maturity, if their original
term to maturity exceeded 60 days where it has been determined in good faith
under procedures approved by the Board of Trustees that amortized cost equals
fair value. All other assets are valued at fair value as determined in good
faith under such valuation procedures approved by the Board of Trustees.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Equity Funds intend to distribute to shareholders of the Equity Funds
on an annual basis, substantially all of the net investment income, if any, for
each respective Equity Fund for such period.
Capital gains (short-term and long-term), if any, realized by each of the
Equity Funds during their fiscal year will be distributed to the respective
shareholders shortly after the end of such fiscal year.
Each income dividend and capital gains distribution, if any, declared by
the Equity Funds on the outstanding shares of any Equity Fund will, at the
election of each shareholder, be paid in cash or reinvested in additional full
and fractional shares of that Equity Fund. Such distributions, to the extent
they would otherwise be taxable, will be taxable to shareholders regardless of
whether paid in cash or reinvested in additional shares. An election to receive
dividends
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and distributions in cash or shares is made at the time of the initial
investment and may be changed by notice received by the Equity Funds from a
shareholder or the shareholder's investment dealer of record at least 30 days
prior to the record date for a particular dividend or distribution on shares of
each Equity Fund. There is no charge in connection with the reinvestment of
dividends and capital gains distributions.
There is no fixed dividend rate and there can be no assurance that an
Equity Fund will pay any dividends or realize any gains. The amount of any
dividend or distribution paid by each Equity Fund depends upon the realization
by the Equity Fund of income and capital gains from that Fund's investments. All
dividends and distributions will be made to shareholders of an Equity Fund
solely from assets of that Equity Fund.
Payment (either in cash or in portfolio securities) received by a
shareholder upon redemption of his shares, assuming the shares constitute
capital assets in his hands, will result in long-term or short-term capital
gains (or losses) depending upon the shareholder's holding period and basis in
respect of shares redeemed. Any loss realized by a shareholder on the sale of
Equity Fund shares held for six months or less will be treated for federal
income tax purposes as a long-term capital loss to the extent of any
distributions of long-term capital gains received by the shareholder with
respect to such shares. Note that any loss realized on the sale of shares will
be disallowed to the extent the shares disposed of are replaced within a period
of 61 days beginning 30 days before the disposition of such shares. In such
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
Distributions may be subject to certain state and local taxes. If
distributions had been declared in the year just ended, the Equity Funds will
send you tax information (by January 31) stating amount and type of all
distributions.
Each Equity Fund intends to continue 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 Equity 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 custodian 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 Equity Funds or the Equity Funds'
Transfer Agent. While the Equity Funds reserve the right to suspend sales of its
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 Equity 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 distributed from the IRA.
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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)
Offers 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. It is anticipated
that these forms of retirement plans will be available for investment in the
Equity Funds shortly after the date of this Prospectus. Please telephone the
Equity Funds' shareholder servicing representative 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 or more Equity 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 Equity Funds may be suitable for self-directed IRA accounts
and prototype retirement plans such as those developed by Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliate of the Adviser and Subadviser and
the Equity 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, no par value, which may, without
shareholder approval, be divided into an unlimited number of series, and an
unlimited number of classes. Such shares are currently divided into four series,
one for each of the Equity Funds and Money Funds. Shares of each Equity Fund are
divided into Class A and Class B shares of each Equity Fund and are normally
entitled to one vote (with proportional voting for fractional shares) for all
purposes. Generally, shares of both Equity Funds vote as a single series on
matters that affect all Equity Funds in substantially the same manner. As to
matters affecting each Equity Fund separately, such as approval of the
investment advisory agreement, shares of each Equity Fund would vote as separate
series. With respect to each Equity Fund, each class is identical in all
respects except that (i) each class bears different distribution services fees,
(ii) each class has exclusive voting rights with respect to its Rule 12b-1 Plan
and (iii) each class has a different exchange privilege. The Equity 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 Equity 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 an Equity Fund are freely transferable, are entitled to dividends
as determined by the Trustees and, in liquidation of an Equity Fund are entitled
to receive the net assets of that Equity Fund. Since Class B shares of each
Equity Fund are subject to greater distribution services fees than Class A
shares of the
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Equity Fund, the liquidation proceeds to shareholders of Class B shares are
likely to be less than the proceeds to Class A shareholders. Shareholders have
no preemptive rights.
DISTRIBUTOR
Donaldson, Lufkin & Jenrette Securities Corporation, an affiliate of the
Adviser and Subadviser, serves as the Equity Funds' Distributor.
CUSTODIAN, DIVIDEND DISBURSING AGENT AND TRANSFER AGENT
Citibank, N.A. acts as Custodian for the securities and cash of the Equity
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 Equity Funds or the status of the
shareholder's account can be made to the Equity 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 Equity Funds, will be sent to shareholders.
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WINTHROP OPPORTUNITY FUNDS
SHARE PURCHASE APPLICATION
<TABLE>
<S> <C>
WINTHROP OPPORTUNITY 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
(1) TYPE OF ACCOUNT DATE __________________, 199_______
[ ] New Account [ ] Existing Account #________________________________
(2) INVESTMENT SELECTION -- Please indicate the dollar amount you wish to invest
in each Fund and make checks payable to Winthrop Mutual Funds. Please select
the class of shares you wish to purchase. If no class of shares is selected,
Class A shares will be purchased.
WINTHROP FUND NAME AMOUNT CLASS OF SHARES (FUND NUMBER)
------------------ ------ -----------------------------
Developing Markets Fund $__________ [ ] Class A (540)
International Equity Fund $__________ (front-end sales charge)
Total $__________ [ ] Class B (640)
(contingent deferred sales charge)
[ ] Class A (541)
(front-end sales charge)
[ ] Class B (641)
(contingent deferred sales charge)
Initial Investment Minimum per Fund $250; Subsequent Class B Shares are not available for purchases of
Investment Minimum $25. Minimums are waived for SEP, $250,000 or more.
SARSEP, SIMPLE 401K, 403B and 457 plans.
(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 # of minor in space
State provided below)
[ ] Other________________________________________________________________________________________
(Name of corporation, organization, trusts, 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.
(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.
________________________________ __________________________________
Signature Date
________________________________ __________________________________
Signature Date
(If an institution, please include documentation establishing
authorized signatories).
(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.
(NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations)
[ ] I do not elect the telephone exchange privilege.
TELEPHONE REDEMPTION PRIVILEGE -- I hereby authorize the 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 ACH to the commercial bank referenced in Section
10.
[ ] Wire Redemption proceeds to the Bank referenced in Section 10
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 have no change within the
last 30 days.)
By selecting any of the above telephone privileges, I agree that
neither the Funds, the Adviser, the Subadviser, the Winthrop Focus
Funds, the Alliance Money Market 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 Funds reasonably believe to
be genuine, and that neither the 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 Funds at any time. I understand and agree that the
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
(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_______________________
(7) BANK ACCOUNT INFORMATION* (To be completed if applicable under
Sections 5 or 11).
________________________________________________ ________________________________________________
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.)
------------
FOR DIVIDEND INSTRUCTIONS AND OTHER ACCOUNT OPTIONS, PLEASE
COMPLETE THE REVERSE SIDE OF THIS PURCHASE APPLICATION.
</TABLE>
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WINTHROP OPPORTUNITY FUNDS
SHARE PURCHASE APPLICATION
<TABLE>
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(8) DIVIDEND OPTIONS
DIVIDEND INSTRUCTIONS -- If no instructions are given, all
distributions will be reinvested.
INCOME DIVIDENDS: (select one)
[ ] 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. No. ______________________
(if applicable)
Address________________________________________
City, State, Zip_______________________________
(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.)
(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 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
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 -- The undersigned requests that Winthrop or any transfer agent of Winthrop (as their
agent) make regular exchanges ($50 minimum) beginning the 5th, 10th, 15th or 25th (circle one) day of _______ 19__.
(month)
FROM* TO*
Class** Frequency
Fund Name Fund Name (Circle One) Amount (Circle One)'D'
--------- --------- ------------ ------ ---------------
_________________________ ____________________________________ 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
* Your automatic exchange selection must be between Winthrop Funds within the same share class unless your exchange
is to be directed to a Winthrop Money Fund in which case class designation will not be required.
`D' Monthly, Quarterly, Semi-Annual, or Annual processing.
Please 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.
(11) [ ] SYSTEMATIC CASH WITHDRAWAL PLAN -- (Minimum initial purchase
$10,000). The undersigned requests that the Funds, or any transfer
agent of the Funds, as their agent make withdrawals beginning
the 25th day (approximately of _______ 19__).
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 and
account referenced in Section 10.
[ ] by wire to the Bank and account referenced in Section 10 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 elected on a semi-annual or annual basis are not
eligible for Winthrop's CDSC waiver.)
(12) REDUCED SALES CHARGES (Class A only) -- If you or your spouse or
minor children own shares in other Winthrop Funds, you may be
eligible for a reduced sales charge. If applicable, please complete
the sections below and indicate the accounts to be considered.
RIGHT OF ACCUMULATION OR CONCURRENT PURCHASES
[ ] I qualify for Right of Accumulation or Concurrent Purchase
privileges with the account(s) listed below.
_______________ ________________________ ___________________ _____________________
Fund Name Account Number Fund Name Account Number
_______________ ________________________ ___________________ _____________________
Fund Name Account Number Fund Name Account Number
(NOTE: When qualifying for the Concurrent Purchase privilege, Account Number reference is not
required for new accounts).
LETTER OF INTENT
[ ] I agree to the terms of the Letter of Intent set forth in the Prospectus (including the
escrowing of shares.) Although I am not obligated to do so, it is my intention to invest over a
thirteen-month period in shares of one or more Winthrop Funds in an aggregate amount at least
equal to:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
If the full amount indicated is not purchased within 13 months, I understand an additional sales
charge must be paid from my accounts.
(13) CONSOLIDATED ACCOUNT STATEMENTS -- If you prefer to receive one
quarterly combined statement instead of individual account
statements please reference the Winthrop Fund name and account
numbers that you would like consolidated.
___________________________________ ________________________________________
Fund Name/Account Number Fund Name/Account Number
____________________________________ ________________________________________
Fund Name/Account Number Fund Name/Account Number
</TABLE>
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<PAGE>
WINTHROP OPPORTUNITY FUNDS
(800) 225-8011
ADVISER
Wood Struthers & Winthrop Management Corp.
277 Park Avenue, New York, New York 10172
SUBADVISER
AXA Asset Management Partenaires
40 rue du Colisee, 75008 Paris, France
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 Equity Fund Expenses 2
Financial Highlights 4
Introduction 5
Investment Objectives, Policies and Risk
Considerations 5
Management 9
Expenses of the Equity Funds 11
Purchases, Redemptions and Shareholder
Services 12
Net Asset Value 20
Dividends, Distributions and Taxes 20
Retirement Plans 21
General Information 22
</TABLE>
This Prospectus does not constitute an offering in any
state in which such offering may not lawfully be made.
[LOGO]
WOF-1
WINTHROP
OPPORTUNITY
FUNDS
---------------------------
WINTHROP DEVELOPING
MARKETS FUND
WINTHROP INTERNATIONAL
EQUITY FUND
PROSPECTUS
JANUARY 24, 1997
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<PAGE>
<PAGE>
WINTHROP OPPORTUNITY FUNDS
277 PARK AVENUE, NEW YORK, NEW YORK 10172
TOLL FREE (800) 255-8011
STATEMENT OF ADDITIONAL INFORMATION
January 24, 1997
This Statement of Additional Information relates to the Winthrop Developing
Markets Fund (the 'Developing Markets Fund') and the Winthrop International
Equity Fund (the 'International Equity Fund' and together with the Developing
Markets Fund, the 'Equity Funds'), each of which is a series of the Winthrop
Opportunity Funds (the 'Opportunity Funds'). The Statement of Additional
Information is not a prospectus and should be read in conjunction with the
Equity 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 Equity Funds at the address or
telephone number listed above.
TABLE OF CONTENTS
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PAGE
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Investment Policies and Restrictions............................................................................. 1
Management....................................................................................................... 7
Expenses of the Equity Funds..................................................................................... 9
Purchases, Redemptions, Exchanges and Systematic Withdrawal Plan................................................. 11
Net Asset Value.................................................................................................. 13
Dividends, Distributions and Taxes............................................................................... 14
Portfolio Transactions........................................................................................... 17
Portfolio Turnover............................................................................................... 19
Investment Performance Information............................................................................... 19
Shares of Beneficial Interest.................................................................................... 20
General Information.............................................................................................. 21
Appendix -- Securities Ratings................................................................................... A-1
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INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions supplement and should be
read in conjunction with the information set forth under the heading 'Investment
Objectives, Policies and Risk Considerations' in the Equity Funds' Prospectus.
Except as noted in the Prospectus, each Equity Fund's investment policies are
not fundamental and may be changed by the Trustees of the Funds without
shareholder approval; however, shareholders will be notified prior to a
significant change in such policies. Each Equity Fund's fundamental investment
restrictions may not be changed without shareholder approval as defined in
'Fundamental Investment Restrictions' in this Statement of Additional
Information.
It is the policy of the Developing Markets Fund to seek long-term growth of
capital by investing primarily in common stocks and other equity securities from
developing countries; it is the policy of the International Equity Fund to seek
long-term growth of capital by investing primarily in common stocks and other
equity securities from established markets outside the United States. In
addition, each Equity Fund may invest in any of the securities described below.
Depositary Receipts. The Equity Funds may purchase sponsored or unsponsored
ADRs, EDRs and GDRs (collectively, 'Depositary Receipts'). ADRs are American
Depositary Receipts typically issued by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs and GDRs are Depositary Receipts typically issued by foreign banks or trust
companies, although they also may be issued by U.S. banks or trust companies,
and evidence ownership of underlying securities issued by either a foreign or a
United States corporation. Generally, Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the United States.
Depositary Receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary Receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of Depositary Receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the Depositary Receipts. For
purposes of each Equity Fund's investment policies, an Equity Fund's investments
in Depositary Receipts will be deemed to be investments in the underlying
securities.
Convertible Securities. A convertible security is a bond or preferred stock
which may be converted at a stated price within a specified period of time into
a certain quantity of the common stock of the same or different issuer.
Convertible securities are senior to common stocks in a corporation's capital
structure, but are usually subordinated to similar nonconvertible securities.
While providing a fixed income stream (generally higher in yield than the income
stream from common stocks but lower than that afforded by a similar
nonconvertible fixed income security), a convertible security also affords an
investor the opportunity, through its conversion feature, to participate in the
capital appreciation dependent upon a market price advance in the underlying
common stock. Each Equity Fund may invest up to 25% of its assets in foreign
convertible securities. Wood, Struthers & Winthrop Management Corp. (the
'Adviser') and AXA Asset Management Partenaires (the 'Subadviser') currently do
not intend to invest over 5% of each Equity Fund's assets in convertible
securities rated below investment grade.
The market value of a convertible security is at least the higher of its
'investment value' (i.e., its value as a fixed-income security) or its
'conversion value' (i.e., its value when converted into its underlying common
stock). As a fixed-income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market
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value of the underlying security. The price of a convertible security tends to
increase as the market value of the underlying stock rises, whereas it tends to
decrease as the market value of the underlying stock declines. While no
securities investment is without some risk, investments in convertible
securities generally entail less risk than investments in the common stock of
the same issuer.
Nonconvertible Fixed Income Securities. Each Equity Fund may invest up to
35% of its total assets in investment grade fixed income securities. Investment
grade obligations are those obligations rated BBB or better by Standard and
Poor's Ratings Group ('S&P') or Baa or better by Moody's Investor Service
('Moody's') in the case of long-term obligations and equivalently rated
obligations in the case of short-term obligations, or unrated instruments
believed by the Adviser or Subadviser to be of comparable quality to such rated
instruments. Securities rated BBB by S&P are regarded by S&P as having an
adequate capacity to pay interest and repay principal; whereas such securities
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely, in the opinion of S&P, to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories. Securities rated Baa by Moody's are considered
by Moody's to be medium grade obligations; they are neither highly protected nor
poorly secured; interest payments and principal security appear to be adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; in the opinion of
Moody's, they lack outstanding investment characteristics and in fact have
speculative characteristics as well. Fixed income securities in which the Equity
Funds may invest include asset and mortgage backed securities. Prepayments of
principal may be made at any time on the obligations underlying asset and
mortgage backed securities and are passed on to the holders of the assets and
mortgage backed securities. As a result, if an Equity Fund purchases such a
security at a premium, faster than expected prepayments will reduce and slower
than expected prepayments will increase yield to maturity. Conversely, if an
Equity Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. For a more complete description of Moody's and S&P's ratings,
see the Appendix to this Statement of Additional Information. The foregoing
investment grade limitation applies only at the time of initial investment and
an Equity Fund may determine to retain in its portfolio securities the issuers
of which have had their credit characteristics downgraded.
Options. The Equity Funds may purchase and sell call and put options. A
call option gives the purchaser, in exchange for a premium paid, the right for a
specified period of time to purchase the securities or currency subject to the
option at a specified price (the exercise price or strike price). The writer, or
seller, of a call option, in return for the premium, has the obligation, upon
exercise of the option, to deliver, depending upon the terms of the option
contract, the underlying securities or a specified amount of cash to the
purchaser upon receipt of the exercise price. When an Equity Fund writes a call
option, that Equity Fund gives up the potential for gain on the underlying
securities or currency in excess of the exercise price of the option during the
period that the option is open.
A put option gives the purchaser, in return for a premium, the right, for a
specified period of time, to sell securities or currency subject to the option
to the writer of the put at the specified exercise price. The writer of the put
option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the securities or currency underlying the option at the
exercise price. An Equity Fund that sells a put option might, therefore, be
obligated to purchase the underlying securities or currency for more than their
current market price.
If an Equity Fund desires to sell a particular security from its portfolio
on which it has written an option, the Equity Fund will seek to effect a closing
purchase transaction prior to or concurrently with the sale of the security. A
closing purchase transaction is a transaction in which an investor who is
obligated as a writer of an option terminates his obligation by purchasing an
option of the same series as the option previously written. (Such a purchase
does not result in the ownership of an option). An Equity Fund may enter into a
closing purchase transaction to realize a profit on a previously written option
or to enable the Equity Fund to write another option on the underlying security
with
2
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either a different exercise price or expiration date or both. An Equity Fund
realizes a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more, respectively, than the premium received from the
writing of the option.
The Equity Funds will write only fully 'covered' options. An option is
fully covered if at all times during the option period, the Fund writing the
option owns either (i) the underlying securities, or securities convertible into
or carrying rights to acquire the optioned securities at no additional cost, or
(ii) an offsetting call option on the same securities at the same or a lower
price.
An Equity Fund may not write a call option if, as a result thereof, the
aggregate of such Equity Fund's portfolio securities subject to outstanding call
options (valued at the lower of the option price or market value of such
securities) would exceed 10% of its total assets. The Equity Funds may also
purchase and sell financial futures contracts and options thereon for hedging
and risk management purposes and to enhance gains as permitted by the Commodity
Futures Trading Commission (the 'CFTC').
The Equity Funds may also purchase and sell securities index options.
Securities index options are similar to options on specific securities. However,
because options on securities indices do not involve the delivery of an
underlying security, the option represents the holder's right to obtain from the
writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying securities index on the exercise date. When an
Equity Fund writes an option on a securities index, it will establish a
segregated account with its custodian in which it will deposit cash or high
quality short-term obligations or a combination of both with a value equal to or
greater than the market value of the option and will maintain the account while
the option is open.
Each Equity Fund's successful use of options and financial futures depends
on the ability of the Adviser and Subadviser to predict the direction of the
market and is subject to various additional risks. The investment techniques and
skills required to use options and futures successfully are different from those
required to select equity securities for investment. The ability of an Equity
Fund to close out an option or futures position depends on a liquid secondary
market. There is no assurance that liquid secondary markets will exist for any
particular option or futures contract at any particular time. The inability to
close options and futures positions also could have an adverse impact on each
Equity Fund's ability to effectively hedge its portfolio. There is also the risk
of loss by the Equity Funds of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Equity Funds have an open position in an
option, a futures contract or related option.
To the extent that puts, calls, straddles and similar investment strategies
involve instruments regulated by the CFTC, each Equity Fund is limited to an
investment not in excess of 5% of its total assets, except that each Equity Fund
may purchase and sell such instruments, without limitation, for bona fide
hedging purposes.
Forward Foreign Currency Exchange Contracts. A forward contract on foreign
currency is an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days agreed upon by the parties from the
date of the contract at a price set on the date of the contract.
The Equity Funds will generally enter into forward contracts only under two
circumstances. First, when an Equity Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to 'lock in' the U.S. dollar price of the security in relation to another
currency by entering into a forward contract to buy the amount of foreign
currency needed to settle the transaction. Second, when the Adviser or
Subadviser believes that the currency of a particular foreign country may suffer
or enjoy a substantial movement against another currency, it may enter into a
forward contract to sell or buy the former foreign currency (or another currency
which acts as a proxy for that currency) approximating the value of some or all
of the Equity Fund's portfolio securities denominated in such foreign currency.
This second investment practice is generally referred to as
3
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'cross-hedging.' Although forward contracts will be used primarily to protect
the Equity Funds from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted.
Futures and Options Thereon. The Equity Funds may purchase and sell
financial futures contracts and options thereon which are traded on a
commodities exchange or board of trade for certain hedging, return enhancement
and risk management purposes in accordance with regulations of the CFTC. These
futures contracts and related options will be on financial indices and foreign
currencies or groups of foreign currencies. A financial futures contract is an
agreement to purchase or sell an agreed amount of securities or currencies at a
set price for delivery in the future.
Repurchase Agreements. The Equity 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 an Equity Fund to
keep all of its assets at work while retaining 'overnight' flexibility in
pursuit of investments of a longer-term nature. The Equity Funds require
continual maintenance of collateral with the 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 Equity Fund 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 Equity Fund might be
delayed in selling the collateral.
Reverse Repurchase Agreements. The Equity Funds may also enter into reverse
repurchase agreements. Under a reverse repurchase agreement an Equity Fund would
sell securities and agree to repurchase them at a mutually agreed upon date and
price. At the time an Equity Fund enters into a reverse repurchase agreement, it
would establish and maintain with an approved custodian a segregated account
containing liquid high-grade 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 an Equity Fund 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 an Equity Fund's obligations
to repurchase the securities and an Equity Fund's 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 Equity Funds or the Securities and Exchange
Commission ('SEC') to the extent liquid high-grade debt securities are
segregated in an amount at least equal to the amount of the liability.
Illiquid Investments. Each Equity Fund may invest up to 15% of its assets
in illiquid investments. Under the supervision of the Trustees, the Adviser and
Subadviser determine the liquidity of an Equity Fund's investments. The absence
of a trading market can make it difficult to ascertain a market value for
illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for an Equity Fund to sell them promptly at an acceptable price. The
staff of the SEC currently takes the position that OTC options purchased by an
Equity Fund, and portfolio securities 'covering' the amount of that Equity
Fund's obligation pursuant to an OTC option sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid, and are subject to
such Equity Fund's limitations on investments in illiquid securities.
Securities Lending. The Equity Funds may seek to receive or increase income
by lending their respective portfolio securities. Under present regulatory
policies, such loans may be made to member firms of the New York Stock Exchange
and are required to be secured continuously by collateral held by the Custodian
consisting of cash, cash equivalents or U.S. Government Securities maintained in
an amount at least equal to the market value of the securities loaned.
Accordingly, the Equity Funds will continuously secure the lending of portfolio
securities by collateral held by the Custodian consisting of cash, cash
equivalents or U.S. Government Securities maintained in an amount at least equal
to the market value of the securities loaned. The Equity Funds have the right to
call such a loan and obtain the securities loaned at any time on five days
notice. Cash collateral may be invested in fixed income
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securities rated at least A or better by S&P or Moody's. As is the case with any
extension of credit, loans of portfolio securities involve special risks in the
event that the borrower should be unable to repay the loan, including delays or
inability to recover the loaned securities or foreclose against the collateral.
The aggregate value of securities loaned by an Equity Fund may not exceed 25% of
the value of its net assets.
When Issued, Delayed Delivery Securities and Forward Commitments. The
Equity 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
a month or more after the date of the commitment. While an Equity Fund will only
enter into a forward commitment with the intention of actually acquiring the
security, such Equity Fund 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 an Equity Fund prior to
the settlement date. Each Equity Fund will segregate with its Custodian cash or
liquid high-grade securities in an aggregate amount at least equal to the amount
of their respective outstanding forward commitments.
Privatization. The governments in some countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ('privatization'). The Adviser and Subadviser believe
that privatization may offer opportunities for significant capital appreciation,
and intend to invest assets of the Equity Funds in privatization in appropriate
circumstances. In certain countries, the ability of foreign entities such as the
Equity Funds to participate in privatization may be limited by local law and/or
the terms on which the Equity Funds may be permitted to participate may be less
advantageous than those afforded local investors. There can be no assurance that
certain governments will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
Investment Companies. Certain markets are closed in whole or in part to
equity investments by foreigners. The Equity Funds may be able to invest in such
markets solely or primarily through governmentally authorized investment
vehicles or companies. Pursuant to the Investment Company Act of 1940, as
amended (the '1940 Act'), each Equity Fund generally may invest up to 10% of its
total assets in the aggregate in shares of other investment companies and up to
5% of its total assets in any one investment company as long as each investment
does not represent more than 3% of the outstanding voting stock of the acquired
investment company at the time of investment. Investment in other investment
companies may involve the payment of substantial premiums above the value of
such investment companies' portfolio securities, and is subject to limitations
under the 1940 Act and market availability. The Equity Funds do not intend to
invest in such investment companies unless, in the judgment of the Adviser and
Subadviser, the potential benefits of such investment justify the payment of any
applicable premium or sales charge. As a shareholder in an investment company,
an Equity Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time an
Equity Fund would continue to pay its own management fees and other expenses.
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following fundamental investment restrictions are applicable to each of
the Equity Funds and may not be changed with respect to an Equity Fund without
the approval of a majority of the shareholders of that Equity Fund,
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which means the affirmative vote of the holders of (a) 67% or more of the shares
of that Equity Fund represented at a meeting at which more than 50% of the
outstanding shares of the Equity Fund are represented or (b) more than 50% of
the outstanding shares of that Equity Fund, whichever is less. Except as set
forth in the Prospectus, all other investment policies or practices are
considered by each Equity 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 restrictions provide that an Equity Fund may not:
(1) purchase the securities of any one issuer, other than the United
States Government, or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total
assets would be invested in such issuer or the Equity Fund would own more
than 10% of the outstanding voting securities of such issuer, except that
up to 25% of the value of the Equity Fund's total assets may be invested
without regard to such 5% and 10% limitations;
(2) invest 25% or more of the value of its total assets in any one
industry, 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;
(3) issue senior securities (including borrowing money, including on
margin if margin securities are owned and enter into reverse repurchase
agreements) in excess of 33 1/3% of its total assets (including the amount
of senior securities issued but excluding any liabilities and indebtedness
not constituting senior securities) except that the Equity Fund may borrow
up to an additional 5% of its total assets for temporary purposes; or
pledge its assets other than to secure such issuances or in connection with
hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies. The Equity Fund's
obligations under swaps are not treated as senior securities;
(4) make loans of money or property to any person, except through
loans of portfolio securities, the purchase of fixed income securities
consistent with the Equity Fund's investment objective and policies or the
acquisition of securities subject to repurchase agreements;
(5) underwrite the securities of other issuers, except to the extent
that in connection with the disposition of portfolio securities the Equity
Fund may be deemed to be an underwriter:
(6) purchase real estate or interests therein;
(7) purchase or sell commodities or commodities contracts except for
purposes, and only to the extent, permitted by applicable law without the
Equity Fund becoming subject to registration with the CFTC as a commodity
pool;
(8) 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 Equity Fund's total assets and the Equity Fund's aggregate
short sales of a particular class of securities does not exceed 25% of the
then outstanding securities of that class; or
(9) invest in oil, gas or other mineral leases.
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MANAGEMENT
The Trustees and principal officers of the Equity Funds, 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 Equity Funds as defined by the 1940 Act.
*G. Moffett Cochran, 46, Chairman of the Board of Trustees and President of
the Opportunity Funds is President and Chief Executive Officer of the Adviser
with which he has been associated since 1992. Prior to his association with the
Equity 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, Treasurer and Chief Operating Officer
of the Adviser, with which he has been associated 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, is a Managing
Director and Chief Investment Officer of the Adviser with which he has been
associated since prior to 1991.
Richard L. Glessmann, 35, Vice President of the Opportunity Funds, has been
associated with 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 the Adviser since prior to 1991.
Brian A. Kammerer, 39, Assistant Treasurer to the Opportunity Funds, is a
Vice President of the Adviser, with which he has been associated since prior to
1991.
The following table sets forth certain information regarding compensation of the
Equity Funds' Trustees and officers. Except as disclosed below, no executive
officer or person affiliated with the Equity Funds received compensation from
the Equity Funds for the calendar year ended December 31, 1996 in excess of
$60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT FROM TRUST
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
FROM AS PART OF TRUST BENEFITS UPON COMPLEX PAID
NAME AND POSITION TRUST(1) EXPENSES RETIREMENT TO TRUSTEES(2)
----------------- ------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
G. Moffett Cochran, Trustee........................ $ 0 None None $ 0(9)
Robert E. Fischer, Trustee......................... $ 10,000 None None $ 10,000(4)
Martin Jaffe, Trustee.............................. $ 0 None None $ 0(4)
Wilmot H. Kidd, III, Trustee....................... $ 10,000 None None $ 10,000(4)
John W. Waller, III, Trustee....................... $ 7,000 None None $ 7,000(4)
</TABLE>
- ------------
(1) The Opportunity Funds anticipate paying each independent Trustee
approximately $10,000 in each calendar year.
(footnotes continued on next page)
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(footnotes continued from previous page)
(2) Represents the total compensation paid to such persons during the year ended
December 31, 1996. The parenthetical number represents the number of
portfolios (including the Equity Funds) for which such person acts as
Trustee that are considered part of the same fund complex as the Equity
Funds.
------------------------
The Trustees of the Opportunity Funds who are officers or employees of the
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 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.
ADVISER
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 Equity Funds' investment adviser (see 'Management' in the
Prospectus). The Adviser was established in 1871, as a private concern to manage
money for the Winthrop family of Boston. From these origins, the Adviser has
grown to serve a select group of individual and institutional investors.
The Adviser is (since 1977) a wholly-owned subsidiary of Donaldson, Lufkin
& Jenrette Securities Corporation ('DLJ Securities'), the distributor of the
Equity Fund's 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 and financial services holding company. The Adviser is
an integral part of the DLJ Securities family, and as one of the oldest money
management firms in the country, it maintains a tradition of personalized
service and performance. The address of Donaldson, Lufkin & Jenrette, Inc. is
277 Park Avenue, New York, New York 10172. The 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, as of 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.
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The Investment Advisory Agreement was approved by the Board of Trustees of
the Equity Funds on July 25, 1995 and by the then shareholders, the Adviser and
Subadviser, on August 23, 1995 and became effective on the same date. The
Investment Advisory Agreement is reviewed annually by the Board of Trustees and
was most recently reapproved on July 18, 1996. The Investment Advisory Agreement
continues in force for successive twelve month periods computed from the first
day of each fiscal year of each Equity 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 Equity 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.
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 Equity Funds.
SUBADVISER
The Subadviser has been retained under a subadvisory agreement by the
Adviser to assist in the performance of its services to the Equity Funds.
The Subadviser, a registered investment advisor, is a wholly-owned
subsidiary of AXA. The Subadviser has hired employees from AXA, a company with
a long history of providing financial services advice.
Certain other clients of the Adviser or Subadviser may have investment
objectives, policies and risk considerations similar to those of the Equity
Funds. The Adviser or Subadviser may, from time to time, make recommendations
which result in the purchase or sale of a particular security by their other
clients simultaneously with the Equity Funds. If transactions on behalf of more
than one client during the same period increase the demand for securities being
purchased or the supply of the securities being sold, there may be an adverse
effect on price. It is the policy of the Adviser and Subadviser to allocate
advisory recommendations and the placing of orders in a manner which is deemed
equitable by the Adviser and Subadviser to the accounts involved, including the
Equity Funds. When two or more of the clients of the Adviser and Subadviser
(including the Equity Funds) are purchasing the same security on a given day
from the same broker-dealer, such transactions may be averaged as to price.
EXPENSES OF THE EQUITY FUNDS
GENERAL
In addition to the payments to the Adviser under the investment advisory
agreement, each Equity 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 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 or Subadviser; 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 Equity Funds by the Adviser under the investment advisory
agreement or Subadviser under the investment subadvisory agreement, the Equity
Funds may employ their own personnel. For such services, they also may utilize
personnel employed by the Adviser, the Subadviser or their affiliates. In such
event, the services shall be provided to the Equity Funds at cost and the
payments therefor must be specifically approved in advance by the Equity Funds'
Trustees, including a majority of its disinterested Trustees.
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DISTRIBUTION PLAN
Pursuant to Rule 12b-1 adopted by the SEC under the 1940 Act, the Equity
Funds have adopted a Distribution Agreement (the 'Distribution Agreement') and a
Rule 12b-1 Plan for each Class of shares of each Equity Fund (the '12b-1 Plans')
to permit such Equity 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 Equity Funds reports the amounts expended under the Distribution
Agreement and the purposes for which such expenditures were made to the Trustees
of the Equity Funds on a quarterly basis. Also, the 12b-1 Plans provide that the
selection and nomination of disinterested Trustees (as defined in the 1940 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 Equity 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 Equity Fund's Trustees on July 25, 1995 and by
the then shareholders on August 23. 1995. The Distribution Agreement was most
recently reviewed and reapproved on July 18, 1996. 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 Equity 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. In addition to such Trustee approval, the 12b-1 Plans may not be
amended in order to increase materially the costs which the Equity Funds may
bear pursuant to the 12b-1 Plans without the approval of a majority of the
outstanding shares of such Equity Funds. Each Equity 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 an Equity 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 an Equity Fund on not
more than 60 days notice to any other party to the agreement, and will terminate
automatically in the event of assignment.
With respect to sales of an Equity Fund's Class B shares through a
broker-dealer, the Distributor pays the broker-dealer a concession at the time
of sale. In addition, an ongoing maintenance fee may be paid to broker-dealers
on sales of both Class A shares and Class B shares. Pursuant to the Equity
Funds' Rule 12b-1 Plans, the Distributor is then reimbursed for such payments
with amounts paid from the assets of such Equity Fund. The payments to the
broker-dealer, although an Equity 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 Equity Funds. Broker-dealers who
sell shares of the Equity Funds may provide services to their customers that are
not available to investors who purchase their shares directly from the Equity
Funds. Investors who purchase their shares directly from an Equity Fund will pay
a pro rata share of such Equity 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 Equity Funds.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement, each Equity Fund pays a distribution services fee each month to the
Distributor, with respect to the Class A shares of each Equity Fund at an
annual rate of up to .25 of 1%, and with respect to the Class B shares of each
Equity Fund the annual rate may be up to 1%, of the aggregate average daily net
assets attributable to Class A shares and Class B shares, respectively, of each
Equity Fund.
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PURCHASES, REDEMPTIONS, EXCHANGES AND
SYSTEMATIC WITHDRAWAL PLAN
The following information supplements that set forth in the Equity Funds'
Prospectus under the heading 'Purchases, Redemptions and Shareholder Services'.
PURCHASES
Shares of the Equity Funds are offered at the respective net asset value
per share next determined following receipt of a purchase order in proper form
by the Equity Funds, the Equity Funds' transfer agent, FPS Services, Inc. (the
'Transfer Agent'), or by the Distributor. The Equity Funds calculate net asset
value per share as of the close of the regular session of the New York Stock
Exchange, (the 'NYSE') which is generally 4:00 p.m. New York City time on each
day that trading is conducted on the New York Stock Exchange.
Orders for the purchase of shares of an Equity Fund become effective at the
next transaction time 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 Equity 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 credited to
such shareholder's account at net asset value and with respect to the Class A
shares, less any applicable initial sales charge. As a convenience to the
investor and to avoid unnecessary expense to the Equity Funds, share
certificates representing shares of the Equity Fund purchased are not issued
except upon the written request of the shareholder and payment of a fee in the
amount of $50 for such share issuance. The Equity Funds retain the right to
waive such fee in their sole discretion. This facilitates later redemption and
relieves the shareholder of the responsibility and inconvenience of preventing
the share certificates from becoming lost or stolen. No certificates are issued
for fractional shares (although such shares remain in the shareholder's account
on the books of the Equity Funds).
REDEMPTIONS
Shares of the Equity Funds may be redeemed at a redemption price equal to
the net asset value per share, as next completed as of the regular trading
session of the NYSE following the receipt in proper form by the Equity 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 economic conditions exist which would make such a practice
detrimental to the best interest of the Equity Funds. 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. See the
Prospectus for a description of the contingent deferred sales charge which may
be applicable to certain redemptions.
To redeem shares, the registered owner or owners should forward a letter to
the Transfer Agent 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. If
the shares are represented by share certificates, investors should forward the
appropriate share certificates, endorsed in blank or with blank stock powers
attached, to the Transfer Agent with the request that the shares represented
thereby or a portion thereof be
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redeemed at the next determined net asset value per share. The share assignment
form on the reverse side of each share certificate surrendered to the Transfer
Agent for redemption must be signed by the registered owner or owners exactly as
the registered name appears on the face of the certificate or, in the
alternative, a stock power signed in the same manner may be attached to the
share certificate or certificates, or, where tender is made by mail, separately
mailed to the Transfer Agent. The signature or signatures on the assignment form
must be guaranteed in the manner described below.
If the total value of the shares being redeemed exceeds $50,000 (before
deducting any applicable contingent deferred sales charge) 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
Shares of one class of an Equity Fund can be exchanged for shares of the
same class of another Equity Fund, Shares of the Winthrop Municipal Money Fund
and the Winthrop U.S. Government Money Fund (collectively, the 'Money Funds')
and shares of the same class of Winthrop Growth Fund, Winthrop Fixed Income
Fund, Winthrop Aggressive Growth Fund, Winthrop Growth and Income Fund and
Winthrop Municipal Trust Fund (the ' Focus Funds'). Shareholders may exchange
shares by mail. Shareholders or the shareholders' investment dealer of record
may exchange shares by telephone.
In the case of each Money Fund and Focus Fund, the exchange privilege is
available only in those jurisdictions where shares of such Fund may be legally
sold. In addition, the exchange privilege is available only when payment for the
shares to be redeemed has been made and the shares exchanged are held by the
Transfer Agent.
Only those shareholders who have had shares in an Equity Fund for at least
seven days may exchange all or part of those shares for shares of the other
Equity Fund, the Money Funds or Focus Funds, and no partial exchange may be made
if, as a result, the shareholders' interest in an Equity Fund would be reduced
to less than $250. The minimum initial exchange into another Equity Fund is
$250.
All exchanges into either of the Money Funds or any of the Focus Funds are
subject to the minimum investment requirements and any other applicable terms
set forth in the Prospectus for the relevant Money Fund or Focus Fund 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, the
Money 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 for such fund may be
higher and a sales charge differential may apply.
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SYSTEMATIC WITHDRAWAL PLANS
Shares of an Equity Fund owned by a participant in the Equity Funds'
systematic withdrawal plan will be redeemed as necessary to meet withdrawal
payments. A contingent deferred sales charge which would otherwise be imposed
will be waived in connection with redemptions made pursuant to the Equity Funds'
systematic withdrawal plan up to 1% monthly or 3% quarterly of an account's
total market value not to exceed 10% of total market value over any 12 month
rolling period. Systematic withdrawals elected on a semi-annual or annual basis
are not eligible for the waiver. See the Prospectus for a description of the
contingent deferred sales charge. The systematic withdrawal plan may be
terminated at any time by the shareholder or the Equity Funds.
Redemption of shares for withdrawal purposes may reduce or even liquidate
an account. While an occasional lump sum investment may be made by a shareholder
who is maintaining a systematic withdrawal plan, such investment should normally
be an amount equivalent to three times the annual withdrawal or $5,000 whichever
is less.
NET ASSET VALUE
Shares of each Equity Fund will be priced at the net asset value per share
as computed each Equity Fund Business Day in accordance with the Equity Funds'
Agreement and Declaration of Trust and By-Laws. For this purpose, an Equity 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 Equity 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 taking the sum of the value of each
Equity 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 net asset value
determination purposes, securities quoted in foreign currencies are translated
into U.S. dollars at the current exchange rates (determined at 4:00 p.m. London
time) or at such rates as the Trustees may determine. As a result, to the extent
an Equity Fund holds securities quoted or denominated in a foreign currency,
fluctuations in the value of such currencies in relation to the U.S. dollar will
affect the net asset value of such Equity Fund's shares even though there has
not been any change in the value of such securities as quoted in the foreign
currency. For purposes of this computation, the securities in each Equity Fund's
portfolio are, except as described below, valued at their current market value
determined on the basis of market quotations or, if such quotations are not
readily available, such other method as the Trustees believe would accurately
reflect their fair value.
Foreign securities trading may not take place on all days on which the NYSE
is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Accordingly, the determination of the net asset
value of an Equity Fund's shares may not take place contemporaneously with the
determination of the prices of investments held by such Equity Fund. Events
affecting the values of investments that occur between the time their prices are
determined and the close of regular trading on the NYSE on each day that the
NYSE is open will not be reflected in the net asset value of an Equity Fund's
shares unless the Adviser or Subadviser, under the supervision of such Equity
Fund's Board of Trustees, determine that the particular event would materially
affect net asset value. As a result, the net asset value of an Equity Fund's
shares may be significantly affected by such trading on days when a shareholder
has no access to such Equity Fund.
For purposes of the computation of net asset value, each of the Equity
Funds values securities held in its respective portfolios as follows: readily
marketable portfolio securities listed on an exchange are valued, except as
indicated below, at the last sale price at the close of the exchange on the
business day as of which such value is being determined. If there has been no
sale on such day, the securities are valued at the mean of the closing bid and
asked
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prices on such day. If no bid or asked prices are quoted on such day, then the
security is valued by such method as the Trustees of the Equity Funds shall
determine in good faith to reflect its fair value.
Readily marketable securities, including certain options, not listed on an
exchange but admitted to trading on the National Association of Securities
Dealers Automatic Quotations, Inc. ('NASDAQ') National List (the 'List') are
valued in like manner. Portfolio securities traded on more than one exchange are
valued at the last sale price on the business day as of which such value is
being determined at the close of the exchange representing the principal market
for such securities.
Readily marketable securities, including certain options traded only in the
over-the-counter market and listed securities whose primary market is believed
by the Adviser or Subadviser to be over-the-counter (excluding those admitted to
trading on the List) are valued at the mean of the current bid and asked prices
as reported by such sources as the Trustees of the Equity Funds deem appropriate
to reflect their fair market value. However, fixed-income securities (except
short-term securities) may be valued on the basis of prices provided by a
pricing service when such prices are believed by the Adviser or Subadviser to
reflect the fair market value of such securities. The prices provided by a
pricing service are determined without regard to bid or last sale prices but
take into account institutional size trading in similar groups of securities and
any developments related to specific securities. Portfolio securities underlying
listed call options will be valued at their market price and reflected in net
assets accordingly. Premiums received on call options written by an Equity Fund
will be included in the liability section of the Statement of Assets and
Liabilities as a deferred credit and subsequently adjusted (marked-to-market) to
the current market value of the option written. Investments for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Trustees of the Equity Funds.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Equity Funds intend to distribute to shareholders of the Equity Funds
on an annual basis, substantially all of such respective periods' net investment
income, if any, for each respective Equity Fund.
Capital gains (short-term and long-term), if any, realized by each of the
Equity Funds during their fiscal year will be distributed to the respective
shareholders shortly after the end of such fiscal year.
Each income dividend and capital gains distribution, if any, declared by
the Equity Funds on the outstanding shares of any Equity Fund will, at the
election of each shareholder, be paid in cash or reinvested in additional full
and fractional shares of that Equity Fund at the net asset value as of the close
of business on the payment date. Such distributions, to the extent they would
otherwise be taxable, will be taxable to shareholders regardless of whether paid
in cash or reinvested in additional shares. An election to receive dividends and
distributions in cash or shares is made at the time of the initial investment
and may be changed by notice received by the Equity Funds from a shareholder at
least 30 days prior to the record date for a particular dividend or distribution
on shares of each Equity Fund. There is no charge in connection with the
reinvestment of dividends and capital gains distributions.
There is no fixed dividend rate and there can be no assurance that an
Equity Fund will pay any dividends or realize any gains. The amount of any
dividend or distribution paid by each Equity Fund depends upon the realization
by the Equity Fund of income and capital gains from that Equity Fund's
investments. All dividends and distributions will be made to shareholders of an
Equity Fund solely from assets of that Equity Fund.
Payment (either in cash or in portfolio securities) received by a
shareholder upon redemption of his shares, assuming the shares constitute
capital assets in his hands, will result in long-term or short-term capital
gains (or losses) depending upon the shareholder's holding period and basis in
respect of shares redeemed. Any loss realized by a shareholder on the sale of
Equity Fund shares held for six months or less will be treated for federal
income tax purposes as a long-term capital loss to the extent of any
distributions of long-term capital gains received by the shareholder with
respect to such shares. Note that any loss realized on the sale of shares will
be disallowed to the
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extent the shares disposed of are replaced within a period of 61 days beginning
30 days before the disposition of such shares. In such case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss.
Each Equity Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, 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 Equity
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 Equity
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 Equity 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). Foreign currency gains that are not 'directly
related' to the Equity Fund's principal business of investing in stock or
securities may be excluded by Treasury Regulations from income that counts
toward the 90% of gross income requirement described above and may continue to
be included in income that counted for the purposes of the 30% of gross income
requirements described above. The Treasury Department has not yet issued any
such regulations. For federal income tax purposes, dividends of net ordinary
income and distributions of any net short-term capital gains in excess of any
net long-term capital losses are treated as ordinary income of the shareholders,
and distributions of net long-term capital gains in excess of any net short-term
capital losses are taxable to shareholders as long-term capital gains
irrespective of the length of time the shareholder has held shares of the Equity
Fund.
Since the Equity Funds are not treated as a single entity for federal
income tax purposes, the performance of one Equity Fund will have no effect on
the income tax liability of shareholders of another Equity Fund.
A dividend or capital gains distribution with respect to shares of any
Equity 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.
As a regulated investment company, each Equity Fund will not be subject to
federal income tax on income and gains distributed to shareholders if it
distributes at least 90% of its investment company taxable income to
shareholders each year but will be subject to tax on its income and gains to the
extent that it does not distribute to its shareholders an amount equal to such
income and gains. In addition, each Equity 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 Equity Fund.
To the extent possible, each Equity Fund intends to make such distributions as
may be necessary to avoid this excise tax.
For federal income tax purposes, dividends that are declared by an Equity
Fund in October, November or December as of a record date in such month and
actually paid in January of the following year will be treated as if they were
paid on December 31 of the year in which they were declared. Therefore such
dividends will generally be taxable to a shareholder in the year declared rather
than the year paid.
Shareholders will be advised annually as to the federal tax status of
dividends and capital gains distributions made by each Equity Fund for the
preceding year.
Some of the investment practices of each Equity Fund are subject to special
provisions that, among other things, may defer the use of certain losses of such
Equity Funds and affect the holding period of the securities held by the Equity
Funds and the character of the gains or losses realized. These provisions may
also require the Equity Fund to
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mark-to-market some of the positions in their respective portfolios (i.e., treat
them as if they were closed out), which may cause such Equity Funds to recognize
income without receiving cash with which to make distributions in amounts
necessary to satisfy the distribution requirements for qualification as a
regulated investment company and for avoiding income and excise taxes. Each
Equity Fund will monitor its transactions and may make certain tax elections in
order to mitigate the effect of these rules and prevent disqualification of the
Equity Fund as a regulated investment company.
The Equity Funds may make investments denominated in a foreign currency.
Gains or losses attributable to dispositions of foreign currency or to foreign
currency contracts, or to fluctuations in exchange rates between the time an
Equity Fund accrues income or receivables or expenses or other liabilities
denominated in a foreign currency and the time the Equity Fund actually collects
such income or pays such liabilities, are generally treated as ordinary income
or ordinary loss. Similarly, gains or losses on the disposition of debt
securities held by an Equity Fund, if any, denominated in foreign currency, to
the extent attributable to fluctuations in exchange rates between the
acquisition and disposition dates, also are generally treated as ordinary income
or loss. These gains and losses increase or decrease the amount of the Equity
Fund's net investment income available for distribution.
If an Equity Fund owns shares in certain foreign investment entities,
referred to as passive foreign investment companies ('PFICs'), such Equity Fund
may be subject to federal income tax, and additional charges in the nature of
interest, on a portion of any 'excess distribution' from such company or gain
from the disposition of such shares, even if the entire distribution or gain is
distributed by the Equity Fund to its shareholders. If an Equity Fund were able
and elected to treat a PFIC as a 'qualified electing fund,' in lieu of the
treatment described above, such Equity Fund would be required each year to
include in income, the Equity Fund's pro rata share of the ordinary earnings and
net capital gains of the company, whether or not actually received by the Equity
Fund. Proposed Treasury Regulations would allow certain regulated investment
companies to elect to mark to market their stock in certain PFICs at the end of
each taxable year, whereby the Equity Fund would include in its taxable income
each year any unrealized gain on such PFIC investments. In order to distribute
the income includible in the Equity Fund's income under either election,
maintain its qualification as a regulated investment company, and avoid income
or excise taxes, such Equity Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold. There can be no
assurance that these regulations will be finalized as proposed or as to the
effective date of any such final regulations.
If, as is expected, more than 50 percent of the value of the each Equity
Fund's total assets at the close of its taxable year consists of stock or
securities of foreign corporations, it will be eligible to file an election with
the Internal Revenue Service to 'pass through' to its shareholders the amount of
foreign income taxes (including withholding taxes) paid by such Equity Fund.
Pursuant to this election a shareholder will: (1) include in gross income (in
addition to the taxable dividends actually received) the shareholder's pro rata
share of the foreign income taxes paid by such Equity Fund; (2) treat the
shareholder's pro rata share of the foreign income taxes paid by such Equity
Fund as paid by the shareholder; and (3) subject to certain limitations, either
deduct the pro rata share of such foreign income taxes in computing the
shareholder's taxable income or use it as a foreign tax credit against federal
income taxes. Each shareholder will be notified within 60 days after the close
of an Equity Fund's taxable year whether the foreign income taxes paid by an
Equity Fund will 'pass through' for that year and, if so, such notification will
designate the shareholder's portion of the foreign income taxes paid to each
country and the portion of dividends that represents income derived from sources
derived within each country.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's federal income tax (before the credit)
attributable to the shareholder's total foreign source taxable income. For this
purpose, the portion of dividends and distributions paid by each Equity Fund
from its foreign source income will be treated as foreign source income. Each
Equity Fund's gains and losses from the sale of securities, and certain currency
gains and losses, will generally be treated as derived from United States
sources. The limitation on the foreign tax credit is applied separately to
foreign source 'passive income,' such as dividend income. Because of these
limitations, a
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shareholder may be unable to claim a credit for the full amount of the
shareholder's proportionate share of foreign income taxes paid by such Equity
Fund. In addition, no deduction for foreign income taxes may be claimed by a
shareholder who does not itemize deductions. Shareholders are advised to consult
their own tax advisers on the application of the foreign tax credit rules to
their own particular circumstances.
Each Equity Fund's ability to dispose of portfolio securities may be
limited by the requirement of qualification as a regulated investment company
that less than 30% of an Equity Fund's gross income be derived from the
disposition of securities held for less than three months.
Each Equity 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 Equity Funds with a correct
taxpayer identification number, who under-reports dividend or interest income or
who fails to certify to the Equity Funds that he or she is not subject to such
withholding. An individual's tax identification number is his or her social
security number.
The foregoing discussion is a general summary of certain current federal
income tax laws regarding the Equity Funds. The discussion does not purport to
deal with all of the federal income tax consequences applicable to the Equity
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 Equity Funds.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of the Equity
Funds, the Adviser and Subadviser are responsible for the investment decisions
and the placing of the orders for portfolio transactions for the Equity Funds.
Portfolio transactions for the Equity Funds are normally effected by brokers.
The Equity Funds have no obligation to enter into transactions in portfolio
securities with any broker, dealer, issuer, underwriter or other entity. In
placing orders, it is the policy of the Equity Funds to obtain the best price
and execution for its transactions. Where best price and execution may be
obtained from more than one broker or dealer, the Adviser or Subadviser may, in
its discretion, purchase and sell securities through brokers and dealers who
provide research, statistical and other information to the Adviser or
Subadviser. Such services may be used by the Adviser or Subadviser for all of
their investment advisory accounts, and accordingly, not all such services may
be used by the Adviser or Subadviser in connection with the Equity Funds. If an
Equity Fund determines in good faith that the amount of transaction costs
charged by a broker or dealer is reasonable in relation to the value of the
brokerage and research and statistical services provided by the executing broker
or dealer, the Equity Fund may utilize such broker or dealer although the
transaction costs of another broker or dealer are lower. The supplemental
information received from a broker or dealer is in addition to the services
required to be performed by the Adviser under the Investment Advisory Agreement
or Subadviser under the Investment Subadvisory Agreement, and the expenses of
the Adviser or Subadviser will not necessarily be reduced as a result of the
receipt of such information.
Neither the Equity Funds, the Adviser nor the Subadviser have entered into
agreements or understandings with any broker or dealer regarding the placement
of securities transactions. Because of research or information to the Adviser or
Subadviser for use in rendering investment advice to the Equity Funds, such
information may be supplied at no cost to the Adviser or Subadviser and,
therefore, may have the effect of reducing the expenses of the Adviser or
Subadviser in rendering advice to the Equity Funds. While it is impossible to
place an actual dollar value on such investment information, its receipt by the
Adviser and Subadviser probably does not reduce the overall expenses of the
Adviser or Subadviser to any material extent.
The investment information provided to the Adviser and Subadviser is of the
types described in Section 28(e)(3) of the Securities Exchange Act of 1934 and
is designed to augment the Adviser's and Subadviser's own internal
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research and investment strategy capabilities. Research and statistical services
furnished by brokers through which the Equity Funds effect securities
transactions are used by the Adviser and Subadviser in carrying out its
investment management responsibilities with respect to all its client accounts
but not all such services may be utilized by the Adviser and Subadviser in
connection with the Equity Funds.
The Equity Funds may deal in some instances in equity securities which are
not listed on an exchange but are traded in the over-the-counter market. Where
transactions are executed in the over-the-counter market, the Equity Funds seek
to deal with the primary market-makers; but when necessary in order to obtain
the best price and execution, it utilizes the services of others. In all cases,
the Equity Funds will attempt to negotiate best execution.
The Equity Funds may from time to time place orders for the purchase or
sale of securities (including listed call options) with DLJ Securities, the
Equity Funds' Distributor or other affiliates in accordance with the provisions
of Section 11(a) of the Securities Exchange Act of 1934 referred to below. With
respect to orders placed with DLJ Securities for execution on a national
securities exchange, commissions received must conform to Section 17(e)(2)(A) of
the 1940 Act and Rule 17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as the Equity Funds), or any affiliated
person of such person, to receive a brokerage commission from such registered
investment company provided that such commission is reasonable and fair compared
to the commissions received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, DLJ
Securities and its affiliates are restricted as to the nature and extent of the
brokerage services they may perform for the Equity Funds. The SEC has adopted
rules under Section 11(a) which permit an investment adviser to a registered
investment company, or the adviser's affiliates, to receive compensation for
effecting, on a national securities exchange, transactions in portfolio
securities of such investment company, including causing such transactions to be
transmitted, executed, cleared and settled and arranging for unaffiliated
brokers to execute such transactions.
To the extent permitted by such rule, DLJ Securities and its affiliates may
receive compensation relating to transactions in portfolio securities of the
Equity Funds provided that each Equity Fund enter into a written agreement, as
required by such rules, with that firm authorizing it to retain compensation for
such services. The Trustees of the Equity Funds have granted authorization
conforming to the requirements of Section 11(a) to the Adviser and Subadviser to
effect transactions in portfolio securities of the Equity Funds through their
affiliates, DLJ Securities and Autranet, Inc.
For the year ended October 31, 1996, brokerage commissions paid by the
Developing Markets Fund and International Equity Fund were $263,491 and
$363,085, respectively. DLJ Securities and Autranet, Inc., affiliates of the
Advisor and Sub-Advisor, did not receive any amounts of such brokerage
commissions.
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PORTFOLIO TURNOVER
Each Equity Fund's average annual portfolio turnover rate is the ratio of
the lesser of sales or purchases to the monthly average value of such securities
owned during the year, excluding from both the numerator and the denominator all
securities with maturities at the time of acquisition of one year or less. For
the year ended October 31, 1996, the portfolio turnover rates for the Developing
Markets Fund and the International Equity Fund were 26.76% and 94.12%,
respectively. A higher rate involves greater transaction costs to an Equity Fund
and may result in the realization of net capital gains, which would be taxable
to shareholders when distributed.
INVESTMENT PERFORMANCE INFORMATION
Each Equity Fund may furnish data about its investment performance in
advertisements, sales literature and reports to shareholders. 'Total return'
represents the change in value of $1,000 invested at the maximum public offering
price for a period assuming reinvestment of all dividends and distributions.
Quotations of yield will be based on the investment income per share earned
during a particular 30 day period, less expenses accrued during the period ('net
investment income') and will be computed by dividing net investment income by
the maximum offering price per share on the last day of the period, according to
the following formula:
YIELD = 2[(A-B + 1)'pp'6 - 1]
---
CD
where A = dividends and interest earned during the period, B = expenses accrued
for the period (net of any reimbursements), C = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and D = the maximum offering price per share on the last day of the period.
Quotations of average annual total return will reflect only the performance
of an investment in any Equity Fund during the particular time period shown.
Each Equity 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 Equity Fund's current
yield to yields published for other investment companies and other investment
vehicles. Average annual total return and yield should also be considered
relative to change in the value of each Equity Fund's shares and the risks
associated with each Equity Fund's investment objectives, policies and risk
considerations. At any time in the future, average annual total returns and
yield may be higher or lower than past total returns and yields and there can
be no assurance that any historical return or yield will continue.
From time to time evaluations of performance are made by independent
sources that may be used in advertisements concerning each Equity 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.
In connection with communicating its yield or average annual total return
to current or prospective shareholders, each Equity 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 costs.
Quotations of each Equity Fund's average annual total return will represent
the average annual compounded rate of return of a hypothetical investment in
each Equity Fund over periods of 1, 5, and 10 years (or up to the life of each
Equity Fund), and are calculated pursuant to the following formula:
P(1+T)'pp'n=ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). All
average annual total return figures will reflect the deduction of Equity Fund
expenses (net of certain expenses reimbursed by the Adviser and Subadviser) on
an annual basis, and will assume that all dividends and distributions are
reinvested and
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will deduct the maximum sales charge, if any is imposed. The Equity Funds may
also quote total return that eliminates any applicable initial sales charge or
contingent deferred sales charge.
For the year ended October 31, 1996, the average annual total return for
the Class A and Class B shares of the Developing Markets Fund was +4.51% and
+3.57%, respectively, and +8.35% and +7.52% for Class A and Class B shares,
respectively, of the International Equity Fund. Assuming deduction of the
maximum sales charge, the average annual total return for the Class A and Class
B shares of the Developing Markets Fund was - 1.50% and - .43%, respectively,
and +2.12% and +3.52 for Class A and Class B shares, respectively, of the
International Equity Fund.
SHARES OF BENEFICIAL INTEREST
Set forth below is certain information as to persons who owned 5% or more
of a Fund's outstanding shares as of January 17, 1997.
<TABLE>
<CAPTION>
DEVELOPING MARKETS FUND NAME AND ADDRESS % OF CLASS NATURE OF OWNERSHIP
----------------------- --------------------------------- ---------- --------------------
<S> <C> <C> <C>
Class A........................................... Hamilton E. James 21.04 Beneficial(a)
Donaldson Lufkin & Jenrette
277 Park Avenue
New York, NY 10172
DLJ Growth Fund 6.13 Record(a)
Bank of New York
One Wall Street
25th Floor
New York, NY 10286
Class B........................................... Donaldson Lufkin Jenrette 5.36 Record(a)
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 5.15 Record(a)
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
INTERNATIONAL EQUITY FUND
Class A........................................... DLJ Growth Fund 8.15 Record(a)
Bank of New York
One Wall Street
25th Floor
New York, NY 10286
Hamilton E. James 7.87 Beneficial(a)
Donaldson Lufkin & Jenrette
277 Park Avenue
New York, NY 10172
Robert Winthrop 5.89 Beneficial
c/o Wood Struthers & Winthrop
277 Park Avenue
New York, NY 10172
Class B........................................... None
</TABLE>
- ------------
(a) Such Recordholder disclaims beneficial ownership.
As of the date of this Statement of Additional Information the Trustees and
Officers of the Funds as a group owned less than 1% of the outstanding shares of
either Fund.
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GENERAL INFORMATION
ORGANIZATION AND CAPITALIZATION
The Trust 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 Equity Funds is liable to the Equity Funds or to a
shareholder, nor is any Trustee, officer, employee or agent liable to any third
persons 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 Equity Funds or the property of
the appropriate Equity Fund for satisfaction of claims arising in connection
with the affairs of an Equity 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 Equity Funds against all
liability in connection with the affairs of the Equity Funds.
All shares of the Equity 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 Equity 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 1940 Act and the laws of the State of Delaware.
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COUNSEL AND INDEPENDENT AUDITORS
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022, serves as legal counsel for the Equity Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, have been
appointed as independent auditors for the Equity Funds.
ADDITIONAL INFORMATION
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the Equity Funds
with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the offices of the SEC in Washington, D.C.
FINANCIAL STATEMENTS
The audited financial statements of each Equity Fund for the fiscal year
ended October 31, 1996 and the report of the Funds' independent auditors in
connection therewith are included in the October 31, 1996 Annual Report to
Shareholders. The Annual Report is incorporated by reference into this Statement
of Additional Information. You can obtain a copy of the Equity Funds' Annual
Report by writing or calling the Equity Funds at the address or telephone
numbers set forth on the cover of this Statement of Additional Information.
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APPENDIX
The following is a description of the ratings given by Moody's and S&P to
corporate bonds.
RATINGS OF CORPORATE BONDS
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having adequate capacity
to pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
MOODY'S:
Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt edge.'
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized
A-1
<PAGE>
<PAGE>
are most unlikely to impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities. Bonds which
are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Bonds rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
A-2
<PAGE>
<PAGE>
PART C
Other Information
Item 24 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements for the Winthrop Developing
Markets Fund and the Winthrop International Equity Fund
The following reports and financial statements are incorporated
in Part B of this Registration Statement by reference to the
Funds' Annual Report to Shareholders for the fiscal year ended
October 31, 1996:
Report of Independent Auditors dated December 13, 1996;
Statement of Investments as of October 31, 1996; Statement
of Assets and Liabilities as of October 31, 1996; Statement
of Operations for the year ended October 31, 1996; Statement
of Changes in Net Assets for the year ended October 31,
1996; Financial Highlights for the period from September 8,
1995 (commencement of operations) through October 31, 1995
and for the year ended October 31, 1996; Notes to Financial
Statements as of October 31, 1996.
Included in the Prospectus constituting Part A of this
Registration Statement:
Financial Highlights for the period from September 8, 1995
(commencement of operations) through October 31, 1995
(audited) and for the year ended October 31, 1996 (audited)
(b) Exhibits
(1) Form of Agreement and Declaration of Trust
(2) Form of Bylaws
(3) Not Applicable
(4) (a) Form of Stock Certificate of the Winthrop Developing
Markets Fund*
(b) Form of Stock Certificate of the Winthrop International
Equity Fund*
(5) (a) Form of Investment Advisory Agreement for the Winthrop
Developing Markets Fund and the Winthrop International
Equity Fund*
(b) Form of Sub-Advisory Agreement for the Winthrop
Developing Market Fund and the Winthrop International
Equity Fund*
(c) Form of Investment Advisory Agreement for the Winthrop
Municipal Money Fund and the Winthrop U.S. Government
Money Fund
(6) Form of Distribution Agreement for the Winthrop Opportunity
Funds*
(7) Not Applicable
(8) Form of Custodial Services Agreement for the
Winthrop Opportunity Funds*
(9) (a) Form of Custody Administration and Agency Agreement for
the Winthrop Developing Markets Fund and the Winthrop
International Equity Fund*
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<PAGE>
(b) Form of Custody Administration and Agency Agreement for
the Winthrop Municipal Money Fund and the Winthrop U.S.
Government Money Fund
(c) Form of Transfer Agent Services Agreement for the
Winthrop Developing Markets Fund and the Winthrop
International Equity Fund*
(d) Form of Transfer Agent Services Agreement for the
Winthrop Municipal Money Fund and the Winthrop U.S.
Government Money Fund
(e) Form of Accounting Services Agreement for the Winthrop
Developing Markets Fund and the Winthrop International
Equity Fund*
(f) Form of Accounting Services Agreement for the Winthrop
Municipal Money Fund and the Winthrop U.S. Government
Money Fund
(10) Legal Opinion*
(11) Consent of Independent Auditors
(12) Not Applicable
(13) (a) Form of Subscription Agreement with initial shareholders
for the Winthrop Developing Markets Fund and the Winthrop
International Equity Fund*
(b) Form of Subscription Agreement with the initial
shareholders for the Winthrop Municipal Money Fund and
the Winthrop U.S. Government Money Fund
(14) Form of Prototype Retirement Plans*
(15) (a) Rule 12b-1 Plans for the Winthrop Developing Markets Fund
and the Winthrop International Equity Fund*
(b) Rule 12b-1 Plans for the Winthrop Municipal Money Fund
and the Winthrop U.S. Government Money Fund
(16) Schedule of Performance Calculation
(17) (a) Financial Data Schedules**
(b) Powers of Attorney*
(18) Rule 18F-3 Plan*
----------------------------
* Previously filed.
** Included in the Prospectus.
Item 25 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Not Applicable
Item 26 NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Title of Numbers of Record
Class Holders (12/31/96)
------- ------------------
<S> <C>
Winthrop Developing Markets Fund-Class A 408
Winthrop Developing Markets Fund-Class B 308
Winthrop International Equity Fund-Class A 422
Winthrop International Equity Fund-Class B 331
</TABLE>
<PAGE>
<PAGE>
Item 27 INDEMNIFICATION
Registrant's Agreement and Declaration of Trust provides that the
Trust (for the appropriate Money or Equity Fund) shall indemnify each
person who is or has been a trustee or officer of the Trust (including
persons who serve, or have served, at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise) against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants and counsel fees, incurred in connection with the defense or
disposition of any action, suit or proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such
person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a person, except with respect to any
matter as to which it has been determined that such person (i) did not act
in good faith in the reasonable belief that such person's action was in the
best interests of the Trust or (ii) had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office.
The Investment Advisory Agreements between Registrant and DLJ
Investment Management Corp. (for the Money Funds) and Wood, Struthers &
Winthrop Management Corp. (for the Equity Funds) (together, the "Advisors")
and the Investment Sub-Advisory Agreement among the Registrant, AXA Asset
Management Partenaires (the "Sub-Advisor") and Wood, Struthers & Winthrop
Management Corp. (the "Sub-Advisory Agreement") provides that Advisors will
not be liable thereunder for any mistake of judgment or in any event
whatsoever except for lack of good faith and that nothing therein shall be
deemed to protect Advisors and Sub-Advisor against any liability to
Registrant or its security holders to which they would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties thereunder, or by reason of reckless disregard of
its duties and obligations thereunder.
The Sub-Advisory Agreement provides that the Sub- Advisor will
indemnify Wood, Struthers & Winthrop Management Corp. and its directors,
officers, employees, agents, associates and controlling persons while
acting in any capacity set forth in the Sub-Advisory Agreement except such
activities arising by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard to the duties involved in the conduct of
such person's office.
The Sub-Advisory Agreement provides that Wood, Struthers &
Winthrop Management Corp. will indemnify the Sub- Advisor and its
directors, officers, employees, agents, associates and controlling persons
while acting in any capacity set forth in the Sub-Advisory Agreement except
such activities arising by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard to the duties involved in the conduct of
such person's office.
<PAGE>
<PAGE>
The Distribution Agreement between the Registrant and Donaldson,
Lufkin & Jenrette Securities Corporation provides that Registrant will
indemnify, defend and hold Donaldson, Lufkin & Jenrette Securities
Corporation, and any other person who controls it within the meaning of
Section 15 of the Investment Company Act of 1940, free and harmless from
and against any and all claims, demands, liabilities and expenses which
Donaldson, Lufkin & Jenrette Securities Corporation or any controlling
person may incur arising out of or based upon any alleged untrue statement
of a material fact contained in Registrant's Registration Statement,
Prospectus or Statement of Additional Information or arising out of, or
based upon any alleged omission to state a material fact required to be
stated in any one of the foregoing or necessary to make the statements in
any one of the foregoing not misleading.
The foregoing summaries are qualified by the entire text of
Registrant's Agreement and Declaration of Trust, the Investment Advisory
Agreements between Registrant and the Advisors and the Distribution
Agreement between Registration and Donaldson, Lufkin & Jenrette Securities
Corporation. The Registrant's Investment Advisory Agreements are attached
hereto as exhibit 6 or have been previously filed, and the Agreement and
Declaration of Trust and the Distribution Agreement have been previously
filed in response to Item 24.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The Equitable Life Assurance Society of the United States (the
parent of Advisors' parent) carries for itself and its subsidiaries
Directors and Officers Liability Insurance. Coverage under this policy has
been extended to directors and officers of the investment companies managed
by the Advisors. Under this policy, outside trustees would be covered up to
the limits specified for any claim against them for acts committed in their
capacities as members of the Board.
Item 28 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The description of the Advisers under the caption "Management" in
the Prospectus and in the Statement of Additional
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<PAGE>
Information constituting Parts A and B, respectively, of this Registration
Statement as well as the Advisers' respective current Forms ADV are
incorporated by reference herein.
Item 29 PRINCIPAL UNDERWRITERS
(a) Donaldson, Lufkin & Jenrette Securities Corporation,
the Registrant's Distributor (Underwriter) also acts as
Distributor for the following investment companies:
Winthrop Focus Funds: Winthrop Aggressive Growth Fund,
Winthrop Fixed Income Fund, Winthrop Growth and Income
Fund, Winthrop Municipal Trust Fund and Winthrop Growth
Fund.
(b) For information required with respect to the directors and
officers of the Funds' Distributor, reference is made to the Form
BD filed by the Distributor under the Securities Exchange Act of
1934.
(c) Not Applicable
Item 30 LOCATION OF ACCOUNTS AND RECORDS
The majority of accounts, books and other documents required to
be maintained by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder are maintained at the offices of the Winthrop
Opportunity Funds at 277 Park Avenue, New York, New York 10172 (see
"Management" in the Prospectus). Additional records are maintained at the
offices of Citibank, N.A., the Registrant's Custodian, 111 Wall Street, New
York, New York 10043.
Item 31 MANAGEMENT SERVICES
Not applicable
Item 32 UNDERTAKINGS
(a) Not Applicable
(b) Registrant will file a post-effective amendment containing
unaudited financial statements for the Winthrop Municipal Money
Fund and the Winthrop U.S. Government Money Fund within four to
six months after effectiveness of Registrant's Registration
Statement.
(c) Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest Annual
Report to Shareholders upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration
<PAGE>
<PAGE>
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and the State of New York on the 24th
day of January, 1997.
Winthrop Opportunity Funds
/s/ G. Moffett Cochran
By:-------------------------
Name: G. Moffett Cochran
Title: President
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in
the capacities and on the date included:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ G. Moffett Cochran
______________________ Trustee and President January 24, 1997
G. Moffett Cochran
/s/ Martin Jaffe
______________________ Trustee and Vice President, January 24, 1997
Martin Jaffe Secretary and Treasurer
/s/ Robert E. Fischer
______________________ Trustee January 24, 1997
Robert E. Fischer
/s/ Wilmot H. Kidd III
______________________ Trustee January 24, 1997
Wilmot H. Kidd III
/s/ John W. Waller III
______________________ Trustee January 24, 1997
John W. Waller III
</TABLE>
Index of Exhibits to Form N-1A
Exhibits
(5) (b) Form of Investment Advisory Agreement for the
Winthrop Municipal Money Fund and the
Winthrop U.S. Government Money Fund
(9) (b) Form of Custody Administration and Agency
Agreement for the Winthrop Municipal Money
Fund and the Winthrop U.S. Government Money
Fund
(9) (d) Form of Transfer Agent Services Agreement for
the Winthrop Municipal Money Fund and the
Winthrop U.S. Government Money Fund
(9) (f) Form of Accounting Services Agreement for the
Winthrop Municipal Money Fund and the
Winthrop U.S. Government Money Fund
(11) Consent of Independent Auditors
(13) (b) Form of Subscription Agreement with the
initial shareholders for the Winthrop
Municipal Money Fund and the Winthrop U.S.
Government Money Fund
(14) (b) Rule 12b-1 Plans for the Winthrop Municipal
Money Fund and the Winthrop U.S. Government
Money Fund
(16) Schedule of Performance Calculation
<PAGE>
<PAGE>
STATEMENT OF DIFFERENCES
------------------------
Characters normally expressed as superscript shall be preceded by... 'pp'
The dagger symbol shall be expressed as............................ `D'
<PAGE>
<PAGE>
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated October 22,
1996, between the Winthrop Opportunity Funds for two of its
series, the Winthrop Municipal Money Fund and the Winthrop
U.S. Government Money Fund (individually, each a "Fund" and
collectively, the "Trust"), a Delaware business trust, and DLJ
Investment Management Corp. (the "Adviser"), a Delaware
corporation.
In consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, it
is agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth
herein, to act as investment adviser to the Trust with respect
to the investment of the Trust's assets and to supervise and
arrange the purchase of securities and other assets and the
sale of securities and other assets held in the investment
portfolio of the Trust in accordance with the Trust's
objectives and policies.
2. Duties and obligations of the Adviser with
respect to investments of assets of the Trust
(a) Subject to the succeeding provisions of
this section and subject to the direction and control of the
Trust's Board of Trustees, the Adviser shall (i) act as
investment adviser for and supervise and manage the investment
and reinvestment of the Trust's assets in accordance with the
Trust's objectives and policies and in connection therewith
have complete discretion in purchasing and selling securities
and all other assets for the Trust and in voting, exercising
consents and exercising all other rights appertaining to such
securities and other assets on behalf of the Trust, (ii)
supervise continuously the investment program of the Trust and
the composition of its investment portfolio, (iii) arrange,
subject to the provisions of Section 3 hereof, for the
purchase and sale of securities and all other assets held in
the investment portfolio of the Trust, (iv) retain, from time
to time, in its sole discretion, one or more sub-adviser(s)
(each, a "Sub-Adviser") that shall act as sub-adviser with
respect to certain assets designated by the Adviser, in its
sole discretion, to be managed by such Sub-Adviser in
accordance with the terms and conditions set forth herein and
to supervise each Sub-Adviser and (v) provide, from time to
time, certain administrative services listed in Section 8
herein to the Trust in accordance with the terms and
conditions provided herein.
(b) In the performance of its duties under this
Agreement, the Adviser shall at all times conform to, and act
in accordance with, any requirements imposed by (i) the
provisions of the Investment Company Act of 1940, as amended
<PAGE>
<PAGE>
(the "Act"), and of any rules or regulations in force
thereunder, (ii) any other applicable provision of law, (iii)
the provisions of the Declaration of Trust and By-Laws of the
Trust, as such documents are amended from time to time, (iv)
the investment objective and policies of the Trust as set
forth in its Registration Statement on Form N-1A and (v) any
policies and determinations of the Board of Trustees of the
Trust.
(c) The Adviser shall bear all costs and
expenses of its officers, directors and employees and any
overhead incurred in connection with its duties hereunder and
shall bear the costs of any salaries or trustees fees of any
officers or trustees of the Trust who are affiliated persons
(as defined in the Act) of the Adviser except that the Board
of Trustees of the Trust may approve reimbursement to the
Adviser of the pro rata portion of the salaries, bonuses,
health insurance, retirement benefits and all similar
employment costs for the time spent on Trust and Fund
operations (other than the provision of investment advice) of
all personnel employed by the Adviser who devote substantial
time to Trust operations.
(d) The Adviser shall give the Trust the
benefit of its best judgment and effort in rendering services
hereunder, but the Adviser shall not be liable for any act or
omission or for any loss sustained by the Trust in connection
with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under
this Agreement.
(e) Nothing in this Agreement shall prevent
the Adviser or any director, officer, employee or other
affiliate thereof from acting as investment adviser for any
other person, firm or corporation, or from engaging in any
other lawful activity, and shall not in any way limit or
restrict the Adviser or any of its directors, officers,
employees or agents from buying, selling or trading any
securities for its or their own accounts or for the accounts
of others for whom it or they may be acting, provided, however
that the Adviser will undertake no activities which, in its
judgment, will adversely affect the performance of its
obligations under this Agreement.
3. Portfolio Transactions and Brokerage
The Adviser is authorized, for the purchase and sale
of the Trust's portfolio securities, to employ such securities
brokers and dealers as may, in the judgment of the Adviser,
implement the policy of the Trust to obtain the best net
results taking into account such factors as price, including
commission or dealer spread, the size, type and difficulty of
the transaction involved, the firm's general execution and
operational facilities and the firm's risk in positioning the
securities involved. Consistent with this policy, the Adviser
is authorized to direct the execution of the Trust's portfolio
transactions to dealers and brokers furnishing statistical
<PAGE>
<PAGE>
information or research deemed by the Adviser to be useful or
valuable to the performance of its investment advisory
functions for the Trust in accordance with the requirements of
Section 28(e) of the Securities Exchange Act of 1934, as
amended.
4. Agency Cross Transactions. From time to time,
the Adviser or brokers or dealers affiliated with it may find
themselves in a position to buy for certain of their brokerage
clients securities which the Adviser's investment advisory
clients wish to sell, and to sell for certain of their
brokerage clients securities which advisory clients wish to
buy. Where one of the parties is an advisory client, the
Adviser or the affiliated broker or dealer cannot participate
in this type of transaction (known as a cross transaction) on
behalf of an advisory client and retain commissions from both
parties to the transaction without the advisory client's
consent. This is because in a situation where the Adviser is
making the investment decision (as opposed to a brokerage
client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from one or
both sides of the transaction, there is a potential
conflicting division of loyalties and responsibilities on the
Adviser's part regarding the advisory client. The Securities
and Exchange Commission has adopted a rule under the
Investment Advisers Act of 1940, as amended which permits the
Adviser or its affiliates to participate on behalf of the
Account in agency cross transactions if the advisory client
has given written consent in advance. By execution of this
Agreement, each Fund authorizes the Adviser or its affiliates
to participate in agency cross transactions involving the
Account. Each Fund may revoke its consent at any time by
written notice to the Adviser.
5. Compensation of the Adviser
(a) With respect to each Fund the Trust agrees
to pay to the Adviser and the Adviser agrees to accept as full
compensation for all services rendered by the Adviser as such,
a fee computed and payable monthly in an amount equal to the
aggregate of .40 of 1% of each Fund's average daily net asset
value on an annualized basis of each Fund with such amount
reduced to .35 of 1% of each Fund's average daily net assets
over $1 billion until termination of the Trust pursuant to its
Agreement and Declaration of Trust. For any period less than
a month during which this Agreement is in effect, the fee
shall be prorated according to the proportion which such
period bears to a full month of 28, 29, 30 or 31 days, as the
case may be.
(b) For purposes of this Agreement, the net
assets of the Trust shall be calculated pursuant to the
procedures for calculating the net asset value of the Trust's
shares adopted by resolutions of the Trustees of the Trust.
6. Net Asset Value Calculation Errors
To the extent the Adviser provides inaccurate
information to the transfer agent or any other party that
<PAGE>
<PAGE>
calculates either Fund's daily net asset value and such
information results in an error in the calculation of such
Fund's net asset value, the Adviser shall bear all costs and
expenses in connection with such error.
7. Indemnity
(a) The Trust hereby agrees to indemnify the
Adviser and each of the Adviser's directors, officers,
employees, agents- (including any sub-advisers), associates
and controlling persons and the partners, directors, officers,
employees and agents thereof (including any individual who
serves at the Adviser's request as director, officer, partner,
trustee or the like of another entity) (each such person being
an "Indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees (all as
provided in accordance with applicable corporate law)
reasonably incurred by such Indemnitee in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or investigative body in which such Indemnitee
may be or may have been involved as a party or otherwise or
with which such Indemnitee may be or may have been threatened,
while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity,
except with respect to any matter as to which such Indemnitee
shall have been adjudicated not to have acted in good faith in
the reasonable belief that such Indemnitee action was in the
best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no
reasonable cause to believe that the conduct was unlawful,
provided, however, that (1) no Indemnitee shall be indemnified
hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by
reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence or (iv) reckless disregard of the duties involved
in the conduct of such Indemnitee's position (the conduct
referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by
such Indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other
expenses shall be provided unless there has been a
determination that such settlement or compromise is in the
best interests of the Trust and that such Indemnitee appears
to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust and
did not involve disabling conduct by such Indemnitee and (3)
with respect to any action, suit or other proceeding
voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of
such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of Trustees of the
Trust.
(b) The Trust shall make advance payments in
connection with the expenses of defending any action with
respect to which indemnification might be sought hereunder if
<PAGE>
<PAGE>
the Trust receives a written affirmation of the Indemnitee's
good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that
such Indemnitee is entitled to such indemnification and if the
trustees of the Trust determine that the facts then known to
them would not preclude indemnification. In addition, at
least one of the following conditions must be met: (A) the
Indemnitee shall provide a security for such Indemnitee's
undertaking, (B) the Trust shall be insured against losses
arising by reason of any lawful advances, or (C) a majority of
a quorum consisting of trustees of the Trust who are neither
"interested persons" of the Trust (as defined in Section
2(a)(19) of the Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal
counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-
type inquiry), that there is reason to believe that the
Indemnitee ultimately will be found entitled to
indemnification.
(c) All determinations with respect to
indemnification hereunder shall be made (1) by a final
decision on the merits by a court or other body before whom
the proceeding was brought that such Indemnitee is not liable
by reason of disabling conduct or, (2) in the absence of such
a decision, by (i) a majority vote of a quorum of the
Disinterested Non-party Trustees of the Trust, or (ii) if such
a quorum is not obtainable or even, if obtainable, if a
majority vote of such quorum so directs, independent legal
counsel in a written opinion. All determinations that advance
payments in connection with the expense of defending any
proceeding shall be authorized shall be made in accordance
with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under
these provisions shall not exclude any other right to which
such Indemnitee may be lawfully entitled.
8. Duration and Termination
This Agreement shall become effective on the date it
is approved by the shareholders of the Trust and shall
continue in effect for a period of two years and thereafter
from year to year, but only so long as such continuation is
specifically approved at least annually in accordance with the
requirements of the Act.
This Agreement may be terminated by the Adviser at
any time without penalty upon giving the Trust sixty days
written notice (which notice may be waived by the Trust) or
may be terminated by the Trust at any time without penalty
upon giving the Adviser sixty days notice (which notice may be
waived by the Adviser), provided that such termination by the
Trust shall be directed or approved by the vote of a majority
of the Trustees of the Trust in office at the time or by the
vote of the holders of a "majority" (as defined in the Act) of
the voting securities of the Trust at the time outstanding and
entitled to vote. This Agreement shall terminate
<PAGE>
<PAGE>
automatically in the event of its assignment (as assignment is
defined in the Act).
9. Administrative Services
(a) The Adviser may, from time to time,
provide administrative services for the Trust including the
following: (i) maintaining each Fund's books and records, such
as journals, ledger accounts and other records in accordance
with applicable laws and regulations to the extent not
maintained by each Fund's custodian, transfer agent and
dividend disbursing agent, (ii) transmitting purchase and
redemption orders for each Fund's shares to the extent not
transmitted by each Fund's distributor or others who purchase
and redeem shares, (iii) initiating all money transfers to
each Fund's custodian and from each Fund's custodian for the
payment of each Fund's expenses, investments, dividends and
share redemptions, (iv) reconciling account information and
balances among each Fund's custodian, transfer agent,
distributor, dividend disbursing agent and the Adviser, (v)
providing the Funds, upon request, with such office space and
facilities, utilities and office equipment as are adequate for
each Fund's needs, (vi) preparing, but not paying for, all
reports by the Trust, on behalf of each Fund, to their
shareholders and all reports and filings required to maintain
the registration and qualification of each Fund's shares under
federal and state law including periodic updating of the
Trust's registration statement and Prospectus (including its
Statement of Additional Information), (vii) supervising the
calculation of the net asset value of each Fund's shares,
(viii) preparing notices and agendas for meetings of each
Fund's shareholders and the Trust's Board of Trustees as well
as minutes of such meetings in all matters required by
applicable law to be acted upon by the Board of Trustees and
(ix) other services generally performed by administrators of
funds.
(b) In connection with such administrative
services described in paragraph (a) of this Section and in
addition to the compensation described in Section 4 herein,
the Adviser shall be reimbursed by the Trust for all costs and
expenses (including out-of-pocket expenses) and the pro rata
portion of the direct and indirect costs of personnel
including, but not limited to, the salaries, bonuses, health
insurance, retirement benefits and all similar employment
costs of such persons for the time spent providing such
administrative services.
10. Notices
Any notice under this Agreement shall be in writing
to the other party at such address as the other party may
designate from time to time for the receipt of such notice and
shall be deemed to be received on the earlier of the date
actually received or on the fourth day after the postmark if
such notice is mailed first class postage prepaid.
11. Governing Law
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<PAGE>
This Agreement shall be construed in accordance with
the laws of the State of New York for contracts to be
performed entirely therein without reference to choice of law
principles thereof and in accordance with the applicable
provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused
the foregoing instrument to be executed by their duly
authorized officers, all as of the day and the year first
above written.
WINTHROP OPPORTUNITY FUNDS
WINTHROP MUNICIPAL MONEY FUND
WINTHROP U.S. GOVERNMENT MONEY FUND
By_________________________________
Name:
Title:
DLJ INVESTMENT MANAGEMENT CORP.
By_________________________________
Name:
Title
<PAGE>
<PAGE>
AMENDMENT TO CUSTODY ADMINISTRATION AND AGENCY AGREEMENT
This AGREEMENT, dated as of the -------- day of -----------------,
1997, made by and between Winthrop Opportunity Funds, a business trust (the
"Trust") operating as an open-end management investment company registered
under the Investment Company Act of 1940, as amended, duly organized and
existing under the laws of the State of Delaware and FPS Services, Inc.
("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into a Custody Administration and
Agency Agreement dated April 1, 1995, wherein FPS agreed to provide certain
agency services concerning the custody of the assets of the Trust (the
"Agreement");
WHEREAS, the Parties wish to amend the Agreement to: (i) reflect the
change in the name of FPS; (ii) amend Schedule "B" of the Agreement and to
include under its general terms two separate series of shares to be known
as "Winthrop U.S. Government Money Fund" and "Winthrop Municipal Money
Fund" (the "Money Funds"); and (iii) the addition to the Agreement of
Schedules "C" and "D" which set forth, respectively, the services to be
provided to the Money Funds and the fees to be charged there against.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do
hereby agree:
1. That Schedule "B" of the Agreement be replaced in its entirety
with Schedule "B" attached hereto;
2. That Schedule "C" in the form attached hereto become part of the
Agreement setting forth the services to be performed by FPS on behalf
of the Money Funds; and
3. That Schedule "D" in the form attached hereto become part of the
Agreement setting forth the fees to be charged by FPS for the
services performed by it on behalf of the Money Funds.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "B," "C" and
"D," to be signed by their duly authorized officers as of the day and year
first above written.
Winthrop Opportunity Fund FPS Services, Inc.
- ---------------------------------- ------------------------------------
Martin Jaffe, Treasurer Kenneth J. Kempf, President
SCHEDULE "B"
<PAGE>
<PAGE>
Identification of Series
Below are listed the Series and Classes of Shares to which services under
this Agreement are to be performed as of the Effective Date of this
Agreement:
"WINTHROP OPPORTUNITY FUNDS"
1. Winthrop Developing Markets Fund - Class A Shares
2. Winthrop Developing Markets Fund - Class B Shares
3. Winthrop International Equity Fund - Class A Shares
4. Winthrop International Equity Fund - Class B Shares
5. Winthrop U.S. Government Money Fund
6. Winthrop Municipal Money Fund
This Schedule "B" may be amended from time to time by agreement of the
Parties.
SCHEDULE "C"
SCHEDULE OF CUSTODY ADMINISTRATION AND AGENCY SERVICES
FOR
WINTHROP U.S. GOVERNMENT MONEY FUND AND
WINTHROP MUNICIPAL MONEY FUND
O ASSIGN AN EXPERIENCED CUSTODY ADMINISTRATOR TO ACCEPT, CONTROL AND
PROCESS DAILY PORTFOLIO TRANSACTIONS.
O MATCH AND REVIEW DTC ELIGIBLE ID'S AND TRADE INFORMATION WITH
INSTRUCTIONS FOR ACCURACY AND COORDINATE WITH CUSTODIAN AND THE
FUND'S PORTFOLIO ACCOUNTING AGENT FOR RECORDING AND AFFIRMATION
PROCESSING WITH THE DEPOSITORY.
O SETTLE ALL DEPOSITORY ELIGIBLE ISSUES IN A TOTALLY AUTOMATED
ENVIRONMENT. TRANSACTIONS REQUIRING PHYSICAL DELIVERY WILL BE
SETTLED THROUGH THE CUSTODIAN'S NEW YORK OFFICE.
O ASSIST IN PLACING CASH MANAGEMENT TRADES THROUGH CUSTODIAN,
COMMERCIAL PAPER, CD'S AND REPURCHASE AGREEMENTS.
O PROVIDE FUNDS' PORTOFOLIO ACCOUNTING AGENT AND FUND PERSONNEL WITH DAILY
CUSTODIAN STATEMENTS REFLECTING ALL PRIOR DAY CASH ACTIVITY ON BEHALF OF
EACH PORTFOLIO BY 8:30 A.M. EASTERN TIME. COMPLETE DESCRIPTIONS OF ANY
POSTING, INCLUSIVE OF SEDOL/CUSIP NUMBERS, INTEREST/DIVIDEND PAYMENT
DATE, CAPITAL STOCK DETAILS, EXPENSE AUTHORIZATIONS, BEGINNING/ENDING
CASH BALANCES, ETC. WILL BE PROVIDED BY THE CUSTODIAN'S REPORTS OR
SYSTEM.
O ACTIVITY STATEMENTS COMBINING BOTH CASH CHANGES AND SECURITY TRADES
INCLUDING PORTFOLIO LISTING WILL BE PROVIDED EACH MONTH.
O COMMUNICATE TO THE FUNDS' PORTFOLIO ACCOUNTING AGENT AND THE FUND ANY
CORPORATE ACTIONS, CAPITAL CHANGES AND INTEREST RATE CHANGES SUPPORTED
BY APPROPRIATE SUPPLEMENTAL REPORTS RECEIVED FROM THE CUSTODIAN.
<PAGE>
<PAGE>
FOLLOW-UP WILL BE MADE WITH THE CUSTODIAN INSURING ALL NECESSARY ACTIONS
AND/OR PAPERWORK IS COMPLETED.
O ASSIST THE FUNDS' PORTFOLIO ACCOUNTING AGENT AND THE CUSTODIAN BANK ON
MONTHLY ASSET RECONCILIATION.
O COORDINATE AND RESOLVE UNSETTLED DIVIDENDS, INTEREST, PAYDOWNS AND
CAPITAL CHANGES. ASSIST IN RESOLUTION OF FAILED TRANSACTIONS AND
ANY SETTLEMENT PROBLEMS.
O PROVIDE A COMPREHENSIVE PROGRAM THAT AUDITS TRANSACTIONS, MONITORS
AND EVALUATES THE CUSTODIAN'S SERVICE AND RECOMMENDS CHANGES THAT
MAY IMPROVE PERFORMANCE.
O ARRANGE FOR SECURITIES LENDING, LINES OF CREDIT AND/OR LETTERS OF
CREDIT THROUGH CUSTODIAN.
O MONITOR FUNDS CASH POSITIONS.
O PROVIDE AUTOMATED MORTGAGE-BACKED PROCESSING THROUGH CUSTODIAN.
O PROVIDE FUND'S AUDITORS WITH TRADE DOCUMENTATION TO HELP EXPEDITE
FUND'S AUDIT.
SCHEDULE "D"
SCHEDULE OF FEES FOR CUSTODY ADMINISTRATION AND AGENCY SERVICES
FOR
WINTHROP U.S. GOVERNMENT MONEY FUND AND
WINTHROP MUNICIPAL MONEY FUND
This Fee Schedule is fixed for a period of two years from January 1, 1997
and shall not increase greater than 10% during the one year period
beginning January 1, 1999.
CUSTODY OF FUND ASSETS USING CITIBANK, N.A.
I. DOMESTIC SECURITIES AND ADRS PER PORTFOLIO: (1/12TH PAYABLE
MONTHLY)
.00015 ON THE FIRST $ 50 MILLION OF AVERAGE NET ASSETS
.000125 ON THE NEXT $ 50 MILLION OF AVERAGE NET ASSETS
.0001 ON THE NEXT $400 MILLION OF AVERAGE NET ASSETS
.00008 ON THE NEXT $500 MILLION OF AVERAGE NET ASSETS
.00006 OVER $ 1 BILLION OF AVERAGE NET ASSETS
MINIMUM MONTHLY FEE IS $500 PER PORTFOLIO.
II. CUSTODY DOMESTIC SECURITIES TRANSACTIONS CHARGE:
(BILLED MONTHLY)
BOOK ENTRY, DTC, FEDERAL BOOK ENTRY $12.00
PTC, HELD ELSEWHERE SECURITIES $15.00
Physical Securities, Options $24.00
P&I PAYDOWNS $ 7.00
<PAGE>
<PAGE>
WIRES $ 5.00
CHECK REQUEST $ 8.50
A TRANSACTION INCLUDES BUYS, SELLS, MATURITIES OR FREE
SECURITY MOVEMENTS.
III. WHEN ISSUED, SECURITIES LENDING, INDEX FUTURES, ETC.
SHOULD ANY INVESTMENT VEHICLE REQUIRE A SEPARATE SEGREGATED
CUSTODY ACCOUNT, A FEE OF $125 PER ACCOUNT PER MONTH WILL
APPLY.
IV. CUSTODY MISCELLANEOUS FEES
ADMINISTRATIVE FEES INCURRED IN CERTAIN LOCAL MARKETS WILL BE
PASSED ONTO THE CUSTOMER WITH A DETAILED DESCRIPTION OF THE FEES.
FEES INCLUDE INCOME COLLECTION, CORPORATE ACTION HANDLING, FUNDS
TRANSFER, SPECIAL LOCAL TAXES, STAMP DUTIES, REGISTRATION FEES,
MESSENGER AND COURIER SERVICES AND OTHER OUT-OF- POCKET EXPENSES.
V. OUT-OF-POCKET EXPENSES
THE FUNDS WILL REIMBURSE FPS SERVICES, INC. MONTHLY FOR ALL
REASONABLE OUT-OF- POCKET EXPENSES, INCLUDING TELEPHONE, POSTAGE,
OVERDRAFT CHARGES, TELECOMMUNICATIONS, SPECIAL REPORTS, RECORD
RETENTION, SPECIAL TRANSPORTATION COSTS, COPYING AND SENDING
MATERIALS TO AUDITORS AND/OR REGULATORY AGENCIES AS INCURRED AND
APPROVED.
VI. ADDITIONAL SERVICES
TO THE EXTENT THE FUNDS COMMENCE USING INVESTMENT TECHNIQUES SUCH
AS FUTURES, SECURITY LENDING, SWAPS, LEVERAGING, SHORT SALES,
DERIVATIVES, PRECIOUS METALS, OR FOREIGN TRADING (NON U.S. DOLLAR
DENOMINATED SECURITIES AND CURRENCY), ADDITIONAL FEES WILL APPLY.
ACTIVITIES OF A NON-RECURRING NATURE SUCH AS SHAREHOLDER INKINDS,
FUND CONSOLIDATIONS, MERGERS OR REORGANIZATIONS WILL BE SUBJECT TO
NEGOTIATION. ANY ADDITIONAL/ENHANCED SERVICES, PROGRAMMING
REQUESTS, OR REPORTS WILL BE QUOTED UPON REQUEST.
<PAGE>
<PAGE>
AMENDMENT TO TRANSFER AGENT SERVICES AGREEMENT
This AGREEMENT, dated as of the -------- day of -----------, 1997,
made by and between Winthrop Opportunity Funds, a business trust (the
"Trust") operating as an open-end management investment company registered
under the Investment Company Act of 1940, as amended, duly organized and
existing under the laws of the State of Delaware and FPS Services, Inc.
("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into an Transfer Agent Agreement
dated April 1, 1995, wherein FPS agreed to provide certain shareholder
services to the Trust (the "Agreement"); and
WHEREAS, the Parties wish to amend the Agreement to: (i) reflect the
change in the name of FPS; (ii) amend Schedule "C" of the Agreement and to
include under its general terms two separate series of shares to be known
as "Winthrop U.S. Government Money Fund" and "Winthrop Municipal Money
Fund" (the "Money Funds"); and (iii) the addition to the Agreement of
Schedules "D" and "E" which set forth, respectively, the services to be
provided to the Money Funds and the fees to be charged there against.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do
hereby agree:
1. That Schedule "C" of the Agreement be replaced in its entirety
with Schedule "C" attached hereto;
2. That Schedule "D" in the form attached hereto become part of the
Agreement setting forth the services to be performed by FPS on behalf
of the Money Funds; and
3. That Schedule "E" in the form attached hereto become part of the
Agreement setting forth the fees to be charged by FPS for the
services performed by it on behalf of the Money Funds.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "C," "D" and
"E," to be signed by their duly authorized officers as of the day and year
first above written.
Winthrop Opportunity Fund FPS Services, Inc.
- --------------------------------- ---------------------------------
Martin Jaffe, Treasurer Kenneth J. Kempf, President
SCHEDULE "C"
Identification of Series
<PAGE>
<PAGE>
Below are listed the Series and Classes of Shares to which services under
this Agreement are to be performed as of the Effective Date of this
Agreement:
"WINTHROP OPPORTUNITY FUNDS"
1. Winthrop Developing Markets Fund - Class A Shares
2. Winthrop Developing Markets Fund - Class B Shares
3. Winthrop International Equity Fund - Class A Shares
4. Winthrop International Equity Fund - Class B Shares
5. Winthrop U.S. Government Money Fund
6. Winthrop Municipal Money Fund
This Schedule "C" may be amended from time to time by agreement of the
Parties.
SCHEDULE "D"
SCHEDULE OF TRANSFER AGENCY AND SHAREHOLDER SERVICES
FOR
WINTHROP U.S. GOVERNMENT MONEY FUND AND
WINTHROP MUNICIPAL MONEY FUND
I. - Shareholder File Services
1. Establish new accounts and enter demographic data into shareholder
base. Includes in-house processing and NSCC - Fund/SERV - Networking
transmissions.
2. Create Customer Information File (CIF) to link accounts within the
Fund and across funds within the Fund Group. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.
3. 100% quality of new account information, including verification of
initial investment.
4. Systematic linkage of shareholder accounts with exact matches on SSN
and address for the purpose of consolidated account history
reporting. Periodic production of laser printed combined statements.
*5. Production of household mailing labels which enable the Fund to do
special mailings to each address in the Fund Group rather than each
account.
6. Maintain account and customer file records based on shareholder
request and routine quality review.
7. Maintain tax ID certification and NRA records for each account,
including backup withholding.
8. Provide written confirmation of address changes.
9. Produce shareholder statements for daily activity, dividends,
on-request, third party, and periodic mailings.
<PAGE>
<PAGE>
*10. Produce shareholder lists, labels and ad hoc reports to Fund
management as requested. (first 10 requests included at no additional
cost)
11. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
12. Image all applications, account documents, data changes,
correspondence, monetary transactions, and other pertinent
shareholder documents.
II. - Shareholder Services
1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research and
correspondence representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals, pre-authorized drafts, FundSERV
and wire order trades, problem solving and process telephone
transactions.
3. Silent monitoring of shareholder calls by the phone supervisor to
ensure exceptional customer service.
4. Record and maintain tape recordings of all shareholder calls for a
six month period.
5. Phone Supervisor produces daily management reports of shareholder
calls which track volumes, length of calls, average wait time and
abandoned call rates to ensure quality service.
6. Phone representatives are thoroughly trained through in house
training programs on the techniques of providing Exceptional Customer
Service.
7. Customer inquiries received by letter or telephone are thoroughly
researched by a correspondence team member. These inquires include
such items, as account/customer file information, complete historical
account information, stop payments on checks, transaction details,
and lost certificates.
III. - Investment Processing
1. Initial investment (checks or Fed wires).
2. Subsequent investments via daily sweep purchases.
3. Other investments (checks or Fed wires) processed through lock box.
4. Pre-authorized investments (PAD) through ACH system.
5. Government allotments through ACH system.
6. Prepare and process telephone purchase transactions.
<PAGE>
<PAGE>
7. NSCC-FundSERV trades.
IV. - Redemption Processing
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal File and process automated
transactions on monthly basis.
4. Redemptions processed through daily sweep transactions.
5. Redemptions proceeds distributed to shareholder by check, Fed wire or
ACH processing.
6. Provide NSCC - FundSERV trade processing.
V. - Exchange & Transfer Processing
1. Process legal transfers.
2. Issue and cancel certificates.
3. Replace certificates through surety bonds (separate charge to
shareholder).
4. Process exchange transactions (letter and telephone request).
5. Process ACATS transfers.
VI. - Retirement Plan Services
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70-1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRA's and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered:
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
VII. - Settlement & Control
<PAGE>
<PAGE>
1. Daily review of processed shareholder transactions to assure input
was processed correctly. Accurate trade activity figures passed to
Funds' Accounting Agent by 10:00 a.m. EST.
2. Preparation of daily cash movement information to be passed to the
Funds' Accounting Agent and Custodian Bank by 10:00 a.m. EST for use
in determining Funds' daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to include the proper notification of
any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of Funds' declared daily dividends and any
capital gains to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is posted.
Verify the posting date shares, the rate used and the NAV
price of reinvest date to ensure dividend was posted properly.
c. Distribute copies to the Funds' Accounting Agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement information for the cash portion of
the dividend payment on payable date.
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9. Aggregate tax filings for all FPS clients. Monthly deposits to the
IRS of all types withhold from shareholder disbursements,
distributions and foreign account distributions. Correspond with the
IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV activity.
VIII. - Year End Processing
1. Maintain shareholder records in accordance with IRS notices for
under-reporting and invalid Tax IDs. This includes initiating 31%
backup withholding and notifying shareholders of their tax status and
the corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
<PAGE>
<PAGE>
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year end activity with client. Activities include
producing year end statements, scheduling record dates for year
dividends and capital gains, production of combined statements and
printing of inserts to be mailed with tax forms.
6. Distribute Dividend Letter to funds for them to sign off on all
distributions paid year to date. Dates and rates must be authorized
so that they can be used for reporting to the IRS.
7. Coordinate the ordering of form stock and envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year end statements and tax forms.
9. Match and settle tax reporting totals to fund records and on-line
data from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.
12. Prepare IRS magnetic tapes and appropriate forms for the filing of
all reportable activity to the Internal Revenue Service.
IX. - Client Services
1. An Account Manager is assigned to each relationship. The Account
Manager acts as the liaison between the Fund and the Transfer Agency.
Responsibilities include scheduling of events, system enhancement
implementation, special promotion/event implementation and follow-up,
and constant fund interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailing and special
mailings.
b. Coordinate with the Fund the shipment of materials for scheduled
mailings.
c. Liaison between the Fund and support services for preparation of
proofs and eventual printing of statement forms, certificates,
proxy cards, envelopes, etc.
d. Handle all notification to the client regarding proxy tabulation
through the meeting. Coordinate scheduling of materials, including
voted cards, tabulation letters, and shareholder list, to be
available for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
<PAGE>
<PAGE>
f. Implement any new operational procedures, i.e., minimum waivers,
sweeps, telephone options, PAD promotions, etc.
g. Coordinate with systems, services and operations any special
events, i.e., mergers, new fund start ups, small account
liquidations, combined statements, household mailings, additional
mail files, etc.
h. Prepare standard operating procedures and review prospectuses for
new start up funds and our current client base. Coordinate
implementation of suggested changes with the Fund.
i. Liaison between the Fund and the Transfer Agency staff regarding
all service and operational issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and mailroom.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Funds' direction.
b. Provide daily and monthly reports to enable the Fund to do
necessary state filings.
*Separate fees will apply for these services.
X. - Periodic Reports
1. Daily Reports
Report Number Report Description
------------- ------------------
-- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report
2. Monthly Reports
Report Description
------------------
Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type
<PAGE>
<PAGE>
SCHEDULE "E"
SCHEDULE OF FEES FOR TRANSFER AGENCY AND SHAREHOLDER SERVICES
FOR
WINTHROP U.S. GOVERNMENT MONEY FUND AND
WINTHROP MUNICIPAL MONEY FUND
This Fee Schedule is fixed for a period of two years from January 1, 1997
and shall not increase greater than 10% during the one year period
beginning January 1, 1999.
I. TRANSFER AGENT AND SHAREHOLDER SERVICES:
$18.00 PER ACCOUNT PER YEAR
$16.00 PER ACCOUNT PER YEAR FOR ACCOUNTS OVER 25,000
$14.00 PER ACCOUNT PER YEAR FOR ACCOUNTS OVER 50,000
$12.00 PER ACCOUNT PER YEAR PER PORTFOLIO FOR EACH SWEEP ACCOUNT
ANNUAL MINIMUM FEE FOR THE ABOVE NAMED FUNDS IS $66,000.
II. IRA'S, 403(B) PLANS, DEFINED CONTRIBUTION/BENEFIT PLANS:
ANNUAL MAINTENANCE FEE - $12.00 PER ACCOUNT PER YEAR
(NORMALLY CHARGED TO PARTICIPANTS)
III. OUT-OF-POCKET EXPENSES
THE FUNDS WILL REIMBURSE FPS SERVICES, INC. MONTHLY FOR ALL
REASONABLE OUT-OF- POCKET EXPENSES, INCLUDING TELEPHONE, POSTAGE,
OVERDRAFT CHARGES, TELECOMMUNICATIONS, FUND/SERV AND NETWORKING
EXPENSES, SPECIAL REPORTS, RECORD RETENTION, SPECIAL TRANSPORTATION
COSTS, COPYING AND SENDING MATERIALS TO AUDITORS AND/OR REGULATORY
AGENCIES AS INCURRED AND APPROVED.
IV. ADDITIONAL SERVICES
TO THE EXTENT THE FUNDS COMMENCE USING INVESTMENT TECHNIQUES SUCH
AS FUTURES, SECURITY LENDING, SWAPS, LEVERAGING, SHORT SALES,
DERIVATIVES, PRECIOUS METALS, OR FOREIGN TRADING (NON U.S. DOLLAR
DENOMINATED SECURITIES AND CURRENCY), ADDITIONAL FEES WILL APPLY.
ACTIVITIES OF A NON-RECURRING NATURE SUCH AS SHAREHOLDER INKINDS,
FUND CONSOLIDATIONS, MERGERS OR REORGANIZATIONS WILL BE SUBJECT TO
NEGOTIATION. ANY ADDITIONAL/ENHANCED SERVICES, PROGRAMMING
REQUESTS, OR REPORTS WILL BE QUOTED UPON REQUEST.
<PAGE>
<PAGE>
AMENDMENT TO ACCOUNTING SERVICES AGREEMENT
This AGREEMENT, dated as of the ------- day of -------------- , 1997,
made by and between Winthrop Opportunity Funds, a business trust (the
"Trust") operating as an open-end management investment company registered
under the Investment Company Act of 1940, as amended, duly organized and
existing under the laws of the State of Delaware and FPS Services, Inc.
("FPS") (formerly known as Fund/Plan Services, Inc.), a corporation duly
organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPS entered into an Accounting Services
Agreement dated April 1, 1995, wherein FPS agreed to provide certain
portfolio accounting and pricing services to the Trust (the "Agreement");
and
WHEREAS, the Parties wish to amend the Agreement to: (i) reflect the
change in the name of FPS; (ii) amend Schedule "C" of the Agreement and to
include under the Agreement's terms two separate series of shares to be
known as "Winthrop U.S. Government Money Fund" and "Winthrop Municipal
Money Fund" (the "Money Funds"); and (iii) the inclusion under the
Agreement of Schedules "D" and "E" which set forth, respectively, the
services to be provided to the Money Funds and the fees to be charged there
against.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do
hereby agree:
1. That Schedule "C," of the Agreement be replaced in its entirety
with Schedule "C" attached hereto;
2. That Schedule "D" in the form attached hereto become part of the
Agreement setting forth the services to be performed by FPS on behalf
of the Money Funds; and
3. That Schedule "E" in the form attached hereto become part of the
Agreement setting forth the fees to be charged by FPS for the
services performed by it on behalf of the Money Funds.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement,
consisting of one type-written page, together with Schedules "C" "D" and
"E," to be signed by their duly authorized officers as of the day and year
first above written.
Winthrop Opportunity Fund FPS Services, Inc.
- --------------------------------- ---------------------------------
Martin Jaffe, Treasurer Kenneth J. Kempf, President
SCHEDULE "C"
<PAGE>
<PAGE>
Effective April 1, 1995
Amended --------------, 1997
Identification of Series
Below are listed the Series and Classes of Shares to which services under
this Agreement are to be performed as of the Effective Date of this
Agreement:
"WINTHROP OPPORTUNITY FUNDS"
1. Winthrop Developing Markets Fund - Class A Shares
2. Winthrop Developing Markets Fund - Class B Shares
3. Winthrop International Equity Fund - Class A Shares
4. Winthrop International Equity Fund - Class B Shares
5. Winthrop U.S. Government Money Fund
6. Winthrop Municipal Money Fund
This Schedule "C" may be amended from time to time by agreement of the
Parties.
SCHEDULE "D"
SCHEDULE OF FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
TO BE PERFORMED ON BEHALF OF
WINTHROP U.S. GOVERNMENT MONEY FUND AND
WINTHROP MUNICIPAL MONEY FUND
(A FUND OR COLLECTIVELY, THE FUNDS)
I. Daily Accounting Services
1) Calculate Net Asset Value ("NAV") and Daily Dividend Rate:
o Provide money market original and amortized cost schedules in
accordance with valuing the Fund based on amortized cost, inclusive
of all debt issues income accruals.
o Prepare Net Asset Value (NAV) proof sheets. Review components of
change in NAV and distribution rate for reasonableness.
o Calculate net investment income available for distribution daily.
o Verify system calculated dollar average weighted maturity.
o Calculate daily rate, and 1, 7, 30-day yields.
o Supply Trust's transfer agent (the "Transfer Agent"), and Wood,
Struthers & Winthrop with distribution rates, average weighted
maturity and 1, 7, 30-day yields.
o If applicable, communicate required information electronically to
NASDAQ.
2) Determine and Report Cash Availability by approximately 9:00 AM
Eastern Time and 1:00 PM Eastern Time, as provided by the Funds'
Transfer Agent :
o Receive daily cash and transaction statements from the Trust's
custodian (the "Custodian") by 8:30 AM Eastern time.
o Receive previous day shareholder activity reports from the Transfer
Agent by 8:30 AM Eastern time and 12:30 PM Eastern time.
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<PAGE>
o Hard copy Cash Availability calculations with all details to Wood,
Struthers & Winthrop will be supplied by the Transfer Agent.
o Prepare and complete daily bank cash reconciliations including
documentation of any reconciling items and notify the Custodian
and Wood, Struthers & Winthrop.
3) Reconcile and Record All Daily Expense Accruals:
o Accrue expenses based on budget supplied by Wood, Struthers &
Winthrop either as percentage of net assets or specific dollar
amounts.
o If applicable, monitor expense limitations established by Wood,
Struthers & Winthrop.
o If applicable, accrue daily amortization of Organizational Expense.
o Complete daily accrual of 12b-1 expenses.
4) Verify and Record All Daily Income Accruals for Debt and Money Market
Issues:
o Review and verify all system generated Interest and Amortization
reports.
o Establish unique security codes for fixed income and money market
issues to permit segregated Trial Balance income reporting.
o Review and verify all Variable Rate Demand Notes, daily, weekly,
quarterly, semi-annual and annual rate resets, supplied by the
Funds' Investment Advisor or vendor, such as Municipal Market
Data.
5) Enter All Security Trades on Investment Accounting System (IAS) based
on written instructions from the Funds' advisor (the "Advisor").
o Review system verification of trade and interest calculations.
o Verify settlement through statements supplied by the Custodian.
o Maintain security ledger transaction reporting.
o Maintain tax lot holdings.
o Determine realized gains or losses on security trades.
o Provide complete broker commission reporting.
6) Enter All Fund Share Transactions on IAS:
o Process activity identified on reports supplied by the Transfer
Agent.
o Verify settlement through each Fund's statements supplied by the
Custodian.
o Reconcile to the Transfer Agent's report balances.
7) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance
(listing all asset, liability, equity, income and expense accounts)
o Post manual entries to the general ledger.
o Post Custodian bank activity.
o Post security transactions.
o Post and verify system generated activity, i.e. income and expense
accruals.
o Prepare Fund's general ledger net cash proof used in NAV and daily
distribution calculations.
8) Review and Reconcile with the Custodian's Statements:
<PAGE>
<PAGE>
o Verify all posted interest, expenses, and shareholder and security
payments/receipts, etc. (Discrepancies will be reported to the
Custodian.)
o Post all cash settlement activity to the Trial Balance.
o Reconcile to ending cash balance accounts.
o Clear IAS subsidiary reports with settled amounts.
o Track status of past due items and failed trades handled by the
Custodian.
9) Submission of Daily Accounting Reports to Wood, Struthers & Winthrop:
(Additional reports readily available.)
o Trial Balance
o Daily, 7-day and 30-day yield calculations o NAV Calculation
Report with daily distribution rate o Cash availability o Dollar
weighted average maturity o Interest and Amortization Report o
Portfolio Valuation using Amortized Cost
II. Weekly Accounting Services
If applicable, submit Money Market Fund Mark-to-Market Report and Interest
and Amortization schedule to Wood, Struthers & Winthrop (based on Wood,
Struthers & Winthrop or vendor supplied money market yields or prices).
III. Monthly Accounting Services
1) For each Series, full Financial Statement Preparation (automated
Statements of Assets and Liabilities, of Operations and of Changes in
Net Assets) and submission to Wood, Struthers & Winthrop by 10th
business day.
2) Submission of Monthly Automated IAS Reports to Wood, Struthers &
Winthrop:
o Security Purchase/Sales Journal
o Interest and Maturity Report
o Brokers Ledger (Commission Report)
o Security Ledger Transaction Report with Realized Gains/Losses
o Security Ledger Tax Lot Holdings Report
o Additional reports available upon request
3) Reconcile Accounting Asset Listing to the Custodian's Asset Listing:
o Report any security balance discrepancies to the Custodian and
Wood, Struthers & Winthrop.
4) Provide Monthly Analysis and Reconciliation of Additional Trial
Balance Accounts, such as:
o Security cost and realized gains/losses o Interest/dividend
receivable and income o Payable/receivable for securities
purchased and sold
o Payable/receivable for Fund's shares; issued and redeemed o
Expense payments and accruals analysis o Distribution
Payable/Dividend Paid
5) If Appropriate, Prepare and Submit to Wood, Struthers & Winthrop:
o Income by state reporting
<PAGE>
<PAGE>
o Standard Industry Code Valuation Report
o Alternative Minimum Tax Income segregation schedule
IV. Annual (and Semi-Annual) Accounting Services
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. for each
Fund during the year in accordance with standard audit assistance
requirements.
2) Provide NSAR Reporting (Accounting Questions):
If applicable for each Fund, answer the following items: 2, 12B, 20,
21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B,
71, 72, 73, 74, 75, 76.
V. Basic Assumptions:
The Accounting Fees as stated in Schedule "E," attached hereto, are
based on the following assumptions. These assumptions are based upon
discussions with and information received from Brian Kammerer. To the
extent these assumptions do not reflect the ongoing operation of the
Trust during the term of this Agreement, fee revisions may be
necessary.
1) Compliance reporting (Sub-Chapter "M") shall be maintained by Wood,
Struthers & Winthrop as Fund administrator.
2) The Funds' security trading activity is assumed to be approximately
65 trades per month in the Municipal Money Fund and 80 trades per
month in the U.S. Government Money Fund (inclusive of domestic and
money market transactions).
3) The Funds will invest in money market instruments, such as:
Tax Exempt Government
---------- ----------
Repo's Repo's
Variable Rate Demand Notes Variable Rate Demand Notes
Treasury Securities Treasury Securities
Agencies Agencies
Revenue Bond FHLMC's
Tax-free Commercial Paper
Tax Anticipation Notes
Revenue Anticipation Notes
4) The Funds have a tax year-end which coincides with its fiscal
year-end. No additional accounting requirements are necessary to
identify or maintain book-tax differences. FPS does not provide
security tax accounting which differs from its book accounting.
5) The Funds agree to utilize FPS's standard current pricing services
for domestic bond securities. Muller Data Corporation, Telerate
Systems or Interactive Data Corporation (IDC) are used for bonds and
money market issues. Bloomberg is also available for price research
and backup. Municipal Market Data (MMD) would be recommended to
supply daily rate changes on Variable Rate Demand Notes (VRDN).
It is assumed that FPS will work closely with the Wood, Struthers &
<PAGE>
<PAGE>
Winthrop to ensure the accuracy of the Funds' NAV and daily
distribution rates and to obtain the most satisfactory pricing
sources and specific methodologies prior to the actual start- up
date.
6) FPS will supply daily Portfolio Valuation and Interest and
Amortization Reports to the Advisor or manager identifying current
security positions and original/amortized cost.
FPS will submit weekly mark-to-market reports and Interest and
Amortization Reports to the client (based on client or vendor
supplied money market yields or prices) for the Funds. It is assumed
that the stability of the Funds' $1.00 NAV will be reviewed by the
Advisor.
It is the responsibility of the Advisor to review these reports and
to promptly notify FPS of any possible problems, trade discrepancies,
incorrect security prices or corporate action/capital change
information that could result in a misstated Fund NAV and
distribution rate.
7) The Funds do not expect to invest in Options, Futures, Swaps, Hedges,
Derivatives or Foreign (non-US dollar denominated) Securities and
Currency. To the extent these investment strategies should change,
additional fees will apply after the appropriate procedural
discussions have taken place between FPS and the Funds' management.
(Two weeks advance notice is required should the Funds commence
trading in these investments.)
To the extent the Fund will purchase/hold open-end registered
investment companies (RIC's), it will require procedural discussions
between FPS and Fund management clarifying the appropriate pricing
and dividend rate sources. Depending on the methodologies selected by
the Fund, additional fees may apply.
8) It is assumed for all debt and money market issues that the Advisor
will supply FPS with critical income information such as accrual
methods, interest payment frequency details, coupon payment dates,
variable rate demand note resets, floating rate reset dates, and
complete security descriptions with issue types and CUSIP numbers. If
applicable, for proper income accrual accounting, FPS will look to
the Advisor to supply the yield to maturity and related cash flow
schedules for any mortgage/asset- backed securities held in the
Funds. Also, FPS would need updated rate changes on variable rate
demand notes from the Advisor or third party provider.
9) With respect to Mortgage/Asset-Backed securities including GNMA's,
FHLMC's, FNMA's, CMO's, ARM's, the Funds shall direct the Custodian,
or a Wood, Struthers & Winthrop supplied source, to provide FPS with
current principal repayment factors on a timely basis in accordance
with the appropriate securities' schedule. Income accrual adjustments
(to the extent necessary) based upon initial estimates will be
completed by FPS when actual principal/income payments are collected
by the Custodian and reported to FPS.
10) To the extent that the Funds should establish a Line of Credit in
segregated accounts with the Custodian for temporary administrative
purposes, and/or leveraging/hedging the portfolio, it is not the
responsibility under this proposal for FPS to complete the
<PAGE>
<PAGE>
appropriate paperwork/monitoring for segregation of assets and
adequacy of collateral. The Funds shall direct the Advisor to execute
such responsibilities. FPS will, however, reflect appropriate Trial
Balance account entries and interest expense accrual charges on the
daily Trial Balance adjusting as necessary at month-end.
11) If the Funds commence participation in Security Lending, Leveraging,
or Short Sales within their portfolio securities, additional fees
will apply. (Two weeks advance notice to FPS is required should the
Funds desire to participate in the above.)
12) The Funds shall direct the Advisor to supply FPS with portfolio
specific expense accrual procedures and monitor the expense accrual
balances for adequacy based on outstanding liabilities monthly. The
Advisor will promptly communicate to FPS any adjustments needed.
13) Specific deadlines shall be met and complete information shall be
supplied by the Funds in order to minimize any settlement problems,
NAV miscalculations or income accrual adjustments.
The Funds shall direct the Advisor to provide to FPS Trade
authorization Forms with the appropriate Funds' officer's signature
on all security trades placed by the Fund no later than 1:30 PM
Eastern time on settlement/value date for short term money market
securities issues (assuming that trade date equals settlement date);
and by 11:00 AM Eastern time on trade date plus one for next days
settlement and non- money market securities. The Advisor will supply
FPS with the trade details in accordance with the above stated
deadlines.
The Funds shall direct the Advisor to include all information
required by FPS; including CUSIP numbers for all U.S. dollar
denominated trades on the Trade Authorization Form. FPS will supply
the Advisor with recommended trade ticket documents to minimize
receipt of incomplete information. FPS will not be responsible for
NAV changes or distribution rate adjustments that result from
incomplete trade information.
14) To the extent the funds utilize Purchases In-Kind (U.S. dollar
denominated securities only) as a method for shareholder
subscriptions, FPS will provide the Funds with procedures to properly
handle and process Securities In-Kind. Should the Funds prefer
procedures other than those provided by FPS, additional fees may
apply. Discussions shall take place at least two weeks in advance
between FPS and the Funds to clarify the appropriate In-Kind
operational procedures to be followed.
15) It is assumed that the Funds' Advisor will complete the applicable
performance and rate of return calculations as required by the SEC
for the Funds.
16) Adjustments for financial statements regarding any issues with
Original Issue Discount (OID) are not included under this agreement.
The Fund shall direct its independent auditors to complete the
necessary OID adjustments for financial statements and/or tax
reporting.
17) It is assumed that FPS will provide Transfer Agency and Custody
Administration services.
<PAGE>
<PAGE>
SCHEDULE "E"
SCHEDULE OF FEES FOR FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
FOR
WINTHROP U.S. GOVERNMENT MONEY FUND AND
WINTHROP MUNICIPAL MONEY FUND
This Fee Schedule is fixed for a period of two years from commencement
of operations and shall not increase greater than 10% during the
one year period beginning January 1, 1999.
The Accounting Fees as set forth below are based on the "Basic Assumptions"
as set forth in Schedule "D." To the extent that those assumptions are
inaccurate or requirements change, fee revisions may be necessary.
I. Annual Fee Schedule Per Domestic Portfolio: Investments in U.S. Dollar
denominated securities only. (1/12th payable monthly)
.00054 On the First $ 75 Million of Average Net Assets*
.00038 On the Next $ 75 Million of Average Net Assets*
.0002 On the Next $600 Million of Average Net Assets*
.0001 Over $750 Million of Average Net Assets*
Minimum of $24,000 per portfolio per year with Single Class. Each
additional Class is $7,500 per year per Class.
*For Multiple Class portfolios, fees are based on Combined Classes'
Average Net Assets.
II. Pricing Services Quotation Fee: Specific costs will be identified
based upon options selected by Wood, Struthers & Winthrop and will be
billed monthly.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Muller Data Interactive J.J. Kenny
Security Types Corp.* Data Corp.* Co., Inc.*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Bonds $ .50 $ .50 $ .25 (a)
- -----------------------------------------------------------------------------------
Mortgage-Backed (evaluated, seasoned, .50 .50 .25 (a)
closing)
- -----------------------------------------------------------------------------------
Corporate Bonds (short and long term) .50 .50 .25 (a)
- -----------------------------------------------------------------------------------
U.S. Municipal Bonds (short and long .55 .80 .50 (b)
term)
- -----------------------------------------------------------------------------------
CMO's/ARM's/ABS 1.00 .80 1.00 (a)
- -----------------------------------------------------------------------------------
Convertible Bonds .50 .50 1.00 (a)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
High Yield Bonds .50 .50 1.00 (a)
- -----------------------------------------------------------------------------------
Mortgage-Backed Factors (per Issue per 1.00 n/a n/a
Month)
- -----------------------------------------------------------------------------------
Domestic Equities (d) .15 n/a
- -----------------------------------------------------------------------------------
Domestic Options n/a .15 n/a
- -----------------------------------------------------------------------------------
Domestic Dividends & Capital Changes
(per Issue per Month) (d) 3.50 n/a
- -----------------------------------------------------------------------------------
Foreign Securities .50 .50 n/a
- -----------------------------------------------------------------------------------
Foreign Securities Dividends & Capital
Changes 2.00 4.00 n/a
(per Issue per Month)
- -----------------------------------------------------------------------------------
Set-up Fees n/a n/a (e) .25 (c)
- -----------------------------------------------------------------------------------
All Added Items n/a n/a .25 (c)
- -----------------------------------------------------------------------------------
</TABLE>
* Based on current Vendor costs, subject to change. Costs are quoted
based on individual security CUSIP/identifiers and are per issue
per day.
(a) $35.00 per day minimum
(b) $25.00 per day minimum
(c) $ 1.00, if no CUSIP
(d) At no additional cost to FPS clients
(e) Interactive Data also charges monthly transmission cost and
disk storage charges.
A) Futures and Currency Forward Contracts $2.00 per Issue per Day
B) Telerate Systems, Inc.* (if applicable)
*Based on current vendor costs, subject to change.
Specific costs will be identified based upon options selected by
Wood, Struthers & Winthrop and will be billed monthly.
C) Reuters, Inc.*
*Based on current vendor costs, subject to change.
FPS does not currently pass along the charges for the domestic
security prices supplied by Reuters, Inc.
D) Municipal Market Data*
*Based on current vendor costs, subject to change
Specific costs will be identified based upon options selected by
Wood, Struthers & Winthrop and will be billed monthly.
II. OUT-OF-POCKET EXPENSES
The Funds will reimburse FPS Services, Inc. monthly for all
<PAGE>
<PAGE>
reasonable out-of- pocket expenses, including telephone, postage,
overdraft charges, telecommunications, special reports, record
retention, special transportation costs, copying and sending materials
to auditors and/or regulatory agencies as incurred and approved.
III. ADDITIONAL SERVICES
To the extent the Funds commence using investment techniques such
as Futures, Security Lending, Swaps, Leveraging, Short Sales,
Derivatives, Precious Metals, or foreign trading (non U.S. dollar
denominated securities and currency), additional fees will apply.
Activities of a non-recurring nature such as shareholder inkinds, fund
consolidations, mergers or reorganizations will be subject to
negotiation. Any additional/enhanced services, programming requests, or
reports will be quoted upon request.
<PAGE>
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions 'Financial
Highlights' and 'General Information -- Counsel and Independent Auditors' and to
the use of our report dated December 13, 1997, in this Registration Statement
(Form N-1A No. 33-92982) of Winthrop Opportunity Funds.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
New York, New York
January 22, 1997
<PAGE>
<PAGE>
DLJ Investment Management Corp.
277 Park Avenue
24th Floor
New York, New York 10172
January 24, 1997
Winthrop Opportunity Funds
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
DLJ Investment Management Corp. (the "Adviser")
hereby offers and agrees to purchase 250 shares of the
Winthrop Municipal Money Fund common stock and 250 shares
of Winthrop U.S. Government Money Fund common stock (the
"Shares") at a price of $1.00 per Share for an aggregate
purchase price of $500.00. The Adviser acknowledges that
the Shares are being purchased for the Adviser's own
account and for investment purposes only and will be sold
only pursuant to a registration statement declared
effective under the Securities Act of 1933, as amended,
or an exemption therefrom.
Sincerely,
DLJ INVESTMENT MANAGEMENT
CORP.
By: ______________________
Name:
Title:
Winthrop Opportunity Funds hereby accepts the
Adviser's offer to purchase the Shares at a price of $1.00
per Share for an aggregate purchase price of $500.00.
WINTHROP OPPORTUNITY FUNDS
By: _________________________
Name:
Title:
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
WINTHROP MUNICIPAL MONEY FUND
The Winthrop Municipal Money Fund (the "Fund")
intends to engage in business as a separate series of
Winthrop Opportunity Funds (the "Company"), which is an
open-end management investment company registered as such
under the Investment Company Act of 1940 (the "Act").
The Company intends to employ Donaldson, Lufkin &
Jenrette Securities Corporation and/or others as the
principal underwriter and distributor (the "Distributor")
of the shares of the Fund pursuant to a written
distribution agreement and desires to adopt a plan of
distribution pursuant to Rule 12b-1 under the Act to
assist in the distribution of the shares of the Fund.
The Board of Trustees (the "Board") of the Company
having determined that a plan of distribution containing
the terms set forth herein is reasonably likely to
benefit the Fund and its shareholders, the Company hereby
adopts a plan of distribution for the Fund's shares (the
"Plan") pursuant to Rule 12b-1 under the Act on the
following terms and conditions:
1. The Company is hereby authorized to pay as
distribution payments (the "Payments") in connection with
the distribution of the shares of the Fund an aggregate
amount not to exceed 0.25% per year of the average daily
net assets of the Fund which can be raised up to .40% per
year of the average daily net assets by a majority vote
of the Board if, in their opinion, the raise is in the
best interest of the Fund and its shareholders. Such
Payments as shall be approved by the Board shall be
accrued daily and paid monthly in arrears or shall be
accrued and paid at such other intervals as the Board
shall determine.
2. Payments may be made by the Company under this
Plan for the purpose of financing or assisting in the
financing of any activity which is primarily intended to
result in the sale of shares of the Fund. The scope of
the foregoing shall be interpreted by the Board from time
to time including the selection of those activities for
which payment can be made whose decision shall be
conclusive. Without in any way limiting the discretion
of the Board, the following activities are hereby
declared to be primarily intended to result in the sale
of Regular shares of the Fund: advertising the Fund
either alone or together with other funds; compensating
underwriters, dealers, brokers, banks and other selling
entities and sales and marketing personnel of any of them
for sales of the shares of the Fund, whether in a lump
sum or on a continuous, periodic, contingent, deferred or
other basis; compensating underwriters, dealers, brokers,
banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and
<PAGE>
<PAGE>
its personnel) of any of them for providing services to
shareholders of the Fund relating to their investment in
the Fund, including assistance in connection with
inquiries relating to shareholder accounts; the
production and dissemination of prospectuses (including
statements of additional information) of the Fund and the
preparation, production and dissemination of sales,
marketing and shareholder servicing materials; third
party consultancy or similar expenses relating to any
activity for which Payment is authorized by the Board;
and the financing of any activity for which Payment is
authorized by the Board.
3. If the Board so authorizes by Board Approval (as
defined below) and Disinterested Trustee Approval (as
defined below), the Company may make Payments under and
within the limitations of this Plan in a subsequent year
with respect to activities which occurred in a prior year
and for which Payments were not previously made.
4. The Company is hereby authorized and directed to
enter into appropriate written agreements with the
Distributor and each other person to whom the Company
intends to make any Payment, and the Distributor is
hereby authorized and directed to enter into appropriate
written agreements with each person to whom the
Distributor intends to make any payments in the nature of
a Payment. The foregoing requirement is not intended to
apply to any agreement or arrangement with respect to
which the party to whom Payment is to be made does not
have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus
or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or
arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
5. Each agreement required to be in writing by
Section 4 must contain the provisions required by Rule
12b-1 under the Act and must be approved by a majority of
the Board ("Board Approval") and by a majority of the
trustees ("Disinterested Trustee Approval") who are not
"interested persons" of the Company and have no direct or
indirect financial interest in the operation of the Plan
or any such agreement, by vote cast in person at a
meeting called for the purposes of voting on such
agreement.
6. The officers, investment adviser or Distributor
of the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and
the purposes for which such Payments were made.
7. To the extent any activity is covered by Section
2 and is also an activity which the Company may pay for
on behalf of the Fund without regard to the existence or
terms and conditions of a plan of distribution under Rule
12b-1 of the Act (such as the printing of prospectuses
<PAGE>
<PAGE>
for existing Fund shareholders), this Plan shall not be
construed to prevent or restrict the Company from paying
such amounts outside of this Plan and without limitation
hereby and without such payments being included in
calculation of Payments subject to the limitation set
forth in Section 1.
8. This Plan shall not take effect until it has
been approved by a vote of at least a majority of the
outstanding voting securities of the Fund. This Plan may
not be amended in any material respect without Board
Approval and Disinterested Trustee Approval and may not
be amended to increase the maximum level of Payments
permitted hereunder without such approvals and further
approval by a vote of at least a majority of the
outstanding voting securities of the Fund. This Plan may
continue in effect for longer than one year after its
approval by the shareholders of the Fund only as long as
such continuance is specifically approved at least
annually by Board Approval and by Disinterested Trustee
Approval.
9. While the Plan is in effect, the selection and
nomination of the Trustees who are not "interested
persons" of the Company will be committed to the
discretion of such disinterested Trustees.
10. This Plan may be terminated at any time by a
vote of the Trustees who are not interested persons of
the Company and have no direct or indirect financial
interest in the operation of the Plan or any agreement
hereunder, cast in person at a meeting called for the
purposes of voting on such termination, or by a vote of
at least a majority of the outstanding voting securities
of the Fund.
11. For purposes of this Plan the terms "interested
person" and "related agreement" shall have the meanings
ascribed to them in the Act and the rules adopted by the
Securities and Exchange Commission thereunder and the
term "vote of a majority of the outstanding voting
securities" of the Fund shall mean the vote, at the
annual or a special meeting of the security holders of
the Fund duly called the lesser of (a) 67% or more of the
voting securities present at such meeting, if the holders
of more than 50% of the outstanding voting securities of
the Fund are present or represented by proxy or (b) more
than 50% of the outstanding voting securities of the
Fund.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
WINTHROP U.S. GOVERNMENT MONEY FUND
The Winthrop U.S. Government Money Fund (the "Fund")
intends to engage in business as a separate series of
Winthrop Opportunity Funds (the "Company"), which is an
open-end management investment company registered as such
under the Investment Company Act of 1940 (the "Act").
The Company intends to employ Donaldson, Lufkin &
Jenrette Securities Corporation and/or others as the
principal underwriter and distributor (the "Distributor")
of the shares of the Fund pursuant to a written
distribution agreement and desires to adopt a plan of
distribution pursuant to Rule 12b-1 under the Act to
assist in the distribution of the shares of the Fund.
The Board of Trustees (the "Board") of the Company
having determined that a plan of distribution containing
the terms set forth herein is reasonably likely to
benefit the Fund and its shareholders, the Company hereby
adopts a plan of distribution for the Fund's shares (the
"Plan") pursuant to Rule 12b-1 under the Act on the
following terms and conditions:
1. The Company is hereby authorized to pay as
distribution payments (the "Payments") in connection with
the distribution of the shares of the Fund an aggregate
amount not to exceed 0.25% per year of the average daily
net assets of the Fund which can be raised up to .40% per
year of the average daily net assets by a majority vote
of the Board if, in their opinion, the raise is in the
best interest of the Fund and its shareholders. Such
Payments as shall be approved by the Board shall be
accrued daily and paid monthly in arrears or shall be
accrued and paid at such other intervals as the Board
shall determine.
2. Payments may be made by the Company under this
Plan for the purpose of financing or assisting in the
financing of any activity which is primarily intended to
result in the sale of shares of the Fund. The scope of
the foregoing shall be interpreted by the Board from time
to time including the selection of those activities for
which payment can be made whose decision shall be
conclusive. Without in any way limiting the discretion
of the Board, the following activities are hereby
declared to be primarily intended to result in the sale
of the shares of the Fund: advertising the Fund either
alone or together with other funds; compensating
underwriters, dealers, brokers, banks and other selling
entities and sales and marketing personnel of any of them
for sales of the shares of the Fund, whether in a lump
sum or on a continuous, periodic, contingent, deferred or
other basis; compensating underwriters, dealers, brokers,
banks and other servicing entities and servicing
personnel (including the Fund's investment adviser and
<PAGE>
<PAGE>
its personnel) of any of them for providing services to
shareholders of the Fund relating to their investment in
the Fund, including assistance in connection with
inquiries relating to shareholder accounts; the
production and dissemination of prospectuses (including
statements of additional information) of the Fund and the
preparation, production and dissemination of sales,
marketing and shareholder servicing materials; third
party consultancy or similar expenses relating to any
activity for which Payment is authorized by the Board;
and the financing of any activity for which Payment is
authorized by the Board.
3. If the Board so authorizes by Board Approval (as
defined below) and Disinterested Trustee Approval (as
defined below), the Company may make Payments under and
within the limitations of this Plan in a subsequent year
with respect to activities which occurred in a prior year
and for which Payments were not previously made.
4. The Company is hereby authorized and directed to
enter into appropriate written agreements with the
Distributor and each other person to whom the Company
intends to make any Payment, and the Distributor is
hereby authorized and directed to enter into appropriate
written agreements with each person to whom the
Distributor intends to make any payments in the nature of
a Payment. The foregoing requirement is not intended to
apply to any agreement or arrangement with respect to
which the party to whom Payment is to be made does not
have the purpose set forth in Section 2 above (such as
the printer in the case of the printing of a prospectus
or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or
arrangement should be treated as a "related" agreement
for purposes of Rule 12b-1 under the Act.
5. Each agreement required to be in writing by
Section 4 must contain the provisions required by Rule
12b-1 under the Act and must be approved by a majority of
the Board ("Board Approval") and by a majority of the
trustees ("Disinterested Trustee Approval") who are not
"interested persons" of the Company and have no direct or
indirect financial interest in the operation of the Plan
or any such agreement, by vote cast in person at a
meeting called for the purposes of voting on such
agreement.
6. The officers, investment adviser or Distributor
of the Fund, as appropriate, shall provide to the Board
and the Board shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and
the purposes for which such Payments were made.
7. To the extent any activity is covered by Section
2 and is also an activity which the Company may pay for
on behalf of the Fund without regard to the existence or
terms and conditions of a plan of distribution under Rule
12b-1 of the Act (such as the printing of prospectuses
<PAGE>
<PAGE>
for existing Fund shareholders), this Plan shall not be
construed to prevent or restrict the Company from paying
such amounts outside of this Plan and without limitation
hereby and without such payments being included in
calculation of Payments subject to the limitation set
forth in Section 1.
8. This Plan shall not take effect until it has
been approved by a vote of at least a majority of the
outstanding voting securities of the Fund. This Plan may
not be amended in any material respect without Board
Approval and Disinterested Trustee Approval and may not
be amended to increase the maximum level of Payments
permitted hereunder without such approvals and further
approval by a vote of at least a majority of the
outstanding voting securities of the Fund. This Plan may
continue in effect for longer than one year after its
approval by the shareholders of the Fund only as long as
such continuance is specifically approved at least
annually by Board Approval and by Disinterested Trustee
Approval.
9. While the Plan is in effect, the selection and
nomination of the Trustees who are not "interested
persons" of the Company will be committed to the
discretion of such disinterested Trustees.
10. This Plan may be terminated at any time by a
vote of the Trustees who are not interested persons of
the Company and have no direct or indirect financial
interest in the operation of the Plan or any agreement
hereunder, cast in person at a meeting called for the
purposes of voting on such termination, or by a vote of
at least a majority of the outstanding voting securities
of the Fund.
11. For purposes of this Plan the terms "interested
person" and "related agreement" shall have the meanings
ascribed to them in the Act and the rules adopted by the
Securities and Exchange Commission thereunder and the
term "vote of a majority of the outstanding voting
securities" of the Fund shall mean the vote, at the
annual or a special meeting of the security holders of
the Fund duly called the lesser of (a) 67% or more of the
voting securities present at such meeting, if the holders
of more than 50% of the outstanding voting securities of
the Fund are present or represented by proxy or (b) more
than 50% of the outstanding voting securities of the
Fund.
<PAGE>
<PAGE>
EXHIBIT 16
Quotations of each Fund's average annual return for the year ended October
31, 1996 and the period from September 8, 1995 (commencement of operations) to
October 31, 1996 are calculated pursuant to the following formula:
P(1+T)'pp'n = ERV
<TABLE>
<S> <C>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of periods
ERV = Ending redeemable value at October 31, 1996 of a hypothetical $1,000 payment made at the beginning of
the year
</TABLE>
AVERAGE ANNUAL RETURN FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
DEVELOPING MARKETS INTERNATIONAL EQUITY
FUND FUND
----------------------- ---------------------
AVERAGE AVERAGE
ENDING ANNUAL ENDING ANNUAL
REDEEMABLE TOTAL REDEEMABLE TOTAL
VALUE RETURN* VALUE RETURN*
---------- --------- ---------- -------
<S> <C> <C> <C> <C>
Class A............................................... 985 -1.50% 1,021 2.12%
Class B............................................... 996 - .43% 1,035 3.52%
</TABLE>
AVERAGE ANNUAL RETURN FOR THE PERIOD FROM SEPTEMBER 8, 1995 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1996
<TABLE>
<CAPTION>
DEVELOPING MARKETS INTERNATIONAL EQUITY
FUND FUND
------------------------ -----------------------
AVERAGE AVERAGE
ENDING ANNUAL ENDING ANNUAL
REDEEMABLE TOTAL REDEEMABLE TOTAL
VALUE RETURN* VALUE RETURN*
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Class A............................................... 939 -5.42% 978 -1.91%
Class B............................................... 958 -4.23% 996 -.45%
</TABLE>
- ------------
* Each Fund's average annual return figures assume all dividends and
distributions by such Fund over the relevant time period were reinvested and
the maximum sales charge, if any, was imposed. It was then assumed that at
the end of these periods, the entire amount was redeemed and the appropriate
deferred sales load, if applicable, was deducted. The average annual return
was then calculated by calculating the rate required for the initial payment
to grow to the amount which would have been received upon redemption (i.e.,
the average annual rate of return).
<PAGE>