<PAGE>
As filed with the Securities and Exchange Commission on December 9, 1998
Registration No. 33-92982
Registration No. 811-9054
- --------------------------------------------------------------------------------
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. 8 _X_
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ___
Amendment No. 9 _X_
(Check appropriate box or boxes)
DLJ 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
One Pershing Plaza
10th Floor
Jersey City, New Jersey 07399
(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)
[___] Immediately upon filing pursuant to paragraph (b)
[___] on (date) pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(1)
[___] on (date) pursuant to paragraph (a)(1)
[_X_] 75 days after filing pursuant to paragraph (a)(2), or
[___] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[___] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
- ------------- --------
Part A for DLJ Opportunity Funds
<S> <C>
Item 1. Front and Back Cover Page Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks, The Opportunity Funds'
and Performance Risk/Return Summary
Item 3. Risk/Return Summary: Fee Table Summary of DLJ Fund Expenses
Item 4. Investment Objectives, Principal Investment Opportunity Funds' Investment
Strategies and Related Risks Objectives and Policies
Item 5. Management's Discussion of Fund Performance Not Applicable
Item 6. Management, Organization, and Capital Structure Fund Management
Item 7. Shareholder Information How to Buy and Sell Shares,
Other Shareholder Information,
Taxes
Item 8. Distribution Arrangements Dividend and Distribution
Information
Item 9. Financial Highlights Information Financial Highlights
<CAPTION>
Part B for DLJ Developing Markets Fund and DLJ International Equity Fund
<S> <C>
Item 10. Cover Page and Table of Contents Cover Page
Item 11. Fund History Fund History
Item 12. Description of the Fund and Its Investments and Risks Investment Policies and Restric-
tions
Item 13. Management of the Fund Management
Item 14. Control Persons and Principal Holders of Securities Shares of Beneficial Interest
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Item 15. Investment Advisory and Other Services Management, Expenses of the International
Funds
Item 16. Brokerage Allocation and Other Practices Expenses of the International Funds, Portfolio
Transactions
Item 17. Capital Stock and Other Securities General Information, Purchases, Redemptions,
Exchanges and Systematic Withdrawal Plan
Item 18. Purchase, Redemption, and Pricing of Shares Purchases, Redemptions, Exchanges and
Systematic Withdrawal Plan, Net Asset Value
Item 19. Taxation of the Fund Dividends, Distributions and Taxes
Item 20. Underwriters Expenses of the International Funds
Item 21. Calculation of Performance Data Investment Performance
Information
Item 22. Financial Statements Not Applicable
<CAPTION>
Part B for DLJ Municipal Money Fund, DLJ U.S. Government Money Fund and DLJ High Income Fund
<S> <C>
Item 10. Cover Page and Table of Contents Cover Page
Item 11. Fund History Fund History
Item 12. Description of the Fund and Its Investments and Risks Investment Policies and Restric-
tions
Item 13. Management of the Fund Management
Item 14. Control Persons and Principal Holders of Securities Shares of Beneficial Interest
Item 15. Investment Advisory and Other Services Management, Expenses of the
Funds
Item 16. Brokerage Allocation and Other Practices Expenses of the Funds, Portfolio
Transactions
Item 17. Capital Stock and Other Securities General Information, Purchases,
Redemptions and Exchanges
Item 18. Purchase, Redemption, and Pricing of Shares Purchases, Redemptions and
Exchanges, Net Asset Value
Item 19. Taxation of the Fund Dividends, Distributions and Taxes
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Item 20. Underwriters Expenses of the Funds
Item 21. Calculation of Performance Data Investment Performance Informa-
tion
Item 22. Financial Statements Not Applicable
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
3
<PAGE>
DLJ Mutual Funds
Prospectus
February , 1999
DLJ FOCUS FUNDS
DLJ Growth Fund DLJ Growth and Income Fund DLJ Small Company Value Fund
DLJ Fixed Income Fund DLJ Municipal Trust Fund
DLJ OPPORTUNITY FUNDS
DLJ High Income Fund DLJ Developing Markets Fund DLJ International
Equity Fund
DLJ Municipal Money Fund DLJ U.S. Government Money Fund
This prospectus provides information about two separate series of Funds: the
DLJ Focus Funds and the DLJ Opportunity Funds. Each series has a number of
individual Funds. Each Fund has a separate investment objective and portfolio
of investments.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
An investment in any of the Funds is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
TABLE OF CONTENTS
Risk/Return Summary
Investment Objectives and Policies
Fund Management
How to Buy and Sell Shares
Other Shareholder Information
Dividend and Distribution Information
Taxes
Financial Highlights
For More Information
<PAGE>
RISK/RETURN SUMMARY
This part of the prospectus summarizes each Fund's investment objective,
principal investment strategies and principal risks. This section also contains
limited performance data. More information about the Funds is contained in
"Investment Objectives and Policies" and "Additional Information on Investment
Policies and Risks." Please read the entire prospectus carefully before
investing and save it for future reference.
DLJ FOCUS FUNDS
The DLJ GROWTH FUND's investment objective is long-term capital appreciation.
The Fund seeks to achieve the objective by investing in companies that offer
long-term appreciation. This Fund invests in common stock, securities
convertible into common stock and other equity securities of well known and
established companies. The Fund takes a long-term view of each stock it buys,
holding each company until its long-term growth potential no longer meets the
Fund's requirements. The Fund may also make an investment to earn income when
its Adviser believes that it will not compromise the investment objective.
Like any investment, an investment in the DLJ Growth Fund is subject
to risk and you could lose money. While investments are selected that the
Adviser believes will experience long-term appreciation, their value could
decline. The Fund is subject to risks that affect equity securities markets in
general, such as general economic conditions and adverse changes (generally
increases) in interest rates. These and other factors could adversely affect
your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
During the 10-year period shown in the bar chart for Class A shares,
the highest return for a quarter was xx.x% (quarter ending [date] and
the lowest return for a quarter was xxx% (quarter ending [date]). The
annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ============================= ============================ ============================
Average Annual Total Returns One Year Past 5 years Past 10 years
(for the periods ending
December 31, 1998)
============================= ============================= ============================ ============================
<S> <C> <C> <C>
Growth Fund Class A % % %
Growth Fund Class B
============================= ============================= ============================ ============================
S & P 500* Xx.xx% xx.xx% xx.xx%
============================= ============================= ============================ ============================
2
<PAGE>
<FN>
*The S & P 500(R) is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices. The returns for the
S&P 500 do not include any sales charges, fees or other expenses.
</TABLE>
The DLJ GROWTH AND INCOME FUND's investment objective is long-term capital
appreciation and continuity of income. The Fund seeks to achieve this objective
by investing in dividend paying common stock and by diversifying its
investments among different industries and different companies. Securities are
selected on the basis of their investment merit and their potential for
appreciation in value and/or income. A portion of the Fund is invested in debt
securities that are of investment-grade quality, U.S. Government securities,
and money market instruments. There is no fixed proportion of the DLJ Growth
and Income Fund's assets that must be invested in any particular type of
securities.
Like any investment, an investment in the DLJ Growth and Income Fund
is subject to risk and you could lose money. While the Fund seeks investments
that will appreciate in value and/or provide income, the Adviser could select
securities that will decline in value and provide no income. The Fund is also
subject to risks that affect equity securities markets in general, such as
general economic conditions and adverse changes (generally increases) in
interest rates. These and other factors could adversely affect your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
During the 10-year period shown in the bar chart for Class A shares,
the highest return for a quarter was xx.x% (quarter ending [date]) and
the lowest return for a quarter was xx.x% (quarter ending [date]). The
annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ============================= ============================ ============================
Average Annual Total Returns
(for the periods ending
December 31, 1998)
Past One Year Past 5 years Past 10 years
============================= ============================= ============================ ============================
<S> <C> <C> <C>
Growth and Income Fund % % %
Class A
Growth and Income Fund
Class B
============================= ============================= ============================ ============================
S & P 500* % % %
============================= ============================= ============================ ============================
3
<PAGE>
<FN>
*The S & P 500(R) is the Standard & Poor's Composite Index of 500 Stocks, a
widely recognized, unmanaged index of common stock prices. The returns for the
S&P 500 do not include any sales charges, fees or other expenses.
</TABLE>
The DLJ SMALL COMPANY VALUE FUND's investment objective is a high level of
growth of capital. The Fund seeks to achieve this objective by investing in
common stock and other equity securities of "small cap" companies that appear
to be undervalued. Companies with market capitalizations of $2 billion or less
at the time of purchase are considered to be "small cap" companies.
This Fund's investment objective causes it to be riskier than other
funds and you could lose money. While the Fund seeks investments that provide a
high level of growth of capital, they may decline in value. You should not
invest in this Fund if your principal objective is assured income or capital
preservation. Investments in smaller companies often involve greater risks than
investments in larger, more established companies. Smaller companies may have
less management experience, fewer financial resources, and limited product
diversification. The frequency and trading volume for securities of smaller
companies is substantially less than for larger companies. This can result in
greater and more abrupt price fluctuations and can cause the small cap stock to
be less liquid than securities of larger companies. The Fund is also subject to
risks that affect equity securities markets in general, such as general
economic conditions and adverse changes (generally increases) in interest
rates. These factors could adversely affect your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
During the 10-year period shown in the bar chart for Class A shares,
the highest return for a quarter was xx%(quarter ending [date] and the
lowest return for a quarter was % (quarter ending [date]. The annual
returns do not include sales charges. If sales charges were included,
the annual returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ============================= ============================ ============================
Average Annual Total Returns
(for the periods ending
December 31, 1998)
Past One Year Past 5 years Past 10 years
============================= ============================= ============================ ============================
<S> <C> <C> <C>
Small Company Value Fund % % %
Class A
Small Company Value Class B
============================= ============================= ============================ ============================
Russell 2000* % % %
============================= ============================= ============================ ============================
<FN>
* The Russell 2000 Index is an unmanaged index and is composed of the 2,000
smallest companies in the Russell 3000 Index. The Russell 3000 Index is
composed of 3,000 of the largest U.S. companies by market capitalization. The
returns for the Index do not include any sales charges, fees or other expenses.
</TABLE>
4
<PAGE>
The DLJ FIXED INCOME FUND's investment objective is to provide as high
a level of total return as is consistent with capital preservation by investing
principally in debt securities, including, without limitation, convertible and
non-convertible debt securities of foreign and domestic companies, including
both well-known and established and new and lesser- known companies. To achieve
this objective, the Fund invests in corporate bonds, U.S. Government
securities, commercial paper and other obligations issued or guaranteed by
national or state bank holding companies. The Fund seeks to limit risk by
selecting higher-quality debt securities.
While the Fund seeks investments that will satisfy the investment
objective, the investments could decline in value and you could lose money.
Concerns about an issuer's ability to repay its borrowings or to pay interest
will adversely affect the value of its securities. The Fund is subject to risks
that affect the bond markets in general, such as general economic conditions
and adverse changes (generally increases) in interest rates. These factors
could adversely affect your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
During the 10-year period shown in the bar chart for Class A shares,
the highest return for a quarter was xxxx% (quarter ending [date]) and
the lowest return for a quarter was xxx% (quarter ending [date]).
The annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ============================= ============================ ============================
Average Annual Total Returns
(for the year ending
December 31, 1998)
Past One Year Past 5 years Past 10 years
============================= ============================= ============================ ============================
<S> <C> <C> <C>
Fixed Income Fund Class A % % %
============================= ============================= ============================ ============================
Fixed Income Fund Class B % % %
============================= ============================= ============================ ============================
Lehman Index
============================= ============================= ============================ ============================
<FN>
*The Lehman Brothers Government/Corporate Intermediate Index is comprised of
securities in the Lehman Brothers Government/Corporate Bond Index that have
maturities of 5-10 years. The Lehman Brothers Government/Corporate Bond Index
includes the Lehman Brothers Government Bond Index and the Lehman Brothers
Corporate Bond Index.
</TABLE>
The DLJ MUNICIPAL TRUST FUND's investment objective is to provide as
high a level of total return as is consistent with capital preservation by
investing principally in high-grade tax-exempt municipal securities. It is
important to note that unlike most other municipal bond funds, this Fund's
objective is not
5
<PAGE>
to provide current income that is exempt from federal and/or state income
tax. The Fund seeks to achieve its objective by investing primarily in a
diversified portfolio of high-grade, intermediate-term municipal securities. In
addition, the Adviser actively manages the maturities of the securities in the
portfolio in response to the Adviser's anticipation of the movement of interest
rates and relative yields. Certain investments are selected that the Adviser
believes are undervalued. The Fund attempts to limit risk by selecting
higher-quality debt securities.
While the Fund seeks investments that will satisfy its investment objective,
these investments could decline in value and you could lose money. Concerns
about an issuer's ability to repay its borrowings or to pay interest will
adversely affect the value of its securities. The Fund is also subject to the
risk that, in seeking to enhance total return, the Adviser will incorrectly
forecast changes in interest rates or improperly assess the value of municipal
securities. Like all bond funds, this Fund is subject to risks that affect the
bond markets in general, such as general economic conditions and adverse
changes (generally increases) in interest rates.
These factors and others could adversely affect your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
1995
1994
During the period shown in the bar chart for Class A shares, the
highest return for a quarter was xxxx% (quarter ending [date]) and the
lowest return for a quarter was xxxx% (quarter ending [date]). The
annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ============================= ============================ ============================
Average Annual Total Returns From inception on 7/28/93
(for the periods ending
December 31, 1998)
Past One Year Past 5 years
============================= ============================= ============================ ============================
<S> <C> <C> <C>
Municipal Trust Fund Class A % %
Municipal Trust Fund Class B
============================= ============================= ============================ ============================
LIMI* % %
============================= ============================= ============================ ============================
<FN>
* The Lipper Intermediate Municipal Fund Index is an equally weighted
performance index of the largest funds in the Lipper Analysts intermediate
municipal debt funds, adjusted for capital gains and income dividends.
</TABLE>
DLJ OPPORTUNITY FUNDS
The DLJ DEVELOPING MARKETS FUND's investment objective is to provide long-term
growth by investing in common stocks and other equity securities of companies
from developing countries. The Fund seeks to achieve itsobjective by investing
in companies from the countries included in the Morgan Stanley Capital Index
("MSCI") Emerging Market Free Index that are identified by the Adviser as being
best positioned to take advantage of certain economic and political factors.
The Fund invests in securities of issuers in at least three different
developing countries.
This Fund's investment objective causes it to be riskier than other funds and
you could lose money. While the Fund seeks investments that provide a high
level of growth of capital, they may decline in value. You
6
<PAGE>
should not invest in this fund if your principal objective is assured income or
capital preservation. This fund invests primarily in non-U.S. securities
(securities of non-U.S. based issuers or issuers that do business principally
outside the United States) of issuers in developing markets. Investments in
non-U.S. securities present additional risks including that securities may
experience greater price volatility and a lack of liquidity. Investments in
developing markets present further risks because they tend to be smaller, less
mature and less stable than developed markets. The Fund is also subject to risks
that affect equity securities markets in general, such as general economic
conditions and adverse changes in interest rates. These and other factors could
adversely affect your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
During the period shown in the bar chart for Class A shares, the
highest return for a quarter was % (quarter ending ) and the lowest
return for a quarter was % (quarter ending ). The annual returns do
not include sales charges. If sales charges were included, the annual
returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ============================= ============================
Average Annual Total Returns
(for the periods ending From Inception on 9/8/95
December 31, 1998)
Past One Year
============================= ============================= ============================
<S> <C> <C>
Developing Markets Fund % %
Class A
Developing Markets Fund
Class B
============================= ============================= ============================
MSCI Emerging Markets Free % %
Index*
============================= ============================= ============================
<FN>
* The MSCI Emerging Markets Free Index is an unmanaged index composed of a
sample of companies representative of the market structure of developing
countries worldwide. The index is the property of Morgan Stanley & Co.
Incorporated. The returns for the Index do not include any sales charges, fees
or other expenses.
</TABLE>
The DLJ INTERNATIONAL EQUITY FUND's investment objective is long-term growth by
investing in equity securities from established international markets. The Fund
seeks to achieve this objective by investing in a diversified portfolio of
investments that include companies from the countries of the MSCI Europe,
Australia and Far East Index (the "EAFE Index"), an unmanaged index of over
1000 foreign stock prices. The Fund seeks to identify countries and industries
with favorable growth prospects. Once the countries have been selected, the
Adviser chooses the stocks and industries in each country. The Adviser employs
a comprehensive top-down approach to invest in industries in each country that
are likely to do well and in stocks with reasonable value, reliable earnings
and high quality management.
Like any investment, an investment in the Fund is subject to risk and you could
lose money. While the Fund selects investments that the Adviser believes will
appreciate in value, those securities could decline in value and provide no
income. The Fund invests primarily in non-U.S. securities (securities of
non-U.S. based issuers or issuers that do business principally outside the
United States ). Investments in non-U.S. securities present additional risks
including that securities may experience greater price volatility and a lack of
liquidity. The Fundisalso subject to risks that affect equity securities
markets in general, such as general
7
<PAGE>
economic conditions and adverse changes in interest rates. These and other
factors could adversely affect your investment.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
1997
1996
During the period shown in the bar chart for Class A shares, the
highest return for a quarter was % (quarter ending ) and the lowest
return for a quarter was (quarter ending ). The annual returns do not
include sales charges. If sales charges were included, the annual
returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ====================== ======================
Average Annual Total Returns From inception 9/8/95
(for the periods ending Past One Year
December 31, 1998)
============================= ====================== ======================
<S> <C> <C>
International Equity Fund
Class A
International Equity Fund
Class B
============================= ====================== ======================
MSCI -EAFE*
============================= ====================== ======================
<FN>
* The MSCI-EAFE(R) is an unmanaged index composed of a sample of companies
representative of the market structure of European and Pacific Basin Countries.
The index is the property of Morgan Stanley & Co. Incorporated. The returns for
the Index do not include any sales charges, fees or other expenses.
</TABLE>
The DLJ MUNICIPAL MONEY FUND's investment objective is maximum current income,
consistent with liquidity and safety of principal. The Fund seeks to achieve
this objective by investing in a diversified portfolio of municipal securities,
that is intended to be exempt from Federal income taxes.
Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The Fund seeks to preserve the value of your investment at $1.00 per
share, however, it is possible to lose money by investing in the Fund.
The following chart illustrates how Fund results may vary over time. The Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
During the year shown in the bar chart, the highest return for a
quarter was % (quarter ending) and the lowest return for a quarter was
% (quarter ending). The annual returns do not include sales charges.
If sales charges were included, the annual returns would be lower than
those shown.
8
<PAGE>
<TABLE>
<CAPTION>
===================== ============================ ===========================
Average Annual
Total Returns Past One Year From Inception on 2/27/97
(for the periods
ending December 31,
1998)
===================== ============================ ===========================
<S> <C> <C>
Municipal Money Fund
%
%
===================== ============================ ===========================
</TABLE>
The DLJ U.S. GOVERNMENT MONEY FUND's investment objective is maximum current
income, consistent with liquidity and safety of principal. The Fund seeks to
achieve its objective by investing in a portfolio of U.S. Government
securities.
Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The Fund seeks to preserve the value of your investment at $1.00 per
share, however, it is possible to lose money by investing in the Fund.
The following chart illustrates how Fund results vary over time. This Fund's
past performance is not necessarily an indication of how it will perform in the
future.
1998
During the period shown in the bar chart, the highest return for a
quarter was % (quarter ending ) and the lowest return for a quarter
was % (quarter ending ).
The annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.
<TABLE>
<CAPTION>
============================= ================================== =================================
Average Annual Total Returns Past One Year From Inception on 2/24/97
(for the periods ending
December 31, 1998)
============================= ================================== =================================
<S> <C> <C>
U.S. Government Money Fund % %
Class A
U.S. Government Money Fund
Class B
============================= ================================== =================================
</TABLE>
The DLJ HIGH INCOME FUND's investment objective is to provide a high
level of current income and capital appreciation. The Fund seeks to achieve its
objective by investing in fixed income securities of U.S. issuers that are
rated below investment-grade quality or unrated income securities deemed to be
of comparable quality. Lower grade income securities are commonly known
as "junk bonds".
Our investment objective causes us to be riskier than other funds and you could
lose money. Investments in lower grade securities are subject to special risks,
including greater price volatility and a greater risk of loss of principal and
non-payment of interest. The Fund is not recommended for investors whose
principal objectives are assured income or capital preservation. This Fund is
designed for investors willing to assume additional risk in return primarily
for the potential for high current income and secondarily capital appreciation.
This is a new Fund and does not have any performance history.
FUND EXPENSES SUMMARY
9
<PAGE>
ANNUAL FUND OPERATING EXPENSES
These examples help you compare the cost of investing in the Funds with the
cost of investing in other mutual funds. They assume that you invest $10,000 in
the Fund for the periods indicated and then sell all of your shares at the end
of those periods. The examples also assume that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
Annual Fund Operating Expenses Examples
------------------------------ --------
Growth Fund Class A Class B Class D Examples++ Class A Class B* Class B** Class D
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .73% .73% After 1 Year $60 $60 $20
Distribution (12b-1) and Service Fees(a) .30% 1.00% After 3 Years $87 $83 $63
Other Expenses .27% .27% After 5 Years $115 $108 $108
Total Annual Fund Operating Expenses 1.30% 2.00% After 10 Years $187 $214 $214
<CAPTION>
Growth and Income Fund Class A Class B Class D Examples++ Class A Class B* Class B** Class D
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .60% .60% After 1 Year $58 $59 $19
Distribution (12b-1) and Service Fees(a) .30% 1.00% After 3 Years $82 $78 $58
Other Expenses .23% .23% After 5 Years $107 $99 $99
Total Annual Fund Operating Expenses 1.13% 1.83% After 10 Years $178 $196 $196
<CAPTION>
Small Company Value Fund Class A Class B Examples++ Class A Class B* Class B**
<S> <C> <C> <C> <C> <C> <C>
Management Fee .75% .75% After 1 Year $60 $60 $20
Distribution (12b-1) and Service Fees(a) .30% 1.00% After 3 Years $86 $82 $62
Other Expenses .24% .24% After 5 Years $115 $107 $107
Total Annual Fund Operating Expenses 1.29% 1.99% After 10 Years $196 $213 $213
<CAPTION>
Fixed Income Fund Class A Class B Class D Examples++ Class A Class B* Class B** Class D
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .63% .63% After 1 Year $57 $57 $17
Distribution (12b-1) and Service Fees(a) .30% 1.00% After 3 Years $78 $74 $54
Other Expenses 1.30% 2.00% After 5 Years $100 $92 $92
Total Annual Fund Operating Expenses .37% .37% After 10 Years $164 $182 $182
Waived Fees (.30%) (.30%)
Total Expenses Less Waived Fees 1.00% 1.70%
<CAPTION>
Municipal Trust Fund Class A Class B Examples++ Class A Class B* Class B**
<S> <C> <C> <C> <C> <C> <C>
Management Fee .63% .63% After 1 Year $57 $57 $17
Distribution (12b-1) and Service Fees(a) .30% 1.00% After 3 Years $78 $74 $54
Other Expenses .49% .49% After 5 Years $100 $92 $92
Total Annual Fund Operating Expenses 1.42% 2.12% After 10 Years $164 $182 $182
Waived Fees (.42%) (.42%)
Total Expenses Less Waived Fees 1.00% 1.70%
<CAPTION>
Developing Markets Fund Class A Class B Examples++ Class A Class B* Class B**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 1.25% 1.25% After 1 Year $78 $69 $29
Distribution (12b-1) and Service Fees(a) .25% 1.00% After 3 Years $121 $110 $90
Other Expenses 1.26% 1.26% After 5 Years $166 $153 $153
Total Annual Fund Operating Expenses 2.76%(b) 2.51%(b) After 10 Years $291 $304 $304
Waived Fees (.61%) (.61%)
Total Expenses Less Waived Fees 2.15% 2.90%
<CAPTION>
Developing Markets Fund Class A Class B Examples++ Class A Class B* Class B**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 1.25% 1.25% After 1 Year $78 $69 $29
Distribution (12b-1) and Service Fees(a) .25% 1.00% After 3 Years $121 $110 $90
Other Expenses 1.26% 1.26% After 5 Years $166 $153 $153
Total Annual Fund Operating Expenses 2.76%(b) 2.51%(b) After 10 Years $291 $304 $304
Waived Fees (.61%) (.61%)
Total Expenses Less Waived Fees 2.15% 2.90%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund Class A Class B Class D Examples++ Class A Class B* Class B** Class D
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees 1.25% 1.25% After 1 Year $78 $69 $29
Distribution (12b-1) and Service
Fees(a) .25% 1.00% After 3 Years $121 $110 $90
Other Expenses .75% .75% After 5 Years $166 $153 $153
Total Annual Fund Operating
Expenses 2.25%(b) 3.00%(b) After 10 Years $291 $305 $305
Waived Fees (.10%) (.10%)
Total Expenses Less Waived Fees 2.15% 2.90%
<CAPTION>
Municipal Money Fund Examples+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .40% After 1 Year $9
Distribution (12b-1) and Service
Fees(c) .25% After 3 Years $29
Other Expenses .40% After 5 Years $50
Total Annual Fund Operating
Expenses 1.05% After 10 Years $111
Waived Fees (.15%)
Total Expenses Less Waived Fees .90%
<CAPTION>
U.S. Government Money Examples+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .40% After 1 Year $9
Distribution (12b-1) and Service
Fees(c) .25% After 3 Years $29
Other Expenses .50% After 5 Years $50
Total Annual Fund Operating
Expenses 1.15% After 10 Years $111
Waived Fees (.25%)
Total Expenses Less Waived Fees .90%
<CAPTION>
High Income Fund Class A Class B Class D Examples Class A Class B Class B** Class D
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees After 1 Year
Distribution (12b-1) and Service
Fees After 3 Years
Other Expenses
Total Annual Fund Operating
Expenses
Waived Fees
Total Expenses Less Waived Fees
11
<PAGE>
<FN>
* Assumes reinvestment of all dividends and redemption at end of period.
** Assumes reinvestment of all dividends and no redemption at end of period.
+ Shares purchased directly into a Money Fund will not be subject to a CDSC and
therefore expenses paid will remain unaffected by redemption.
+ + Ten year figures assume conversion of Class B Shares to Class A shares at
the end of the eighth year following the date of purchase.
(a) Long-term Class B 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. A portion of the 12b-1 Fee
represents an asset-based sales charge.
(b) 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. (as
adviser) and AXA Asset Management Partenaires (as subadviser) believe the fees
are comparable to those paid by investment companies of similar investment
orientation.
(c) The maximum allowable amount payable for distributing shares is .40 of 1% of
the average daily net assets of each Money Fund. The Board of Trustees has
currently limited the amount payable to .25 of 1% of the average daily net
assets of each Money Fund.
</TABLE>
SHAREHOLDER TRANSACTION EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the DLJ Funds. These fees are paid directly from your investment.
12
<PAGE>
<TABLE>
<CAPTION>
DLJ Focus Funds DLJ Opportunity Funds DLJ Money
SHAREHOLDER FEES Class A(1) Class B(2) Class D Class A(1) Class B(2) Class D Funds
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge (load) imposed on 4.75% None None 5.75% None None None
purchases (as a percentage of offering price)
Maximum sales charge load imposed on
reinvested dividends (as a percentage of None None None None None None None
offering price)
Maximun deferred sales charge (as a
percentage of original purchase price or None (3) 4% (4) None None 4% (4) None None
redemption proceeds, as applicable)
Redemption fees None None None None None None None
Exchange Fee None None None None None None None
Maximum Account Fee None None None None None None None
<FN>
(1) The maximum sales charge imposed is reduced for larger purchases. Purchases
of $1,000,000 or more are not subject to an initial sales charge but may be
subject to a 1% CDSC on redemptions within one year of purchase.
See "Purchases, Redemptions and Shareholder Services."
(2) Class B shares of each Fund automatically convert to Class A shares after
eight years. See "Purchases, Redemptions and Shareholder Services."
(3) DLJ Focus Funds Class A shareholders who received their shares upon
conversion of shares purchased prior to February 28, 1996 may be subject to a
CDSC as described under "Purchases, Redemptions and Shareholder
Services--Contingent Deferred Sales Charge on Converted Shares."
(4) 4% during the first year decreasing 1% annually to 0% after the fourth
year.
</TABLE>
PURCHASE INFORMATION
Shares of the DLJ Municipal Money Fund and the DLJ U.S. Government Money Fund
(the "Money Funds") or Class A or Class B shares of the other Funds may be
purchased directly by using the Share Purchase Application found in this
Prospectus, or through Donaldson, Lufkin & Jenrette Securities Corporation, the
Funds' distributor, or by contacting your securities dealer.
The minimum initial investment in each Fund is $250. The minimum for additional
investments is $25. These minimums are waived for certain types of accounts.
Further information can be obtained from DLJ at the address and telephone
number shown on the back cover of this Prospectus. See "How to Buy and Sell
Shares of the Fund" and "Other Shareholder Information."
The Funds, except the Money Funds, offer Class A and Class B shares. Class A
shares may be purchased for net asset value of the Fund plus an initial sales
charge imposed at the time of purchase and may be subject to a contingent
deferred sales charge ("CDSC") in cases where the initial sales charge was not
applied because of the size of the purchase. Class B shares may be purchased for
net asset value, but are subject to a CDSC upon redemption. The CDSC applicable
to Class B shares declines from 4% for redemptions made during the year
of purchase to zero after four years. The Growth Fund, Growth and Income Fund,
Fixed Income Fund, High Income Fund and the International Equity Fund also offer
Class D shares. Class D shares are offered without any initial sales charge or
CDSC to employees of Donaldson, Lufkin & Jenrette Inc. ("DLJ, Inc.") and its
subsidiaries that are eligible to participate in the DLJ Profit Sharing Plan.
See "How to Buy and Sell Shares."
Shares of the Money Funds may be purchased at a price equal to the net asset
value of each Money Fund, which is expected to be $1.00 per share. See "Net
Asset Value."
13
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are set forth below. There
can be, of course, no assurance that any of the Funds will achieve its
investment objective. The Funds' investment objectives are fundamental policies
that cannot be changed without the approval of the shareholders of the
applicable Fund. The Board of Trustees of a Fund may change non-fundamental
policies without shareholder approval.
FOCUS FUNDS
DLJ GROWTH FUND
Goal: The investment objective of the DLJ Growth Fund (the "Growth Fund") is
long-term capital appreciation. Investments are made based on their potential
for long-term capital appreciation. The Growth Fund may make an investment to
earn income when, in the opinion of the Adviser, such an investment will not
compromise the Growth Fund's investment objective.
Strategy: The Growth Fund invests in common stock, securities convertible into
common stock and other equity securities (e.g., preferred stock, interests in
master limited partnerships). It invests primarily in well-known and
established companies (generally, companies in operation for more than three
years). The Fund may occasionally invest in young companies which, in the
opinion of the Adviser, have the potential for long-term capital appreciation.
The Adviser applies extensive research that has been conducted primarily by
research analysts employed by DLJ on the growth prospects of stocks that are
considered for the portfolio. Target companies normally have market
capitalizations of at least $1 billion at the time of purchase. Generally, the
Adviser attempts to identify companies with growth rates that will exceed that
of the S&P 500 Index. The Growth Fund is "sector neutral." This means that its
investments are allocated to industries in proportion to the sector allocation
of the S&P 500 index, with the exception of the electric and the gas utilities
sectors. Other factors considered in the selection of securities include the
economic and political outlook, the value of a particular security relative to
another security, trends in the determinants of corporate profits, and
management capability and practices.
Investments: Under normal circumstances, the Growth Fund invests at least 65%
of its total assets in equity securities of companies that the Adviser believes
have above-average long-term capital appreciation potential. For temporary
defensive purposes, the Growth Fund may invest in investment-grade short-term
fixed-income securities, enter into repurchase agreements and hold cash. A
temporary defensive position could affect the Fund's ability to achieve its
investment objective. In addition, the Fund may invest in equity securities
selected on a basis other than long-term capital appreciation. The Fund may
invest up to 35% of the value of its assets in investment- grade fixed income
securities, including bonds, debentures, notes, asset and mortgage-backed
securities and money market instruments such as commercial paper and bankers
acceptances and other financial instruments. The Fund may invest in both listed
and unlisted securities and may also
o invest up to 10% of the value of its total assets in foreign securities
o invest no more than 10% of its net assets in restricted securities or other
instruments with no ready market
o invest up to 5% of its total assets in warrants, and
o attempt to minimize the effect of a market decline on the value of its
securities, subject to market conditions, by writing covered call options on
securities or stock indices. (See "Additional General Investment Policies and
Risks")
14
<PAGE>
[side bar for Growth Fund and Growth and Income Fund]
Risks. Like any investment, an investment in the Growth Fund or Growth and
Income Fund is subject to risk and you could lose money. While the Funds seek
investments that will appreciate in value and/or provide income, the value of
the securities could decline and provide no income. The Funds are subject to
risks that affect equity securities markets in general, such as general
economic conditions and adverse changes in interest rates (generally
increases). If the value of equity markets in general declines, you can expect
the value of your investment in the Funds to decline, possibly to a greater
extent than the decline in equity markets generally.
The Growth Fund may invest in new and unseasoned companies. Stocks of these
companies tend to be more volatile than stocks of larger and more established
companies. In addition, because stocks are selected on the basis of their
appreciation potential, they tend to be more risky than many investments that
provide current income. The Growth and Income Fund may invest in debt
securities. Debt securities are subject to risks that the issuer will not repay
its borrowings or pay interest. They are also subject to the risk of declines
in value because of increases in interest rates and decreases in the credit
quality of the issuer.
Investments in unlisted securities may be less liquid and more volatile than
investments in listed securities and could result in losses to the Funds if
they had to be sold quickly. Non-U.S. securities carry the same risks as
securities of U.S. companies and the added risks of being traded in less liquid
markets than U.S. securities. Non-U.S. securities are also issued by companies
that are not subject to U.S. reporting requirements and may have political
systems, ecomomies and markets that may not be as developed as in the U.S. See
"Additional Investment Policies and Risks".
[end side bar]
DLJ GROWTH AND INCOME FUND
Goal: The investment objective of the DLJ Growth and Income Fund (the "Growth
and Income Fund") is long-term capital appreciation and continuity of income.
Strategy: The Growth and Income Fund pursues its investment objective by
investing principally in dividend-paying common stock and by diversifying its
investments among different industries and companies. Securities are selected
based on the Adviser's evaluation of their investment merit and their potential
for appreciation in value and/or income. The selection of securities on the
basis of their capital appreciation or income potential does not ensure against
possible loss in value.
Investments: The Growth and Income Fund invests in common stock, preferred
stock and securities convertible into common stock. The Growth and Income Fund
may invest in debt securities that are of investment-grade quality at the time
of purchase (including bonds, debentures, notes and asset and mortgage-backed
securities), U.S. government securities, municipal securities (including
general and special obligation securities and industrial revenue bonds) and
money market instruments. (See '"Additional Investment Policies and
Risks"--"Mortgage and Asset-Backed Securities" and "Investment-Grade Debt
Securities.") There is no fixed proportion of the Growth and Income Fund's
assets that must be invested in particular types of securities. The percentage
of assets invested in various types of securities may be changed from time to
time by the Adviser.
The Growth and Income Fund invests in both listed and unlisted securities.
Unlisted securities may be less liquid and more volatile than listed
securities. The Growth and Income Fund may invest in foreign securities and
restricted securities. To minimize the effect of a market decline in the value
of its securities, the Fund may, depending on market conditions, write covered
call options on securities or stock indices. The Fund may invest up to 10% of
its assets in non-U.S. securities and up to 10% of its assets in restricted
securities. For additional information on the use, risks and costs of the above
referenced policies and practices, see "'Additional Investment Policies and
Risks."'
15
<PAGE>
DLJ SMALL COMPANY VALUE FUND
Goal: The investment objective of the DLJ Small Company Value Fund (the '"Small
Company Value Fund"') is a high level of growth of capital. The Small Company
Value Fund is not intended for investors whose principal objective is assured
income or preservation of capital.
Strategy: The Small Company Value Fund invests primarily in common stock and
may also invest in securities convertible into common stock, preferred stock,
other equity securities, bonds or other debt securities as described below.
Under normal market conditions, at least 65% of the Fund's assets are invested
in equity securities of small market capitalization companies. Small cap
companies for purposes of this Fund are considered to be companies with market
capitalizations of $2 billion or less at the time of purchase.
Investments: The Small Company Value Fund pursues its investment objective by
employing a value-oriented investment approach. This means that the Adviser
seeks securities that appear to be underpriced. The Adviser looks for stocks
issued by companies with proven management, consistent earnings, sound finances
and strong potential for market growth. By investing in such companies, the
Small Company Value Fund tries to enhance its potential for appreciation and
limit the risk of decline in the value of its portfolio. The Small Company
Value Fund focuses on the fundamentals of each small-cap company instead of
trying to anticipate what changes might occur in the stock market, the economy,
or the political environment. This approach differs from that used by many
other funds investing in small-cap company stocks. Those other funds often buy
stocks of companies they believe will have above-average earnings growth, based
on anticipated future developments. In contrast, the Small Company Value Fund's
securities are generally selected with the belief that they are currently
undervalued based on existing conditions and that their earning power or
franchise value does not appear to be reflected in their current stock price.
To further reduce risk, the Small Company Value Fund diversifies its holdings
among many companies and industries. The Adviser also considers whether a
company has an established presence in its industry, a product or market niche
and whether management owns a significant stake in the company.
The Small Company Value Fund may also invest in special situation companies. A
special situation company is a company whose value may increase within a
reasonable period of time solely by reason of a development particularly or
uniquely applicable to that company. The securities of these companies may be
affected by particular developments unrelated to business conditions generally.
These investments may fluctuate without relation to general market trends. In
general, the principal risk associated with investing in special situation
companies is the potential decline in the value of these securities likely to
occur if the anticipated development fails to take place. Examples of special
situation companies are companies that are being reorganized or merged, that
have unusual new products, enjoy particular tax advantages, or acquire new
management.
The Fund invests primarily in common stock. It may also invest in securities
convertible into common stock, preferred stock, investment-grade debt
securities (including bonds, debentures, notes, asset and mortgage-backed
securities and convertible securities), U.S. Government Securities, municipal
securities (including general and special obligation securities and industrial
revenue bonds), money market instruments (such as commercial paper and bankers'
acceptances) and other financial instruments.
The Small Company Value Fund also may invest in unlisted securities and
securities traded in the over-the-counter markets. The Small Company Value Fund
may allocate a larger percentage of its assets to unlisted securities than
would a typical large company mutual fund. The Small Company Value Fund may
also:
o purchase or sell options on securities and on indices to seek to enhance
return or hedge its portfolio
o purchase or sell financial futures contracts and options thereon for hedging
and risk management purposes
o invest up to 20% of total assets in foreign securities
o invest up to 5% of total assets in rights or warrants
o invest not more than 10% of net assets in instruments having no ready
market.
However, the Fund does not invest in restricted securities.
16
<PAGE>
Risks: The investment objective for Small Company Value Fund causes it to be
riskier than other funds and you could lose money. While it seeks investments
that will provide a high level of growth of capital, they may decline in value.
You should not invest in the Small Company Value Fund if your principal
objective is assured income or capital preservation. While smaller companies
generally have the potential for rapid growth, they often involve greater risks
than investments in larger, more established companies. Small companies may
have less management experience, fewer financial resources, and limited product
diversification. In addition, in many instances the frequency and trading
volume for securities of smaller companies is substantially less than for
larger companies, causing such securities to be subject to greater and more
abrupt price fluctuations and to be less liquid than securities of larger
companies. When making large sales of portfolio securities, it may be necessary
for the Small Company Value Fund to sell such securities at discounts from
quoted prices or to execute a series of small sales over an extended period of
time. These factors cause an investment in the Small Company Value Fund to be
riskier than an investment in a "large company" mutual fund.
Small Company Value Fund also is subject to risks that affect equity securities
markets in general, such as general economic conditions and adverse changes in
interest rates. These factors also could adversely affect an investment in the
Fund. If the value of equity markets in general declines, the value of your
investment in the Small Company Value Fund could also decline, possibly to a
greater extent than the decline in equity markets generally.
Debt securities are subject to the risk that the issuer will not repay its
borrowings or pay interest. They are also subject to the risk of declines in
value because of increases in interest rates and decreases in the perceived
credit quality of the issuer.
Investments in unlisted securities may be less liquid and more volatile than
investments in listed securities and could result in losses if they had to be
sold quickly. Not only do non-U.S. securities carry the same risks as
securities of U.S. companies, they also have the added risks of generally being
traded in less liquid markets than U.S. securities, involve political systems,
economies and markets that may not be as developed as in the U.S. and may be
issued by companies that are not subject to reporting requirements that are as
rigorous as those imposed on U.S.issuers.
Selecting options, warrants and financial futures contracts involves
determinations as to how a particular security, index, interest rate, or
currency will change. If the Adviser is wrong on its prediction, the Fund could
lose money. In addition, such instruments may not be available, or if
available, may be too expensive to utilize. See "Additional Investment Policies
and Risks".
DLJ FIXED INCOME FUND
Goal: The investment objective of the DLJ Fixed Income Fund (" Fixed Income
Fund")is to provide as high a level of total return as is consistent with
capital preservation by investing principally in debt securities , including,
without limitation, convertible and nonconvertible debt securities of domestic
and foreign companies, including both well-known and established and new and
lesser-known companies. The Fund invests at least 80% of its assets at the time
of investment in debt securities. Total return means the sum of net investment
income (if any) and realized and unrealized gains less losses. Capital
preservation means minimizing the risk of capital loss in a period of falling
prices (rising interest rates) for debt securities.
Strategy: The Fund invests in and holds debt securities that the Adviser
believes will maximize total return at a level consistent with capital
preservation. The average maturity of the Fund's portfolio is adjusted based on
the Advisor's assessment of relative yields on debt securities and expectations
of future interest rate patterns.
A change in the price of a debt security generally is inversely related to
market interest rates. This means that the value of the Fund's investments will
tend to decrease during periods of rising interest rates and to increase during
periods of falling rates. In general, as the average maturity of the portfolio
increases, so does the potential volatility in share price. In normal
circumstances, the Fixed Income Fund invests at
17
<PAGE>
least 65% of the value of its total assets in fixed income securities. Tthe
Fund may hold cash and short-term fixed income securities and may enter into
repurchase agreements for temporary defensive purposes as determined by the
Adviser without regard to the above limits. A temporary defensive position
could affect the Fund's ability to achieve its investment objective.
Investments: The Fixed Income Fund may invest in bonds, including municipal
bonds (taxable and tax-exempt, and other debt securities), rated Aaa, Aa, A or
MIG-1 by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or SP-1 by
Standard & Poor's Ratings Group ("S&P"), U.S. Government Securities,
obligations issued or guaranteed by national or state bank holding companies,
and commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P.
.
[side bar]
High Quality Ratings are those securities rated Aaa, Aa, A or MIG-1 by Moody's
, or AAA, AA, A or SP-1 by S&P. [end of side bar]
The Fixed Income Fund may also invest not more than 25% (in the aggregate) of
its total assets in lower-rated debt securities that are not rated below BBB or
SP-2 by S&P or Baa or MIG-2 by Moody's to the extent the Adviser views such
investments as consistent with this fund's investment objective. (See
'"Additional Investment Policies and Risks",' for a description of securities
rated BBB by S&P and Baa by Moody's and of asset and mortgage-backed
securities.) The Fixed Income Fund may enter into repurchase agreements,
terminable within seven days or less, involving U.S. Treasury securities, with
member banks of the Federal Reserve System or primary dealers in U.S.
Government Securities. The Fixed Income Fund may invest up to 10% of its assets
in restricted securities and in instruments having no ready market value.
[side bar for Fixed Income Fund and Municipal Trust Fund]
Risks of the Fixed Income Fund and Municipal Trust Fund. While the Funds seek
investments that will satisfy their investment objectives, the Funds'
investments could decline in value and you could lose money. Concerns about an
issuer's ability to repay its borrowings or to pay interest will adversely
affect the value of the securities. The Funds' Adviser seeks to limit this risk
generally by selecting higher-quality debt securities. In addition, the Funds
are subject to risks that affect the bond markets in general, such as general
economic conditions and adverse changes (generally increases) in interest
rates. Investments in unlisted securities may be less liquid and more volatile
than listed securities and could result in losses if they had to be sold
quickly. The Municipal Trust Fund is also subject to risks of investing in
municipal securities. These risks include uncertainties regarding the
securities - tax status, political and legislative changes and the rights of
their holders. The Municipal Trust Fund may also experience risks as a result
of the Adviser incorrectly forcasting interest rates or improperly assessing
the value of municipal securities. These factors could adversely affect your
investment.
[end of side bar]
DLJ MUNICIPAL TRUST FUND
Goal: The investment objective of the DLJ Municipal Trust Fund ("Municipal
Trust Fund") is to provide as high a level of total return as is consistent
with capital preservation by investing principally in high grade tax-exempt
municipal securities. This investment objective, unlike that of most other
municipal bond funds, is not to provide current income. Total return means the
sum of interest income and capital gains less capital losses. The Municipal
Trust Fund intends to distribute annually its net capital gains. Such
distributions, if any, will be taxable to a shareholder as capital gain. (See
"Dividends and Distribution Information" and "Taxes.")
Strategy: The Municipal Trust Fund attempts to maximize total return by
actively managing the maturities of the bonds in its portfolio to reflect the
Advisor's assessment of anticipated interest rate movements and relative
yields. The Municipal Trust Fund currently maintains an average maturity of 10
years or less in
18
<PAGE>
order to help reduce the interest rate risk associated with investing in
long-term bonds. However, the Fund may adjust this average maturity as the
Advisor's views on interest rate movements change, shortening maturities in
periods of rising interest rates and lengthening maturities in periods of
falling interest rates. The Fund attempts to supplement total return by
identifying and purchasing undervalued municipal securities. As with any fixed
income investment, the success of these strategies depends upon the Adviser's
ability to accurately forecast changes in interest rates and to assess the
value of municipal securities. You should be aware that there are no assurances
that the Fund's investment strategies will be successful.
Investments: The Municipal Trust Fund seeks to achieve its objective by
investing primarily in a diversified portfolio of high-grade, intermediate-term
municipal securities. Municipal securities fall into two principal classes:
bonds and notes, both of which may have fixed, variable or floating rates of
interest. The Fund invests in tax-exempt municipal bonds and notes which are
rated Aaa, Aa, A or MIG-1 by Moody's or AAA, AA, A or SP-1 by S&P. The Fund may
also invest up to 25% of its total assets in lower-rated municipal securities
to the extent the Adviser views such investments as consistent with this Fund's
investment objective. (See "Additional Investment Policies and
Risks--Investment-Grade Debt Securities" for a description of securities rated
BBB by S&P and Baa by Moody's.) The Fund may also invest in unrated municipal
securities when the Adviser believes they are of comparable quality to that of
rated securities and are consistent with the Fund's objective and policies.
Because a change in the market value of a debt security generally is
inversely related to market interest rates, the market value of the Municipal
Trust Fund's investments will tend to decrease during periods of rising
interest rates and to increase during periods of falling rates. In general, as
the average maturity of the portfolio increases, so does the potential
volatility in share price. The market value of the Municipal Trust Fund's
portfolio as a result of fluctuations in interest rates will be greater at
times when the average maturity of the Municipal Trust Fund's portfolio is
longer.
The Municipal Trust Fund may enter into repurchase agreements, terminable
within seven days or less. The Fund may also invest in restricted securities,
in instruments having no ready market value and municipal bonds that are
subject to the alternative minimum tax ("AMT-Subject Bonds").The Municipal
Trust Fund reserves the right to hold cash and short-term fixed income
securities and to enter into repurchase agreements as necessary for temporary
defensive or emergency purposes as determined by the Adviser without regard for
the above limitation. A temporary defensive position could affect the Fund's
ability to achieve its investment objective. Dividends of the Municipal Trust
Fund will consist of income exempt from federal income tax, income subject to
the federal AMT, and taxable ordinary income and capital gains. (See
'"Dividends and Distributions Information" and "Taxes."')
DLJ OPPORTUNITY FUNDS
THE INTERNATIONAL FUNDS
DLJ DEVELOPING MARKETS FUND
Goal: The investment objective of the DLJ Developing Markets Fund ("Developing
Markets Fund") is long-term growth of capital by investing primarily in common
stocks and other equity securities in developing countries. Under normal market
conditions, the Fund invests at least 65% of its assets in equity securities of
developing countries.
Strategy: The Fund seeks to identify those countries and industries where
economic and political factors are likely to produce above average growth
rates. The Fund seeks to invest in those companies in such industries and
countries that are best positioned and managed to take advantage of these
economic and political factors. The assets of the Fund ordinarily will be
invested in the securities of issuers in at least three different developing
countries.
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Investments: Equity securities include common and preferred stock, warrants,
rights or options that are convertible into common stock, debt securities that
are convertible into common stock, depository receipts for those securities and
other classes of stock that may exist. The Fund may purchase foreign securities
in the form of sponsored or unsponsored depository receipts or other securities
restricted or otherwise representing underlying shares of foreign issuers. The
Fund may purchase a limited amount of illiquid securities. The Fund may enter
into forward foreign currency exchange contracts to attempt to protect the
value of its assets against future changes in the level of currency exchange
rates. The Fund 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. The Fund 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 the Fund's portfolio.
As used in this Prospectus, a company in a developing country is an entity for
which either the principal securities trading market is in a developing
country, it is organized under the laws in a developing country or it has its
principal office in a developing country. The Fund invests primarily in
countries represented within the MSCI Emerging Market Free Index. Those
countries currently include Argentina, Brazil, Chile, China, Colombia, Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Israel, Jordan, Korea,
Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Portugal, Russia, South
Africa, Sri Lanka, Taiwan, Thailand, Turkey and Venezuela. The Fund generally
does not invest more than 25% of its total assets in developing countries not
represented within the MSCI Emerging Markets Free Index.
Risks. Like any investment, an investment in the Developing Markets Fund is
subject to risk and you could lose money. While we select investments that we
believe will experience long-term appreciation, their value could decline. We
are also subject to risks that affect equity securities markets in general,
such as general economic conditions and adverse changes (generally increases)
in interest rates. There are certain risks involved in investing in non-U.S.
securities, in addition to the risks inherent in U.S. investments. These risks
may include currency fluctuations, currency revaluations, adverse political and
economic developments, currency exchange blockages, foreign governmental laws
or restrictions, reduced public information concerning issuers, and the lack of
uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements comparable for domestic companies.
Furthermore, non-U.S. securities may be less liquid and more volatile than
comparable U.S. securities. There is also a possibility of expropriation,
nationalization, confiscatory taxation, and limitations on use or removal of
Funds or assets. Investments in non-U.S. securities may result in higher
expenses due to currency conversions, brokerage commissions which generally are
higher than U.S. commissions and the expense of maintaining securities with
foreign custodians. In addition to the general risks of investing in non-U.S.
securities, characteristics of developing countries may affect certain
investments, such as national policies that restrict foreign investment and the
absence of developed legal structures governing private property and private
and foreign investments. The typically small size of the securities markets
issued in developing countries and the possibility of a low or nonexistent
volume of trading may also result in a lack of liquidity and substantial price
volatility. You should be aware that investing in developing countries
generally involves exposure to economic structures that are generally less
diverse and mature, and to political systems with less stability than those of
developed countries.
This Fund may from time to time take a defensive position by holding all or a
portion of the Fund in 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 U.S.
and non-U.S issuers, repurchase agreements, time deposits or cash (foreign
currencies or U.S. dollars). The 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 the Fund's shares or
to meet ordinary daily cash needs.
For additional information on the use, risks and costs of the above referenced
policies and practices, see 'Additional Investment Policies and Risks.'
DLJ INTERNATIONAL EQUITY FUND
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Goal: The investment objective of the DLJ International Equity Fund
("International Equity Fund")is long-term growth of capital by investing
primarily in common stocks and other equity securities from established foreign
markets. During normal market conditions, the Fund invests most of the assets
in securities of issuers from at least three different countries outside the
United States. The Fund may invest in securities of companies incorporated in
the United States but having their principal activities and interests outside
of the United States.
Strategy: In pursuing its investment objective, the International Equity Fund
attempts to diversify its equity investments primarily among countries
represented within the EAFE Index. Those countries currently include Australia,
Austria, Belgium,France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
the Netherlands, New Zealand, Singapore, Spain, Switzerland, the United
Kingdom, and the Scandinavian countries. The Fund generally does not intend to
invest more than 10% of its total assets in countries not represented within
the EAFE Index.
This Fund seeks to identify countries and industries with favorable growth
prospects. Then the Fund invests in the companies in such countries and
industries that are reasonably valued. Typically these companies offer reliable
earnings and high quality management.
Investments: Equity securities include common and preferred stock, warrants or
rights or options that are convertible into common stock, debt securities that
are convertible into common stock, depositary receipts for those securities and
other classes of stock that may exist. The Fund may purchase foreign securities
in the form of sponsored or unsponsored depositary receipts or other securities
representing underlying shares of foreign issuers. This Fund may purchase a
limited amountof its assets in restricted or otherwise illiquid securities. The
Fund 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. The Fund may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or the board of trade for
certain hedging, return enhancement and risk management purposes. The Fund 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 the Fund's portfolio.
[side bar for both International Funds]
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 U.S. corporation.
The International Funds may from time to time take a defensive position by
holding all or a portion of the Fund in 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 U.S. and non-U.S issuers, repurchase agreements, time
deposits or cash (foreign currencies or U.S. dollars). The International Funds
may also temporarily hold cash and invest in high quality foreign or domestic
money market instruments up to 35% of their assets, pending investment of
proceeds from new sales of International Funds' shares or to meet ordinary
daily cash needs.
[end side bar]
Risks. Like any investment, an investment in the International Equity Fund is
subject to risk and you could lose money. While we select investments that we
believe will experience long-term appreciation, their value could decline. We
are also subject to risks that affect equity securities markets in general,
such as general economic conditions and adverse changes (generally increases)
in interest rates. There are certain risks involved in investing in non-U.S.
securities, in addition to the risks inherent in U.S. investments. These risks
may include currency fluctuations, currency revaluations, adverse political and
economic developments, currency exchange blockages, foreign governmental laws
or restrictions, reduced public
21
<PAGE>
information concerning issuers, and the lack of uniform accounting, auditing
and financial reporting standards and other regulatory practices and
requirements comparable for domestic companies. Furthermore, non-U.S.
securities may be less liquid and more volatile than comparable U.S.
securities. There is also a possibility of expropriation, nationalization,
confiscatory taxation, and limitations on use or removal of funds or assets.
Investments in non-U.S. securities may result in higher expenses due to
currency conversions, brokerage commissions which generally are higher than
U.S. commissions and the expense of maintaining securities with foreign
custodians.
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Investment Policies and Risks."
THE MONEY FUNDS
DLJ MUNICIPAL MONEY FUND
Goal: The DLJ Municipal Money Fund ("Municipal Money Fund")seeks maximum
current income, consistent with liquidity and safety of principal, that is
exempt from Federal income taxation to the extent described herein.
Strategy: The Fund pursues its objectives by investing at least 80% of its
total assets in high quality municipal securities having remaining maturities
of one year or less, which maturities may extend to 397 days. The Fund reserves
the right to lower the percentage of investments in municipal securities if
economic or political conditions warrant. To increase the 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 Money Fund's investments could cause its net asset
value per share to deviate from $1.00.
Investments: Normally, substantially all the Municipal Money Fund's income will
be exempt from Federal income taxation. Such income may be subject to state or
local and/or Federal AMT income taxes. The Fund invests in municipal notes and
short-term municipal bonds, which may have fixed, variable or floating rates of
interest. Municipal securities with variable rates 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 institution in respect of all variable rate obligations will not
cover more than the allowable percentage of the Municipal Money Fund's total
assets in accordance with Rule 2a-7 under the Investment Company Act of 1940,
as amended ('1940 Act'). For a more complete discussion of Municipal
Securities, see 'Additional General Investment Policies--Municipal Securities.'
All of the Fund's municipal securities at the time of purchase are rated within
the two highest quality ratings of Moody's or S&P's, or judged by the Adviser
to be of comparable quality. The Municipal Money Fund may also invest without
limitation in tax-exempt municipal securities subject to the AMT. (See
'Dividends, Distributions and Taxes.')
The Municipal Money Fund may invest to a limited extent in stand-by
commitments, delayed-delivery, when-issued securities and other illiquid
securities. This Fund may also invest a small percentage of its net assets 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. The Fund may from time to time
invest in taxable securities including obligations of the U.S. Government and
its agencies, high quality certificates of deposit and bankers' acceptances,
prime commercial paper, and repurchase agreements.
Risks: Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. This fund seeks to preserve the value of your investment at $1.00 per
share, however, it is possible to lose money by investing in this Fund. To seek
to reduce investment risk, the Municipal Money Fund may not invest in the
securities of any one issuer, except the U.S. Government, in excess of the
percentage of the Municipal Money Fund's total assets
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<PAGE>
allowed under Rule 2a-7 of the 1940 Act. The Municipal Money 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 Money Fund nor
its yield are insured or guaranteed by the U.S. Government.
For additional information on the use, risks and costs of the above referenced
policies and practices, see "Additional Investment Policies and Risks."
DLJ U.S. GOVERNMENT MONEY FUND
Goal: The DLJ U.S. Government Money Fund ("Government Fund") seeks maximum
current income, consistent with liquidity and safety of principal.
Strategy: This 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. Some 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 its net asset value
per share to deviate from $1.00.
Investments: The Fund invests in U.S. Government Securities, including issues
of the U.S. 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 Fund also invests in repurchase agreements that are
collateralized in full each day by eligible mortgage related securities or 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. This type of investment could create a loss to the
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 Fund's right to dispose of the
securities might be restricted. The Government Fund may also to a limited
extent, invest in illiquid securities, which includes when-issued U.S.
Government securities.
Side bar
To maintain portfolio diversification and reduce investment risk, the Money
Funds do 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 (the borrowings are not 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 investments listed the Money Funds may take temporary
defensive measures by holding other types of securities which are permitted by
Rule 2a-7 of the 1940 Act.
Risks: Like any money market fund investment, this investment is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. This Fund seeks to preserve the value of your investment at $1.00 per
share, however, it is possible to lose money by investing in this Fund. 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.
For additional information on the use, risks and costs of the above referenced
policies and practices, see 'Additional Investment Policies and Risks.'
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<PAGE>
DLJ HIGH INCOME FUND
Goal: The DLJ High Income Fund ("High Income Fund") seeks a high level of
current income and capital appreciation. This Fund is not recommended for
investors whose principal objective is assured income or capital preservation.
Strategy: This Fund seeks to achieve its investment objectives by investing in
fixed-income securities, including corporate bonds and notes, convertible
securities and preferred stocks, that are rated in the lower rating categories
of the established rating services (Baa or lower by Moody's and BBB or lower by
S & P), or, if unrated, are of comparable quality. Securities rated Baa or
lower by Moody's and BBB or lower by Standard & Poor's are commonly known as
"junk bonds." These bonds are considered by those rating agencies to have
speculative characteristics. These bonds can be expected to provide higher
yields. However these securities may be subject to greater market fluctuations
and risk of loss of income and principal than lower yielding, higher-rated
fixed-income securities. Investment in such high-yield securities entails
relatively greater risk of loss of income or principal.
Investments: This Fund seeks to achieve its objective by investing primarily in
a diversified portfolio of lower-rated fixed-income securities including
convertible and non-convertible debt securities and preferred stock. The Fund
may also hold assets in cash or cash equivalents. This Fund generally does not
invest in common stocks, rights or other equity securities. From time to time
the Fund may acquire or hold such securities (if consistent with its
objectives) when they are acquired in unit offerings with fixed-income
securities or in connection with an actual or proposed conversion, exchange or
restructuring of fixed-income securities.
Selection and supervision by the management of the Fund of investments in
lower-rated fixed-income securities involves continuous analysis of individual
issuers, general business conditions and other factors. The furnishing of these
services does not, of course, guarantee successful results. The Adviser's
analysis of issuers includes, among other things, historic and current
financial conditions, current and anticipated cash flow and borrowing
requirements, value of assets in relation to historical cost, strength of
management, responsiveness to business conditions, credit standing, and current
and anticipated results of operations. Analysis of general business conditions
and other factors may include anticipated changes in economic activity and
interest rates, the availability of new investment opportunities, and the
economic outlook for specific industries. While the Adviser considers as one
factor in its credit analysis the ratings assigned by the rating services, the
Adviser performs its own independent credit analysis of issuers and
consequently, the High Income Fund may invest, without limit, in unrated
securities. The Fund's ability to achieve its investment objective may depend
on the Adviser's own credit analysis to a greater extent than the funds that
invest in higher-rated securities.
Although the High Income Fund primarily invests in lower-rated securities, it
will generally not invest in securities rated at the time of investment in the
lowest rating categories (Ca or below for Moody's and CC or below for S & P).
Securities which are subsequently downgraded may continue to be held and will
be sold only if, in the judgment of the Adviser, it is advantageous to do so.
Risks: While we seek investments that will satisfy our investment objective,
our investments could decline in value and you could lose money. Concerns about
an issuer's ability to repay its borrowings or to pay interest will adversely
affect the value of its securities. We are also subject to risks that affect
the bond markets in general, such as general economic conditions and adverse
changes (generally increases) in interest rates. The market value of longer
maturity debt securities, like those held by the Fund, is more sensitive to
interest rate changes than the market value of shorter maturity debt
securities. In addition, the Fund's investments in lower grade securities will
subject investors to additional risk than normally experienced in other fixed
income securities. Lower grade securities are regarded as being predominantly
speculative as to the issuer's ability to pay the principal and interest.
Issuers of lower grade securities are more likely to experience financial
stress in periods of economic downturn or rising interest rates. The issuer's
ability to service its debt may be adversely affected by poor management,
inability to meet business forecasts or unavailability of additional financing.
There is a higher default rate with lower grade securities
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<PAGE>
because they may be unsecured or subordinate to other securities of the issuer.
There are fewer dealers in lower grade securities which may make the market
less liquid and cause larger differences in prices quoted than that of
higher-rated fixed income securities. In addition, the Fund may incur
additional expense when it is required to seek recovery upon a default or
restructuring.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISKS
The following general investment policies and risks supplement those set forth
above for each Fund.
Equity Securities. "Equity Securities", includes common stock, preferred stock
(including convertible preferred stock), bonds convertible into common or
preferred stock, rights and warrants, equity interests in trusts and depositary
receipts for equity 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 or preferred stock of the same or a different
issuer. Convertible securities have characteristics of both bonds and equity
securities. Like a bond, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in market 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. A warrant gives the holder thereof the right to buy equity securities
at a specific price during 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, the holder of the warrant can acquire the stock at a price below its
market value.
Mortgage and Asset-Backed Securities. Except for the Municipal Trust Fund, the
DLJ Funds may invest in mortgage and asset-backed securities. "Mortgage-backed
securities" are securities that directly or indirectly represent a
participation in, or are secured by and payable from, mortgage loans on real
property, including pass-through securities such as Ginnie Mae, Fannie Mae and
Freddie Mac Certificates. The yield and credit characteristics of
mortgage-backed securities differ in a number of respects from traditional
fixed income securities. The major differences typically include more frequent
interest and principal payments, usually monthly, and the possibility that
prepayment of principal may be made at any time. Prepayment rates are
influenced by changes in current interest rates and a variety of other factors.
In general, changes in the rate of prepayment on a security will change the
yield to maturity of that security. Under certain interest rate or prepayment
rate scenarios, a Fund may fail to recoup fully its investment in such
securities notwithstanding the credit quality of the issuers of such
securities. Based on historic prepayment patterns, amounts available for
reinvestment are likely to be greater during a period of declining interest
rates and, thus, are likely to be reinvested at lower interest rates, than
during a period of rising interest rates. Mortgage-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed income securities from declining interest rates because
of the risk of prepayment.
Except for the Municipal Trust Fund, the DLJ Funds also may invest in private
mortgage pass-through securities. Such securities are not guaranteed by the
U.S. Government or its agencies or instrumentalities.
Asset-Backed Securities. "Asset-backed securities" have similar structural
characteristics to mortgage-backed securities, but the underlying assets
include assets such as motor vehicle installment sales or installment loan
contracts, leases of various types of real and personal property, and
receivables from
25
<PAGE>
revolving credit agreements, rather than mortgage loans or interests in
mortgage loans. Asset-backed securities present certain risks that are not
present in mortgage-backed securities; primarily, these securities do not have
the benefit of the same security interest in the related collateral. There is
the possibility that recoveries of repossessed collateral may not, in some
cases, be available to support payments on these securities. For example, in
the event that the collateral underlying an asset-backed security must be
disposed of, it may be difficult to convert that collateral into a stream of
payments to be paid to the holders of the security.
Municipal Securities. "Municipal securities" are either bonds or notes.
Municipal bonds, which are longer-term debt obligations meeting long-term
capital needs, are either "general obligation" bonds or "revenue" bonds.
Payment of principal and interest on general obligation bonds is secured by the
issuing municipality's pledge of its full faith, credit, and taxing power.
Payment on revenue bonds is met from the revenues obtained from a certain
facility, class of facilities, special excise or other tax, but not from
general tax revenues. Variations on these two classifications exist, such as
revenue bonds backed by a municipality's general taxing power, or general
obligation bonds backed by limited taxing power. Municipal notes are short-term
debt obligations generally maturing in one year or less, meeting short-term
capital needs and are also either "general obligation" or "revenue" debt
securities. They include tax anticipation notes, revenue anticipation notes,
bond anticipation notes, construction loan notes and tax-exempt commercial
paper.
Municipal securities may have fixed, variable or floating rates of interest.
Variable and floating rate securities pay interest at rates that are adjusted
periodically, according to a specified formula, in order to minimize
fluctuation in the value of the principal of the securities. A "variable"
interest rate adjusts at predetermined intervals (e.g., daily, weekly, or
monthly), while a "floating" interest rate adjusts whenever a specified
benchmark rate (such as the bank prime lending rate) changes.
The Municipal Money Fund and Municipal Trust Fund may invest in variable rate
obligations. Such adjustments minimize changes in the market value of the
obligation, and accordingly, enhance the ability of the Municipal Money Fund to
maintain a stable $1.00 net asset value. (See "'Net Asset Value"').
Investment-Grade Debt Securities. All of the DLJ Funds may invest in debt
securities of investment-grade quality. Investment-grade debt securities are
debt securities rated in one of the four highest rating categories by a
nationally recognized statistical rating organization. Investment-grade debt
securities may also include debt securities believed by the Adviser (on the
basis of criteria believed by the Adviser to be comparable to that applied by
such rating agencies) to be of comparable quality to debt securities so rated
by the rating agencies.
Debt securities rated Baa or higher by Moody's or BBB or higher by S&P are
investment-grade securities. Securities rated BBB are regarded by S&P as having
an adequate capacity to pay interest and repay principal; while 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
to be medium-grade obligations. These securities are neither highly protected
nor poorly secured. The rating organization determines that 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. For a more complete description of Moody's and S&P's
ratings, see the Appendix to the Statement of Additional Information of each of
the DLJ Funds.
The investment-grade limitations referenced for each Fund are applicable at the
time of initial investment and a fund may determine to retain securities of
issuers which have had their credit characteristics downgraded.
Repurchase Agreements. The DLJ Funds may enter into "repurchase agreements"
with member banks of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New
26
<PAGE>
York) in such securities. Repurchase agreements permit a Fund to keep all of
its assets at work while retaining "overnight" flexibility in pursuit of
investments of a longer-term nature. The Adviser requires continual maintenance
of collateral with a Fund's custodian in an amount equal to, or in excess of,
the market value of the securities thatare the subject of a repurchase
agreement. In the event a vendor defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral are less than the repurchase price. If the vendor becomes the
subject of bankruptcy proceedings,the Fund might be delayed in selling the
collateral.
Non-U.S. Securities. All of the DLJ Funds, except the Money Funds and the
Municipal Trust Fund, may invest in non-U.S. securities. There are additional
risks involved in investing in non-U.S. securities. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, and the possible imposition of currency exchange blockages. In
addition, there are risks associated with future adverse political and economic
developments and a limited availability of public information concerning
issuers. Foreign issuers typically are subject to different accounting,
auditing and financial reporting standards. Securities of many foreign
companies may be less liquid and their prices more volatile than those of
domestic companies. 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.
Non-U.S.securities may be subject to taxes imposed by foreign governments that
would reduce the net yield on such securities. Investment in non-U.S.
securities may 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.
Investment Companies. Certain funds may invest a limited amount of their assets
in shares of other investment companies. Investments in other mutual funds may
involve the payment of substantial premiums above the value of such investment
companies' portfolio securities. In addition, such investments are subject to
limitations under the 1940 Act and market availability. Currently, the
International Funds and the Municipal Money Fund may invest in such investment
companies if, in the judgment of the Adviser or Subadviser, the potential
benefits of such investment justify the payment of any applicable premium or
sales charge. As a shareholder in an investment company, the Municipal Money
Fund or an International Fund would bear its ratable share of that investment
company's expenses, including its advisory and administrative fees. At the same
time shareholders of the Municipal Money Fund or an International Fund would
continue to pay their own management fees and other expenses.
Options. The Growth Fund and the Growth and Income Fund may write covered call
options on individual securities or stock indices. For these Funds, this
practice will only be used to minimize the effect of a market decline in the
value of securities in their respective portfolios. We cannot guarantee that,
should a Fund seek to enter into such transactions, it could do so at all or on
terms that were acceptable. The Small Company Value Fund may purchase or sell
put and call options on individual securities or stock indices as a means of
achieving additional return or of hedging the value of its portfolio. The
International Funds may purchase and sell put and call 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.) A call option is a
contract that gives the holder the right to buy from the seller the security
underlying the call option at a pre-determined price while a put option is a
contract that gives the buyer the right to require the seller to purchase the
security underlying the put option at a pre-determined price.
Lower or Unrated Securities. The High Income Fund will purchase lower or
unrated securities. Lower-grade securities are regarded as being predominantly
speculative as to the issuer's ability to make payments of principal and
interest. Investment in these securities involves substantial risk. Lower-grade
securities are commonly referred to as "junk bonds". Issuers of lower-grade
securities may be highly leveraged and may not have traditional methods of
financing. The risks associated with acquiring the securities of these issuers
generally are greater than is the case with higher-rated securities. For
example, during an economic
27
<PAGE>
downturn or a sustained period of rising interest rates, issuers of lower grade
securities may be more likely to experience financial stress, especially if
such issuers are highly leveraged. The risk of loss due to default is
significantly greater for the holders of lower-grade securities because such
securities may be unsecured and may be subordinate to other securities of the
issuer.
Year 2000. Many computer systems used today cannot tell the year 2000 from the
year 1900 because of the way dates are encoded. This could be a problem when
the year 2000 arrives and could affect securities trades, interest and dividend
payments, pricing and account services. Although we can't guarantee that this
won't be a problem, the Funds' service providers have been working on adapting
their computer systems. They expect that their systems, and the systems of
their service providers, will be ready for the new millennium. In addition,
your investment in the Funds could be adversely affected if a company that your
Fund has invested in has, or is perceived to have, a Year 2000 problem.
FUND MANAGEMENT
Wood, Struthers & Winthrop Management Corp., a Delaware corporation with
principal offices at 277 Park Avenue, New York, New York 10172 ("WSWMC"),
serves as the investment adviser for the DLJ Focus Funds and the International
Funds. DLJ Investment Management Corp., a Delaware corporation with principal
offices at 277 Park Avenue, New York, New York 10172, ("DLJIM"), serves as
investment adviser for the Money Funds and the High Income Fund. AXA Asset
Management Partenaires, a societe anonyme organized under the laws of France
with principal offices at 46, avenue de la Grande Armee, Paris, France 75017
serves as sub-investment advisor for the International Funds and is a wholly
owned subsidiary of AXA-UAP ("AXA").
WSWMC and DLJIM (the "Advisers") are subsidiaries 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 four French mutual
insurance companies.
The fees paid for the fiscal year ended October 31, 1998 are as follows:
<TABLE>
<CAPTION>
Fund % of average net assets Fees Paid
- -------------------------------------------------------------------------
<S> <C> <C>
Growth Fund .75% $
- -------------------------------------------------------------------------
Growth and Income Fund .63% $
- -------------------------------------------------------------------------
Small Company Fund .77% $
- -------------------------------------------------------------------------
Fixed Income Fund .625% $
- -------------------------------------------------------------------------
Municipal Trust Fund .625% $
- -------------------------------------------------------------------------
High Income Fund N/A *
- -------------------------------------------------------------------------
International Equity Fund 1.25% $
- -------------------------------------------------------------------------
Developing Markets Fund 1.25% $
- -------------------------------------------------------------------------
U.S. Government Fund .40% $
- -------------------------------------------------------------------------
Municipal Money Fund .40% $
- -------------------------------------------------------------------------
<FN>
*As of the date of this prospectus, the High Income Fund has not commenced
operations.
</TABLE>
The following individuals are responsible for management of the DLJ's Funds.
James A. Engle serves as the primary manager of the Growth and Income Fund. He
has been a manager of the Growth and Income Fund since July 1986. Mr. Engle
also serves as co-portfolio manager of the Growth Fund since March, 1993 and
the Small Company Value Fund since 1989. Mr. Engle is a Vice President of the
DLJ Focus Funds and the DLJ Opportunity Funds. Heis also the Chief Investment
Officer
28
<PAGE>
and Managing Director of WSWMC. Mr. Engle heads WSWMC's Investment Committee,
which focuses its attention on identifying undervalued securities and has been
an employee of the firm since 1983.
Cathy A. Jameson is the portfolio manager of the Fixed Income Fund, a position
she has held since the Fund was started in 1986. Ms. Jameson is a Vice
President of the DLJ Focus Funds. She is also a Managing Director of WSWMC and
has been an employee of WSWMC since 1979.
Roger W. Vogel serves as the primary portfolio manager of the Small Company
Value Fund. He has acted as the portfolio co-manager of the Growth Fund, the
Growth and Income Fund, and the Small Company Value Fund since July 1993. Mr.
Vogel is a Vice President of the DLJ Focus Funds, and a Senior Vice President
of the Advisers and the Chief Investment Officer--Equities of DLJIM. Prior to
becoming associated with the Funds, Mr. Vogel was a Vice President and
portfolio manager with Chemical Banking Corp.
Marybeth B. Leithead is the portfolio manager of the Municipal Trust Fund, a
position she has held since the commencement of its operations on July 28,
1993. Ms. Leithead is also a Vice President of the DLJ Focus Funds and of the
Advisers and has been an employee of WSWMC since 1989. A tax-exempt fixed
income specialist, Ms. Leithead is responsible for short-term and long-term
municipal bond investment management for clients of the Advisers. Prior to
joining WSWMC, Ms. Leithead was an employee of Citicorp Securities Markets Inc.
Hugh M. Neuburger, is the primary portfolio manager of the Growth Fund. He has
also served as the co-portfolio manager of the Growth Fund, the Growth and
Income Fund and the Small Company Value Fund since August 1995. Mr. Neuburger
is a Managing Director and Director of Quantitative Analysis of the Advisers
and has been an employee of WSWMC since March 1995. Prior to March 1995, Mr.
Neuburger was the president of Hugh M. Neuburger, Inc., a consulting firm
providing domestic and global tactical asset allocation advice and other
consulting services to large corporate and state pension plans. From 1986
through 1991, Mr. Neuburger was Managing Director of Matrix Capital Management,
an investment management firm. Prior to 1986, Mr. Neuburger managed asset
allocation portfolios for Prudential Insurance Company of America.
Michael A. Snyder is the portfolio manager of the High Income Fund. Mr. Snyder
was appointed Vice President of the Opportunity Funds and Managing Director of
DLJIM in October, 1998. Prior to becoming associated with the DLJ Funds and
joining DLJIM, Mr. Snyder spent two years as a managing director with Bear
Stearns Asset Management where he was responsible for the firm's high-yield
bond management effort. Prior to that position, Mr. Snyder spent ten years at
Prudential Investments where he was a senior portfolio manager in the firm's
High Yield Mutual Fund Group.
Robert de Guigne, an employee of the Subadviser, serves as portfolio manager of
the International Funds. Mr. de Guigne assumed the day-to-day investment
responsibilities of the Developing Markets Fund in August 1996 and the
International Equity Fund in June 1997. 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.
HOW TO BUY AND SELL SHARES
How to Buy Shares of the DLJ Funds?
Shares of the Money Funds or Class A or Class B shares of the other DLJ Funds
may be purchased directly by using the Share Purchase Application found in this
prospectus, or through Donaldson, Lufkin & Jenrette Securities Corporation, or
by contacting your securities dealer. Shareholders should read the prospectus
carefully before investing in the Funds.
29
<PAGE>
The minimum initial investment in each Fund is $250. The minimum for
additional investments is $25. There is a maximum purchase limitation in the
Funds' Class B shares of $250,000. Each of the funds, except the Money Funds,
offers Class A and Class B shares. Class A shares may be purchased at a price
equal to net asset value of the Fund plus an initial sales charge imposed at
the time of purchase. On purchase of $1,000,000 or more, there is no initial
sales charge but there could be a CDSC if the shares are redeemed within one
year of purchase. Class B shares may be purchased for net asset value, but may
be subject to a CDSC upon redemption. The CDSC declines from 4% during the
first year of purchase to zero after four years. Class B shares will convert to
Class A shares approximately eight years from the time of purchase. Class D
shares are offered exclusively to employees of DLJ and its subsidiaries that
are eligible to participate in the DLJ Profit Sharing Plan. These employees
should contact their Profit Sharing Plan administrator to learn how to purchase
Class D shares. Shares of the Money Funds may be purchased at a price equal to
the net asset value which is expected to be $1.00 per share.
Opening an Account:
Decide whether your first payment will be delivered by check or wire. The
initial investment minimum is $250.
By check:
Complete an application and send it along with a check made payable to the DLJ
Mutual Funds, to:
Regular Mail Overnight Delivery
DLJ Funds DLJ Funds
First Data Investor Services Group First Data Investor Services Group
P.O. Box 61503 3200 Horizon Drive
King of Prussia, PA 19406-0903 King of Prussia, PA 19406-0903
By wire:
First call DLJ 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
application and a fund account number. Contact your bank to arrange a wire
transfer to:
UMB Bank, n.a.
ABA #10-10-00695
For: First Data Investor Services Group
A/C #98-7037-0719
Attn: DLJ Funds
Your wire instructions must also include: the name of the Fund, your account
number and the name(s) of the account holders.
The account will be established once the application and check are received in
good order. If you purchase shares of the Money Funds through a wire transfer,
you will be eligible to receive the daily dividend declared on the date of
purchase, as long as the Transfer Agent, First Data Investor Services Group
("Transfer Agent") is notified of such purchase by 12:00 Noon. The Funds must
be received by the Transfer Agent by 4:00 p.m.
Investors may also open accounts for their DLJ Funds through 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. For more information, contact
your securities dealer.
30
<PAGE>
Shareholder accounts established on behalf of the following types of plans will
be exempt from the Fund's minimum and additional investments: 401K Plans, 403B
Plans, 457 Plans, SEP plans, and SIMPLE plans.
Additional investments may be made at any time by sending a check payable to
the Funds along with an investment stub found at the bottom of the Funds'
Shareholder Statement form. If the stub is not available you may send a check
payable to the "DLJ Mutual Funds" directly to the Transfer Agent at the address
listed above.
[side bar]
Net Asset Value - Net asset value per share (or "NAV") is determined
separately for each class by taking the total assets of each class of a Fund
and subtracting its total liabilities and then dividing the difference by the
total number of each class's shares outstanding. The NAV is determined at the
close of the New York Stock Exchange each day that the New York Stock Exchange
is open for trading. For the Money Funds, the net asset value is expected to be
maintained at a constant $1.00 per share although this price is not guaranteed.
For purposes of computing NAV, 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.
Shares of the DLJ Funds except the Money Funds are 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 of the
applicable Fund believe in good faith would accurately reflect their fair
value.
[end of side bar]
How to Sell Your Shares
You may sell shares of the Money Funds or Class A or Class B shares of the
other DLJ Funds on any day that the funds are open for business by calling or
writing the DLJ Funds. If you have completed the optional Telephone Redemption
Section of the Funds application, you may call the transfer agent at
1-800-225-8011. Requests for redemptions of more than $50,000 must be made in
writing and be accompanied by a signature guarantee.
Your redemption will be processed at the net asset value per share, next
computed following the receipt of your request in proper form. If you own Class
B shares or purchased Class A shares without paying an initial sales charge,
any applicable CDSC will be applied to the net asset value and deducted from
your redemption. The value of your shares may be more or less than your
investment depending on the net asset value of your Fund on the day you redeem.
The DLJ Funds have a minimum account size of $250. You may be requested to
increase your balance if it falls below $250. The Funds reserve the right to
close such account and send the proceeds to you. A fund will not redeem
involuntarily any shareholder account with an aggregate balance of less than
$250 based solely on the market movement of such Fund's shares.
For information concerning circumstances in which redemptions may be effected
through the delivery of in-kind portfolio securities, see your Statement of
Additional Information.
OTHER SHAREHOLDER INFORMATION
Classes of Shares and Sales Charges
The DLJ Funds, except the Money Funds, offer Class A and Class B shares to the
public. Class D shares are offered exclusively to employees of DLJ. and its
subsidiaries that are eligible to participate in the DLJ Profit Sharing Plan.
Class D shares are only offered by the Growth Fund, the Growth and Income Fund,
the Fixed Income Fund, the High Income Fund and the International Equity Fund.
Shares held in each
31
<PAGE>
Fund are normally entitled to one vote (with proportional voting for fractional
shares) for all purposes. This is referred to as a multi-class fund.
With respect to the DLJ Focus Funds and DLJ Opportunity Funds, each class is
identical in all respects except that each Class bears different distribution
service fees. Each Class has different exchange privileges, and only Class B
shares have a conversion feature. Class D does not bear distribution services
fees. Class A and Class B have exclusive voting rights with respect to each
class's 12b-1 Plan.
CLASS A Shares
[side bar]
Offering Price - The offering price for Class A shares (with a sales charge) is
NAV plus the applicable sales charge (unless you are entitled to a waiver).
[end side bar]
The offering price for Class A shares of the Funds is the net asset value plus
the applicable sales charge from the schedule below.
Initial Sales Charge- Class A Shares
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Amount Purchased As a % of Amount Invested As a % of Offering Price Commission to
Dealer/Agent as a % of
Offering Price
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000.... 4.99% 4.75% 4.25%
- ------------------------------------------------------------------------------------------------------------
$50,000 to less than 4.71 4.50 4.00
$100,000...........
- ------------------------------------------------------------------------------------------------------------
$100,000 to less than 3.90% 3.75 3.25
$250,000...........
- ------------------------------------------------------------------------------------------------------------
$250,000 to less than 2.56 2.50 2.25
$500,000...........
- ------------------------------------------------------------------------------------------------------------
$500,000 to less than 1.78 1.75 1.60
$1,000,000.........
- ------------------------------------------------------------------------------------------------------------
$1,000,000 or more... 0 0 0
- ------------------------------------------------------------------------------------------------------------
</TABLE>
International Funds:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Amount Purchased As a % of Amount Invested As a % of Offering Price Commission to
Dealer/Agent as a % of
Offering Price
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000.... 6.10% 5.75% 5.00%
- ------------------------------------------------------------------------------------------------------------
$50,000 to less than 4.71 4.50 3.75
$100,000...........
- ------------------------------------------------------------------------------------------------------------
$100,000 to less than 3.63% 3.50 2.80
$250,000...........
- ------------------------------------------------------------------------------------------------------------
$250,000 to less than 2.56 2.50 2.00
$500,000...........
- ------------------------------------------------------------------------------------------------------------
$500,000 to less than 2.04 2.00 1.60
$1,000,000.........
- ------------------------------------------------------------------------------------------------------------
$1,000,000 or more... 0 0 0
- ------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
[High Income Information to Come]
On purchases of $1,000,000 or more, there is no initial sales charge although
there could be a Limited CDSC (as described below). 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, .50% on the next $47 million , .25% on purchases
over $50 million. In addition, Class A shares issued upon conversion of Class B
shares of the Fund are not subject to an initial sales charge. From time to
time, the Distributor may re-allow the full amount of the sales charge to
brokers as a commission for sales of such shares. In addition, investors may be
charged a fee by a securities dealer if they effect transactions through a
broker or agent.
The initial sales charge is waived for the following shareholders or
transactions: (1) investment advisory clients of the Advisers;
(2) officers, Trustees and retired Trustees of the Funds, directors or
trustees of other investment companies managed by the Advisers, officers,
directors and full-time employees of the Advisers and of their wholly-owned
subsidiaries or parent entities ("Related Entities"); or the spouse, siblings,
children, parents or grandparents of any such person or any such person's
spouse (collectively, "relatives"), 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 Funds);
(3) certain employee benefit plans for employees of the Advisers and Related
Entities;
(4) an agent or broker of a dealer that has a sales agreement with the
Distributor, for their own 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 Funds);
(5) shares purchased by registered investment advisors on behalf of fee-based
accounts or by broker-dealers that have sales agreements with the 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, record keeping or other services;
(6) shares purchased as a client of DLJdirect Inc., a subsidiary of the
Distributor;
(7) shareholders who received shares in the DLJ Funds as a result of the merger
of Neuwirth Fund, Inc., Pine Street Fund, Inc. or deVegh Mutual Fund, Inc., and
who have maintained their investment in such shares;
(8) shares purchased for 401K plans, 403(b) plans and 457 plans; and
(9) Class B Shares which are automatically converted to Class A Shares.
Reduced sales charges are available to participants in the following programs:
Letter of Intent. By initially investing at least $250 and submitting a Letter
of Intent to the Funds' Distributor or Transfer Agent, you may purchase shares
of a DLJ Fund over a 13-month period at the reduced sales charge, which
applies, to the aggregate amount of the intended purchases stated in the
Letter. The Letter only applies to purchases made up to 90 days before the date
of the Letter.
33
<PAGE>
Right of Accumulation. For investors who already have an account with the
Funds, reduced sales charges based upon the Funds' sales charge schedule are
applicable to subsequent purchases. The sales charge on each additional
purchase is determined by adding the current net asset 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 reduced 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.
Concurrent Purchases. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares purchased in any DLJ Fund. For example, if the
investor concurrently invests $25,000 in one Fund 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 prior to his or her purchase.
Combined Purchase Privilege. By combining the investor's holdings of shares in
any DLJ Fund, 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. (See "Contingent Deferred Sales Charge on
Class A Shares.")
Reinstatement Privilege. The Reinstatement Privilege permits shareholders to
reinvest the proceeds provided by a redemption of a fund's Class A shares
within 120 days from the date of redemption without an initial sales charge. It
is the investor's responsibility to notify the Transfer Agent prior to his or
her purchase in order to exercise the Reinstatement Privilege. In addition, a
CDSC paid to the Distributor will be eligible for reimbursement at the current
net asset value of the applicable Fund if a shareholder reinstates his fund
account holdings within 120 days from the date of redemption.
CLASS B SHARES
You may chose to purchase shares in Class B at the Fund's net asset value
although such shares may be, subject to a sales charge when you redeem your
investment. This redemption charge is known as a CDSC. The CDSC does not apply
to investments held for more than four years.
Where the CDSC is imposed, the amount of the CDSC will depend on the number of
years since that you have held the shares according to the table below. 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 shares identified for
redemption.
<TABLE>
<CAPTION>
Year after Purchase/ CDSC Percentage
<S> <C>
1st 4%
2nd 3%
3rd 2%
4th 1%
After 4th year None
</TABLE>
The CDSC on Class B shares will be waived for the following shareholders or
transactions:
(1) shares received pursuant to the exchange privilege which are currently
exempt from a CDSC;
34
<PAGE>
(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 DLJ Fund's systematic withdrawal plan
pursuant to which up to 1% monthly or 3% quarterly of an account (excluding
dividend reinvestments) may be withdrawn, provided that no more than 10% of the
total market value of an account may be withdrawn over any 12 month period
(shareholders who elect systematic withdrawals 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:
o Section 401(k) retirement plans
o Section 403(b) plans
o Section 457 plans.
Redemptions effected by the 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 CDSC.
A Limited Contingent Deferred Sales Charge ("Limited CDSC") will be imposed by
the 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 the time of purchase" of such
Class A shares even if those shares are later exchanged, and, in the event of
an exchange of such 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.
Contingent Defered Sales Charge On Converted Shares--DLJ Focus Funds
Class A shares issued upon conversion of shares of a DLJ Focus Fund purchased
prior to February 28, 1996 ("Converted Shares") will be subject to the same
contingent deferred sales charge with the same terms as the Converted Shares
were subject to at the time of purchase. This CDSC is similar in all respects
to the CDSC charged on Class B shares except that a CDSC will not be imposed if
the amount redeemed is the result of increases in the value of the account in a
Fund (whether from appreciation or reinvestment of dividends and capital gains
distributions) above the amounts of purchase payments during the past four
years.
Class D Shares
Class D shares are offered only to employees of DLJ and its subsidiaries that
are eligible to participate in the DLJ Profit Sharing Plan for Employees. Class
D shares are not subject to any sales charges or distribution fees. These
employees should contact their Profit Sharing Plan administrator to learn how
to purchase Class D shares.
ADDITIONAL SHAREHOLDER SERVICES
The following privileges are provided by the Transfer Agent and do not apply to
Class D shares.
Exchange Privilege. You may exchange shares of Class A or Class B shares of a
Fund for shares of the same class in any other DLJ Fund. Shareholders whose
initial investment was directly into a Money Fund may exchange such shares in
either class of the other DLJ Opportunity Funds or the DLJ Focus Funds. Shares
of each Money Fund established pursuant to the DLJ Funds' exchange privilege
will be eligible for exchange into the DLJ Opportunity Funds or DLJ Focus Funds
provided that the exchange is directed into the same class of shares upon which
the initial investment was made. Shareholders whose initial
35
<PAGE>
investment was invested directly into a Money Fund will, upon an exchange
request, automatically be exchanged into Class A shares of the requested Fund
(unless otherwise indicated on the purchase application or by written notice to
the Transfer Agent). You should be aware that for federal income tax purposes
an exchange is treated as a sale and a purchase of shares which may result in
recognition of a gain or loss.
Automatic Monthly Investment Plan. You may elect on the Application to make
additional investments in a Fund automatically by authorizing DLJ to withdraw
funds from your bank or other cash account and purchase additional shares with
those Funds. You select the date (either the 10th, 15th or 20th of each month)
and amount (subject to a minimum of $25). The plan may be terminated at any
time without penalty by you or the Fund.
Automatic Exchange Plan. You may authorize the DLJ Funds in advance to exchange
a set dollar amount of shares in one Fund for shares of the same class of
another Fund or for shares of the Money Funds on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum
exchange amount under the Automatic Exchange Plan is $50. These exchanges are
subject to the terms of the Exchange Privilege described above.
Dividend Direction Option. A shareholder may elect on the Application to have
his or her dividends paid to another individual or directed for reinvestment
within the same class of another Fund 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 a
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 CDSC which may otherwise be imposed
on a redemption will be waived in connection with redemptions made pursuant to
DLJ Funds Systematic Withdrawal Plan up to 1% monthly or 3% quarterly of an
account (excluding dividend reinvestment) not to exceed 10% over any 12-month
rolling period. Systematic withdrawals elected on a semi-annual or annual basis
are not eligible for the waiver.
Checkwriting Privileges. Shareholders of the Money Funds may redeem shares by
writing checks of at least $100 against their account balance. 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
Transfer Agent if there are insufficient shares to meet the withdrawal amount.
You 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, UMB 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 you. Checkwriting
privileges are not available for accounts subject to a CDSC.
Retirement Plans. DLJ offers a range of qualified retirement plans including
Traditional, Educational and Roth IRAs, SEPs, SIMPLE plans and other pension
and profit sharing plans. Semper Trust Company serves as custodian under these
prototype retirement plans and charges an annual account maintenance fee of $15
per participant, regardless of the number of Funds selected. For more
information you should write or telephone the Transfer Agent at 1-800-225-8011.
For a more detailed explanation of the retirement plans offered by the Funds,
see each Fund's Statement of Additional Information.
Additional information concerning Shareholder Services is available by
contacting the Funds at the address or telephone number listed on the back
cover of this Prospectus.
DISTRIBUTION CHARGES
36
<PAGE>
Each Fund has adopted 12b-1 Plans pursuant to the rules of the
Investment Company Act of 1940. These plans allow each Fund to collect
distribution and service fees for the sale and servicing of the individual
classes of each Fund's shares. Since these fees are paid out of each Fund's
assets on an on-going basis, over time these fees will increase the cost of
your investment. These fees may cost you more than paying other types of sales
charges. The following payments were made in the fiscal year ending October 31,
1998. tThe Funds do not pay any of the expenses for distributing Class D
shares.
<TABLE>
<CAPTION>
Fund
Daily Net Assets
% of Average Class A Fees Paid
- -------------------------------------------------------------------------
<S> <C> <C>
Growth Fund Class A .30% $
- -------------------------------------------------------------------------
Growth Fund Class B 1.00%
- -------------------------------------------------------------------------
Growth and Income Fund Class A .30% $
- -------------------------------------------------------------------------
Growth and Income Fund Class B 1.00%
- -------------------------------------------------------------------------
Small Company Value Fund Class A .30% $
- -------------------------------------------------------------------------
Small Company Value Fund Class B 1.00%
- -------------------------------------------------------------------------
Fixed Income Fund Class A .30% $
- -------------------------------------------------------------------------
Fixed Income Fund Class B 1.00%
- -------------------------------------------------------------------------
Municipal Trust Fund Class A .30% $
- -------------------------------------------------------------------------
Municipal Trust Fund Class B 1.00%
- -------------------------------------------------------------------------
High Income Fund Class A* .30%
- -------------------------------------------------------------------------
High Income Fund Class B* 1.00%
- -------------------------------------------------------------------------
International Equity Fund Class A .25% $
- -------------------------------------------------------------------------
International Equity Fund Class B
- -------------------------------------------------------------------------
Developing Markets Fund Class A .25% $
- -------------------------------------------------------------------------
Developing Markets Fund Class B 1.00%
- -------------------------------------------------------------------------
U.S. Government Fund .40% $
- -------------------------------------------------------------------------
Municipal Money Fund .40% $
- -------------------------------------------------------------------------
<FN>
*As of the date of this prospectus, the High Income Fund had not commenced
operations.
</TABLE>
[side bar]
Distribution and Service Fees - are used to pay the distributor for expenses
incurred to promote the sale of shares and the servicing of accounts of each
Fund. The expenses incurred by the Distributor under the 12b-1 Plans include
the preparation, printing and distribution of prospectuses, sales brochures and
other promotional materials sent to prospective shareholders. They also include
purchasing radio, television, newspaper and other advertising and compensating
the Distributor's employees or employees of the Distributor's affiliates for
their distribution assistance. Distribution fees also allow the Distributor to
compensate broker-dealers or other persons for providing distribution
assistance, as well as financial intermediaries for providing administrative
and accounting services for their account holders.
[end side bar]
DIVIDEND AND DISTRIBUTION INFORMATION
Dividends are paid to shareholders of the Money Funds, Fixed Income Fund,
Municipal Trust Fund and the High Income Fund from net investment income every
month. Dividends are paid to shareholders of the Growth and Income Fund
quarterly and shareholders of the Growth Fund, the Small Company Value Fund and
the International Funds once a year. Capital gains earned in any of the Funds
are normally distributed to shareholders once a year. Dividends from net
investment income on shares of the Money Funds, Fixed Income Fund and Municipal
Trust Fund are declared daily and paid monthly. For purposes of this
calculation, net investment income consists of all accrued interest income on
fund assets less the fund's expenses applicable to that dividend period.
37
<PAGE>
For your convenience, dividends and capital gains are automatically reinvested
in your Fund. If you ask us to pay the distributions in cash, we will send you
a check instead of purchasing more shares of your Fund. You will receive
confirmation that shows the payment amount and a summary of all transactions.
Checks are normally mailed within five business days of the payment date.
TAXES
As with any investment, you should consider how your investment in the Funds
will be taxed. If your account is not a tax-deferred retirement account, you
should be aware of these tax consequences. For federal income tax purposes, a
Fund's income and short-term capital gain distributions are taxed as dividends.
Long-term capital gain distributions are taxed as long-term capital gains. These
may be taxed at different rates depending on the length of time a Fund holds its
assets. Your distributions may also be subject to state and local income taxes.
The distributions are taxable when they are paid, whether you receive them in
cash or participate in the dividend reinvestment program. Each January, your
Fund mails you a form indicating the federal tax status of your dividend and
capital gain distributions. For individuals, capital gains are generally subject
to a maximum tax rate of 20%.
Distributions to shareholders of tax-exempt interest income earned by the
Municipal Trust Fund and the Municipal Money Fund are not subject to Federal
income tax if, at the close of each quarter of each Fund's taxable year, at
least 50% of the value of each Fund's total assets consists of tax-exempt
obligations. Both Funds intend to meet this requirement. Because the Municipal
Trust Fund and Municipal Money Fund can invest in taxable municipal bonds and
other taxable securities as well as tax-exempt municipal bonds, the portion of
its dividends exempt from or subject to regular federal income taxes cannot be
predicted. In addition, these distributions may also be subject to state and
local taxes.
If you are subject to the alternative minimum tax ("AMT") you should be aware
that a portion of the distributions out of tax-exempt interest earned by the
Municipal Trust Fund and the Municipal Money Fund may be taxable.
When you redeem your shares, the tax treatment of any gains or losses may be
affected by the length of time for which you hold your shares.
As a shareholder, you must provide your Fund with a correct taxpayer
identification number (generally your Social Security number) and certify that
you are not subject to backup withholding. If you fail to do so, the IRS can
require your Fund to withhold 31% of your taxable distributions and
redemptions. Federal law also requires your Fund to withhold 30% of the
applicable tax treaty rate from dividends paid to certain non-resident alien,
non-U.S. partnership and non-U.S. corporation shareholder accounts.
Please see the Statement of Additional Information for your Fund for more
information on the tax consequences of your investment. You should also consult
your own tax adviser for further information.
[side bar]
The Taxpayer Relief Act of 1997 made certain changes to capital gains tax
rates. Under the law, taxpayers in all brackets will have an advantage when it
comes to capital gains tax rates. The Fund will provide information relating to
the portion of any Fund distribution that is eligible for the reduced capital
gains tax rate. [end side bar]
FINANCIAL HIGHLIGHTS
38
<PAGE>
The following financial highlights, except as noted otherwise, have
been audited by Ernst & Young LLP, the Funds' independent auditors,
whose unqualified report thereon, together with the Funds' Financial
Statements, appears in the applicable Statement of Additional
Information, which is available upon request. Additional information
about the performance of the Focus Funds and the Opportunity Funds is
contained in each Fund's annual report to shareholders, which may be
obtained without charge. The total returns presented in the highlights
represent the rate that an investor would have earned (or lost) on an
investment in the indicated Fund (assuming reinvestment of all
dividends and distributions).
Prior to February 28, 1996, the Focus Funds offered only a single
class of shares. Accordingly, the data presented below with respect to
Class A shares of the Focus Funds for periods prior to such date have
been obtained from the financial statements for the Funds' sole class
of shares outstanding during such prior fiscal years.
39
<PAGE>
<TABLE>
<CAPTION>
Net Realized Dividends
Net Asset Value Net and Unrealized Total from from Net Distributions
Beginning of Investment Gains/(Losses) Investment Investment from Capital
Period Income (Loss) on Securities Operations Income Gains
--------------- ------------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
GROWTH FUND CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 12.69 0.028 3.065 3.093 (0.048) (1.175)
Year Ended October 31, 1996 11.35 0.053 2.107 2.160 (0.038) (0.782)
Year Ended October 31, 1995 10.82 0.037 1.190 1.227 (0.012) (0.685)
Year Ended October 31, 1994 10.97 0.014 0.435 0.449 - (0.599)
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 12.63 (0.030) 3.016 2.986 (0.031) (1.175)
Year Ended October 31,
1996++ 11.88 (0.013) 0.763 0.750 - -
GROWTH AND INCOME FUND
CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 17.18 0.211 4.588 4.799 (0.214) (1.675)
Year Ended October 31, 1996 14.57 0.266 2.935 3.201 (0.241) (0.350)
Year Ended October 31, 1995 13.38 0.254 1.769 2.023 (0.266) (0.567)
Year Ended October 31, 1994 13.42 0.244 0.358 0.602 (0.223) (0.419)
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 17.15 0.079 4.577 4.656 (0.071) (1.675)
Year Ended October 31,
1996++ 16.05 0.136 1.109 1.245 (0.145) -
SMALL COMPANY VALUE FUND
CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 18.41 0.073 5.661 5.734 (0.081) (0.723)
Year Ended October 31, 1996 16.61 0.084 2.162 2.246 (0.037) (0.409)
Year Ended October 31, 1995 15.65 0.035 1.621 1.656 - (0.696)
Year Ended October 31, 1994 16.11 0.105 0.603 0.708 (0.026) (1.142)
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 18.34 (0.021) 5.576 5.555 (0.052) (0.723)
Year Ended October 31,
1996++ 17.41 (0.023) 0.953 0.930 - -
FIXED INCOME FUND CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 10.07 0.575 0.090 0.665 (0.575) -
Year Ended October 31, 1996 10.22 0.577 (0.150) 0.427 (0.577) -
Year Ended October 31, 1995 9.66 0.588 0.560 1.148 (0.588) -
Year Ended October 31, 1994 10.93 0.567 (1.027) (0.460) (0.567) (0.243)
<FN>
+ Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestments 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.
++ For the period February 28, 1996 (commencement of offering of Class B
shares) to October 31, 1996.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Net
Asset Ratio of Ratio of Net
Value Net Assets Expenses Investment Income Portfolio
Total End of Total End of Period to Average (Loss) to Average Turnover
Distributions Period Return+ (000 omitted) Net Assets Net Assets Rate
- ------------- ------ -------- ------------- ---------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C>
(1.223) 14.56 26.48% 82,926 1.36% 0.21% 41.1%
(0.820) 12.69 20.32 68,096 1.48 0.47 60.6
(0.697) 11.35 12.21 55,946 1.63 0.35 101.7
(0.599) 10.82 4.15 52,455 1.65 0.06 28.2
(1.206) 14.41 25.66 10,378 2.06 (0.51) 41.1
- 12.63 6.40 3,177 2.17(1) (0.34)(1) 60.6
(1.889) 20.09 30.53% 145,586 1.22% 1.15% 19.8%
(0.591) 17.18 22.60 113,803 1.36 1.68 44.0
(0.833) 14.57 16.10 87,975 1.58 1.94 31.8
(0.642) 13.38 4.58 67,020 1.64 1.88 25.9
(1.746) 20.06 29.59 19,664 1.92 0.39 19.8
(0.145) 17.15 7.67 6,545 1.99(1) 1.06(1) 44.0
(0.804) 23.34 32.48 283,001 1.35% 0.37% 21.1%
(0.446) 18.41 13.80 227,716 1.47 0.48 35.1
(0.696) 16.61 11.10 202,730 1.64 0.23 25.1
(1.168) 15.65 4.67 144,624 1.70 (0.04) 31.6
(0.775) 23.12 31.55 18,395 2.05 (0.32) 21.1
- 18.34 5.28 6,305 2.15(1) (0.34)(1) 35.1
(0.575) 10.16 6.84 54,755 1.00 5.74% 119.3%
(0.577) 10.07 4.34 56,388 1.00 5.72 90.2
(0.588) 10.22 12.23 53,885 1.00 5.90 66.1
(0.810) 9.66 (4.37) 39,150 0.93 5.58 55.9
(0.504) 10.16 6.10 3,375 1.70 4.99 119.3
(0.339) 10.07 2.23 1,629 1.70(1) 5.03(1) 90.2
<FN>
(1) Annualized
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Net Realized Dividends
Net Asset Value Net and Unrealized Total from from Net Distributions
Beginning of Investment Gains/(Losses) Investment Investment from Capital
Period Income (Loss) on Securities Operations Income Gains
--------------- ------------- --------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 10.07 0.504 0.090 0.594 (0.504) -
Year Ended October 31, 1996+++ 10.22 0.339 (0.150) 0.189 (0.339) -
MUNICIPAL TRUST FUND CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 10.01 0.445 0.280 0.725 (0.445) -
Year Ended October 31, 1996 10.06 0.425 (0.050) 0.375 (0.425) -
Year Ended October 31, 1995 9.51 0.389 0.550 0.939 (0.389) -
Year Ended October 31, 1994 10.10 0.365 (0.590) (0.225) (0.365) -
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 10.01 0.370 0.280 0.650 (0.370) -
Year Ended October 31, 1996+++ 10.12 0.248 (0.110) 0.138 (0.248) -
INTERNATIONAL EQUITY CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 10.38 (0.070) 1.110 1.04 - -
Year Ended October 31, 1996 9.58 (0.040) 0.840 0.800 - -
Year Ended October 31, 1995* 10.00 - (0.420) (0.420) - -
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 10.29 (0.150) 1.100 0.950 - -
Year Ended October 31, 1996 9.57 (0.130) 0.850 0.720 - -
Year Ended October 31, 1995* 10.00 (0.020) (0.410) (0.430) - -
DEVELOPING MARKETS FUND CLASS A
Year Ended October 31, 1998
Year Ended October 31, 1997 9.96 (0.020) (0.400) (0.420) - (0.020)
Year Ended October 31, 1996 9.53 (0.010) 0.440 0.430 - -
Year Ended October 31, 1995* 10.00 - (0.470) (0.470) - -
CLASS B
Year Ended October 31, 1998
Year Ended October 31, 1997 9.86 (0.190) (0.290) (0.480) - (0.020)
Year Ended October 31, 1996 9.52 (0.080) 0.420 0.340 - -
Year Ended October 31, 1995* 10.00 (0.010) (0.470) (0.480) - -
MUNICIPAL MONEY FUND
Year Ended October 31, 1998
Period Ended October 31, 1997+ 1.00 0.020 - 0.020 (0.020) -
U.S. GOVERNMENT MONEY FUND
Year Ended October 31, 1998
Period Ended October 31, 1997+ 1.00 .032 - .032 (0.032) -
<FN>
* Commencement of operations for the International Equity Fund and the
Developing Markets Fund was September 8, 1995.
+ Commencement of operations for the Municipal Money Fund and the U.S.
Government Money Fund was February 24, 1997.
++ 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.
+++ For the period February 28, 1996 (commencement of offering of Class B
shares) to October 31, 1996.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Net Asset value Net Assets Expenses Investment Income Portfolio
Total End of Total End of Period to Average (Loss to Average Turnover
Distributions Period Return++ (000 omitted) Net Assets(2) Net Assets(2) Rate
- ------------- --------------- --------- ------------- ------------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C>
(0.575) 10.16 6.84 54,755 1.00 5.74% 119.3%
(0.577) 10.07 4.34 56,388 1.00 5.72 90.2
(0.588) 10.22 12.23 53,885 1.00 5.90 66.1
(0.810) 9.66 (4.37) 39,150 0.93 5.58 55.9
(0.504) 10.16 6.10 3,375 1.70 4.99 119.3
(0.339) 10.07 2.23 1,629 1.70(1) 5.03(1) 90.2
(0.445) 10.29 7.37 35,878 0.70 4.38% 84.3%
(0.425) 10.01 3.83 38,794 0.80 4.26 79.3
(0.389) 10.06 10.06 39,059 1.00 3.97 49.3
(0.365) 9.51 (2.27) 34,470 0.83 3.71 42.5
(0.370) 10.29 6.62 546 1.40 3.66 84.3
(0.248) 10.01 1.42 489 1.23(1) 3.81(1) 79.3
-- 11.42 10.02 44,316 2.15 (0.59)% 73.9%
-- 10.38 8.35 42,170 2.15 (0.39) 94.1
-- 9.58 (4.20) 28,819 2.15(1) (0.02)(1) --
-- 11.24 9.23 6,821 2.90 (1.32) 73.9
-- 10.29 7.52 4,955 2.90 (1.25) 94.1
-- 9.57 (4.30) 1,803 2.90(1) (1.77)(1) --
(0.020) 9.52 (4.18) 29,402 2.15 (0.17) 52.8
-- 9.96 4.51 36,918 2.15 (0.14) 26.8
-- 9.53 (4.70) 14,622 2.15(1) 0.32(1) --
(0.020) 9.36 (4.83) 4,941 2.90 (1.74) 52.8
-- 9.86 3.57 3,641 2.90 (0.83) 26.8
-- 9.52 (4.80) 1,004 2.90(1) (1.00)(1) (1)
(0.020) 1.00 2.90%(1) 38,681 0.90%(1) 2.87% N/A
(0.032) 1.00 4.68%(1) 35,174 0.90%(1) 4.65%(1) N/A
<FN>
(1) Annualized
(2) Net of voluntary assumption by the investment adviser of expenses,
expressed as a percentage of average net assets, as follows: Fixed Income Fund
Class A shares, ?%, .30%, .34%, .51%, and .67%, for the years ended 10/31/98,
97, 96, 95, and 94, respectively; Fixed Income Fund Class B shares, ?%, and
.30% for the years ended 10/31/98 and 97, and .34% (annualized) for the period
2/28/96 through 10/31/96; Municipal Trust Fund Class A shares, ?%, .74%, .64%,
.58%, and .77% (annualized) for the years ended 10/31/98, 97, 96, 95, and 94,
respectively; Municipal Trust Fund Class B shares, ?% and .74% for the years
ended 10/31/98 and 97, and .64% (annualized) for the period 2/28/96 through
10/31/96; Developing Markets Fund Class A and Class B shares, ?%, .34%, .54%
and .60% (annualized) for the years ended 10/31/98, 97, 96 and 95,
respectively; International Equity Fund Class A and Class B shares, ?%, .18%,
.27% and .60% for the years ended 10/31/98, 97, 96 and 95, respectively;
Municipal Money Fund, ?% and .40% (annualized) for the periods ended 10/31/98
and 97; and U.S. Government Money Fund, ?% and .45% (annualized) for the
periods ended 10/31/98 and 97.
</TABLE>
43
<PAGE>
BACK COVER
FOR MORE INFORMATION
General Information and Other Available Information The Funds send out a
semi-annual report and an annual report to all shareholders. These reports
include a list of your Fund's investments and financial statements. The annual
report contains a statement from the Fund's Adviser discussing market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
The Funds have Statements of Additional Information that contain additional
information on all aspects of the Funds and are incorporated by reference into
this prospectus. The Statements of Additional Information have been filed with
the Securities and Exchange Commission and are available for review at the
SEC's Public Reference Room in Washington, DC (1-800-SEC-0330) or on the SEC's
web site at http://www.sec.gov. You can also obtain copies of Fund documents
filed with the SEC by writing:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
Payment of a duplicating fee may be required. .
Shareholders may obtain any of these documents free of charge and may request
other information about the Funds by calling 800-225-8011.
DLJ FUNDS
SEC file numbers: 811-
811-
44
<PAGE>
SUBECT TO COMPLETION
DLJ OPPORTUNITY FUNDS
277 PARK AVENUE, NEW YORK, NEW YORK 10172
Toll Free (800) 225-8011
STATEMENT OF ADDITIONAL INFORMATION
February 26, 1999
This Statement of Additional Information relates to the DLJ Municipal Money
Fund (the "Municipal Fund") and the DLJ U.S. Government Money Fund (the
"Government Fund" and together with the Municipal Fund, the "Money Funds").
This Statement of Additional Information also relates to the DLJ High Income
Fund (the "High Income Fund") together with the Money Funds, the "Funds").
Each Fund is a series of the DLJ Opportunity Funds. Each Fund is an open-end,
diversified management investment company. This Statement of Additional
Information is not a prospectus. It should be read in conjunction with the
Funds' current Prospectus, dated February 26, 1999, as supplemented from time
to time, which is incorporated herein by reference. A copy of the Prospectus
may be obtained by contacting the Funds at the address or telephone number
listed above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Fund History
Investment Policies and Restrictions
Management
Expenses of the Funds
Purchases, Redemptions and Exchanges
Retirement Plans
Net Asset Value
Daily Dividends, Distributions and Taxes
Portfolio Transactions
Investment Performance Information
Shares of Beneficial Interest
General Information
Financial Statements
Appendix A-- Securities Ratings
Appendix B -- Description of Municipal Securities
</TABLE>
1
<PAGE>
FUND HISTORY
DLJ Opportunity Funds was formed on May 31, 1995 as a business trust
under the laws of the state of Delaware. Until the filing of this registration
statement, the trust was referred to as the "Winthrop Opportunity Funds." Its
shares are currently divided into five series, the DLJ High Income Fund, each
Money Fund, the Developing Markets Fund and the International Equity Fund.
This Statement of Additional Information is for the Money Funds and the High
Income Fund. The Money Funds commenced operations in . The High Income Fund is
a newly organized management investment company. The DLJ Opportunity Funds
have an unlimited number of authorized shares of beneficial interest, par
value $.001 per share, which may, without shareholder approval, be divided
into an unlimited number of series and an unlimited number of classes.
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 and Policies" in the Funds' Prospectus. Except as noted
in the Prospectus and this Statement of Additional Information, the Funds'
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. The 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 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 Funds may invest in the securities
described below.
It is the policy of the High Income Fund to seek a high level of
current income and capital appreciation. The High Income Fund seeks to achieve
its objective by investing in fixed income securities, including corporate
bonds and notes, that are rated in the lower rating categories of the
established rating services (Baa or lower by Moody's and BBB or lower by
Standard & Poor's.
The Prospectus indicates what securities a particular Fund may invest in, or
may be limited in investing in, which may include the following securities.
Securities
2
<PAGE>
U.S. Government Obligations. The 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,
any domestic or foreign broker/dealer which is recognized as a reporting
government securities dealer or any other counterparty allowable under Rule
2a-7 of the Investment Company Act of 1940 (the "Act"). Repurchase agreements
permit the Funds to keep all of their assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. The
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 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 Funds might be delayed in selling the collateral. Pursuant to Rule 2a-7 of
the 1940 Act, 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 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 Funds
would sell securities and agree to repurchase them at a mutually agreed upon
date and price. At the time the 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 Funds for such securities. In the event
the buyer of securities under a reverse repurchase agreement filed for
bankruptcy or became insolvent, such buyer or receiver would receive an
extension of time to determine whether to enforce the Funds' obligations to
repurchase the securities and the 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 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.
3
<PAGE>
When-Issued and Delayed-Delivery Securities. The Funds may, to the
extent consistent with their other investment policies and restrictions, enter
into forward commitments for the purchase or sale of securities, including on
a "when-issued" or "delayed-delivery" basis, in excess of customary settlement
periods for the type of security involved. In some cases, a forward commitment
may be conditioned upon the occurrence of a subsequent event, such as approval
and consummation of a merger, corporate reorganization or debt restructuring,
i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time
of the commitment, with payment and delivery taking place in the future,
generally ten days to a month, or more, after the date of the commitment.
While the Funds will only enter into a forward commitment with the intention
of actually acquiring the security, the 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 Funds prior to the
settlement date. The Funds will segregate with their custodian cash or liquid
debt securities in an aggregate amount at least equal to the amount of their
respective outstanding forward commitments.
Standby Commitments. The Municipal Fund may purchase municipal
securities together with the right to resell them to the seller at an
agreed-upon price or yield within specified periods prior to their maturity
dates. Such a right to resell is commonly known as a "standby commitment," and
the aggregate price which the Municipal Fund pays for securities with a
standby commitment may be higher than the price which otherwise would be paid.
The primary purpose of this practice is to permit the Municipal Fund to be as
fully invested as practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated redemptions. In this
regard, the Municipal Fund acquires standby commitments solely to facilitate
liquidity and does not exercise its rights thereunder for trading purposes.
Since the value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase, the Municipal
Fund's policy is to enter into standby commitment transactions only with
municipal securities dealers which are determined to present minimal credit
risks.
The acquisition of a standby commitment does not affect the valuation
or maturity of the underlying municipal securities which continue to be valued
in accordance with the amortized cost method. Standby commitments acquired by
the Municipal Fund are valued at zero in determining net asset value. Where a
Municipal Fund pays directly or indirectly for a standby commitment, its cost
is reflected as unrealized depreciation for the period during which the
commitment is held. Standby commitments do not affect the average weighted
maturity of the Municipal Fund's portfolio of securities.
4
<PAGE>
The Municipal Fund may only invest up to 10% of its net assets, in
the aggregate, in standby commitments, when-issued securities,
delayed-delivery securities and other illiquid 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
5
<PAGE>
the taxing power, if any, of the issuer of such bonds. AMT-Subject Bonds are
generally limited obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state or any
governmental subdivision. Typically the obligation of the issuer of an
AMT-Subject Bond is to make payments to bond holders only out of, and to the
extent of, payments made by the private business entity for whose benefit the
AMT-Subject Bonds were issued. Payment of the principal and interest on such
revenue bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the pledge, if
any, of real and personal property so financed as security for such payment.
It is not possible to provide specific detail on each of these obligations in
which Municipal Fund assets may be invested.
While the Municipal Fund may invest without limitation in securities
subject to AMT, the AMT affects only a small percentage of all taxpaying
investors.
Taxable Securities for the Municipal Fund. The Municipal Fund is, and
expects to be, largely invested in municipal securities, but may elect to
invest up to 20% of its total assets in taxable money market securities when
such action is deemed to be in the best interests of shareholders. Such
taxable money market securities also are limited to remaining maturities of
397 days or less at the time of the Municipal Fund's investment, and the
Municipal Fund's municipal and taxable securities are maintained at a
dollar-weighted average of 90 days or less.
Variable Rate Obligations. The interest rate payable on certain
municipal securities in which the Municipal Fund may invest, called "variable
rate" obligations, is not fixed and may fluctuate based upon changes in market
rates. The interest rate payable on a variable rate municipal security is
adjusted either at pre-designated periodic intervals or whenever there is a
change in the market rate to which the security's interest rate is tied. Other
features may include the right of the Municipal Fund to demand prepayment of
the principal amount of the obligation prior to its stated maturity and the
right of the issuer to prepay the principal amount prior to maturity. The main
benefit of a variable rate municipal security is that the interest rate
adjustment minimizes changes in the market value of the obligation. As a
result, the purchase of variable rate municipal securities enhances the
ability of the Municipal Fund to maintain a stable net asset value per share
and to sell an obligation prior to maturity at a price approximating the full
principal amount. The payment of principal and interest by issuers of certain
municipal securities purchased by the Municipal Fund may be guaranteed by
letters of credit or other credit facilities offered by banking or other
financial institutions. Such guarantees will be considered in determining
whether a municipal security meets the Municipal Fund's investment quality
requirements.
Variable rate obligations purchased by the Municipal Fund may include
participation interests in variable rate industrial development bonds.
Purchase of a participation interest gives the Municipal Fund an undivided
interest in certain such bonds. The Municipal Fund can exercise the right, on
not more than 30 days' notice, to sell such an instrument back to the
financial institution from which it purchased the instrument and, if
applicable, draw on the letter of credit 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)
6
<PAGE>
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 the allowable percentage of
the total assets of the Municipal Fund pursuant to Rule 2a-7 of the Act. The
Municipal Fund will not purchase participation interests in variable rate
industrial development bonds unless it receives an opinion of counsel or a
ruling of the Internal Revenue Service that interest earned by the Municipal
Fund from the bonds in which it holds participation interests is exempt from
Federal income taxes. The Municipal Fund's adviser will monitor the pricing,
quality and liquidity of variable rate demand obligations and participation
interests therein held by the Municipal Fund on the basis of published
financial information, rating agency reports and other research services to
which the adviser may subscribe.
Municipal Leases and Participations Therein. These are obligations in
the form of a lease or installment purchase which is issued by state and local
governments to acquire equipment and facilities. Income from such obligations
is exempt from local and state taxes in the state of issuance.
"Participations" in such leases are undivided interests in a portion of the
total obligation. Municipal leases frequently have special risks not normally
associated with general obligation or revenue bonds. The constitutions and
statutes of all states contain requirements that the state or a municipality
must meet to incur debt. These often include voter referenda, interest rate
limits and public sale requirements. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased
asset to pass eventually to the governmental issuer) have evolved as a means
for governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations are deemed to be inapplicable because of the
inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by
the appropriate legislative body on a yearly or other periodic basis.
In addition to the "non-appropriation" risk, municipal leases have
additional risk aspects because they represent a relatively new type of
financing that has not yet developed in many cases the depth of marketability
and liquidity associated with conventional bonds; moreover, although the
obligations will be secured by the leased equipment, the disposition of the
equipment in the event of non-appropriation or foreclosure might, in some
cases, prove difficult. In addition, in certain instances the tax-exempt
status of the obligations will not be subject to the legal opinion of a
nationally recognized "bond counsel," as is customarily required in larger
issues of municipal obligations. However, in all cases the Municipal Fund will
require that a municipal lease purchased by the Municipal Fund be covered by a
legal opinion (typically from the issuer's counsel) to the effect that, as of
the effective date of such lease, the lease is the valid and binding
obligation of the governmental issuer.
7
<PAGE>
Municipal leases and participations will be purchased pursuant to
analysis and review procedures which the Municipal Fund's adviser believes
will minimize risks to shareholders. It is possible that more than 5% of the
Fund's net assets will be invested in municipal leases which have been
determined by the Municipal Fund's adviser to be liquid securities. When
evaluating the liquidity of a municipal lease, the investment adviser
considers all relevant factors including frequency of trading, availability of
quotations, the number of dealers and their willingness to make markets, the
nature of trading activity and the assurance that liquidity will be
maintained. With respect to unrated municipal leases, credit quality is also
evaluated.
General. Net income to shareholders is aided both by the Money Funds'
ability to make investments in large denominations and by its efficiencies of
scale. Also, the 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 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 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 5% of its
assets in the securities of any one issuer other than the United States
Government, its agencies or 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.
8
<PAGE>
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 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.
Other General Information About the High Income Fund
Lower Grade Securities
Lower grade securities are regarded as being predominantly
speculative as to the issuer's ability to make payments of principal and
interest. Investment in such securities involves substantial risk. Lower grade
securities are commonly referred to as "junk bonds." Issuers of lower grade
securities may be highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risks associated with
acquiring the securities of such issuers generally are greater than is the
case with higher-rated securities. For example, during an economic downturn or
a sustained period of rising interest rates, issuers of lower
9
<PAGE>
grade securities may be more likely to experience financial stress, especially
if such issuers are highly leveraged. During periods of economic downturn,
such issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations also may be
adversely affected by specific issuer developments, the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. Therefore, there can be no assurance that in the future there will
not exist a higher default rate relative to the rates currently existing in
the market for lower grade securities. The risk of loss due to default by the
issuer is significantly greater for the holders of lower grade securities
because such securities may be unsecured and may be subordinate to other
creditors of the issuer. Other than with respect to distressed securities,
discussed below, the lower grade securities in which the High Income Fund may
invest do not include instruments which, at the time of investment, are in
default or the issuers of which are in bankruptcy. However, there can be no
assurance that such events will not occur after the High Income Fund purchases
a particular security, in which case the High Income Fund may experience
losses and incur costs.
Lower grade securities frequently have call or redemption features
that would permit an issuer to repurchase the security from the High Income
Fund. If a call were exercised by the issuer during a period of declining
interest rates, the High Income Fund is likely to have to replace such called
security with a lower yielding security, thus decreasing the net investment
income to the High Income Fund and dividends to shareholders.
Lower grade securities are considered to be more volatile than
higher-rated fixed-income securities, so that adverse economic events may have
a greater impact on the prices of lower grade securities than on higher-rated
fixed income securities. Factors adversely affecting the market value of such
securities are likely to affect adversely the High Income Fund's net asset
value. The difference between the yields paid by lower grade securities and
investment grade bonds (i.e., the "spread") varies over time depending on the
demand for lower grade securities. To the extent the spread increases, the
value of lower grade securities in the High Income Fund's portfolio could be
adversely affected.
Like higher-rated fixed-income securities, lower grade securities
generally are purchased and sold through dealers who make a market in such
securities for their own accounts. However, there are fewer dealers in the
lower grade securities market, which market may be less liquid than the market
for higher-rated fixed-income securities, even under normal economic
conditions. Also, there may be significant disparities in the prices quoted
for lower grade securities by various dealers. As a result, during periods of
high demand in the lower grade securities market, it may be difficult to
acquire lower grade securities appropriate for investment by the High Income
Fund. Adverse economic conditions and investor perceptions thereof (whether or
not based on economic reality) may impair liquidity in the lower grade
securities market and may cause the prices the High Income Fund receives for
its lower grade securities to be reduced. In addition, the High Income Fund
may experience difficulty in liquidating a portion of its portfolio when
necessary to meet the High Income Fund's liquidity needs or in response to a
specific economic event such as deterioration in the
10
<PAGE>
creditworthiness of the issuers. Under such conditions, judgment may play a
greater role in valuing certain of the High Income Fund's portfolio
instruments than in the case of instruments trading in a more liquid market.
In addition, the High Income Fund may incur additional expense to the extent
that it is required to seek recovery upon a default on a portfolio holding or
to participate in the restructuring of the obligation.
Distressed Securities
As a component of the High Income Fund's investment in "junk bonds,"
the High Income Fund may invest up to [20%] of its total assets in distressed
securities. Investment in distressed securities is speculative and involves
significant risk. Distressed securities frequently do not produce income while
they are outstanding and may require the High Income Fund to bear certain
extraordinary expenses in order to protect and recover its investment.
Therefore, to the extent the High Income Fund pursues its secondary objective
of capital appreciation through investment in distressed securities, the High
Income Fund's ability to achieve current income for shareholders may be
diminished.
Non-U.S. Securities
The High Income Fund may invest up to [30%] of its total assets in
securities of non-U.S. issuers or that are denominated in various foreign
currencies and multinational foreign currency units. Investing in securities
of non-U.S. issuers and securities denominated in foreign currencies involves
certain risks not involved in domestic investments, including, but not limited
to, fluctuations in foreign exchange rates, future foreign political and
economic developments, different legal and accounting systems and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. Securities prices in different countries are subject to
different economic, financial, political and social factors. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, economic, political or social instability or
diplomatic developments that could affect investments in those countries.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. Certain non-U.S. investments also may be subject to foreign
withholding taxes. These risks often are heightened for investments in
smaller, emerging capital markets.
As a result of these potential risks, the Adviser may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. The High Income
Fund may invest in countries in which foreign investors, including the
Adviser, have had or limited prior experience.
See the Appendix for a further description of securities ratings.
Fundamental Investment Restrictions
11
<PAGE>
The following fundamental investment restrictions are applicable to
each of the Funds and may not be changed with respect to a Fund without the
approval of a majority of the shareholders of that Fund. This means an
affirmative vote of the holders of (a) 67% or more of the shares of that Fund
represented at a meeting at which more than 50% of the outstanding shares of
the Fund are represented or (b) more than 50% of the outstanding shares of
that 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 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 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 instrumentalities, provided that, for purposes of this
policy, consumer finance companies, industrial finance companies and
gas, electric, water and telephone utility companies are each
considered to be separate industries;
(2) Issue senior securities, except as permitted under the
Investment Company Act of 1940;
(3) Make loans of money or property to any person, except
through loans of portfolio securities, the purchase of fixed income
securities consistent with the Funds' investment objective and
policies or the acquisition of securities subject to repurchase
agreements. The High Income Fund may lend its portfolio securities
in an amount not to exceed 33 1/3% of the value of its total assets;
(4) Underwrite the securities of other issuers, except to the
extent that in connection with the disposition of portfolio
securities the 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 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 Funds becoming subject to registration with the
Commodity and Futures Trading Commission as a commodity pool;
12
<PAGE>
(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
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 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 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 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, 48, 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 Funds and the Adviser, Mr. Cochran was a Senior Vice
President with Bessemer Trust Companies.
Robert E. Fischer, 68, Trustee of the Opportunity Funds, has been a
Member at the law firm Wolf, Block, Schorr and Solis-Cohen LLP (or its
predecessor firm) since 1993.
*Martin Jaffe, 52, Trustee, Vice President, Secretary and Treasurer of
the Opportunity Funds, is a Managing Director and Chief Operating Officer of
the Adviser. He has been associated with affiliates of the Adviser since 1993.
Wilmot H. Kidd, III, 57, Trustee of the Opportunity Funds, has been
President of Central Securities Corporation since 1993.
John W. Waller, III, 47, Trustee of the Opportunity Funds, has been
Chairman of Waller Capital Corporation, an investment banking firm, since
1993.
James A. Engle, 40, Vice President of the Opportunity Funds, has been
associated with affiliates of the Adviser since 1993.
13
<PAGE>
Brian A. Kammerer, 41, Vice President of the Opportunity Funds, has
been associated with affiliates of the Adviser since 1993.
The following table sets forth certain information regarding compensation of
the Funds' Trustees and officers. No executive officer or person affiliated
with the Funds will receive compensation from the Funds for the calendar year
ended December 31, 1998 in excess of $60,000.
14
<PAGE>
Compensation Table
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement Estimated From Trust
Aggregate Benefits Accrued Annual and Fund
Compensation as Part of Trust Benefits Upon Complex Paid
Name and Position From Trust(1) Expenses Retirement to Trustees(2)
- ----------------- ------------- -------- ---------- --------------
<S> <C> <C> <C> <C>
G. Moffett Cochran $ 0 None None $ 0 (10)
Trustee
Robert E. Fischer $[ ] None None $[ ] (5)
Trustee
Martin Jaffe $ 0 None None $ 0 (5)
Trustee
Wilmot H. Kidd, III $[ ] None None $[ ] (5)
Trustee
John W. Waller, III $[ ] None None $[ ] (5)
Trustee
</TABLE>
The Trustees of the DLJ Opportunity Funds who are officers or
employees of the Funds' adviser or any of its affiliates receive no
remuneration from the DLJ Opportunity Funds. Each of the Trustees who are not
affiliated with the Adviser will be paid a $[ ] 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 $[ ] 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 (separate
agreements for each of the Funds) as the Funds' investment adviser (see
"Management" in the Prospectus). The Adviser was established in 1996 to serve
a select group of individual and institutional investors.
- ---------
(1) The Opportunity Funds anticipate paying each independent Trustee
approximately $10,000 in each calendar year.
(2) Represents the total compensation to be paid to such persons during the
calendar year ending December 31, 1998. The parenthetical number
represents the number of portfolios (including the Funds) for which such
person acts as a Trustee, that are considered part of the same fund
complex as the Funds.
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<PAGE>
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-UAP ("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 November 30, 1998, 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 November 30, 1998, 18.2% of the issued
ordinary shares (representing 28.2% 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 3.1% of the issued ordinary
shares (representing 2.7% 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 0.2% of the issued ordinary shares
(representing 0.3% of the voting power) of AXA. As of November 30, 1998, 61.5%
of the issued ordinary shares (representing 72.3% of the voting power) of
Finaxa were owned by four French mutual insurance companies (the "Mutuelles
AXA") and 23.7% of the issued ordinary shares (representing 14.7% 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 November 30, 1998, the Mutuelles AXA directly and indirectly
owned 24.8% of the issued ordinary shares of AXA (representing 35.9% of the
voting power). Acting as a group, the Mutuelles AXA will continue to control
AXA and Finaxa.
The Investment Advisory Agreement for the Money Funds is dated
October 22, 1996 (the "Investment Advisory Agreement for the Money Funds").
This agreement was approved by the Board of Trustees of the DLJ Opportunity
Funds on October 22, 1996 and by the shareholders of the Money Funds on
January 24, 1997 and became effective on the same date. The Investment
Advisory Agreement the Money Funds is reviewed annually by the Board of
Trustees and was most recently reapproved on July 16, 1998. The Investment
Advisory Agreement for the Money Funds continues in force for successive
twelve month periods provided that such continuation is specifically approved
at least annually by a majority vote of the Trustees who neither are
interested persons of the Money Funds nor have any direct or indirect
financial interest in the Investment Advisory Agreement for the Money Funds,
cast in person at a meeting called for the
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purpose of voting on such approval. Under the Investment Advisory Agreement
for the Money Funds, 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.
Pursuant to the terms of the Investment Advisory Agreement for the
Money Funds, the Adviser may retain, at its own expense, a subadviser to
assist in the performance of its services to the Money Funds.
For the Money Funds' fiscal year ending October 31, 1998, the
Municipal Fund and the Government Fund paid the Adviser fees of $[ ] and $[ ],
respectively.
The Investment Advisory Agreement for the High Income Fund (the
"Investment Advisory Agreement for the High Income Fund") is dated [ ]. This
agreement was approved by the Board of Trustees of the DLJ Opportunity Funds
on [ ] and by the shareholders of the High Income Fund on [ ] and became
effective on the same date. The Investment Advisory Agreement for the High
Income Fund is reviewed annually by the Board of Trustees. The Investment
Advisory Agreement for the High Income Fund continues in force for successive
twelve month periods provided that such continuation is specifically approved
at least annually by a majority vote of the Trustees who neither are
interested persons of the High Income Fund nor have any direct or indirect
financial interest in the Investment Advisory Agreement for the High Income
Fund, cast in person at a meeting called for the purpose of voting on such
approval. Under the Investment Advisory Agreement for the High Income Fund,
the Adviser is paid a management fee equal to [ ] of the average daily net
assets of the High Income Fund.
Pursuant to the terms of the Investment Advisory Agreement for the
High Income Fund, the Adviser may retain, at its own expense, a subadviser to
assist in the performance of its services to the High Income Funds.
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The Fund intends to enter into arrangements with certain
broker-dealers (including affiliates of the Distributor) whose customers are
Fund shareholders pursuant to which the broker-dealers may perform shareholder
servicing functions, such as opening new shareholder accounts, processing
purchase and redemption transactions, and responding to certain inquiries
regarding the Fund's performance and the status of shareholder accounts. The
Fund may pay for the electronic communications equipment maintained at the
broker-dealers' offices that permits access to the Fund's computer files and,
in addition, may reimburse the broker-dealers at cost for personnel expenses
involved in providing the services.
EXPENSES OF THE FUNDS
General
In addition to the payments to the Adviser under the Investment
Advisory Agreements, each 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 Funds by the Adviser under the Investment Advisory
Agreements, the 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 costs associated with the management, supervision and
assistance and office facilities, in addition to administrative and nonadviser
services provided bythe Adviser or their affiliates, may be reimbursed,
however, the payments must be specifically approved by the Funds' Trustees,
including a majority of the disinterested Trusteees.
Distribution Agreement
Pursuant to Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act, the Funds have adopted a Distribution Agreement (the
"Distribution Agreement") and a Rule 12b-1 Plan for each Money Fund and Class
A and Class B Rule 12b-1 Plans for the High Income Fund (the "12b-1 Plans") to
permit such 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 Funds reports the amounts expended under the Distribution
Agreement and the purposes for which such expenditures were made to the
Trustees of the 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
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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 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 for each Money Fund was initially approved
by each Money Fund's Trustees on October 22, 1996 and by the then shareholders
on January 24, 1997. The Distribution Agreement for the High Income Fund was
initially approved by the High Income Fund's Trustees on [ ] and by the then
shareholders on [ ]. The Distribution Agreement for the Money Funds was most
recently reviewed and reapproved on July 16, 1998. 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 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 Fund's 12b-1 Plan or Plans 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 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 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 the Funds' shares. Pursuant to the Funds' 12b-1
Plans, if such fee is paid, the Distributor is then reimbursed for such
payments with amounts paid from the assets of such Fund. The payments to the
broker-dealer, although a 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 Funds. Broker-dealers who sell shares of
the Funds may provide services to their customers that are not available to
investors who purchase their shares directly from the Funds. Investors who
purchase their shares directly from a Fund will pay a pro rata share of such
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 Funds.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement for the Money Funds, the maximum amount payable by the Money Funds
under the 12b-1 Plans for distributing shares is .40 of 1% of the average
daily net assets during the fiscal year. Currently, each Money Fund pays a
distribution services fee each month to the Distributor, with respect to
shares of each Money Fund, at an annual rate of up to [ ]% of the aggregate
average daily net assets attributable to each Money Fund.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement for the High Income Fund, the maximum amount payable by the High
Income Fund under the 12b-1 Plans for distributing shares is [ ] of the
average daily net assets during the fiscal year. The High Income
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Fund pays a distribution services fee each month to the Distributor, with
respect to shares of the High Income Fund, at an annual rate of up to [ ]
of the aggregate average daily net assets of the High Income Fund.
The table below shows distribution costs charged to each Fund during the past
fiscal year.
<TABLE>
<CAPTION>
DISTRIBUTION COSTS
<S> <C>
Municipal Money Fund.................... $
U.S. Government Money Fund.............. $
</TABLE>
Under the Agreements, the Adviser may make payments to the Distributor from
the Adviser's own resources, which may include the management fees paid by
DLJ. 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 the
Fund. On some occasions, such compensation will be conditioned on the sale of
a specified minimum dollar amount of the shares of the 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.
[Other Service Agreements and Providers to Come]
PURCHASES, REDEMPTIONS AND EXCHANGES
The following information supplements that set forth in the Funds'
Prospectus under the heading "Purchases, Redemptions and Shareholder
Services."
Purchases
Shares of the Funds are offered at the respective net asset value
(less any applicable sales charge for Class A shares of the High Income Fund)
per share next determined following receipt of a purchase order in proper form
by the Funds, the Funds' transfer agent, First Data Investor Services Group
(the "Transfer Agent"), or by the Distributor. The 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 Fund become effective at the
next transaction time (as stated in the Prospectus) after Federal funds or
bank wire monies become available to the
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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 Funds, share certificates representing shares of
the Fund purchased are not issued for full or fractional shares.
Shareholders maintaining Fund accounts through brokerage firms and
other institutions should be aware that such institutions may necessarily set
deadlines for receipt of transaction orders from their clients that are
earlier than the transaction times of the Fund itself so that the institutions
may properly process such orders prior to their transmittal to the Fund or the
Distributor. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or her
institution. (For example, a brokerage firm may accept purchase orders from
its customers up to 2:15 p.m. for issuance at the 4:00 p.m. transaction time
and price.) A brokerage firm acting on behalf of a customer in connection with
transactions in Fund shares is subject to the same legal obligations imposed
on it generally in connection with transactions in securities for a customer,
including the obligation to act promptly and accurately.
Redemptions
Shares of the Funds may be redeemed at a redemption price equal to
the net asset value per share (less any applicable contingent deferred sales
charge ("CDSC"), as next computed as of the closing of the regular trading
session of the NYSE following the receipt in proper form by the 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 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.
Except for Class D shares of the High Income Fund, to redeem shares,
the registered owner or owners should forward a letter to the Funds containing
a request for redemption of such shares at the next determined net asset value
per share. Alternatively, the shareholder may elect the
21
<PAGE>
right to redeem shares by telephone as described in the Prospectus. The
signature or signatures in the redemption letter must be guaranteed in the
manner described below. [Will add timing paragraph]
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
Class A and Class B shares of one class of the High Income Fund can
be exchanged for shares of either Money Fund, or shares of the same class of
the DLJ Developing Markets Fund and the DLJ International Equity Fund (the
"International Funds"), and shares of the same class of DLJ Growth Fund, DLJ
Fixed Income Fund, DLJ Small Company Value Fund, DLJ Growth and Income Fund
and DLJ 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.
Participants within DLJ's Employee Profit Sharing Plan should contact
their plan administrator for information regarding exchanging Class D shares
of the High Income Fund.
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 International Funds,
High Income Fund or Focus Funds. Shares of each Money Fund established
pursuant to DLJ's exchange privilege will be eligible for exchange into the
International Funds, High Income Fund 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.
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
22
<PAGE>
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 the High Income Fund
for at least seven days may exchange all or part of those shares for shares of
the International Funds, the Money Funds or Focus Funds, and no partial
exchange may be made if, as a result, the shareholders' interest in the High
Income Fund would be reduced to less than $250. The minimum initial exchange
into another Fund is $250.
All exchanges into either of the Money Funds, the International 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, International Fund or DLJ 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 all of the Funds.
Shareholders who engage in such frequent transactions may be prohibited from
or restricted in placing future exchange orders.
All 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 "Expenses of the Money Funds" and "Additional Shareholder
Services - Exchange Privilege" in the Prospectus for a description of these
expense differences.
RETIREMENT PLANS
The 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 these prototype
retirement plans and charges an annual account maintenance fee of $15 per
participant, regardless of the number of Funds selected. Persons desiring
information concerning these plans should write or telephone the Funds'
Transfer Agent. While the 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 ("IRA")
The Adviser has available a prototype form of a Traditional IRA.
Under the Code, individuals may currently make IRA contributions of up to
$2,000 annually. Married
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<PAGE>
individuals filing jointly may contribute up to $2,000 for each spouse if the
combined compensation of both spouses is at least equal to the contributed
amount. Contributions to an IRA may be wholly or partly tax- deductible,
depending upon the contributor's income level and participation in an
employer-sponsored retirement plan. The income earned on shares held in an IRA
is not subject to Federal income tax until withdrawn in accordance with the
Code. Investors may be subject to penalties or additional taxes on
contributions to or withdrawals from IRAs under certain circumstances. As with
tax-deductible contributions, taxes on the income earned from nondeductible
IRA contributions will be deferred until distributed from the IRA.
The Adviser has available a prototype form of the Roth IRA. Unlike
Traditional IRA's, contributions to a Roth IRA are not currently deductible.
However, the amounts within the Roth IRA accounts will accumulate tax-free,
and qualified distributions from the Funds will not be included in a
shareholder's taxable income. An individual may contribute a maximum of $2,000
annually to a Roth IRA ($4,000 for joint returns). However, such limit is
calculated in the aggregate with contributions to traditional IRA's. In
addition, Roth IRA's are not available to individuals above certain income
levels.
The Adviser also has available a prototype form of the Education IRA.
Like the Roth IRA, contributions are not currently deductible. However, the
investment earnings accumulate tax-free, and qualifying distributions used for
higher education expenses are not taxable. An individual may contribute a
maximum of $500 per account annually. In addition, Educational IRA's are not
available to individuals above certain income levels.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA is available for investment and may be established on a
group basis by an employer who wishes to sponsor a tax-sheltered retirement
program by making IRA contributions on behalf of all eligible employees.
Savings Incentive Match Plan for Employees ("SIMPLE") - SIMPLE IRA and SIMPLE
401(k)
SIMPLE plans offer employers with 100 or fewer eligible employees who
earned at least $5,000 from the employer in the preceding calendar year the
ability to establish a retirement plan that permits employee contributions. An
employer may also elect to make additional contributions to these Plans.
Please telephone DLJ's shareholder servicing representatives at (800) 225-8011
for more information.
Employer-Sponsored Retirement Plans
The Adviser has a prototype retirement plan available which provides
for investment of plan assets in shares of any one or more 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.
24
<PAGE>
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 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 DLJ's
Distributor.
NET ASSET VALUE
Shares of the Funds will be priced at the net asset value per share
as computed each Fund Business Day in accordance with the Agreement and
Declaration of Trust and By-Laws. For this purpose, a Fund Business Day is any
day on which the NYSE is open for business, typically, Monday through Friday
exclusive of New Year's Day, Martin Luther King Jr. Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
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 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
25
<PAGE>
computed for the purpose of sales and redemptions at $1.00. Such procedures
include review of the Money Funds' portfolio holdings by the Adviser at such
intervals as the Adviser deems appropriate to determine whether and to what
extent the net asset value of the Money Funds calculated by using available
market quotations or market equivalents deviates from net asset value based on
amortized cost. If such deviation exceeds 1/2 of 1%, the Adviser will promptly
consider what action, if any, should be initiated. In the event the Adviser
determines that such a deviation may result in material dilution or other
unfair results to new investors or existing shareholders, they will consider
corrective action which might include (1) selling instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, (2) withholding dividends of net income on shares, or (3)
establishing a net asset value per share using available market quotations or
equivalents. There can be no assurance, however, that the Money Funds' net
asset value per share will remain constant at $1.00.
The net asset value of the shares of the High Income 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 the 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 the 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.
Substantially all of the High Income Fund's investments (excluding
short-term investments) are valued by one or more independent pricing services
(the "Service) approved by the Trustees. Securities valued by the Service for
which quoted bid prices in the judgment of the Service are readily available
and are representative of the bid side of the market are valued at the mean
between the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments valued by the
Service are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of securities of
comparable quality, coupon, maturity and the indications as to values from
dealers; and general market conditions. Debt securities which mature in less
than [ ] days are valued at amortized cost (unless the Trustees determine that
this method does not represent fair value) their original maturity was 60 days
or less by amortizing the value as of the 61st day prior to maturity, if their
original term to maturity exceeded 60 days. Other investments that are readily
marketable portfolio securities listed on an exchange are valued 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 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 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 Automated 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
26
<PAGE>
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
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 deem appropriate to reflect their fair market value.
Options, futures contracts and options thereon which are traded on
exchanges are valued at their last sale or settlement price as of the close of
the exchanges or, if no sales are reported, at the average of the quoted bid
and asked prices as of the close of the exchange. 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 the Fund will be included in the liability section of the financial
statements as a deferred credit and subsequently adjusted (marked-to-market)
to the current market value of the option written.
Any assets or liabilities initially expressed in terms of foreign
currency will be translated into U.S. dollars at the prevailing rates of
exchange or, if no such rate is quoted on such date, at the exchange rate
utilized on the previous business day or at such other quoted market exchange
rate as may be determined to be appropriate by the Adviser. Expenses and fees,
including the management fee, are accrued daily and taken into account for the
purpose of determining net asset value.
Securities that are not valued by the Service are valued at fair
value as determined in good faith by the Trustees utilizing such factors as
the Trustees deem appropriate. The Trustees will review the method of such
valuation on a current basis.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends. The net investment income of the Money Funds and the High
Income Fund 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 Funds'
portfolio assets less the 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.
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<PAGE>
Net investment income may be negative if an unexpected liability must be
accrued or a loss realized. If the net investment income of a Money Fund
determined at any time is a negative amount, the net asset value per share
will be reduced below $1.00 unless one or more of the following steps are
taken: the Adviser has the authority (i) to reduce the number of shares in
each shareholder's account, (ii) to offset each shareholder's pro rata portion
of negative net investment income from the shareholder's accrued dividend
account or from future dividends, or (iii) to combine these methods in order
to seek to maintain the net asset value per share at $1.00. Each Money Fund
may endeavor to restore the net asset value per share to $1.00 by not
declaring dividends from net investment income on subsequent days until
restoration, with the result that the net asset value per share will increase
to the extent of positive net investment income which is not declared as a
dividend.
Should the Money Funds incur or anticipate any unusual or unexpected
significant expense or loss which would affect disproportionately the Money
Funds' income for a particular period, the Adviser would at that time consider
whether to adhere to the dividend policy described above or to revise it in
light of the then prevailing circumstances in order to ameliorate to the
extent possible the disproportionate effect of such expense, loss or
depreciation on then existing shareholders. Such expenses or losses may
nevertheless result in a shareholder's receiving no dividends for the period
during which the shares are held and in receiving upon redemption a price per
share lower than that which was paid.
The Money Funds do not anticipate realizing any long-term capital
gains. 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 Funds on such gains as a credit against their individual Federal income
tax liability.
Upon a redemption or other disposition of shares of a Fund, a shareholder will
generally recognize gain or loss in an amount equal to the difference between
the amount realized and the shareholder's tax basis in such shares. Generally,
such gain or loss will be capital gain or loss and will be long-term capital
gain or loss if the shareholder's holding period for such shares exceeds one
year. Capital gains (short-term and long-term), if any, realized by the 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 Funds on the outstanding shares of any Fund will, at the election of
each shareholder, be paid in cash or reinvested in additional full and
fractional shares of that 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 Fund from a
28
<PAGE>
shareholder at least 30 days prior to the record date for a particular
dividend or distribution on shares of the 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 a Fund will
pay any dividends or realize any gains. The amount of any dividend or
distribution paid by each Fund depends upon the realization by the Fund of
income and capital gains from that Fund's investments. All dividends and
distributions will be made to shareholders of each Fund solely from assets of
that Fund.
Taxation of Distributions. For shareholders' Federal income tax
purposes, all distributions by the 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 Funds. Since the 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 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 Funds may be subject to state and local taxes on
distributions received from the Funds and on redemptions of the 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 Funds. Each 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 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; and (b)
diversify its holdings so
29
<PAGE>
that, at the end of each fiscal quarter, (i) at least 50% of the market value
of the 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 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 Fund. To
the extent possible, each 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.
Amendments to the Code made in 1993 required that any market discount
recognized on a tax-exempt bond is taxable as ordinary income. This rule
applies 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. Accordingly, gain on the disposition by a Money Fund 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.
Since the Funds are not treated as a single entity for Federal income
tax purposes, the performance of any one Fund will have no effect on the
income tax liability of shareholders of another Fund.
Dividend or capital gains distributions with respect to shares of any
Fund held by a tax-deferred or qualified retirement plan, such as an IRA,
Keogh Plan or corporate pension or profit sharing plan, will not be taxable to
the plan. Distributions from such plans will be taxable to individual
participants under applicable tax rules without regard to the character of the
income earned by the qualified plan.
Taxation of Investor's Indebtedness. It is unlikely that interest on
indebtedness incurred by shareholders to purchase or carry shares of the 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
30
<PAGE>
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 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
Funds with a correct taxpayer identification number, who under-reports
dividend or interest income, or who fails to certify to the Funds that he or
she is not subject to such withholding. An individual's tax identification
number is his or her social security number.
Tax Legislation. Tax legislation in recent years has included several
provisions that may affect the supply of, and the demand for, tax-exempt
bonds, as well as the tax-exempt nature of interest paid thereon. It is not
possible to predict with certainty the effect of these recent tax law changes
upon the tax-exempt bond market, including the availability of obligations
appropriate for investment, nor is it possible to predict any additional
restrictions that may be enacted in the future. The Municipal Fund will
monitor developments in this area and consider whether changes in its
objectives or policies are desirable.
General. The foregoing discussion of U.S. federal income tax law
relates solely to the application of that law to U.S. persons, i.e., U.S.
citizens and residents and U.S. corporations, partnerships, trusts and
estates. Each shareholder who is not a U.S. person should consider the U.S.
and foreign tax consequences of ownership of shares of the 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 Funds. The discussion does not purport
to deal with all of the Federal income tax consequences applicable to the
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 Funds.
31
<PAGE>
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of the
Funds, the Adviser is responsible for the investment decisions and the placing
of orders for portfolio transactions for the Funds. Portfolio transactions for
the Funds are normally effected by brokers.
The 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 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 Funds. Therefore, the 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 Funds to
obtain the best price and execution for its transactions.
INVESTMENT PERFORMANCE INFORMATION
The Funds may furnish data about its investment performance in
advertisements, sales literature and reports to shareholders. From time to
time evaluations of performance are made by independent sources that may be
used in advertisements concerning each 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. The yield quotation based on
the 7 days ended October 31, 1998 was [ ]% and [ ]% for the Municipal Fund and
Government Fund, respectively.
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:
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<PAGE>
Effective yield = [(Base Period Return + 1)^(365/7)] - 1.
The effective yield quotation based on the 7 days ended October 31,
1998 was [ ]% and [ ]% for the Municipal Fund and Government Fund,
respectively.
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
30-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 1998 calendar year.
<TABLE>
<CAPTION>
Federal To Equal Hypothetical Tax-Free Yields of
Tax Rates 5%, 7% and 9%, a Taxable Investment
1998 Taxable Individual Would Have To Earn(3)
Income Brackets Return 5% 7% 9%
--------------- ------ ----- ----- -----
[to be updated] [to be updated]
<S> <C> <C> <C> <C>
0-25,350 15.0% 5.88 8.24 10.59
25,350-61,400 28.0% 6.94 9.72 12.50
61,401-128,100 31.0% 7.25 10.14 13.04
128,101-278,450 36.0% 7.81 10.95 14.06
Over 278,450 39.6% 8.28 11.59 14.90
<CAPTION>
Joint
Return
------
<S> <C> <C> <C> <C>
0-42,351 15.0% 5.88 8.24 10.59
42,351-102,300 28.0% 6.94 9.72 12.50
102,301-155,950 31.0% 7.25 10.14 13.04
155,951-278,450 36.0% 7.81 10.95 14.06
Over 278,451 39.6% 8.28 11.59 14.90
<FN>
- ---------
(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 $[ ] ($[ ] 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 $[ ] (for
single individuals). The effective Federal tax rates and equivalent
yields for such taxpayers would be higher than those shown above.
</TABLE>
33
<PAGE>
Based on 1998 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 []% in order to match a tax-free yield of 5%.
There is no guarantee that a fund will achieve a specific yield.
While most of the income distributed to the shareholders of each Money Fund
will be exempt from Federal income taxes, distributions may be subject to
state and local taxes.
Quotations of total return will reflect only the performance of an
investment in any Money Fund during the particular time period shown. Each
Money Fund's total return and current yield may vary from time to time
depending on market conditions, the compositions of its portfolio and
operating expenses. These factors and possible differences in the methods used
in calculating yield should be considered when comparing each Money Fund's
current yield to yields published for other investment companies and other
investment vehicles. Total return and yield should also be considered relative
to change in the value of each Money Fund's shares and the risks associated
with each Money Fund's investment objectives, policies and risk
considerations.
In connection with communicating its yield, effective yield or
tax-equivalent yield to current or prospective shareholders, each Money Fund
may also compare these figures to the performance of other mutual funds
tracked by mutual fund rating services or to other unmanaged indices which may
assume reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
The High Income Fund will commence operations on or about February
26, 1999, and thus, as of the date of this Prospectus, does not report
performance information. 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.
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<PAGE>
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 November 16, 1998.
<TABLE>
<CAPTION>
Nature of
Municipal Money Fund Name and Address % of Class Ownership
- -------------------- ---------------- ---------- ---------
<S> <C> <C> <C>
Park Ave Partners, Inc. 15.70 Beneficial(a)
c/o John J. Quinn III
79 Buena Vista Ave.
Rumson, NJ 07760-1231
Hamilton E. James 5.39 Beneficial(a)
Donaldson, Lufkin & Jenrette
277 Park Avenue, 17th Floor
New York, NY 10172
Chalsty Family LLC 6.74 Beneficial(a)
C/O Winthrop Trust Co.
277 Park Avenue, 24th Floor
New York, NY 10172-0003
U.S. Government Money Fund
--------------------------
Kathleen Koenen 6.33 Beneficial
Exec Austin V. Koenen Estate
c/o Winthrop Trust Co.
277 Park Avenue
New York, NY 10172
Jeff Moskun 5.91 Beneficial(a)
63 Powers Road
Hollis, NH 03049
Robert Winthrop 5.89 Beneficial
Attn. George Gaspari
One Pershing Plaza, 10th Floor
Jersey City, NJ 07399
<FN>
- ---------
(a) Such Recordholder disclaims beneficial ownership.
</TABLE>
35
<PAGE>
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.
The Adviser manages accounts over which it has discretionary power to
vote or dispose of securities held in such accounts and which accounts hold in
the aggregate, as of [], [ ] shares (%) of the Municipal Money Fund and []
shares (%) of the U.S. Government Money Fund.
GENERAL INFORMATION
Organization and Capitalization
The Agreement and Declaration of Trust provides that no Trustee,
officer, employee or agent of the DLJ 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 DLJ
Opportunity Fund for satisfaction of claims arising in connection with the
affairs of an DLJ 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 DLJ
Opportunity Funds against all liability in connection with the affairs of the
DLJ Opportunity Funds.
All shares of the DLJ 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 DLJ 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.
Counsel and Independent Auditors
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, serves as legal counsel for the Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has
been appointed as independent auditors for the Opportunity Funds.
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<PAGE>
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.
Financial Statements
The audited financial statements of each Money Fund for the fiscal
year ended October 31, 1998 and the report of the Funds' independent auditors
in connection therewith are included in the October 31, 1998 Annual Report to
Shareholders. The Annual Report is incorporated by reference into this
Statement of Additional Information. You can obtain a copy of the Funds'
Annual Report by writing or calling the Funds at the address or telephone
numbers set forth on the cover of this Statement of Additional Information.
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<PAGE>
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 Funds are
permitted to invest in accordance with Rule 2a-7 of the Act.
Rating of Municipal Obligations
S&P:
The two highest ratings of S&P for municipal bonds are AAA (Prime)
and AA (High-grade). Bonds rated AAA have the highest rating assigned by S&P
to a municipal obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only in a small
degree. The rating may be modified by the addition of a plus (+) or a minus
(-) to show relative standing within the category.
S&P top ratings for municipal notes are SP-1 and SP-2. The
designation SP-1 indicates a very strong capacity to pay principal and
interest. A "+" is added for those issues determined to possess overwhelming
safety characteristics. An "SP-2" designation indicates a satisfactory
capacity to pay principal and interest.
Moody's:
The two highest ratings of Moody's for municipal bonds are Aaa and
Aa. Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high-grade bonds. Moody's
states that Aa bonds are rated lower than the best bonds because margins of
protection or other elements make long-term risks appear somewhat larger than
for Aaa municipal bonds. Moody's rates a bond in the Aa category as Aa1 if
Moody's believes the bond possesses strong attributes within the category.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and Variable Rate 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.
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<PAGE>
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.
Ratings of Corporate Bonds
S&P:
AAA--Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit 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 bonds in this category than for bonds in higher rated
categories.
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<PAGE>
BB--Bonds rated BB have less near-term vulnerability to default than
other speculative grade debt. However, they face 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.
B--Bonds rated B have a greater vulnerability to default but
presently have the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.
CCC--Bonds rated CCC have a current identifiable vulnerability to
default and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
CC--The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
C--The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating.
D--Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or
a minus (-) sign designation, which is used to show relative standing within
the major rating categories, except in the AAA (Prime Grade) category.
Moody's:
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issuers.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
40
<PAGE>
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--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.
Baa--Bonds which are 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.
Ba--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, therefore, not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--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.
Caa--Bonds which are rated Caa are of poor standing. Such issuers may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca present obligations which are
speculative in a high degree. Such issuers are often in default or have other
marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds, and
issuers so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
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APPENDIX B
DESCRIPTIONS OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for short-term capital
needs and usually have maturities of one year or less. They include the
following:
1. Project Notes, which carry a U.S. Government guarantee, are
issued by public bodies (called "local issuing agencies")
created under the laws of a state, territory, or U.S.
possession. They have maturities that range up to one year from
the date of issuance. Project Notes are backed by an agreement
between the local issuing agency and the Federal Department of
Housing and Urban Development. These Notes provide financing
for a wide range of financial assistance programs for housing,
redevelopment, and related needs (such as 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.
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Municipal Bonds, which meet longer term capital needs and generally
have maturities of more than one year when issued, have three principal
classifications:
7. 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.
8. Revenue Bonds generally are accrued by the net revenues derived
from a particular facility, group of facilities, or, in some
cases, the proceeds of a special excise or other specific
revenue source. Revenue Bonds are issued to finance a wide
variety of capital projects including electric, gas, water and
sewer systems; highways, bridges, and tunnels; 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.
9. 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.
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SUBJECT TO COMPLETION
DLJ OPPORTUNITY FUNDS
277 PARK AVENUE,
NEW YORK, NEW YORK 10172
Toll Free (800) 255-8011
STATEMENT OF ADDITIONAL INFORMATION
February 26, 1999
This Statement of Additional Information relates to the DLJ Developing
Markets Fund (the "Developing Markets Fund") and the DLJ International Equity
Fund (the "International Equity Fund" and together with the Developing
Markets Fund, the "International Funds"). Each of which is a series of the
DLJOpportunity Funds (the "Opportunity Funds"). This Statement of Additional
Information is not a prospectus and should be read in conjunction with the
International Funds' current Prospectus dated February 26, 1999, as supplemented
from time to time, which is incorporated herein by reference. A copy of the
Prospectus may be obtained by contacting the International Funds at the
address or telephone number listed above.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Fund History.......................................
InvestmentPoliciesand Restrictions
Management
Expenses of the International Funds
Purchases, Redemptions, Exchanges and Systematic Withdrawal Plan
Retirement Plans
Net Asset Value
Dividends, Distributions and Taxes
Portfolio Transactions
Portfolio Turnover
Investment Performance Information
Shares of Beneficial Interest
General Information
Appendix - Securities Ratings
</TABLE>
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FUND HISTORY
DLJ Opportunity Funds was formed on May 31, 1995 as a business trust
under the laws of the state of Delaware. Until the filing of this registration
statement, the Trust was referred to as the "Winthrop Opportunity Funds." Its
shares are currently divided into five series, the DLJ High Income Fund, and the
DLJ U.S. Government Money Fund and the DLJ Municipal Money Fund (the "Money
Funds"), and the International Funds. This Statement of Additional Information
is for the International Funds. The International Funds commenced operations on
September 8, 1995. The DLJ Opportunity Funds have an unlimited number of
authorized shares of beneficial interest, par value $.001 per share, which may,
without shareholder approval, be divided into an unlimited number of series and
an unlimited number of classes.
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 and Policies" in the International Funds' Prospectus.
Except as noted in the Prospectus, each International Fund's investment policies
are not fundamental and may be changed by the Trustees of the Funds without
shareholder approval. Shareholders will be notified prior to a significant
change in such policies. Each International 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 International Fund may invest in any of the securities
described below.
Depositary Receipts. The International 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
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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
International Fund's investment policies, an International 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 International 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 International 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 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 International 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
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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
International 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 International 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 International 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 International Fund may determine to retain in its
portfolio securities the issuers of which have had their credit characteristics
downgraded.
Options. The International 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 International Fund
writes a call option, that 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 International 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 International Fund desires to sell a particular security from its
portfolio on which it has written an option, the International 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 International Fund
may enter into a closing purchase transaction to realize a profit on a
previously written option or to enable the International Fund to write another
option on the underlying security with either a different exercise price or
expiration date or both. An International Fund realizes a profit or loss from a
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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 International 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 International Fund may not write a call option if, as a result
thereof, the aggregate of such International 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
International 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 International 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
International 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 International 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 International
securities for investment. The ability of an International 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 International Fund's
ability to effectively hedge its portfolio. There is also the risk of loss by
the International Funds of margin deposits or collateral in the event of
bankruptcy of a broker with whom the International 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 International Fund is
limited to an investment not in excess of 5% of its total assets, except that
each International Fund may purchase and sell such instruments, without
limitation, for bona fide hedging purposes.
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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 International Funds will generally enter into forward contracts
only under two circumstances. First, when an International 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 International Fund's portfolio securities
denominated in such foreign currency. This second investment practice is
generally referred to as "cross-hedging." Although forward contracts will be
used primarily to protect the International Funds from adverse currency
movements, they also involve the risk that anticipated currency movements will
not be accurately predicted.
Futures and Options Thereon. The International 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 International 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 International Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. The
International 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 International 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 International Fund might be delayed in selling the
collateral.
Reverse Repurchase Agreements. The International Funds may also enter
into reverse repurchase agreements. Under a reverse repurchase agreement an
International Fund would sell securities and agree to repurchase them at a
mutually agreed upon date and price. At the time an International 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
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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 International 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 International
Fund's obligations to repurchase the securities and an International 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
International 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 International 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 International 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 International Fund to sell them promptly at an acceptable
price. The staff of the SEC currently takes the position that OTC options
purchased by an International Fund, and portfolio securities "covering" the
amount of that International 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 International Fund's limitations on
investments in illiquid securities.
Borrowing. Each International 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 International 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 International 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.
Securities Lending. The International 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
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securities loaned. Accordingly, the International 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
International 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 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
International Fund may not exceed 25% of the value of its net assets.
When Issued, Delayed Delivery Securities and Forward Commitments. The
International 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
International Fund will only enter into a forward commitment with the intention
of actually acquiring the security, such International 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 International Fund
prior to the settlement date. Each International 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 International Funds in privatization in
appropriate circumstances. In certain countries, the ability of foreign entities
such as the International Funds to participate in privatization may be limited
by local law and/or the terms on which the International 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
International investments by foreigners. The International Funds may be able to
invest in such markets solely or primarily through governmentally authorized
investment vehicles or companies. Pursuant to the 1940 Act, each International
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
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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 International 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 International Fund
would bear its ratable share of that investment company's expenses, including
its advisory and administration fees. At the same time, an International 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 International Funds and may not be changed with respect to an
International Fund without the approval of a majority of the shareholders of
that International Fund, which means the affirmative vote of the holders of (a)
67% or more of the shares of that International Fund represented at a meeting at
which more than 50% of the outstanding shares of the International Fund are
represented or (b) more than 50% of the outstanding shares of that International
Fund, whichever is less. Except as set forth in the Prospectus, all other
investment policies or practices are considered by each International 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 International 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 International Fund
would own more than 10% of the outstanding voting securities of such
issuer, except that up to 25% of the value of the International 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 International
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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 International 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 International 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 International 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 International 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 International Fund's total assets and
the International 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.
MANAGEMENT
The Trustees and principal officers of the International 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 International Funds as defined by the
1940 Act.
*G. Moffett Cochran, 48, 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 International Funds and the Adviser, Mr. Cochran was a
Senior Vice President with Bessemer Trust Companies.
Robert E. Fischer, 68, Trustee of the Opportunity Funds, has been
Member at the law firm Wolf, Block, Schorr and Solis-Cohen LLP (or its
predecessor firm) since 1993.
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*Martin Jaffe, 52, Trustee, Vice President, Secretary and Treasurer of
the Opportunity Funds, is a Managing Director and Chief Operating Officer of the
Adviser, with which he has been associated since 1993.
Wilmot H. Kidd, III, 57, Trustee of the Opportunity Funds, has been
President of Central Securities Corporation, since 1993.
John W. Waller, III, 47, Trustee of the Opportunity Funds, has been
Chairman of Waller Capital Corporation, an investment banking firm, since 1993.
James A. Engle, 40 , Vice President of the Opportunity Funds, is a
Managing Director and Chief Investment Officer of the Adviser with which he has
been associated since 1993.
Brian A. Kammerer, 41, Vice President of the Opportunity Funds, is a
Vice President of the Adviser, with which he has been associated since 1993.
The following table sets forth certain information regarding compensation of the
International Funds' Trustees and officers. Except as disclosed below, no
executive officer or person affiliated with the International Funds received
compensation from the International Funds for the calendar year ended December
31, 1998 will receive in excess of $60,000.
Compensation Table
<TABLE>
<CAPTION>
Total Compensation
Pension or From Trust
Aggregate Retirement and Fund
Compensation Benefits Accrued Estimated Annual Complex
From As Part of Trust Benefits Upon Paid to
Name and Position Trust(1) Expenses Retirement Trustees(2)
----------------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C>
G. Moffett Cochran, Trustee $ 0 None None $ 0(10)
Robert E. Fischer, Trustee $[ ] None None $[ ](5)
Martin Jaffe, Trustee $ 0 None None $ 0 (5)
Wilmot H. Kidd, III, Trustee $[ ] None None $[ ](5)
John W. Waller, III, Trustee $[ ] None None $[ ](5)
12
<PAGE>
<FN>
(1) The Opportunity Funds anticipate paying each independent Trustee
approximately $[ ] in each calendar year.
(2) Represents the total compensation paid to such persons during the
calendar year ended December 31, 1998. The parenthetical number
represents the number of portfolios (including the International Funds)
for which such person acts as Trustee that are considered part of the
same fund complex as the International Funds.
</TABLE>
----------
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 $[ ] 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 $[ ] 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 International 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 International 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-UAP ("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 November 30, 1998, AXA owns [ ] 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
13
<PAGE>
States and Europe. Based on information provided by AXA, as of November 30,
1998, 18.2% of the issued ordinary shares (representing 28.2% 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 3.1% of the issued
ordinary shares (representing 2.7% 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 0.2% of the issued ordinary shares
(representing 0.3% of the voting power) of AXA. As of November 30, 1998, 61.5%
of the issued ordinary shares (representing 72.3% of the voting power) of Finaxa
were owned by four French mutual insurance companies -- (the "Mutuelles AXA")
and 23.7% of the issued ordinary shares (representing 14.7% 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 November 30, 1998, the
Mutuelles AXA directly and indirectly owned 24.8% of the issued ordinary shares
of AXA (representing 35.9% of the voting power). Acting as a group, the
Mutuelles AXA will continue to control AXA and Finaxa.
The Investment Advisory Agreement was approved by the Board of Trustees
of the International 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 16, 1998. The Investment
Advisory Agreement continues in force for successive twelve month periods
provided that such continuation is specifically approved at least annually by a
majority vote of the Trustees who neither are interested persons of the
International 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 International Funds.
For the fiscal years ended October 31, 1998, 1997 and 1996, the
Developing Markets Fund paid the Adviser fees of $506,870, $419,303 and $24,317,
respectively, and the International Equity Fund paid the Adviser fees of
$605,376, $528,653 and $50,310, respectively. Such amounts include fees that
were subsequently paid to the Subadviser.
During the fiscal years ended October 31, 1998, 1997 and 1996, the
Adviser and Subadviser reimbursed the Developing Markets Fund $139,596, $181,527
and $29,855, respectively, and the International Equity Fund $88,653, $112,542
and $38,839, respectively, for operating expenses.
Subadviser
14
<PAGE>
The Subadviser has been retained under a subadvisory agreement by the
Adviser to assist in the performance of its services to the International 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
International 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 International 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 International Funds. When two or more of the clients of the
Adviser and Subadviser (including the International Funds) are purchasing the
same security on a given day from the same broker-dealer, such transactions may
be averaged as to price.
The Fund intends to enter into arrangements with certain broker-dealers
(including affiliates of the Distributor) whose customers are Fund shareholders
pursuant to which the broker-dealers may perform shareholder servicing
functions, such as opening new shareholder accounts, processing purchase and
redemption transactions, and responding to certain inquiries regarding the
Fund's performance and the status of shareholder accounts. The Fund may pay for
the electronic communications equipment maintained at the broker-dealers'
offices that permits access to the Fund's computer files and, in addition, may
reimburse the broker-dealers at cost for personnel expenses involved in
providing the services.
EXPENSES OF THE INTERNATIONAL FUNDS
General
In addition to the payments to the Adviser under the investment
advisory agreement, each International 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 International Funds by the Adviser under the investment
advisory agreement or Subadviser under
15
<PAGE>
the investment subadvisory agreement, the International 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 costs
associated with the management, supervision and assistance and office
facilities, in addition to administrative and nonadviser services provided by
the Adviser or their affiliates, may be reimbursed. These payments must be
specifically approved by the Funds' Trustees, including a majority of the
disinterested Trustees.
Distribution Plan
Pursuant to Rule 12b-1 adopted by the SEC under the 1940 Act, the
International Funds have adopted a Distribution Agreement (the 'Distribution
Agreement') and a Rule 12b-1 Plan for each Class of shares of each International
Fund (the "12b-1 Plans") to permit such International 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 International Funds reports the amounts expended under the
Distribution Agreement and the purposes for which such expenditures were made to
the Trustees of the International 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 International
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
International 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 16, 1998. 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 International 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 International Funds may bear pursuant
to the 12b-1 Plans without the approval of a majority of the outstanding shares
of such International Funds. Each International Fund's 12b-1 Plan or Plans 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
International 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 International Fund on not more than 60 days notice to any other party to
the agreement, and will terminate automatically in the event of assignment.
16
<PAGE>
With respect to sales of an International 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
International Funds' 12b-1 Plans, the Distributor is then reimbursed for such
payments with amounts paid from the assets of such International Fund. The
payments to the broker-dealer, although an International 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 International Funds.
Broker-dealers who sell shares of the International Funds may provide services
to their customers that are not available to investors who purchase their shares
directly from the International Funds. Investors who purchase their shares
directly from an International Fund will pay a pro rata share of such
International 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 International Funds.
Pursuant to the provisions of the 12b-1 Plans and the Distribution
Agreement, each International Fund pays a distribution services fee each month
to the Distributor, with respect to the Class A shares of each International
Fund at an annual rate of up to .25 of 1%, and with respect to the Class B
shares of each International 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 International Fund.
With respect to sales of Class B shares through a broker-dealer, the
broker-dealer is paid a concession at the time of sale. In addition, an ongoing
maintenance fee may be paid to broker-dealers on sales of shares of the Funds.
The payments to the broker-dealer, although a Fund 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 Funds. Broker-dealers who
sell shares of the Funds may provide services to their customers that are not
available to investors who purchase their shares directly. Investors who
purchase their shares directly from a Fund will pay a pro rata share of such
Fund's expenses of encouraging broker-dealers to provide such services but will
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 Fund.
The International Funds 12b-1 Plans permit payments to be made in subsequent
years for expenses incurred in prior years if the Funds' Trustees specifically
authorize such payment. As of the year ended October 31, 1998, the amounts
eligible for payment in subsequent years were $[ ] and $[ ] for the Developing
Markets Fund and the International Equity Fund, respectively, which represents [
]% and [ ]% of the Fund's October 31, 1998 net assets, respectively.
The table below shows distribution costs charged to each Fund during the past
fiscal year.
17
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION COSTS
------------------
Class A Class B
------- -------
<S> <C> <C>
International Equity Fund ................... $ $
Developing Markets Fund.............. $ $
</TABLE>
Under the Agreements, the Adviser may make payments to the Distributor from the
Adviser's own resources, which may include the management fees paid by DLJ. 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 the Fund. On some
occasions, such compensation will be conditioned on the sale of a specified
minimum dollar amount of the shares of the 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.
[chart and additional disclosure to come]
PURCHASES, REDEMPTIONS, EXCHANGES AND
SYSTEMATIC WITHDRAWAL PLAN
The following information supplements that set forth in the International Funds'
Prospectus under the heading "Purchases, Redemptions and Shareholder Services."
Purchases
Shares of the International Funds are offered at the respective net
asset value (less any applicable sales charge for Class A shares) per share next
determined following receipt of a purchase order in proper form by the
International Funds, the International Funds' transfer agent, First Data
Investor Services Group, Inc. (the "Transfer Agent"), or by the Distributor. The
International 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 NYSE.
Orders for the purchase of Class A or Class B shares of an
International 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
18
<PAGE>
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 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 International Funds, share
certificates representing shares of the International 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 International 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 International Funds).
Shareholders maintaining Fund accounts through brokerage firms and
other institutions should be aware that such institutions may necessarily set
deadlines for receipt of transaction orders from their clients that are earlier
than the transaction times of the Fund itself so that the institutions may
properly process such orders prior to their transmittal to the Fund or the
Distributor. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect the order with
the Fund until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or her institution.
(For example, a brokerage firm may accept purchase orders from its customers up
to 2:15 p.m. for issuance at the 4:00 p.m. transaction time and price.) A
brokerage firm acting on behalf of a customer in connection with transactions in
Fund shares is subject to the same legal obligations imposed on it generally in
connection with transactions in securities for a customer, including the
obligation to act promptly and accurately.
Redemptions
Shares of the International Funds may be redeemed at a redemption price
equal to the net asset value per share, as next computed as of the regular
trading session of the NYSE following the receipt in proper form by the
International Funds of the 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.
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 International 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.
19
<PAGE>
Except for Class D shares, 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
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.
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 for redemption, 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 DLJ of its portfolio securities is not reasonably
practicable, or as a result of which it is not reasonably practicable for DLJ 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, redemptions will
be made by payment in cash or by check.
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
Class A and Class B shares of an International Fund can be exchanged
for shares of the same class of another International Fund, shares of the Money
Funds and
20
<PAGE>
, shares of the same class of the DLJ High Income Fund and shares of
the same class of DLJ Growth Fund, DLJ Fixed Income Fund, DLJ Small Company
Value Fund, DLJ Growth and Income Fund and DLJ Municipal Trust Fund (the "DLJ
Focus Funds"). Shareholders may exchange shares by mail. Shareholders or the
shareholders' investment dealer of record may exchange shares by telephone.
Participants within DLJ's Employee Profit Sharing Plan should contact
their plan administrator for information regarding exchanging Class D shares of
the International Funds.
In the case of each Money Fund and DLJ Focus Funds, 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 International Fund
for at least seven days may exchange all or part of those shares for shares of
the other International Fund, the Money Funds or Focus Funds, and no partial
exchange may be made if, as a result, the shareholders' interest in an
International Fund would be reduced to less than $250. The minimum initial
exchange into another International Fund is $250.
Exchanges into any of the DLJ Funds are subject to the minimum
investment requirements and any other applicable terms set forth in the
Prospectus for the 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 all the 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. See "Fund Expenses " and
"Additional Shareholder Services - Exchange Privilege" in the Prospectus for a
description of these expense differences.
Systematic Withdrawal Plan
Shares of an International Fund owned by a participant in the
International 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 International Funds' systematic withdrawal plan up to 1% monthly or 3%
quarterly of an account not to exceed 10% of total market value over any 12
month rolling period. Systematic withdrawals elected on a semi-annual or annual
21
<PAGE>
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 International 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.
RETIREMENT PLANS
Each of the International 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 these
prototype retirement plans and charges an annual account maintenance fee of $15
per participant, regardless of the number of Funds selected. Persons desiring
information concerning these plans should write or telephone the International
Funds' Transfer Agent. While the International 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 ("IRA")
The Adviser has available a prototype form of a Traditional IRA for
investment in shares of any one or more International Funds. Under the Code,
individuals may currently make IRA contributions of up to $2,000 annually.
Married individuals filing jointly may contribute up to $2,000 for each spouse
if the combined compensation of both spouses is at least equal to the
contributed amount. Contributions to an IRA may be wholly or partly
tax-deductible, depending upon the contributor's income level and participation
in an employer-sponsored retirement plan. The income earned on shares held in an
IRA is not subject to federal income tax until withdrawn in accordance with the
Code. Investors may be subject to penalties or additional taxes on contributions
to or withdrawals from IRAs under certain circumstances. As with tax-deductible
contributions, taxes on the income earned from nondeductible IRA contributions
will be deferred until distributed from the IRA.
The Adviser has available a prototype form of the Roth IRA. Unlike
Traditional IRA's, contributions to a Roth IRA are not currently deductible.
However, the amounts within the Roth IRA accounts will accumulate tax-free, and
qualified distributions from the International Funds will not be included in a
shareholder's taxable income. An individual may contribute a maximum of $2,000
annually to a Roth IRA ($4,000 for joint returns). However, such limit is
calculated in the aggregate with contributions to traditional IRA's. In
addition, Roth IRA's are not available to individuals above certain income
levels.
22
<PAGE>
The Adviser also has available a prototype form of the Education IRA
for investment in shares of any one or more International Funds. Like the Roth
IRA, contributions are not currently deductible. However, the investment
earnings accumulate tax-free, and qualifying distributions used for higher
education expenses are not taxable. An individual may contribute a maximum of
$500 per account annually. In addition, Educational IRA's are not available to
individuals above certain income levels.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA is available for investment and may be established on a group
basis by an employer who wishes to sponsor a tax-sheltered retirement program by
making IRA contributions on behalf of all eligible employees.
Savings Incentive Match Plan for Employees ("SIMPLE") - SIMPLE IRA and SIMPLE
401(k)
SIMPLE plans offer employers with 100 or fewer eligible employees who
earned at least $5,000 from the employer in the preceding calendar year the
ability to establish a retirement plan that permits employee contributions. An
employer may also elect to make additional contributions to these Plans. Please
telephone the Funds'transfer agent 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 International 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
23
<PAGE>
Shares of the International Fund 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 the
Distributor.
NET ASSET VALUE
Shares of each International Fund will be priced at the net asset value
per share as computed each International Fund Business Day in accordance with
the International Funds' Agreement and Declaration of Trust and By-Laws. For
this purpose, an International Fund Business Day is any day on which the NYSE is
open for business, typically, Monday through Friday exclusive of New Year's Day,
Martin Luther King Jr. 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 International 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 separately
for each class, by taking the sum of the value of each International Fund's
investments and any cash or other assets, subtracting liabilities, and dividing
by the total number of shares outstanding per class. 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 International 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 International 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 International 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 International Fund's shares may not take place contemporaneously
with the determination of the prices of investments held by such International
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
International Fund's shares unless the Adviser or Subadviser, under the
supervision of such International 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 International Fund's shares may be significantly affected by
such trading on days when a shareholder has no access to such International
Fund.
24
<PAGE>
For purposes of the computation of net asset value, each of the
International 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 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
International 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 International
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 International 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 International
Funds.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The International Funds intend to distribute to shareholders of the
International Funds on an annual basis, substantially all of such respective
periods' net investment income, if any, for each respective International Fund.
Upon a redemption or other disposition of shares of a Fund, a
shareholder will generally recognize gain or loss in an amount equal to the
difference between the amount realized and the shareholder's tax basis in such
shares. Generally, such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the shareholder's holding period for such
shares exceeds one year.
25
<PAGE>
Capital gains (short-term and long-term), if any, realized by each of
the International 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 International Funds on the outstanding shares of any International Fund
will, at the election of each shareholder, be paid in cash or reinvested in
additional full and fractional shares of that International 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
International Funds from a shareholder at least 30 days prior to the record date
for a particular dividend or distribution on shares of each International 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
International Fund will pay any dividends or realize any gains. The amount of
any dividend or distribution paid by each International Fund depends upon the
realization by the International Fund of income and capital gains from that
International Fund's investments. All dividends and distributions will be made
to shareholders of an International Fund solely from assets of that
International 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
International 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.
Each International Fund intends to continue 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 International 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; and (b) diversify its
holdings
26
<PAGE>
so that, at the end of each fiscal quarter, (i) at least 50% of the market value
of the International 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 International 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 International 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.
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 International Fund.
Since the International Funds are not treated as a single entity for
Federal income tax purposes, the performance of one International Fund will have
no effect on the income tax liability of shareholders of another International
Fund. A dividend or capital gains distribution with respect to shares of any
International 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 International 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 International 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 International
Fund. To the extent possible, each International 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
International 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 International Fund for
the preceding year.
Some of the investment practices of each International Fund are subject
to special provisions that, among other things, may defer the use of certain
losses of such International Funds and affect the holding period of the
securities held by the International Funds and the character of the gains or
losses realized. These provisions may also require the International Fund
27
<PAGE>
to 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 International 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
International 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 International Fund as a regulated investment company.
The International 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 International Fund accrues income or receivables or expenses or other
liabilities denominated in a foreign currency and the time the International
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 International 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 International Fund's net investment income available for
distribution.
If an International Fund owns shares in certain foreign investment
entities, referred to as passive foreign investment companies ("PFICs"), such
International 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 International Fund to its
shareholders. If an International Fund were able and elected to treat a PFIC as
a "qualified electing fund," in lieu of the treatment described above, such
International Fund would be required each year to include in income, the
International Fund's pro rata share of the ordinary earnings and net capital
gains of the company, whether or not actually received by the International
Fund. Proposed Treasury Regulations and newly enacted provisions of the Code
would each 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 International 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 International Fund's income under either election, maintain
its qualification as a regulated investment company, and avoid income or excise
taxes, such International Fund may be required to liquidate portfolio securities
that it might otherwise have continued to hold. In the case of the proposed
Treasury Regulations, there can be no assurance that these regulations will be
finalized in the form proposed or as to the effective date of any such final
regulations.
If, as is expected, more than 50 % of the value of the each
International 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
International 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
28
<PAGE>
taxes paid by such International Fund; (2) treat the shareholder's pro rata
share of the foreign income taxes paid by such International 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 International Fund's
taxable year whether the foreign income taxes paid by an International 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 International
Fund from its foreign source income will be treated as foreign source income.
Each International 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 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 International 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 International 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 International
Funds with a correct taxpayer identification number, who under-reports dividend
or interest income or who fails to certify to the International 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 International Funds. The discussion does
not purport to deal with all of the federal income tax consequences applicable
to the International 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 International Funds.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees of the
International Funds, the Adviser and Subadviser are responsible for the
investment decisions and the placing of the orders for portfolio transactions
for the International Funds. Portfolio transactions for the International Funds
are normally effected by brokers.
29
<PAGE>
The International 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 International 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
International Funds. If an International 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 International 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 International Funds, the Adviser nor the Subadviser on
behalf of the International Funds 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 International 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 International 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 research
and investment strategy capabilities. Research and statistical services
furnished by brokers through which the International 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 International Funds.
The International 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
International 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 International Funds will attempt to
negotiate best execution.
The International Funds may from time to time place orders for the
purchase or sale of securities (including listed call options) with DLJ
Securities, the International Funds' Distributor
30
<PAGE>
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 International 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 International 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
International Funds provided that each International 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 International 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
International Funds through their affiliates, DLJ Securities and Autranet, Inc.
For the years ended October 31, 1998, 1997 and 1996, brokerage
commissions paid by the Developing Markets Fund were [to come], $232,122 and
$263,491 , respectively, and the International Equity Fund were [to come] ,
$263,075, and $363,085, respectively. DLJ Securities and Autranet, Inc.,
affiliates of the Advisor and Subadvisor, did not receive any amounts of such
brokerage commissions.
PORTFOLIO TURNOVER
Each International 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, 1998, the portfolio turnover rates
for the Developing Markets Fund and the International Equity Fund were [ ]% and
[ ]%, respectively. A higher rate involves greater transaction costs to an
International Fund and may result in the realization of net capital gains, which
would be taxable to shareholders when distributed.
31
<PAGE>
INVESTMENT PERFORMANCE INFORMATION
Each International 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:
<TABLE>
<S> <C>
YIELD = 2 [multiplied by] [(((A [minus] B) [divided by] (C [multiplied by] D)) [plus] 1)[to the 6th power] [minus] 1]
</TABLE>
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 International Fund during the particular
time period shown. Each International 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
International 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 International
Fund's shares and the risks associated with each International 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 International 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 International 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.
32
<PAGE>
Quotations of each International Fund's average annual total return
will represent the average annual compounded rate of return of a hypothetical
investment in each International Fund over periods of 1, 5, and 10 years (or up
to the life of each International Fund), and are calculated pursuant to the
following formula:
n
P(1+T) = 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 International
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 will deduct the maximum sales charge, if any is imposed. The
International Funds may also quote total return that eliminates any applicable
initial sales charge or contingent deferred sales charge.
For the year ended October 31, 1998, the average annual total return
for the Class A and Class B shares of the Developing Markets Fund was [ ]% and [
]%, respectively, and [ ]% and [ ]% 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 [ ]% and [ ]%, respectively, and [
]% and [ ]% for Class A and Class B shares, respectively, of the International
Equity Fund. For the period from inception of the International Funds'
investment operations on September 13, 1995 through October 31, 1998, the
average annual total return for the Class A and Class B shares of the Developing
Markets Fund was [ ]% and [ ]%, respectively, and [ ]% and [ ]% 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 [ ]% and -[ ]%,
respectively, and [ ]% and [ ]% for Class A and Class B shares, respectively, of
the International Equity Fund.
33
<PAGE>
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 November 16, 1998.
<TABLE>
<CAPTION>
Nature of
Developing Markets Fund Name and Address % of Class Ownership
- ----------------------- ---------------- ---------- ---------
<S> <C> <C> <C>
Class A Donaldson Lufkin & Jenrette 14.60 Beneficial(a)
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303
Balso and Co. 11.70 Record(a)
c/o Chase Manhattan Bank
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Class B Donaldson Lufkin & Jenrette 6.03
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303
Donaldson Lufkin & Jenrette
Securities Corporation Inc. 5.79
PO Box 2052
Jersey City, NJ 07303
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
International Equity Fund
- -------------------------
<S> <C> <C> <C>
Class A Balso and Co. 7.77 Record(a)
c/o Chase Manhattan Bank
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Donaldson Lufkin Jenrette 7.47 Record(a)
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 7.23 Record(a)
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-9998
Robert Winthrop 6.36 Beneficial(a)
c/o Wood Struthers & Winthrop
277 Park Avenue
New York, NY 10172
Class B None
<FN>
- ----------
(a) Such Recordholder disclaims beneficial ownership.
</TABLE>
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.
The Adviser manages accounts over which it has discretionary power to
vote or dispose of securities held in such accounts and which accounts hold in
the aggregate, as of November 17, 1998, 508,044 shares (23.87%) of the
Developing Markets Fund and 712,149 shares (19.40%) of the International Equity
Fund.
35
<PAGE>
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 International Funds is liable to the
International 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
International Funds or the property of the appropriate International Fund for
satisfaction of claims arising in connection with the affairs of an
International 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 International Funds against all liability
in connection with the affairs of the International Funds.
All shares of the International 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 International 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.
Counsel and Independent Auditors
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York,
New York 10022, serves as legal counsel for the International Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has
been appointed as independent auditors for the Opportunity Funds.
Custodian and Transfer Agent
[to come]
Additional Information
36
<PAGE>
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the International
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 International Fund for the
fiscal year ended October 31, 1998 and the report of the Funds' independent
auditors in connection therewith are included in the October 31, 1998 Annual
Report to Shareholders. The Annual Report is incorporated by reference into this
Statement of Additional Information. You can obtain a copy of the International
Funds' Annual Report by writing or calling the International Funds at the
address or telephone numbers set forth on the cover of this Statement of
Additional Information.
37
<PAGE>
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.
38
<PAGE>
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 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 A-1 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.
39
<PAGE>
Part C
Other Information
Item 23 Exhibits
(a) Form of Agreement and Declaration of Trust+
(b) Form of Bylaws+
(c) Not Applicable
(d) (1) Form of Investment Advisory Agreement for the DLJ
Developing Markets Fund and the DLJ International
Equity Fund+
(2) Form of Sub-Advisory Agreement for the DLJ Developing
Markets Fund and the DLJ International Equity Fund+
(3) Form of Investment Advisory Agreement for the DLJ Municipal
Money Fund and the DLJ U.S. Government Money Fund+
(4) Form of Investment Advisory Agreement for the DLJ High
Income Fund***
(e) Not Applicable
(f) Not Applicable
(g) (1) Form of Custody Administration and Agency Agreement for the
DLJ Developing Markets Fund and the DLJ International
Equity+
(2) Form of Custody Administration and Agency Agreement for the
DLJ Municipal Money Fund and the DLJ U.S. Government Money
Fund+
(3) Form of Custody Administration and Agency Agreement for the
DLJ High Income Fund***
(4) Form of Transfer Agent Services Agreement for the DLJ
Developing Markets Fund and the DLJ International Equity
Fund+
- ----------
+ Previously filed.
<PAGE>
(5) Form of Transfer Agent Services Agreement for the DLJ
Municipal Money Fund and the DLJ U.S. Government Money Fund+
(6) Form of Transfer Agent Services Agreement for the DLJ High
Income Fund***
(7) Form of Accounting Services Agreement for the DLJ
Developing Markets Fund and the DLJ International Equity
Fund+
(8) Form of Accounting Services Agreement for the DLJ Municipal
Money Fund and the DLJ U.S. Government Money Fund+
(9) Form of Accounting Services Agreement for the DLJ High
Income Fund***
(h) Form of Joint Fidelity Bond for the DLJ Opportunity Funds+
(i) Legal Opinion+
(j) (1) Consent of Independent Auditors***
(2) Powers of Attorney+
(k) Omitted Financial Statements
Financial Statements for the DLJ Developing Markets Fund and the DLJ
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,
1998:
Statement of Investments as of October 31, 1998; Statement of
Assets and Liabilities as of October 31, 1998; Statement of
Operations for the year ended October 31, 1998; Statement of
Changes in Net Assets for each of the years ended October 31,
1998 and October 31, 1997; Financial Highlights for the period
from September 8, 1995 (commencement of operations) through
October 31, 1995, and for the years ended October 31, 1996,
October 31, 1997 and October 31, 1998; Notes to Financial
Statements as of October 31, 1998; Report of Ernst & Young LLP,
Independent Auditors.
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, and for
the years ended October 31, 1996, October 31, 1997 and October
31, 1998.
Financial Statements for the DLJ Municipal Money Fund and the DLJ
U.S. Government Money 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,
1998:
Statement of Investments as of October 31, 1998; Statement of
Assets and Liabilities as of October 31, 1998; Statement of
Operations for the year ended October 31, 1998; Statement of
Changes in Net Assets for the period from February 24, 1997
(commencement of operations) through October 31, 1997 and for the
year ended October 31, 1998; Financial Highlights for the period
from February 24, 1997 (commencement of operations) through
October 31, 1997 and for the year ended October 31, 1998; Notes
to Financial Statements as of October 31, 1998; Report of Ernst &
Young LLP, Independent Auditors.
Included in the Prospectus constituting Part A of this Registration
Statement:
Financial Highlights for the period from February 24, 1997
(commencement of operations) through October 31, 1997 and for the
year ended October 31, 1998.
Financial Statements for the DLJ High Income Fund***
(l) (1) Form of Subscription Agreement with initial shareholders for
the DLJ Developing Markets Fund and the DLJ International
Equity Fund+
(2) Form of Subscription Agreement with initial shareholders for
the DLJ Municipal Money Fund and the DLJ U.S. Government
Money Fund+
(3) Form of Subscription Agreement with initial shareholders for
the DLJ High Income Fund***
(m) (1) Rule 12b-1 Plans for the DLJ Developing Markets Fund and
the DLJ International Equity Fund+
(2) Rule 12b-1 Plans for the DLJ Municipal Money Fund and
the DLJ U.S. Government Money Fund+
(3) Rule 12b-1 Plans for the DLJ High Income Fund***
(n) Financial Data Schedules***
(o) (1) Rule 18f-3 Plan for the DLJ Developing Markets Fund and the
DLJ International Equity Fund+
(2) Rule 18f-3 Plan for the DLJ Municipal Money Fund and the DLJ
U.S. Government Money Fund+
(3) Rule 18f-3 Plan for the DLJ High Income Fund***
Item 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable
- ----------
+ Previously filed.
*** To be filed by amendment.
<PAGE>
Item 25
INDEMNIFICATION
Registrant's Agreement and Declaration of Trust provides that the Trust
(for the appropriate 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 the High Income Fund) 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.
<PAGE>
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.
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 or either have been previously filed or will be
filed by amendment, and the Agreement and Declaration of Trust and the
Distribution Agreement have been previously filed in response to Item 23.
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
<PAGE>
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 26 BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
The description of the Adviser under the caption "Fund Management" in the
Prospectus and in the Statement of Additional Information constituting Parts A
and B, respectively, of this Registration Statement as well as the Adviser's
respective current Forms ADV are incorporated by reference herein.
Item 27 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 Growth Fund, Winthrop Fixed Income
Fund, Winthrop Small Company Value Fund, Winthrop Growth & Income Fund
and Winthrop Municipal Trust 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 28 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 and One Pershing Plaza, Jersey City,
NJ 07399 (see "Fund 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 29 MANAGEMENT SERVICES
Not Applicable
Item 30 UNDERTAKINGS
Not Applicable
<PAGE>
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 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 9th
day of December, 1998.
Winthrop Opportunity Funds
By: /s/ G. Moffett Cochran
------------------------------
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 December 9, 1998
- -----------------------
G. Moffett Cochran
/s/ Martin Jaffe Trustee and Vice President, December 9, 1998
- ----------------------- Secretary and Treasurer
Martin Jaffe
/s/ Robert E. Fischer Trustee December 9, 1998
- -----------------------
Robert E. Fischer
/s/ Wilmot H. Kidd III Trustee December 9, 1998
- -----------------------
Wilmot H. Kidd III
/s/ John W. Waller III Trustee December 9, 1998
- -----------------------
John W. Waller III
<FN>
- ----------
* Signature by G. Moffett Cochran pursuant to a Power of Attorney filed with
the Securities and Exchange Commission.
</TABLE>
