<PAGE>
PRESIDENT'S LETTER
Dear Shareholders,
While our international equity performance was close to or substantially better
than the performance of the international and developing markets benchmarks, we
were not unscathed by the recent turmoil in overseas markets. We believe the
Funds are well positioned today to take advantage of such important developments
as the introduction of the Euro in January and a continuation of emerging market
economic rebuilding throughout the new year.
WINTHROP DEVELOPING MARKETS FUND
The total return of the Winthrop Developing Markets Fund for the fiscal year
ended October 31, 1998, was -25.00% (Class A) and -25.64% (Class B) vs. -30.99%
for the Fund's benchmark, the MSCI Emerging Markets Free Index.
The most important factor during the fiscal year for developing markets was the
financial crisis in Asia and its effect on other developing markets. After the
collapse of the Thai bhat and the crisis that followed, the Hong Kong dollar peg
was targeted by speculators and came under intense pressure. Interest rates
surged to sky-high levels in order to protect currencies, which in turn resulted
in equities collapsing. Speculators turned to currencies of other countries
where economies were perceived as weak. During the second quarter of the fiscal
year, Indonesia and South Korea were the victims of this second wave of
financial turmoil. The crisis then spread to other regions such as Eastern
Europe and Russia. The Russian economy, already weakened by corruption and
political concerns, saw its economy explode.
The last region to face the financial upheaval was Latin America. In order to
contain the crisis and avoid serious implications for the main industrialized
economies, industrialized countries combined efforts to create a rescue package
for the largest Latin American economy, Brazil. September was a tough month for
Brazil, as it was facing massive capital outflows just before presidential
elections. However, the re-election of President Cardoso strengthened political
unity and meant that he could continue restructuring to reduce the large
deficits. An austerity plan was released that allowed Brazil to benefit from an
important financial rescue package put together by the IMF. This package marked
the end of the panic, and since then, developing markets have stabilized and
reconstruction has begun.
During this period, the Fund was primarily invested in Latin America. It did not
invest in Russia and had very modest exposure to South Korea and Indonesia.
Stock picking focused on defensive sectors, mainly exporters and companies with
low gearing. During the last fiscal quarter, our exposure to Asia was increased
and we seized the opportunity to buy quality stocks at cheap prices.
WINTHROP INTERNATIONAL EQUITY FUND
The total return of the Winthrop International Equity Fund for the fiscal year
ended October 31, 1998, was +8.20% (Class A) and +7.43% (Class B) vs. +9.95% for
the Fund's benchmark, the MSCI EAFE Index.
During the first quarter of 1998, European markets rallied driven by the
anticipation of improving economic fundamentals along with technical factors
such as the switching of funds from Asia. Corporate activity increased as a
merger between Glaxo Wellcome and Smithkline Beecham was announced. March
remarkably produced the largest one-month gain in seven years, where the
benchmark index rose 10% due to falling bond yields, positive news flow on EMU
and strong corporate results. The second quarter had a weak start due to fears
over a possible rate hike in the United States and in Germany, but was followed
by a strong month in May. The best performing sectors in Germany and Britain
were information technologies (SAP, Mysis, CMG), telecommunications, automobile
and agri-business while the underperformers were oil, pharmaceutical and life
insurance.
In July, there were warning signs in the form of profit warnings in the U.S. and
in the U.K. that preceded the catastrophe in August. Markets halved over a
four-week period beginning on July 27. In Europe, however, there were no
tangible signs of a slowdown, which led us to believe that it was more of a
consolidation than a real change in the overall trend. Consumption was up,
unemployment was declining and growth was still on track. The Russian crisis
triggered a massive build-up in the risk premium of most asset classes,
including European equities. The fall was amplified by the fear of a global
deflationary crisis and the uncertainty surrounding the financial sector
following the meltdown of the hedge fund LTCM.
The fiscal year ended with European markets rebounding sharply in October. A
17.8% gain in local currency terms was boosted by falling interest rates and
improved sentiment. The G7 issued a statement on financial system reform and
strong U.S. GDP data eased worries of a U.S. recession. The best performing
sectors were financial (+ 26.7%) and capital goods (+ 22.2%), which were also
the sectors hit hardest by the correction. Fundamentals have generally continued
to improve in Europe and we foresee an acceleration in merger activity that
could quickly propel European markets higher.
The Japanese market was again disappointing over the year, although, we believe
the economy is close to bottoming out, that prospects have improved and that the
Government seems committed to both fiscal and monetary stimulus. After a very
tough year, the Asian markets have just begun to bounce back as falling U.S.
interest rates and the stronger yen have allowed interbank rates and equity risk
premiums to drop. We anticipate earnings momentum will pick up very fast over
the next two to three years and we expect to increase weightings both in Japan
and Asia in coming months.
The Officers & Trustees wish to take this opportunity to convey their gratitude
for your support as well as their hopes for a joyous, healthy and prosperous New
Year.
Sincerely,
/s/ G. Moffett Cochran
G. Moffett Cochran December, 1998
President
1
<PAGE>
OPPORTUNITY FUND HIGHLIGHTS (unaudited)
- --------------------------------------------------------------------------------
Winthrop International Equity Fund
Asset Allocation by Country October 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Country %
- --------------- ------
United Kingdom 24.6%
Japan 19.1%
France 11.7%
Germany 11.6%
Switzerland 9.0%
Italy 6.5%
Netherlands 6.5%
Sweden 3.2%
Spain 2.7%
Finland 2.2%
Portugal 1.2%
Belgium 1.1%
Austria 0.6%
Australia 0.3%
Hong Kong 0.3%
Singapore 0.1%
Cash & Other
Assets/Liabilities -0.7%
Ten Largest Holdings October 31, 1998
Percent of
Country US$ Value Net Assets
-------------- ---------- ----------
France Telecom SA ............... France $1,207,922 2.4%
CMG Plc ......................... United Kingdom 1,173,228 2.3
Oy Nokia (Ab) Ser `A' ........... Finland 1,114,765 2.2
Glaxo Wellcome Plc .............. United Kingdom 1,064,249 2.1
Mannesmann AG ................... Germany 1,036,290 2.1
Vodafone Group Plc .............. United Kingdom 925,218 1.8
Zeneca Group Plc ................ United Kingdom 915,535 1.8
Prudential Corporation Plc ...... United Kingdom 829,942 1.6
Lloyds TSB Group Plc ............ United Kingdom 825,135 1.6
Smithkline Beecham Plc .......... United Kingdom 819,630 1.6
---------- ----
$9,911,914 19.5%
========== ====
Investment Results For the Periods Ended October 31, 1998
[LINE CHART]
MSCI EAFE INDEX With Load Without Load
--------------- --------- ------------
9/95 10000 9425 10000
10/95 9852 9029 9580
10/96 10916 9783 10380
10/97 11454 10763 11420
10/98 12594 11646 12357
- --------------------------------------------------------------------------------
Average Annual Total Return
--------------------------------------
Winthrop International
Equity Fund
----------------------
Without With MSCI EAFE
Load Load INDEX
------ ------ --------
Class A:
1 year ............................... 8.20% 1.98% 9.95%
From inception 9/13/95 ............... 6.99 4.99 7.70
Class B:
1 year ............................... 7.43 3.43 9.95
From inception 9/13/95 ............... 6.21 5.93 7.70
- --------------------------------------------------------------------------------
The performance data quoted represents past performance, which is no indication
of future performance. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. No adjustment has been made for any income taxes payable by
shareholders on dividends or capital gains. Class A returns shown above are
computed with and without the imposition of the maximum 5.75% front-end sales
load. Class B shares, which, instead of a front-end sales load, are subject to a
contingent deferred sales charge (CDSC) ranging from 4% during the first year to
0% after 4 years. Accordingly, returns on Class B shares will differ from those
of Class A shares and are referenced in the table above with and without the
imposition of the applicable CDSC.
The MSCI EAFE 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 index does
not take into account charges, fees and other expenses. Further information
relating to Fund performance, including expense reimbursements, if applicable,
is contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
- --------------------------------------------------------------------------------
2
<PAGE>
OPPORTUNITY FUND HIGHLIGHTS (unaudited)
- --------------------------------------------------------------------------------
Winthrop Developing Markets Fund
Asset Allocation by Country October 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL]
Country %
- ------- ---
Brazil 17.9%
Mexico 14.2%
Argentina 12.4%
Taiwan 9.7%
South Africa 9.1%
South Korea 7.0%
Greece 6.1%
Chile 5.2%
Czech Republic 4.1%
Thailand 3.3%
India 3.3%
Hong Kong 1.8%
Hungary 1.5%
Cash & Other
Assets/Liabilities 1.4%
Malaysia 1.2%
Phillipines 1.0%
China 0.8%
Ten Largest Holdings October 31, 1998
<TABLE>
<CAPTION>
Percent of
Country US$ Value Net Assets
-------------- ---------- ----------
<S> <C> <C> <C>
Telecommunicacoes Brasileiras SA Prf (Telebras) Brazil $ 973,591 5.2%
YPF Sociedad Anonima SA ADR ................... Argentina 857,997 4.5
Telefonos de Mexico SA Cl 'L' ADR ............. Mexico 744,128 3.9
Telefonica de Argentina SA ADR ................ Argentina 695,238 3.7
Cifra SA de CV Ser. 'V' ....................... Mexico 561,504 3.0
Hon Hai Precision Industry .................... Taiwan 511,301 2.7
Centrais Electricas Brasileiras SA Prf Cl 'B' . Brazil 476,251 2.5
SPT Telecom AS ................................ Czech Republic 457,825 2.4
Grupo Mexico SA de CV Ser. 'B' ................ Mexico 403,331 2.1
Korea Electrical Power ADR .................... South Korea 398,285 2.1
---------- ----
$6,079,451 32.1%
========== ====
</TABLE>
Investment Results For the Periods Ended October 31, 1998
[LINE CHART]
MSCI EMF INDEX With Load Without Load
-------------- --------- ------------
9/95 10000 9425 10000
10/95 9462 8982 9530
10/96 10075 9387 9960
10/97 9220 8995 9544
10/98 6363 6746 7158
- --------------------------------------------------------------------------------
Average Annual Total Return
---------------------------------------
Winthrop Developing MSCI
Markets Fund EMERGING
--------------------- MARKETS
Without With FREE
Load Load INDEX
------ ------ --------
Class A:
1 year ............................ (25.00)% (29.31)% (30.99)%
From inception 9/13/95 ............ (10.13) (11.81) (13.42)
Class B:
1 year ............................ (25.64) (28.62) (30.99)
From inception 9/13/95 ............ (10.86) (11.14) (13.42)
- --------------------------------------------------------------------------------
The performance data quoted represents past performance, which is no indication
of future performance. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. No adjustment has been made for any income taxes payable by
shareholders on dividends or capital gains. Class A returns shown above are
computed with and without the imposition of the maximum 5.75% front-end sales
load. Class B shares, which, instead of a front-end sales load, are subject to a
contingent deferred sales charge (CDSC) ranging from 4% during the first year to
0% after 4 years. Accordingly, returns on Class B shares will differ from those
of Class A shares and are referenced in the table above with and without the
imposition of the applicable CDSC.
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
index does not take into account charges, fees and other expenses. Further
information relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report.
3
<PAGE>
Winthrop Opportunity Funds--Statement of Investments October 31, 1998
- --------------------------------------------------------------------------------
Winthrop International Equity Fund
COMMON STOCKS--100.7%
Shares U.S. $ Value
------ ------------
AUSTRALIA--0.3%
National Australia Bank Ltd. ............. 2,810 $ 37,069
Qantas Airways Ltd. ...................... 23,000 38,929
Telstra Corporation Ltd. ................. 15,150 59,863
The News Corporation Ltd. ................ 5,610 38,156
----------
174,017
----------
AUSTRIA--0.6%
Bank Austria AG .......................... 4,275 232,606
OMV AG ................................... 1,150 107,873
----------
340,479
----------
BELGIUM--1.1%
Credit Communal Belgique ................. 3,420 555,666
----------
FINLAND--2.2%
Oy Nokia (Ab) Ser `A' ................... 12,250 1,114,765
----------
FRANCE--11.7%
Accor SA ................................. 2,220 466,222
Castorama Dubois Investisse .............. 2,280 406,610
Compagnie de Saint Gobain ................ 2,845 420,846
Comptoirs Modernes ....................... 90 55,229
Credit Commercial de France .............. 4,900 344,075
Danone Groupe ............................ 2,497 660,100
Elf Aquitaine SA ......................... 2,962 342,740
France Telecom SA* ....................... 17,322 1,207,922
Legrand SA ............................... 2,258 575,382
Pernod Ricard ............................ 8,050 536,003
Renault SA ............................... 10,380 443,640
Rhone-Poulenc ............................ 9,839 449,732
----------
5,908,501
----------
GERMANY--11.6%
Adidas-Salomon AG ........................ 3,300 400,501
Allianz AG ............................... 1,719 576,571
Bayer AG ................................. 9,530 384,094
Bayerische Motoren Werke AG .............. 620 434,253
Bayerische
Motoren Werke AG - New* ................ 186 126,345
Bayerische Vereinsbank AG ................ 7,440 592,980
Daimler Benz AG .......................... 6,369 501,851
Dresdner Bank AG ......................... 3,850 151,798
Mannesmann AG ............................ 10,700 1,036,290
SAP AG ................................... 1,660 807,860
Siemens AG ............................... 6,450 391,788
Veba AG .................................. 8,420 462,135
----------
5,866,466
----------
HONG KONG--0.3%
Hang Seng Bank Ltd. ...................... 3,030 26,209
Hong Kong & China Gas
Company Ltd. ............................. 16,660 23,659
Hong Kong & China Gas Company
Ltd. Warrants 09/30/99* ................. 1,350 139
Hutchison Whampoa Ltd. ................... 7,300 52,306
Wharf (Holdings) Ltd. .................... 21,320 33,855
Wharf (Holdings) Ltd.
Warrants 12/31/99* ...................... 1,900 223
----------
136,391
----------
ITALY--6.5%
Alleanza Assicurazioni SPA ............... 35,772 441,090
Autogrill SPA ............................ 34,830 265,339
Banca Intesa SPA ......................... 42,810 216,376
Ente Nazionale Idrocarburi SPA ........... 78,890 469,526
Instituto Bancario
San Paolo di Torino SPA ................. 21,040 309,525
Instituto Nazionale delle
Assicurazioni SPA ....................... 85,060 234,431
Telecom Italia SPA ....................... 115,490 582,314
Unicredito Italiano SPA .................. 138,070 741,677
----------
3,260,278
----------
JAPAN--19.1%
Asahi Glass Co. Ltd. ..................... 92,000 513,188
Bank of Tokyo-Mitsubishi Ltd. ............ 61,000 565,888
Bridgestone Corp. Ltd. ................... 16,000 352,194
Denso Corp. .............................. 14,000 263,717
Fuji Photo Film Co. Ltd. ................. 11,000 403,084
Marui Co. Ltd. ........................... 36,000 627,153
Matsushita-Electric Industry Ltd. ........ 16,000 234,934
Matsushita-Kotobuki
Electronic Ltd. ......................... 14,000 267,922
Mitsubishi Estate Co. Ltd. ............... 31,000 281,198
Mitsui Re Fudosan Ltd. ................... 69,000 458,316
NTT Corp. ................................ 83 649,603
NTT Mobile Communication
Network, Inc. .......................... 11 397,420
Shin-Etsu Chemical Co. Ltd. .............. 11,000 219,006
Shiseido Co. Ltd. ........................ 21,000 229,956
Sony Corp. ............................... 4,900 311,174
Sumitomo Bank Ltd. ....................... 75,000 736,957
Sumitomo Chemical Co. Ltd. ............... 137,000 458,522
Sumitomo Electric Industries Ltd. ........ 37,000 409,606
Taisei Corp. ............................. 80,000 160,650
Takashimaya Co. Ltd. ..................... 25,000 187,940
TDK Corp. Ltd. ........................... 4,000 263,631
Tokyo Electron Ltd. ...................... 5,000 162,624
Toshiba Corp. ............................ 55,000 258,182
Toyota Motor Corp. Ltd. .................. 25,000 600,722
Yoshitomi Pharmaceutical
Industries Ltd. ........................ 55,000 611,234
----------
9,624,821
----------
See notes to financial statements.
4
<PAGE>
Winthrop Opportunity Funds--Statement of Investments
October 31, 1998 (continued)
- --------------------------------------------------------------------------------
Winthrop International Equity Fund
Shares U.S. $ Value
------ ------------
NETHERLANDS--6.5%
Aegon NV ................................... 851 $ 73,860
Ahold NV ................................... 11,970 398,001
Akzo Nobel NV .............................. 6,930 269,382
ING Groep NV ............................... 12,441 602,174
Philips Electronics NV ..................... 6,210 330,503
Royal Dutch Petroleum Co. .................. 16,300 787,213
STMicroelectronics NV-NY Shares* ........... 4,480 272,440
Unilever NV-CVA ............................ 7,140 529,858
-----------
3,263,431
-----------
PORTUGAL--1.2%
Banco Espirito Santo e Comercial
de Lisboa, SA ............................ 11,024 325,993
Portugal Telecom SA ........................ 5,740 272,190
----------
598,183
----------
SINGAPORE--0.1%
Singapore Telecommunications Ltd. .......... 13,470 23,246
----------
SPAIN--2.7%
Banco Central Hispanoamericano SA .......... 5,520 60,827
Banco Santander SA ......................... 21,114 386,024
Cortefiel SA ............................... 7,760 191,366
Endesa SA .................................. 28,400 714,449
-----------
1,352,666
-----------
SWEDEN--3.2%
Astra AB - A SA ............................ 24,216 391,887
Electrolux AB - B .......................... 29,300 440,426
Telefonaktiebolaget LM Ericsson SA ......... 21,960 494,439
Volvo AB - B ............................... 13,000 280,228
-----------
1,606,980
-----------
SWITZERLAND--9.0%
Alusuisse Lonza Group AG ................... 190 217,208
Credit Suisse Holding Group AG ............. 2,220 341,420
Nestle SA .................................. 370 786,947
Novartis A - Reg. Shares ................... 390 702,758
Reiter Holding Ltd. ........................ 290 173,046
Roche Holding AG ........................... 66 770,109
Schindler Holding AG ....................... 120 162,441
Sulzer AG .................................. 190 109,446
Swisscom AG* ............................... 765 259,314
UBS - Union Bank of
Switzerland Ltd. ......................... 2,248 616,746
Zurich Versicherungs -
Gesellschaft AG .......................... 680 413,295
-----------
4,552,730
-----------
UNITED KINGDOM--24.6%
Abbey National Plc ......................... 12,357 239,433
Bank of Ireland Plc ........................ 23,350 430,538
Bank of Scotland Plc ....................... 62,820 674,888
Barclays Plc ............................... 24,700 530,300
British Aerospace Plc ...................... 48,640 357,598
British Petroleum Co. Plc .................. 42,030 620,467
British Telecommunications Plc ............. 25,816 337,658
CMG Plc .................................... 50,400 1,173,228
Compass Group Plc .......................... 64,544 651,794
Glaxo Wellcome Plc ......................... 34,295 1,064,249
HSBC Holdings Plc .......................... 13,880 322,871
Lloyds TSB Group Plc ....................... 66,672 825,135
Misys Plc .................................. 73,090 510,424
Norwich Union Plc* ......................... 44,410 313,112
Prudential Corporation Plc ................. 63,292 829,942
Reed International Plc ..................... 59,880 496,642
Smithkline Beecham Plc ..................... 66,452 819,630
Southern Electric Plc ...................... 34,400 354,011
Vodafone Group Plc ......................... 69,275 925,218
Zeneca Group Plc ........................... 23,800 915,535
-----------
12,392,673
-----------
TOTAL INVESTMENTS--100.7%
(cost $43,574,450) ......................... 50,771,293
-----------
Cash and Other Assets
Net of Liabilities--(0.7)% ................. (352,303)
-----------
NET ASSETS--100.00% ........................ $50,418,990
===========
* Non-income producing.
See notes to financial statements.
5
<PAGE>
Winthrop Opportunity Funds--Statement of Investments October 31, 1998
- --------------------------------------------------------------------------------
Winthrop Developing Markets Fund
COMMON STOCKS--80.7%
Shares U.S. $ Value
------ ------------
ARGENTINA--12.4%
Banco Frances SA .......................... 4,600 $ 30,461
Banco de Galicia
y Buenos Aires SA ....................... 16,340 65,381
IRSA Inversiones y
Representaciones SA ..................... 84,700 207,577
Perez Compane SA .......................... 74,491 350,212
Siderca SA Cl `A' ......................... 96,548 134,242
Telefonica de Argentina SA ADR ............ 21,028 695,238
YPF Sociedad Anonima SA ADR ............... 29,650 857,997
-----------
2,341,108
-----------
CHILE--5.2%
Cia Cervecerias Unidas SA ADR ............. 6,270 112,860
Cia de Telecomunicaciones
de Chile SA ADR ......................... 13,283 291,396
Empresa Nacional
Electricidad SA ADR ..................... 20,980 208,489
Enersis SA ADR ............................ 6,270 130,886
Gener SA .................................. 3,645 58,776
Madeco GDR ................................ 2,308 17,887
Quimica Minera Chile SA ADR ............... 4,880 162,260
-----------
982,554
-----------
CHINA--0.8%
Beijing Yanhua Petrochemical
Company Ltd.* ........................... 14,420 63,989
Huaneng Power International, Inc.* ........ 6,900 94,875
-----------
158,864
-----------
CZECH REPUBLIC--4.1%
Ceske Energeticke Zavody AS ............... 4,521 102,896
Inzenyrske Prumyslove Stavby* ............. 2,850 10,085
Komercni Banka AS ......................... 1,240 16,447
Skoda Plzen AS* ........................... 3,851 25,759
SPT Telecom AS* ........................... 30,240 457,825
Tabak AS .................................. 669 156,852
-----------
769,864
-----------
GREECE--6.1%
Aktor SA .................................. 1,170 10,619
Alpha Credit Bank SA ...................... 2,230 178,191
Attica Enterprises ........................ 16,420 120,153
Elais SA .................................. 800 31,117
Ergo Bank SA .............................. 798 70,866
Hellenic Bottling Company SA .............. 7,500 182,494
Hellas Can Packaging SA ................... 730 12,421
Hellenic Telecommunication
Organization SA ......................... 3,253 73,948
National Bank of Greece ................... 2,046 290,711
Silver & Baryte Ores Mining SA ............ 620 22,728
Titan Cement Company SA ................... 2,480 153,284
-----------
1,146,532
-----------
HONG KONG--1.8%
Beijing Datang Power
Generation Co. Ltd.* .................... 282,000 87,376
China Eastern Airlines Ltd.* .............. 1,172,000 86,245
Guangdong Kelon
Electric Holdings Co. Ltd. ............. 149,000 126,959
Tsingtao Brewery Co Ltd.* ................. 360,000 40,900
-----------
341,480
-----------
HUNGARY--1.5%
Gedeon Richter Rt. ........................ 460 14,720
Magyar Tavkozlesi Rt. ..................... 3,900 104,813
Mol Magyar Olaj GDR ....................... 7,000 159,425
-----------
278,958
-----------
INDIA--3.3%
Crompton Greaves Ltd. GDR ................. 34,200 23,085
Eih Limited GDR* .......................... 10,300 51,243
Grasim Industries Ltd. GDR ................ 9,400 31,725
Indian Aluminum Co. Ltd. GDR* ............. 40,000 68,000
Mahindra & Mahindra Ltd. GDR* ............. 11,800 42,480
Ranbaxy Laboratories GDR .................. 8,100 119,475
State Bank of India GDR ................... 17,900 134,250
Tata Engineering and
Locomotive Co. Ltd. GDR ................. 26,400 66,924
Videsh Sanchar GDR* ....................... 7,700 80,850
-----------
618,032
-----------
MALAYSIA--1.2%
AMMB Holdings Bhd Warrants
Exp. 05/13/02* .......................... 2,700 253
Ekran Bhd Warrants * ...................... 15,000 1,352
Malayan Banking Bhd ....................... 27,100 22,934
Petronas Gas Bhd .......................... 37,000 46,627
Rothmans of Pall Mall Bhd ................. 8,000 26,639
Telecom Malaysia Bhd ...................... 61,500 76,370
Tenaga Nasional Bhd ....................... 30,400 24,048
YTL Corporation Bhd ....................... 40,000 23,695
-----------
221,918
-----------
MEXICO--14.2%
Cifra SA de CV Ser. `V' ................... 430,602 561,504
Empresa La Moderna
SA de CV ADR* ........................... 1,000 23,875
Grupo Carso SA de CV Ser. `A1'* ........... 71,910 231,585
Grupo Elektra SA de CV .................... 54,180 21,570
Grupo Industrial Bimbo SA de CV ........... 104,836 168,190
Grupo Mexico SA de CV Ser. `B' ............ 160,110 403,331
Grupo Modelo SA de CV Cl `C' .............. 42,990 89,609
Kimberly-Clark de Mexico
SA de CV Cl `A' ......................... 137,950 357,729
Telefonos de Mexico SA Cl `L' ADR ......... 14,090 744,128
Tubos de Acero de Mexico SA* .............. 7,800 63,185
Vitro SA Cl `A' ........................... 9,750 13,773
-----------
2,678,479
-----------
See notes to financial statements.
6
<PAGE>
Winthrop Opportunity Funds--Statement of Investments
October 31, 1998 (continued)
- --------------------------------------------------------------------------------
Winthrop Developing Markets Fund
Shares U.S. $ Value
------ ------------
PHILIPPINES--1.0%
Manila Electric Company Cl `B' ............ 27,680 $ 81,636
SM Prime Holdings, Inc. GDR ............... 13,100 104,800
-----------
186,436
-----------
SOUTH AFRICA--9.1%
Anglo American Corp. ...................... 4,800 156,240
Anglogold Ltd. ............................ 974 49,503
Barlow Ltd. ............................... 14,200 67,079
De Beers Centenary AG ..................... 13,375 185,968
Liberty Life Association of
Africa Ltd. ............................. 8,275 141,608
Metro Cash & Carry Ltd. ................... 243,044 164,633
Nedcor Ltd. ............................... 9,814 195,936
Pick' N Pay Stores Ltd. ................... 72,100 88,039
Rembrandt Group Ltd. ...................... 31,700 210,774
Sasol Ltd. ................................ 36,078 176,536
South African Breweries Ltd. .............. 14,640 283,935
-----------
1,720,251
-----------
SOUTH KOREA--7.0%
Korea Electrical Power ADR ................ 31,238 398,285
Pohang Iron ADR ........................... 21,756 391,608
Samsung Electronics GDR ................... 12,846 268,803
Samsung Electronics - SP GDR N/V* ......... 314 2,457
SK Telecom Co. Ltd.* ...................... 26,250 270,703
-----------
1,331,856
-----------
TAIWAN--9.7%
Cathay Construction Corp. ................. 288,330 182,077
Cathay Life Insurance Co. Ltd. ............ 44,340 156,391
Evergreen Marine Corp. .................... 122,570 112,893
Far Eastern Textile Ltd. .................. 289,882 201,809
Formosa Chemicals & Fibre Corp. ........... 108,094 76,917
Hon Hai Precision Industry* ............... 106,400 511,301
Hua Nan Commercial Bank ................... 48,510 91,153
International Commercial
Bank of China ........................... 117,040 121,500
Microtek International, Inc.* ............. 140,520 107,782
Pacific Electrical
Wire & Cable Corp.* ..................... 248,392 179,811
U-Ming Marine Transport Corp. ............. 170,205 76,286
Yang Ming Marine Transport ................ 6,000 4,528
-----------
1,822,448
-----------
THAILAND--3.3%
Banpu Public Co. Ltd. ..................... 30,400 82,735
Electricity Generating
Public Company Ltd.* .................... 13,500 35,639
PTT Exploration & Production
Public Co. Ltd.* ........................ 21,150 203,764
PTT Exploration & Production - foreign
Public Co. Ltd.* ........................ 4,100 37,938
Siam Cement Public Company Ltd. ........... 5,500 68,855
TelecomAsia Corporation
Public Co. Ltd.* ........................ 456,600 189,505
-----------
618,436
-----------
Total Common Stocks
(cost $19,071,022) ....................... 15,217,216
-----------
PREFERRED STOCKS--17.9%
BRAZIL--17.9%
Banco Bredesco SA Prf ..................... 9,823,040 52,538
Banco Itau SA Prf ......................... 406,000 180,388
Centrais Electricas
Brasileiras SA Prf Cl `B' ............... 23,188,000 476,251
Centrais Geradoras do
Sul do Brasil SA Prf* ................... 24,871,000 27,522
Companhia Brasiliera
de Petroleo Ipiranga SA Prf ............. 32,631,000 169,600
Companhia Paulista
de Forca e Luz SA Prf* .................. 3,572,000 299,446
Companhia Siderurgica
Nacional SA Prf ......................... 8,247,000 124,445
Companhia Vale do Rio Doce
SA Prf Cvrt ............................. 17,238 248,555
Lojas Americanas SA Prf ................... 70,611,000 378,842
Lojas Renner SA Prf ....................... 6,219,000 83,415
Perdiago SA Prf ........................... 215,560,000 238,539
Petrobras Distribuidora SA Prf ............ 1,964,000 17,452
Petroleo Brasileiro SA Prf ................ 886,000 103,613
Telecomunicacoes
Brasileiras SA Prf (Telebras) ........... 13,744,000 973,591
-----------
Total Preferred Stocks
(cost $4,059,287) ....................... 3,374,197
-----------
TOTAL INVESTMENTS-98.6%
(cost $23,130,309) ...................... 18,591,413
-----------
Cash and Other Assets
Net of Liabilities-1.4% ................. 271,764
-----------
NET ASSETS-100.00% .......................... $18,863,177
===========
* Non-income producing.
See notes to financial statements.
7
<PAGE>
<TABLE>
Winthrop Opportunity Funds--Statement of Assets and Liabilities October 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
International Developing
Equity Fund Markets Fund
------------ -------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost $43,574,450 and
$23,130,309, respectively) ....................................................... $ 50,771,293 $ 18,591,413
Cash, at value (cost $373,657 and $30,920, respectively) .......................... 374,681 31,930
Receivable for investment securities sold ......................................... 38,693 1,363,225
Receivable for capital stock sold ................................................. 1,042 --
Dividends and interest receivable ................................................. 213,515 77,099
Deferred organizational costs (Note A) ............................................ 36,540 36,540
------------ ------------
Total assets ..................................................................... 51,435,764 20,100,207
------------ ------------
LIABILITIES:
Payable to investment advisor ..................................................... 133,385 15,786
Payable to distributor ............................................................ 13,923 5,372
Payable for investment securities purchased ....................................... 52,097 938,832
Payable for capital stock redeemed ................................................ 691,675 183,688
Accrued expenses and other liabilities ............................................ 125,694 93,352
------------ ------------
Total liabilities ................................................................ 1,016,774 1,237,030
------------ ------------
NET ASSETS .............................................................................. $ 50,418,990 $ 18,863,177
============ ============
NET ASSETS CONSIST OF:
Capital paid-in ................................................................... $ 40,617,065 $ 28,107,501
Accumulated net realized gain (loss) on investments and
foreign currency transactions .................................................... 2,596,604 (4,703,675)
Net unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities .......................... 7,205,321 (4,540,649)
------------ ------------
$ 50,418,990 $ 18,863,177
============ ============
CLASS A SHARES:
Net assets ........................................................................ $ 44,286,193 $ 16,354,509
------------ ------------
Shares outstanding ................................................................ 3,628,821 2,291,430
------------ ------------
Net asset value and redemption value per share .................................... $ 12.20 $ 7.14
============ ============
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) ...................................................... $ 12.94 $ 7.58
============ ============
CLASS B SHARES:
Net assets ........................................................................ $ 6,132,797 $ 2,508,668
------------ ------------
Shares outstanding ................................................................ 511,811 360,581
------------ ------------
Net asset value and offering price per share ...................................... $11.98 $6.96
============ ============
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
Winthrop Opportunity Funds--Statement of Operations for the year ended October 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
International Developing
Equity Fund Markets Fund
------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .............................................................................. $ 968,348 $ 668,381
Interest ............................................................................... 45,986 13,919
----------- -----------
1,014,334 682,300
Less withholding tax on foreign source dividends ...................................... (115,258) (59,490)
----------- -----------
Total investment income ............................................................... 899,076 622,810
----------- -----------
EXPENSES:
Investment advisory fees (Note B) ...................................................... 678,442 327,927
Distribution fees--Class A (Note B) .................................................... 118,183 55,599
Distribution fees--Class B (Note B) .................................................... 70,023 39,946
Custodian fees ......................................................................... 99,000 106,500
Transfer agent fees .................................................................... 78,000 75,500
Registration fees ...................................................................... 64,000 43,000
Legal fees ............................................................................. 43,000 20,000
Auditing fees .......................................................................... 36,000 24,000
Printing fees .......................................................................... 33,500 22,000
Trustees' fees ......................................................................... 14,000 8,000
Miscellaneous .......................................................................... 15,573 8,586
Amortization of organization costs (Note A) ............................................ 22,721 22,721
----------- -----------
1,272,442 753,779
Less fees waived by investment advisor and subadvisor (Note B) ........................ (53,004) (159,784)
----------- -----------
Net expenses .......................................................................... 1,219,438 593,995
----------- -----------
NET INVESTMENT INCOME (LOSS) ................................................................. (320,362) 28,815
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS--Note C:
Net realized gain (loss) on investments ................................................ 2,945,594 (1,371,728)
Net realized loss on foreign currency transactions ..................................... (122,615) (40,006)
Net change in unrealized appreciation on investments ................................... 1,611,254 (5,518,805)
Net change in unrealized appreciation on translation of foreign currency
denominated assets and liabilities .................................................... 2,940 911
----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currency
transactions .......................................................................... 4,437,173 (6,929,628)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........................................ $ 4,116,811 $(6,900,813)
=========== ===========
</TABLE>
See notes to financial statements.
9
<PAGE>
<TABLE>
Winthrop Opportunity Funds--Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
International Equity Fund Developing Markets Fund
----------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ............................. $ (320,362) $ (332,309) $ 28,815 $ (145,488)
Net realized gain (loss) on investments and
foreign currency transactions ........................... 2,822,979 914,894 (1,411,734) (3,238,751)
Net change in unrealized appreciation/depreciation
on investments and foreign currency denominated
assets and liabilities .................................. 1,614,194 3,559,351 (5,517,894) 1,884,963
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations ......................................... 4,116,811 4,141,936 (6,900,813) (1,499,276)
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Investment income
Class A ............................................... (212,893) -- -- --
Class B ............................................... -- -- -- --
Realized gains on investments
Class A ............................................... (333,161) -- -- (87,147)
Class B ............................................... (51,942) -- -- (9,498)
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders ........ (597,996) -- -- (96,645)
------------ ------------ ------------ ------------
CAPITAL STOCK TRANSACTIONS--(Net) Note D ....................... (4,236,399) (130,060) (8,578,625) (4,621,133)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets .................. (717,584) 4,011,876 (15,479,438) (6,217,054)
NET ASSETS:
Beginning of year ........................................ 51,136,574 47,124,698 34,342,615 40,559,669
------------ ------------ ------------ ------------
End of year .............................................. $ 50,418,990 $ 51,136,574 $ 18,863,177 $ 34,342,615
============ ============ ============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
Winthrop Opportunity Funds--Notes to Financial Statements October 31, 1998
- --------------------------------------------------------------------------------
Note (A) Significant Accounting Policies. Winthrop International Funds ("Fund"
or "Funds") consists of two portfolios (the "Portfolios"), the Winthrop
International Equity Fund and the Winthrop Developing Markets Fund (together the
"International Funds"), each a separate diversified series of the Winthrop
Opportunity Funds (the "Trust"). In addition, the Trust also consists of the
Winthrop Municipal Money Fund and the Winthrop U.S. Government Money Fund. The
Trust was organized as a Delaware business trust under the laws of Delaware on
May 31, 1995 and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as an open-end investment company.
The investment objective of the Developing Markets Fund is long-term growth of
capital by investing primarily in common stocks and other equity securities from
developing countries. The International Equity Fund seeks long-term growth of
capital by investing primarily in common stocks and other equity securities from
established markets outside the United States.
Each Portfolio offers two classes of shares. Class A shares are sold with a
front-end sales charge of up to 5.75%. Class B shares are sold with a contingent
deferred sales charge which declines from 4% to zero depending on the period of
time the shares are held. Both classes have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. Wood, Struthers & Winthrop Management Corp. (the "Advisor")
is a wholly-owned subsidiary of Donaldson, Lufkin and Jenrette Securities
Corporation, which is a wholly-owned subsidiary of Donaldson, Lufkin and
Jenrette, Inc. ("DLJ"). DLJ is an independently operated, indirect subsidiary of
The Equitable Companies, Incorporated, a holding company controlled by AXA - UAP
("AXA"), a member of a large French insurance group. AXA is indirectly
controlled by a group of four French mutual insurance companies. The Advisor has
retained AXA Asset Management Partenaires as subadvisor to the Funds (the
"Subadvisor").
The Trust accounts separately for the assets, liabilities and operations of each
Portfolio. Expenses directly attributable to each Portfolio are charged to that
Portfolio's operations; expenses which are applicable to all portfolios are
allocated among them on a pro rata basis. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles which may
require the use of management estimates and assumptions. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies consistently followed by the Funds.
(1) Security Valuation: All securities for which current market quotations
are readily available are valued at the last sale price prior to the time
of determination, or, if there is no sales price on such date, and if bid
and ask quotations are available, at the mean between the last current bid
and asked prices. Securities that are traded over-the-counter, if bid and
asked quotations are available, are valued at the mean between the current
bid and asked prices, or, if quotations are not available, are valued as
determined in good faith by the Board of Trustees of the Fund. Short-term
investments having a maturity of 60 days or less are valued at amortized
cost. Securities and assets for which current market quotations are not
readily available are valued at fair value as determined in good faith by
the Board of Trustees of the Fund.
(2) Foreign Currency Translations: Investment securities and other assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the bid prices of such currencies against the U.S. dollar as of
the date of valuation. Purchases and sales of portfolio securities,
commitments under forward foreign currency contracts, income receipts and
expense accruals are translated at the prevailing exchange rate on the date
of each transaction.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized gain (loss) on foreign currency transactions arise
from sales and maturities of short-term securities, sales of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid. Net change in unrealized appreciation on translation of
foreign currency denominated assets and liabilities arises from changes in
the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in exchange rates. Investment in
international and developing markets may involve more risks than investing
in domestic markets, including currency risk, political and economic risk,
regulatory risk and market risk.
11
<PAGE>
Winthrop Opportunity Funds--Notes to Financial Statements
October 31, 1998 (continued)
- --------------------------------------------------------------------------------
(3) Federal Income Taxes: The Funds intend to be treated as "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and
to distribute substantially all of their net taxable income. Accordingly,
no provisions for Federal income or excise taxes have been made in the
accompanying financial statements. The Developing Markets Fund has an
unused capital loss carryover of approximately $3,772,000 available for
Federal income tax purposes to be applied against future net securities
profits, if any, realized subsequent to October 31, 1998. If not applied,
approximately $3,185,000 and $587,000 of the carryover expires in fiscal
2005 and 2006, respectively.
(4) Investment Income and Securities Transactions: Dividend income is
recorded on the ex-dividend date or as soon as the Fund is informed of the
dividend. Interest income is accrued daily. Security transactions are
accounted for on the date securities are purchased or sold. Security gains
and losses are determined on the identified cost basis.
(5) Dividends and Distributions: Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income dividends and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting
principles.
(6) Deferred Organization Costs: The Funds will reimburse the Advisor for
costs incurred in connection with the Funds' organization. The costs are
being amortized on a straight-line basis over five years commencing with
the Funds' operation.
(7) Reclassification of Components of Net Assets: At October 31, 1998, the
following reclassifications were recorded to reflect permanent book/tax
differences: International Equity Fund reduced capital paid-in $925,302;
reduced accumulated net realized gain on investments $138,143; and reduced
accumulated net investment loss $1,063,445. Developing Markets Fund reduced
capital paid-in $174,906; reduced accumulated net investment loss $174,906.
These reclassifications had no effect on net assets or net asset value per
share.
Note (B) Advisory and Distribution Services Agreement: Under the terms of an
Advisory Agreement with the Advisor, for the investment management services
furnished to each Portfolio, such Portfolio will pay the Advisor an advisory
fee, on a graduated basis at an annual rate of 1.25% of the first $100 million
of average daily net assets, 1.15% of the next $100 million and 1% of average
daily net assets over $200 million. Such fee will be accrued daily and paid
monthly. Under a Subadvisory Agreement between the Advisor and Subadvisor, the
Advisor pays the Subadvisor for its services, out of the Advisor's own
resources, at the following annual percentage rates of the average daily net
assets of each Portfolio: .625 of 1% of each Portfolio's first $100 million,
.575 of 1% of the next $100 million and .50 of 1% of the balance.
Commencing at the inception of each Fund through October 31, 1998, the Advisor
and Subadvisor voluntarily reduced their management fees by the amount that
total fund operating expenses exceeded 2.15% and 2.90% of the average daily net
assets of the Class A and Class B shares, respectively, of each Fund. Any such
reduction will be borne equally between the Advisor and Subadvisor. After
October 31, 1998, the Advisor and Subadvisor may, in their sole discretion,
determine to discontinue this practice with respect to either Fund. As a result
of the voluntary waiver, the Advisor and Subadvisor waived fees amounting to
$53,004 and $159,784 for the International Equity Fund and Developing Markets
Fund, respectively, during the year ended October 31, 1998.
The Fund has entered into a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A and
Class B shares with Donaldson, Lufkin & Jenrette Securities Corporation, the
Fund's Distributor. Under the Agreement, each Portfolio will pay a distribution
services fee to the Distributor at an annual rate of up to .25 of 1% of the
average daily net assets attributable to Class A shares and 1% of the average
daily net assets attributable to Class B shares. The fees are accrued daily and
paid monthly. The Agreement provides that the Distributor will use such payments
in their entirety for distribution assistance and promotional activities. The
Agreement also provides that the Advisor may use its own resources to finance
the distribution of the Fund's shares.
Each Trustee who is not an affiliated person receives an attendance fee of
$2,000 per meeting. In addition, each unaffiliated Trustee who is a member of
the audit committee receives an attendance fee of $1,000 per meeting. Attendance
fees are charged to all series of the Trust and are allocated on a pro rata
basis.
Note (C) Investment Transactions: Purchases and sales of investment securities
(excluding short-term securities and forward currency exchange contracts )
during the year ended October 31, 1998, aggregated $37,129,571 and $37,424,475
for the International Equity Fund; and $11,111,989 and $18,301,945 for the
Developing Markets Fund, respectively.
12
<PAGE>
Winthrop Opportunity Funds--Notes to Financial Statements
October 31, 1998 (continued)
- --------------------------------------------------------------------------------
The Funds may enter into forward currency exchange contracts in order to hedge
exposure to changes in foreign currency exchange rates on their foreign
portfolio holdings. A forward currency exchange contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gain or
loss from foreign currency transactions.
Fluctuations in the value of forward currency exchange contracts are recorded
for financial reporting purposes as net change in unrealized appreciation
(depreciation) of foreign currency denominated assets and liabilities. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At October 31, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes. At October
31, 1998, the components of net unrealized appreciation (depreciation) of
investments were as follows:
<TABLE>
<CAPTION>
International Developing
Equity Fund Markets Fund
------------ -------------
<S> <C> <C>
Gross appreciation (investments having an excess of value over cost) ................... $ 10,065,048 $ 2,235,101
Gross depreciation (investments having an excess of cost over value) ................... (2,868,205) (6,773,997)
------------ ------------
Net unrealized appreciation (depreciation) of investments .............................. $ 7,196,843 $ (4,538,896)
============ ============
</TABLE>
Note (D) Shares of Beneficial Interest: There is an unlimited number of shares
($0.001 par value) of beneficial interest authorized, divided into two classes,
designated Class A and Class B shares. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
International Equity Fund
------------------------------------------------------------
Year Ended
October 31, 1998 October 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A
Shares sold ............... 139,783 $ 1,702,041 822,555 $ 9,553,450
Shares issued through
reinvestment of dividends
and distributions ....... 48,974 540,052 -- --
------------ ------------ ------------ ------------
188,757 2,242,093 822,555 9,553,450
------------ ------------ ------------ ------------
Shares redeemed ........... (440,781) (5,400,186) (1,005,538) (11,086,992)
------------ ------------ ------------ ------------
Net decrease .............. (252,024) $ (3,158,093) (182,983) $ (1,533,542)
============ ============ ============ ============
Class B
Shares sold ............... 139,435 $ 1,763,811 201,057 $ 2,251,556
Shares issued through
reinvestment of dividends
and distributions ....... 4,788 51,706 -- --
------------ ------------ ------------ ------------
144,223 1,815,517 201,057 2,251,556
------------ ------------ ------------ ------------
Shares redeemed ........... (239,102) (2,893,823) (75,755) (848,074)
------------ ------------ ------------ ------------
Net increase (decrease) ... (94,879) $ (1,078,306) 125,302 $ 1,403,482
============ ============ ============ ============
<CAPTION>
Developing Market Funds
------------------------------------------------------------
Year Ended
October 31, 1998 October 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A
Shares sold ............... 192,165 $ 1,656,541 352,037 $ 3,898,784
Shares issued through
reinvestment of dividends
and distributions ....... -- -- 8,374 84,414
------------ ------------ ------------ ------------
192,165 1,656,541 360,411 3,983,198
------------ ------------ ------------ ------------
Shares redeemed ........... (987,774) (8,873,605) (981,711) (10,394,319)
------------ ------------ ------------ ------------
Net decrease .............. (795,609) $ (7,217,064) (621,300) $ (6,411,121)
============ ============ ============ ============
Class B
Shares sold ............... 66,054 $ 582,468 218,192 $ 2,441,467
Shares issued through
reinvestment of dividends
and distributions ....... -- -- 950 9,486
------------ ------------ ------------ ------------
66,054 582,468 219,142 2,450,953
------------ ------------ ------------ ------------
Shares redeemed ........... (233,191) (1,944,029) (60,685) (660.965)
------------ ------------ ------------ ------------
Net increase (decrease) ... (167,137) $ (1,361,561) 158,457 $ 1,789,988
============ ============ ============ ============
</TABLE>
13
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for a share of capital stock
outstanding throughout the periods presented. This information has been derived
from information provided in the financial statements.
<TABLE>
<CAPTION>
International Equity Fund
------------------------------------------------------------------------------------
Class A Class B
--------------------------------------- --------------------------------------
Year Ended October 31, Year Ended October 31,
--------------------------------------- --------------------------------------
1998 1997 1996 1995* 1998 1997 1996 1995*
------- ------- ------- ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 11.42 $ 10.38 $ 9.58 $ 10.00 $11.24 $ 10.29 $ 9.57 $10.00
------- ------- ------- ------- ------ ------- ------ ------
Net investment loss(1) ................... (0.06) (0.07) (0.04) 0.00 (0.15) (0.15) (0.13) (0.02)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .................. 0.99 1.11 0.84 (0.42) 0.98 1.10 0.85 (0.41)
------- ------- ------- ------- ------ ------- ------ ------
Net increase (decrease) in net
asset value from operations ............ 0.93 1.04 0.80 (0.42) 0.83 0.95 0.72 (0.43)
------- ------- ------- ------- ------ ------- ------ ------
Dividends from net investment income ..... (0.06) -- -- -- -- -- -- --
Distributions from capital gains ......... (0.09) -- -- -- (0.09) -- -- --
------- ------- ------- ------- ------ ------- ------ ------
Total distributions ...................... (0.15) -- -- -- (0.09) -- -- --
------- ------- ------- ------- ------ ------- ------ ------
Net asset value, end of period ........... $ 12.20 $ 11.42 $ 10.38 $ 9.58 $11.98 $ 11.24 $10.29 $ 9.57
======= ======= ======= ======= ====== ======= ====== ======
Total return(2) .......................... 8.20% 10.02% 8.35% (4.20)% 7.43% 9.23% 7.52% (4.30)%
Ratio of expenses to average net assets(4) 2.15% 2.15% 2.15% 2.15%(3) 2.90% 2.90% 2.90% 2.90%(3)
Ratio of net investment
loss to average net assets(4) .......... (0.49)% (0.59)% (0.39)% (0.02)%(3) (1.24)% (1.32)% (1.25)% (1.77)%(3)
Portfolio turnover rate .................. 69.66% 73.92% 94.12% 0.00% 69.66% 73.92% 94.12% 0.00%
Net assets, end of period (000 omitted) .. $44,286 $44,316 $42,170 $28,819 $6,133 $ 6,821 $4,955 $1,803
<CAPTION>
Developing Markets Fund
------------------------------------------------------------------------------------
Class A Class B
--------------------------------------- --------------------------------------
Year Ended October 31, Year Ended October 31,
--------------------------------------- --------------------------------------
1998 1997 1996 1995* 1998 1997 1996 1995*
------- ------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 9.52 $ 9.96 $ 9.53 $ 10.00 $ 9.36 $ 9.86 $ 9.52 $10.00
------- ------- ------- ------- ------- ------ ------ ------
Net investment income (loss)(1) .......... 0.02 (0.02) (0.01) -- (0.04) (0.19) (0.08) (0.01)
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions .................. (2.40) (0.40) 0.44 (0.47) (2.36) (0.29) 0.42 (0.47)
------- ------- ------- ------- ------- ------ ------ ------
Net increase (decrease) in net
asset value from operations ............ (2.38) (0.42) 0.43 (0.47) (2.40) (0.48) 0.34 (0.48)
------- ------- ------- ------- ------- ------ ------ ------
Distributions from capital gains ......... -- (0.02) -- -- -- (0.02) -- --
------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of period ........... $ 7.14 $ 9.52 $ 9.96 $ 9.53 $ 6.96 $ 9.36 $ 9.86 $ 9.52
======= ======= ======= ======= ======= ====== ====== ======
Total return(2) .......................... (25.00)% (4.18)% 4.51% (4.70)% (25.64)% (4.83)% 3.57% (4.80)%
Ratio of expenses to average net assets(4) 2.15% 2.15% 2.15% 2.15%(3) 2.90% 2.90% 2.90% 2.90%(3)
Ratio of net investment income
(loss) to average net assets(4) ........ 0.22% (0.17)% (0.14)% 0.32%(3) (0.50)% (1.74)% (0.83)% (1.00)%(3)
Portfolio turnover rate .................. 43.56% 52.79% 26.76% 0.00% 43.56% 52.79% 26.76% 0.00%
Net assets, end of period (000 omitted) .. $16,355 $29,402 $36,918 $14,622 $ 2,509 $4,941 $3,641 $1,004
</TABLE>
* Commencement of operations was September 8, 1995
(1) Based on average shares outstanding
(2) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all dividends
and distributions at net asset value during the period, and redemption on
the last day of the period. Initial sales charge or contingent deferred
sales charge is not reflected in the calculation of total return. Total
return calculated for a period of less than one year is not annualized.
(3) Annualized
(4) Net of voluntary reduction of management fees by Adviser and Subadviser
expressed as a percentage of average daily net assets of both Class A and
Class B shares of each Fund as follows: International Equity Fund .10%,
.18%, .27% and .60% for the years ended 10/31/98, 97, 96 and 95,
respectively, and Developing Markets Fund .61%, .34%, .54% and .60% for the
years ended 10/31/98, 97, 96 and 95, respectively.
14
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
- --------------------------------------------------------------------------------
Shareholders and Board of Trustees
Winthrop Developing Markets Fund and Winthrop International Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Winthrop Developing Markets Fund and Winthrop
International Equity Fund (two of the Funds constituting Winthrop Opportunity
Funds) as of October 31, 1998, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended and financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1998 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Winthrop Developing Markets Fund and Winthrop International Equity Fund at
October 31, 1998, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 10, 1998
Winthrop Opportunity Funds--TAX INFORMATION (unaudited)
- --------------------------------------------------------------------------------
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you as to the federal tax status of distributions received by
shareholders during the Funds' fiscal year ended October 31, 1998. Accordingly,
we are advising you that the following distributions paid during the fiscal year
by the Fund were derived from the following sources:
<TABLE>
<CAPTION>
Ordinary Income
--------------------------
From From From
Investment Short-Term Long-Term
Fund Income Capital Gains Capital Gains
---- ---------- ------------- -------------
<S> <C> <C> <C>
Winthrop International Equity Fund--Class A ...... $0.055 $0.010 $0.076
Winthrop International Equity Fund--Class B ...... -- 0.010 0.076
</TABLE>
Because the Fund's fiscal year is not the calendar year, calendar year taxpayers
should use the dollar amounts and the nature of those amounts referenced on Form
1099-DIV which will be mailed to you in January, 1999. Shareholders are advised
to consult their own tax advisors with respect to the tax consequences of their
investment in the Fund.
15
<PAGE>
WINTHROP OPPORTUNITY FUNDS
(800) 225-8011
Trustees
G. Moffett Cochran Robert E. Fischer
Wilmot H. Kidd, III Martin Jaffe
John W. Waller, III
OFFICERS
G. Moffett Cochran, Chairman and President
Martin Jaffe, Vice President, Secretary and Treasurer
James A. Engle, Vice President
Brian A. Kammerer, Vice President
INVESTMENT ADVISOR
Wood Struthers & Winthrop Management Corp.
An Investment Management Subsidiary of
Donaldson, Lufkin & Jenrette
277 Park Avenue, New York, NY 10172
SUBADVISER
AXA Asset Management
Partenaires
46, avenue de la Grande Armee
Paris, France 75017
Custodian
Citibank, N.A.
111 Wall Street, New York, NY 10043
Transfer Agent
First Data Investor Services Group, Inc.
P.O. Box 61503 (3200 Horizon Drive)
King of Prussia, PA 19406
Distributor
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, NY 10172
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue, New York, NY 10019
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue, New York, NY 10022
This report is submitted for the general information of the stockholders of
the Fund. It is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus,
which should be read carefully before investing.
Wood, Struthers & Winthrop
Established 1871
[LOGO]
Investment Management Subsidiary of
Donaldson, Lufkin & Jenrette
Securities Corporation
(The Fund Distributor)
WOF-2
================================================================================
[LOGO] WINTHROP[LOGO]
MUTUAL FUNDS
WINTHROP DEVELOPING MARKETS FUND
WINTHROP INTERNATIONAL EQUITY FUND
OCTOBER 31, 1998
-------------
ANNUAL
REPORT
-------------
================================================================================
