File No. 2-84012
811-3752
Rule 497
THE MANAGERS FUNDS
MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1996,
AS SUPPLEMENTED AUGUST 12, 1996
40 Richards Avenue, Norwalk, Connecticut 06854
Investor Services: (800) 835-3879
This Statement of Additional Information relates to the
Managers Money Market Fund (the "Money Market Fund"), one series
of The Managers Funds, a no-load, open-end management investment
company organized as a Massachusetts business trust (the
"Trust"). Information about the other nine series of the Trust
is contained in the prospectuses for the Equity Funds and Income
Funds, and in a separate Statement of Additional Information for
those Funds, copies of which may be obtained without charge by
contacting the Trust at the address or telephone number listed
above.
This Statement of Additional Information is not a
prospectus; it should be read in conjunction with the Money
Market Fund Prospectus of the Trust, dated May 1, 1996, copies of
which may be obtained without charge by contacting the Trust as
noted above.
This Statement of Additional Information is authorized
for distribution to prospective investors only if preceded or
accompanied by an effective prospectus for the Money Market Fund.
TABLE OF CONTENTS
I. INVESTMENT OBJECTIVE AND POLICIES 1
II. INVESTMENT RESTRICTIONS 5
III. TRUSTEES AND OFFICERS 7
IV. MANAGEMENT OF THE FUND AND THE PORTFOLIO 12
V. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANTS 15
VI. EXPENSES 15
VII. CODE OF ETHICS 16
VIII. NET ASSET VALUE 16
IX. CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES 17
X. PERFORMANCE DATA 17
XI. ORGANIZATION OF THE PORTFOLIO 18
XII. PORTFOLIO TRANSACTIONS 18
XIII. TAX INFORMATION 19
XIV. FINANCIAL STATEMENTS 20
This Statement of Additional Information describes the
financial history, investment objectives and policies, management
and operation of the Managers Money Market Fund. The Fund
operates through a two-tiered master/feeder investment fund
structure. Prior to December 1, 1995, the Fund operated as a
free-standing mutual fund and not through the master/feeder
structure. Where indicated in this Statement of Additional
Information, historical information for the Fund includes
information from the period prior to commencement of operations
in the master/feeder structure.
INVESTMENT OBJECTIVE AND POLICIES
The Managers Money Market Fund (the "Money Market Fund" or
the "Fund") has an investment objective of maximizing current
income and maintaining a high level of liquidity. The Fund
attempts to achieve this objective by investing all of its
investable assets in The Money Market Portfolio (the
"Portfolio"), an open-end, diversified management investment
company having the same investment objective as the Money Market
Fund. The Portfolio is advised by Morgan Guaranty Trust Company
of New York ("Morgan" or the "Advisor").
The Portfolio seeks to achieve its investment objective by
maintaining a dollar-weighted average portfolio maturity of not
more than 90 days and by investing in U.S. dollar-denominated
securities described in the Prospectus and this Statement of
Additional Information that meet certain rating criteria, present
minimal credit risk and have effective maturities of not more
than thirteen months. The Portfolio's ability to achieve maximum
current income is affected by its high quality standards. See
"Quality and Diversification Requirements."
The following discussion supplements the information
regarding the investment objective of the Fund and the policies
to be employed to achieve this objective by the Portfolio as set
forth above and in the Prospectus. The investment objective of
the Fund and of the Portfolio are identical. Accordingly,
references below to the Fund also include the Portfolio, and
references to the Portfolio also include the Fund, unless the
context requires otherwise.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, the Fund, through the
Portfolio, invests in money market instruments. A description of
the various types of money market instruments that may be
purchased by the Portfolio appears below. See "Quality and
Diversification Requirements."
U.S. TREASURY SECURITIES. The Portfolio may invest in
direct obligations of the U.S. Treasury, including Treasury
bills, notes and bonds, all of which are backed as to principal
and interest payments by the full faith and credit of the United
States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Portfolio may
invest in obligations issued or guaranteed by U.S. Government
agencies or instrumentalities. These obligations may or may not
be backed by the "full faith and credit" of the United States.
In the case of securities not backed by the full faith and credit
of the United States, the Portfolio must look principally to the
federal agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or
instrumentality does not meet its commitments. Securities in
which the Portfolio may invest that are not backed by the full
faith and credit of the United States include, but are not
limited to, obligations of the Tennessee Valley Authority, the
Federal Home Loan Mortgage Association and the U.S. Postal
Service, each of which has the right to borrow from the U.S.
Treasury to meet its obligations, and obligations of the Federal
Farm Credit System and the Federal Home Loan Banks, both of whose
obligations may be satisfied only by the individual credits of
each issuing agency. Securities which are backed by the full
faith and credit of the United States include obligations of the
Government National Mortgage Association, the Farmers Home
Administration, and the Export-Import Bank.
FOREIGN GOVERNMENT OBLIGATIONS. The Portfolio may also
invest in U.S. dollar denominated short-term obligations of
foreign sovereign governments or of their agencies,
instrumentalities, authorities or political subdivisions.
BANK OBLIGATIONS. The Portfolio may invest in negotiable
certificates of deposit, time deposits and bankers' acceptances
of (i) banks, savings and loan associations and savings banks
which have more than $2 billion in total assets (the "Asset
Limitation") and are organized under laws of the United States or
any state, (ii) foreign branches of these banks or of foreign
banks of equivalent size (Euros) and (iii) U.S. branches of
foreign banks of equivalent size (Yankees). The Portfolio will
not invest in obligations for which the Advisor, or any of its
affiliated persons, is the ultimate obligor or accepting bank.
The Portfolio may also invest in obligations of international
banking institutions designated or supported by national
governments to promote economic reconstruction, development or
trade between nations (e.g., the European Investment Bank, the
Inter-American Development Bank, or the World Bank).
COMMERCIAL PAPER. The Portfolio may invest in commercial
paper, including master demand obligations. Master demand
obligations are obligations that provide for a periodic
adjustment in the interest rate paid and permit daily changes in
the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan acting as agent, for no
additional fee, in its capacity as investment advisor to the
Portfolio and as fiduciary for other clients for whom it
exercises investment discretion. The monies loaned to the
borrower come from accounts managed by the Advisor or its
affiliates, pursuant to arrangements with such accounts.
Interest and principal payments are credited to such accounts.
The Advisor, acting as a fiduciary on behalf of its clients, has
the right to increase or decrease the amount provided to the
borrower under an obligation. The borrower has the right to pay
without penalty all or any part of the principal amount then
outstanding on an obligation together with interest to the date
of payment. Since these obligations typically provide that the
interest rate is tied to the Federal Reserve commercial paper
composite rate, the rate on master demand obligations is subject
to change. Repayment of a master demand obligation to
participating accounts depends on the ability of the borrower to
pay the accrued interest and principal of the obligation on
demand which is continuously monitored by the Portfolio's
Advisor. Since master demand obligations typically are not rated
by credit rating agencies, the Portfolio may invest in such
unrated obligations only if at the time of an investment the
obligation is determined by the Advisor to have a credit quality
which satisfies the Portfolio's quality restrictions. See
"Quality and Diversification Requirements." Although there is no
secondary market for master demand obligations, such obligations
are considered by the Portfolio to be liquid because they are
payable upon demand. The Portfolio does not have any specific
percentage limitation on investments in master demand
obligations.
REPURCHASE AGREEMENTS. The Portfolio may enter into
repurchase agreements with brokers, dealers or banks that meet
the credit guidelines approved by the Portfolio's Trustees. In a
repurchase agreement, the Portfolio buys a security from a seller
that has agreed to repurchase it at a mutually agreed upon date
and price, reflecting an agreed upon interest rate. The interest
rate is effective for the period of time the Portfolio is
invested in the agreement and is not related to the coupon rate
on the underlying security. A repurchase agreement may be viewed
as a fully collateralized loan of money by the Portfolio to the
seller. The period of these repurchase agreements will usually
be short, from overnight to one week, and at no time may the
Portfolio invest in repurchase agreements maturing in more than
thirteen months. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of
thirteen months from the effective date. The Portfolio will
always receive securities as collateral whose market value is,
and during the entire term of the agreement remains, at least
equal to 100% of the dollar amount invested by the Portfolio in
the agreement plus accrued interest, and the Portfolio will make
payment for such securities only upon the physical delivery or
upon evidence of book entry transfer to the account of the
Custodian. The Portfolio will be fully collateralized within the
meaning of paragraph (a) (3) of Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act"). If the seller
defaults, the Portfolio might incur a loss if the value of the
collateral securing the repurchase agreement declines and might
incur disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, realization upon the
disposition of the collateral by the Portfolio may be delayed or
limited.
The Portfolio may make investments in other debt securities
with remaining effective maturities of not more than thirteen
months, including without limitation corporate and foreign bonds,
asset-backed securities and other obligations described in the
Prospectus or this Statement of Additional Information.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio
may purchase securities on a when-issued or delayed delivery
basis. For example, delivery of and payment for these securities
can take place a month or more after the date of the purchase
commitment. The purchase price and interest rate payable, if
any, on the securities are fixed on the purchase commitment date
or at the time the settlement date is fixed. The value of such
securities is subject to market fluctuation and no interest
accrues to the Portfolio until settlement takes place. At the
time the Portfolio makes the commitment to purchase securities on
a when-issued or delayed delivery basis, it will record the
transaction, reflect the value each day of the securities in
determining its net asset value and calculate the maturity for
the purposes of average maturity from that date. At the time of
settlement, a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Portfolio
will maintain with the Custodian a segregated account with liquid
assets consisting of cash, U.S. Government securities or other
appropriate securities, in an amount at least equal to such
commitments. On delivery dates for such transactions, the
Portfolio will meet its obligations from maturities or sales of
the securities held in the segregated account and/or from cash
flow. If the Portfolio chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it
could, as with the disposition of any other portfolio obligation,
incur a gain or loss due to market fluctuation. It is currently
the policy of the Portfolio not to enter into when-issued
commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the
obligations created by when-issued commitments.
INVESTMENT COMPANY SECURITIES. Securities of other
investment companies may be acquired by the Fund to the extent
permitted under the 1940 Act. These limits require that, as
determined immediately after a purchase is made, (i) not more
than 5% of the value of the Portfolio's total assets will be
invested in the securities of any one investment company, (ii)
not more than 10% of the value of its total assets will be
invested in the aggregate in securities of investment companies
as a group, and (iii) not more than 3% of the outstanding voting
stock of any one investment company will be owned by the
Portfolio, provided however, that the Fund may invest all of its
investable assets in an open-end investment company that has the
same investment objective as the Fund (e.g., the Portfolio). As
a shareholder of another investment company, the Portfolio would
bear, along with other shareholders, its pro rata portion of the
other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other
expenses that the Portfolio bears directly in connection with its
operations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into
reverse repurchase agreements. In a reverse repurchase
agreement, the Portfolio sells a security and agrees to
repurchase the same security at a mutually agreed upon date and
price. For purposes of the 1940 Act, a reverse repurchase
agreement is also considered as the borrowing of money by the
Portfolio, and, therefore, a form of leverage. The Portfolio
will invest the proceeds of the borrowings under reverse
repurchase agreements. In addition, the Portfolio will enter
into a reverse repurchase agreement only when the interest income
to be earned from the investment of the proceeds is greater than
the interest expense of the transaction. The Portfolio will not
invest the proceeds of a reverse repurchase agreement for a
period which exceeds the duration of the reverse repurchase
agreement. The Portfolio may not enter into reverse repurchase
agreements exceeding in the aggregate one-third of the market
value of its total assets, less liabilities other than the
obligations created by reverse repurchase agreements. The
Portfolio will establish and maintain with the Custodian a
separate account with a segregated portfolio of securities in an
amount at least equal to its purchase obligations under its
reverse repurchase agreements. If interest rates rise during the
term of a reverse repurchase agreement, entering into the reverse
repurchase agreement may have a negative impact on the Money
Market Fund's ability to maintain a net asset value of $1.00 per
share. See "Investment Restrictions."
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its
securities in an amount up to 33 1/3% of the value of its net
assets if such loans are secured continuously by cash or
equivalent collateral or by a letter of credit in favor of the
Portfolio at least equal at all times to 100% of the market value
of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any
income accruing thereon. Loans will be subject to termination by
the Portfolio in the normal settlement time, generally three
business days after notice, or by the borrower on one day's
notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the
Portfolio and its respective investors. The Portfolio may pay
reasonable finders' and custodial fees in connection with a loan.
In addition, the Portfolio will consider all facts and
circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans
in excess of one year. The Portfolio will not lend its
securities to any officer, Trustee, Director, employee, or other
affiliate of the Fund, the Portfolio, the Advisor, the Portfolio
Co-Administrator or the Distributor, unless otherwise permitted
by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The
Portfolio may invest in privately placed, restricted, Rule 144A
or other unregistered securities as described in the Prospectus.
As to illiquid investments, the Portfolio is subject to a
risk that should the Portfolio decide to sell them when a ready
buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net
assets could be adversely affected. Where an illiquid security
must be registered under the Securities Act of 1933, as amended,
(the "1933 Act") before it may be sold, the Portfolio may be
obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision
to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the
Portfolio might obtain a less favorable price than prevailed when
it decided to sell.
FOREIGN INVESTMENTS. The Portfolio may invest in certain
foreign securities. All investments of the Portfolio must,
however, be U.S. dollar denominated, and any foreign commercial
paper must not be subject to foreign withholding tax at the time
of purchase.
For a description of the risks associated with investing in
foreign securities, see "Foreign Investment Information" in the
Prospectus.
QUALITY AND DIVERSIFICATION REQUIREMENTS
The Portfolio intends to meet the diversification
requirements of the 1940 Act. To meet these requirements, 75% of
the assets of the Portfolio are subject to the following
fundamental limitations: (1) the Portfolio may not invest more
than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government, its agencies and
instrumentalities, and (2) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer. As
for the other 25% of the Portfolio's assets not subject to the
limitation described above, there is no limitation on investment
of these assets under the 1940 Act, so that all of such assets
may be invested in the securities of any one issuer, subject to
the limitation of any applicable state securities laws, or as
described below. Investments not subject to the limitations
described above could involve an increased risk to the Portfolio
should an issuer be unable to make interest or principal payments
or should the market value of such securities decline.
In order to attain the Fund's objective of maintaining a
stable net asset value, the Portfolio will (i) limit its
investment in the securities (other than U.S. Government
securities) of any one issuer to no more than 5% of its assets,
measured at the time of purchase, except for investments held for
not more than three business days (subject, however, to the
investment restriction No. 4 set forth under "Investment
Restrictions" below); and (ii) limit investments to securities
that present minimal credit risks and securities (other than U.S.
Government securities) that are rated within the highest short-
term rating category by at least two nationally recognized
statistical rating organizations ("NRSROs") or by the only NRSRO
that has rated the security. Securities which originally had a
maturity of over one year are subject to more complicated, but
generally similar rating requirements. A description of
illustrative credit ratings is set forth in Appendix A attached
to this Statement of Additional Information. The Portfolio may
also purchase unrated securities that are of comparable quality
to the rated securities described above. Additionally, if the
issuer of a particular security has issued other securities of
comparable priority and security and which have been rated in
accordance with (ii) above, that security will be deemed to have
the same rating as such other rated securities.
In addition, the Board of Trustees of the Portfolio has
adopted procedures which (i) require the Board of Trustees to
approve or ratify purchases by the Portfolio of securities (other
than U.S. Government securities) that are rated by only one NRSRO
or that are unrated; (ii) require the Portfolio to maintain a
dollar-weighted average portfolio maturity of not more than 90
days and to invest only in securities with a remaining maturity
of not more than thirteen months; and (iii) require the
Portfolio, in the event of certain downgradings of or defaults on
portfolio holdings, to dispose of the holding, subject in certain
circumstances to a finding by the Trustees that disposing of the
holding would not be in the Portfolio's best interest.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the
Trust with respect to the Fund and by the Portfolio. Except
where otherwise noted, these investment restrictions are
"fundamental" policies which under the 1940 Act, may not be
changed without the vote of a majority of the outstanding voting
securities of the Fund or Portfolio, respectively. A "majority
of the outstanding voting securities" is defined in the 1940 Act
as the lesser of (a) 67% or more of the voting securities present
at a meeting if the holders of more than 50% of the outstanding
voting securities are present or represented by proxy, or (b)
more than 50% of the outstanding voting securities. The
percentage limitations contained in the restrictions below apply
at the time of the purchase of securities. If the Fund is
requested to vote on a change in the fundamental investment
restrictions of the Portfolio, the Trust will hold a meeting of
Fund shareholders and cast its votes as instructed by the
shareholders.
The investment restrictions of the Fund and the Portfolio
are identical, unless as otherwise specified. Accordingly,
references below to the Fund also include the Portfolio unless
the context requires otherwise; similarly, references to the
Portfolio also include the Fund unless the context requires
otherwise.
The Fund and Portfolio may not:
1. Issue senior securities, except as permitted under the
1940 Act or any rule, order or interpretation thereunder. (This
is a non-fundamental policy with respect to the Portfolio).
2. Enter into reverse repurchase agreements, which
together with any other borrowing exceeds in the aggregate one-
third of the market value of the Fund's total assets, less
liabilities other than obligations created by reverse repurchase
agreements.
3. Borrow money (not including reverse repurchase
agreements), except from banks for temporary or extraordinary or
emergency purposes and then only in amounts up to 10% of the
value of the Fund's total assets, taken at cost, at the time of
such borrowing (and provided that such borrowings and reverse
repurchase agreements do not exceed in the aggregate one-third of
the market value of the Fund's total assets less liabilities
other than the obligations represented by the bank borrowings and
reverse repurchase agreements). Mortgage, pledge, or hypothecate
any assets except in connection with any such borrowing and in
amounts up to 10% of the value of the Fund's net assets at the
time of such borrowing. The Fund will not purchase securities
while borrowings exceed 5% of the Fund's total assets; provided,
however, that the Fund may increase its interest in an open-end
management investment company with the same investment objective
and restrictions as the Fund while such borrowings are
outstanding. This borrowing provision is included to facilitate
the orderly sale of portfolio securities, for example, in the
event of abnormally heavy redemption requests, and is not for
investment purposes.
4. Purchase the securities or other obligations of any one
issuer if, immediately after such purchase, more than 5% of the
value of the Fund's total assets would be invested in securities
or other obligations of any one such issuer; provided, however,
that the Fund may invest all or part of its investable assets in
an open-end management investment company with the same
investment objective and restrictions as the Fund. This
limitation shall not apply to issues of the U.S. Government, its
agencies or instrumentalities and to permitted investments of up
to 25% of the Fund's total assets.
5. Purchase the securities or other obligations of issuers
conducting their principal business activity in the same industry
if, immediately after such purchase, the value of its investment
in such industry would exceed 25% of the value of the Fund's
total assets; provided, however, that the Fund may invest all or
part of its investable assets in an open-end management
investment company with the same investment objective and
restrictions as the Fund. For purposes of industry
concentration, there is no percentage limitation with respect to
investments in U.S. Government securities, negotiable
certificates of deposit, time deposits, and bankers' acceptances
of U.S. branches of U.S. banks.
6. Make loans, except through purchasing or holding debt
obligations, or entering into repurchase agreements, or loans of
portfolio securities in accordance with the Fund's investment
objective and policies.
7. Purchase or sell puts, calls, straddles, spreads, or
any combination thereof, real estate, commodities, or commodity
contracts or interests in oil, gas, or mineral exploration or
development programs. However, the Fund may purchase bonds or
commercial paper issued by companies which invest in real estate
or interests therein including real estate investment trusts.
8. Purchase securities on margin, make short sales of
securities, or maintain a short position, provided that this
restrictions shall not be deemed to be applicable to the purchase
or sale of when-issued securities or of securities for delivery
at a future date.
9. Acquire securities of other investment companies,
except as permitted by the 1940 Act.
10. Act as an underwriter of securities.
11. Acquire any illiquid securities, such as repurchase
agreements with more than seven days to maturity or fixed time
deposits with a duration of over seven calendar days if, as a
result thereof, more than 10% of the market value of the Fund's
net assets would be in investments that are illiquid. (This is a
non-fundamental policy with respect to the Fund; in the case of
the Portfolio, the percentage limitation is applicable to the
Portfolio's total assets).
TRUSTEES AND OFFICERS
The Trust and the Portfolio are governed by two separate
Boards of Trustees. The Trust, which has ten separate investment
portfolios, including the Money Market Fund, is governed by the
Trustees of the Trust, who provide broad supervision over the
affairs of the Trust and the Fund. The Trustees and officers of
the Trust are listed below together with their principal
occupations during at least the past five years, as well as the
Trustees' dates of birth. References to The Managers Funds, L.P.,
the Fund Administrator, should be read to apply to Evaluation
Associates Investment Management Company, the predecessor of The
Managers Funds, L.P., for periods prior to AugustE17,E1990.
NAME, ADDRESS AND POSITION WITH PRINCIPAL OCCUPATION DURING PAST 5
TRUST YEARS
ROBERT P. WATSON1 President and Trustee of The
40 Richards Avenue Managers Funds; Chairman and Chief
Norwalk, CT 06854 Executive Officer, Evaluation
Chief Executive Officer, Associates Investment Management
President, Trustee Company (predecessor of The
Managers Funds, L.P.) (prior to
Date of birth: 1/21/34 June 1988 and from August 1989 to
August 1990); Partner, The Managers
Funds, L.P. (since August 1990);
Executive Vice President,
Evaluation Associates, Inc. (June
1988 to August 1989).
NAME, ADDRESS AND POSITION WITH PRINCIPAL OCCUPATION DURING PAST 5
TRUST YEARS
MADELINE H. McWHINNEY President, Dale, Elliott & Company
24 Blossom Cove (management consultants) (1977 to
Middletown, NJ 07701 present); Assistant Vice President
Trustee and Financial Economist, Federal
Reserve Bank of New York (1943 to
Date of birth: 3/11/22 1973); Trustee and Treasurer,
Institute of International
Education (since 1975); Assistant
Director, Operations, Whitney
Museum of American Art (1983 to
1986); Member, Advisory Committee
on Professional Ethics, New Jersey
Supreme Court (March 1983 to
present).
STEVEN J. PAGGIOLI Executive Vice President and
479 West 22nd Street Director, Wadsworth & Associates,
New York, NY 10011 Inc. (1986 to present); Vice
Trustee President, Secretary and Director,
Date of birth: 4/3/50 First Fund Distributors, Inc. (1991
to present); Vice President,
Secretary and Director; Investment
Company Administration Corporation
(1990 to present); President and
Director, Southampton Investment
Management Company, Inc. (1991 to
present); Trustee of Professionally
Managed Portfolios (1991 to
present).
THOMAS R. SCHNEEWEIS Professor of Finance (1985 to
University of Massachusetts present), Associate Professor of
School of Management Finance (1980-1985), Ph.D. Director
Amherst, MA 01003 (Acting) (1985 to 1986), Chairman
Trustee (Acting) Department of General
Date of birth: 5/10/47 Business and Finance (1981-1982),
and Assistant Professor of Finance
(1977-1980), University of
Massachusetts; Teaching Assistant,
University of Iowa Principal
Occupation (1973-1977); Financial
Consultant, Ehlers and Associates
(1970-1973).
PETER M. LEBOVITZ Director of Marketing, The Managers
40 Richards Avenue Funds, L.P. (September 1994 to
Norwalk, CT 06854 present); Director of Marketing,
Vice President Hyperion Capital Management, Inc.
(June 1993 to June 1994); Senior
Vice President and Chief Investment
Officer, Greenwich Asset
Management, Inc. (April 1989 to
June 1993)
DONALD S. RUMERY Director of Operations, The
40 Richards Avenue Managers Funds, L.P. (December 1994
Norwalk, CT 06854 to present)
Treasurer (Principal Financial Vice President, Signature Financial
and Accounting Officer) Group (March 1990 to December 1994)
Vice President, The Putnam
Companies (August 1980 to March
1990).
KATHLEEN WOOD Vice President (July 1992 to
40 Richards Avenue present) and Assistant Vice
Norwalk, CT 06854 President (August 1989 to June
Secretary and Assistant Treasurer 1992), The Managers Funds, L.P.;
Analyst, Evaluation Associates,
Inc. (May 1986 to August 1989).
NAME, ADDRESS AND POSITION WITH PRINCIPAL OCCUPATION DURING PAST 5
TRUST YEARS
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to
40 Richards Avenue Present) and Assistant Vice
Norwalk, CT 06854 President (July 1986 to June 1992),
Assistant Treasurer/Assistant The Managers Funds, L.P.;
Secretary Accountant, Gintel Co. (June 1980
to June 1986).
Trustees' Compensation:
The Trust's Disinterested Trustees receive an annual
retainer of $10,000, and meeting fees of $750 for each in-person
meeting attended and $200 for participating in each telephonic
meeting. There are no pension or retirement benefits provided by
the Trust or any affiliate of the Trust to the Trustees. The
Trust does not pay compensation to its officers. The following
chart sets forth the aggregate compensation paid to each
Disinterested Trustee for the year ended December 31, 1995:
Aggregate Total Compensation from
Compensation Registrant and Fund Complex
Name of Trustee from Fund Paid to Trustees
William W. Graulty $350 $13,000
Madeline H. McWhinney 356 13,200
Steven J. Paggioli 370 13,750
Thomas R. Schneeweis 370 13,750
As indicated above, certain of the Trust's officers also
hold positions with The Managers Funds, L.P., the Fund
Administrator. All Trustees and officers as a group owned less
than 1% of the shares of the Fund outstanding as of the date of
this Statement of Additional Information.
The Trustees of the Portfolio, their business addresses, and
their principal occupations during the past five years are set
forth below.
FREDERICK S. ADDY - Trustee; Retired; Executive Vice
President and Chief Financial Officer from January 1990 to April
1994, Amoco Corporation. His address is 5300 Arbutus Cove,
Austin, TX 78746. Birthdate January 1, 1932.
WILLIAM G. BURNS - Trustee; Retired; Former Vice President,
NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779.
Birthdate November 2, 1932.
ARTHUR C. ESCHENLAUER - Trustee; Retired: Senior Vice
President, Morgan Guaranty Trust Company of New York until 1987.
His address is 14 Alta Vista Drive, RD #2, Princeton, NJ 08540.
Birthdate May 23, 1934.
MATTHEW HEALEY (1) - Trustee, Chairman and Chief Executive
Officer; Chairman, Pierpont Group, Inc., since 1989; Chairman and
Chief Executive Officer, Execution Services, Inc. until October
1991. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. Birthdate August 23, 1937.
MICHAEL P. MALLARDI - Trustee; Retired; Senior Vice
President, Capital Cities/ABC, Inc., and President, Broadcast
Group, prior to April 1996. His address is 10 Charnwood Drive,
Suffern, NY 10910. Birthdate March 17, 1934.
(1) Mr. Healey is an "interested person" of the Portfolio as
that term is defined in the 1940 Act.
Each Trustee of the Portfolio is paid an annual fee as
follows for serving as Trustee of the Portfolio as well as other
investment companies which are affiliated with the Advisor and is
reimbursed for expenses incurred in connection with service as a
Trustee. The compensation paid to these Trustees in calendar
1995 is set forth below. The Trustees may hold various other
directorships unrelated to these funds.
Total Compensa-
Estimated tion from Port-
Aggregate Annual folios, Pierpont
Compensation Pension or Benefits and JPM Insti-
from the Portfolio Retirement Upon tutional Funds
during 1995 Benefits Retirement during 1995
Frederick S. Addy, Trustee $11,605 None None $62,500
William G. Burns, Trustee $11,605 None None $62,500
Arthur C. Eschenlauer,
Trustee $11,605 None None $62,500
Matthew Healey, Trustee $11,605 None None $62,500
Chairman and Chief Executive
Officer*
Michael P. Mallardi, Trustee $11,605 None None $62,500
*During 1995, Pierpont Group, Inc. paid Mr. Healey, in his role
as Chairman of Pierpont Group, Inc., compensation in the amount
of $140,000, contributed $21,000 to a defined contribution plan
on his behalf and paid $20,000 in insurance premiums for his
benefit.
As of April 1, 1995, the annual fee paid to each Trustee for
serving as a Trustee of the Portfolio and other investment
companies affiliated with the Advisor was adjusted to $65,000.
The Trustees of the Portfolio, in addition to reviewing
actions of the Portfolio's various service providers, decide upon
matters of general policy. On January 15, 1994 the Portfolio
entered into a Portfolio Fund Services Agreement with Pierpont
Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities over the affairs of the Portfolio.
Pierpont Group, Inc. was organized in July 1989 to provide
services for The Pierpont Family of Funds, and the Trustees of
the Portfolio are the equal and sole shareholders of Pierpont
Group, Inc. The Portfolio has agreed to pay Pierpont Group, Inc.
a fee in an amount representing its reasonable costs in
performing these services. These costs are periodically reviewed
by the Trustees.
The aggregate fees paid to Pierpont Group, Inc. by the
Portfolio during the period January 15, 1994 to November 30, 1994
and for the fiscal year ended November 30, 1995 were $246,089 and
$261,045, respectively.
The Portfolio's executive officers (listed below), other
than the Chief Executive Officer, are provided and compensated by
Funds Distributor, Inc. ("FDI"), a wholly-owned indirect
subsidiary of Boston Institutional Group, Inc. The Portfolio's
officers conduct and supervise the business operations of the
Portfolio. The Portfolio has no employees.
OFFICERS OF THE PORTFOLIO
The officers of the Portfolio and their principal
occupations during the past five years are set forth below. The
business address of each of the officers unless otherwise noted
is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont
Group, Inc., since 1989; Chairman and Chief Executive Officer,
Execution Services, Inc. until October 1991. His address is Pine
Tree Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL
33436.
ELIZABETH A. BACHMAN; Vice President and Assistant
Secretary. Counsel, FDI and Premier Mutual Fund Services, Inc.
("Premier Mutual") and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund,
Inc. and certain investment companies advised or administered by
the Dreyfus Corporation ("Dreyfus"). Prior to September 1995,
Ms. Bachman was enrolled at Fordham University School of Law and
received her JD in May 1995. Prior to September 1992, Ms.
Bachman was an assistant at the National Association for Public
Interest Law. Address: FDI, 200 Park Avenue, New York, New York
10166.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer.
President and Chief Executive Officer and Director of FDI,
Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc. and certain investment companies advised or
administered by Dreyfus. From December 1991 to July 1994, she
was President and Chief Compliance Officer of FDI. Prior to
December 1991, she served as Vice President and Controller, and
later as Senior Vice President of The Boston Company Advisors,
Inc. ("TBCA").
DOUGLAS C. CONROY; Vice President and Assistant Treasurer.
Supervisor of Treasury Services and Administration of FDI and an
officer of certain investment companies advised or administered
by Dreyfus. From April 1993 to January 1995, Mr. Conroy was a
Senior Fund Accountant for Investors Bank & Trust Company. Prior
to March 1993, Mr. Conroy was employed as a fund accountant at
The Boston Company.
JACQUELINE HENNING; Assistant Secretary and Assistant
Treasurer. Managing Director, State Street Cayman Trust Company,
Ltd. since October 1994. Prior to October 1994, Mrs. Henning was
head of mutual funds at Morgan Grenfell in Cayman and for five
years was Managing Director of Bank of Nova Scotia Trust Company
(Cayman) Limited from September 1988 to September 1993. Address:
P.O. Box 2508 GT, Elizabethan Square, 2nd Floor, Shedden Road,
George Town, Grand Cayman, Cayman Islands.
RICHARD W. INGRAM; President and Treasurer. Senior Vice
President and Director of Client Services and Treasury
Administration of FDI, Senior Vice President of Premier Mutual
and an officer of RCM Capital Funds, Inc., RCM Equity Funds,
Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. From
March 1994 to November 1995, Mr. Ingram was Vice President and
Division Manager of First Data Investor Services Group, Inc.
From 1989 to 1994, Mr. Ingram was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds of The Boston Company.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary.
Assistant Vice President of FDI and an officer of RCM Capital
Funds, Inc. and RCM Equity Funds, Inc. From June 1994 to January
1996, Ms. Jacoppo was a Manager, SEC Registration, Scudder,
Stevens & Clark, Inc. From 1988 to May 1994, Ms. Jacoppo was a
senior paralegal at TBCA.
CHRISTOPHER J. KELLEY; Vice President and Assistant
Secretary. Vice President and Assistant General Counsel of FDI.
From April 1994 to July 1996, Mr. Kelley was Assistant Counsel at
Forum Financial Group. From 1992 to 1994, Mr. Kelley was
employed by Putnam Investments in the Global Fixed Income Group
of the Legal Department. Prior to 1992, Mr. Kelley served as a
law clerk for the firm of Murphy, DeMarco & O'Neill.
LENORE J. MCCABE; Assistant Secretary and Assistant
Treasurer. Assistant Vice President, State Street Bank and Trust
Company since November 1994. Assigned as Operations Manager,
State Street Cayman Trust Company, Ltd. since February 1995.
Prior to November, 1994, employed by Boston Financial Data
Services, Inc. as Control Group Manager. Address: P.O. Box 2508
GT, Elizabethan Square, 2nd Floor, Shedden Road, George Town,
Grand Cayman, Cayman Islands.
MARY A. NELSON; Vice President and Assistant Treasurer.
Vice President and Manager of Treasury Services and
Administration of FDI, an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc. and certain investment companies advised or
administered by Dreyfus. From 1989 to 1994, Ms. Nelson was
employed as an Assistant Vice President and client manager for
The Boston Company.
JOHN E. PELLETIER; Vice President and Secretary. Senior
Vice President and General Counsel of FDI and Premier Mutual and
an officer of RCM Capital Funds, Inc., RCM Equity Funds, Inc.,
Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus. From
February 1992 to April 1994, Mr. Pelletier served as counsel for
TBCA. From August 1990 to February 1992, Mr. Pelletier was
employed as an Associate at Ropes & Gray.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer.
Senior Vice President, Treasurer and Chief Investment Officer of
FDI and Premier Mutual and an officer of Waterhouse Investors
Cash Management Fund, Inc. and certain investment companies
advised or administered by Dreyfus. From July 1988 to November
1993, Mr. Tower was Financial Manager of The Boston Company.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
INVESTMENT ADVISOR AND ADMINISTRATIVE SERVICES AGENT
The investment advisor to the Portfolio is Morgan Guaranty
Trust Company of New York ("Morgan"), a wholly-owned subsidiary
of J.P. Morgan & Co. Incorporated, a bank holding company
organized under the laws of the State of Delaware. Morgan, whose
principal offices are at 60 Wall Street, New York, New York
10260, is a New York trust company which conducts a general
banking and trust business. Morgan is subject to regulation by
the New York State Banking Department and is a member bank of the
Federal Reserve System. Through offices in New York City and
abroad, Morgan offers a wide range of services, primarily to
governmental, institutional, corporate and individual customers
in the United States and throughout the world.
The investment advisory services Morgan provides to the
Portfolio are not exclusive under the terms of the Advisory
Agreement. Morgan is free to and does render similar investment
advisory services to others. Morgan serves as investment advisor
to personal investors and other investment companies and acts as
fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are
invested in common trust funds for which Morgan serves as
trustee. The accounts which are managed or advised by Morgan
have varying investment objectives and Morgan invests assets of
certain of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the
principal investments of the Portfolio. Such accounts are
supervised by officers and employees of Morgan who may also be
acting in similar capacities for the Portfolio. See "Portfolio
Transactions."
J. P. Morgan & Co. Incorporated ("J.P. Morgan"), through the
Advisor and other subsidiaries, acts as investment advisor to
individuals, governments, corporations, employee benefit plans,
mutual funds and other institutional investors with combined
assets under management of $179 billion (of which the Advisor
advises over $28 billion).
The basis of the Advisor's investment process is fundamental
investment research, as the firm believes that fundamentals
should determine an asset's value over the long term. Morgan
currently employs 104 full-time research analysts devoted to
equity, fixed income, capital market, credit and economic
research in investment management divisions located in New York,
London, Tokyo, Frankfurt, Melbourne and Singapore to cover
countries, industries and companies on site. Morgan's fixed
income investment process is based on analysis of real rates,
sector diversification and quantitative and credit analysis.
Sector weightings are generally similar to the benchmark
with the emphasis on security selection as the method to achieve
investment performance superior to the benchmark. The benchmark
for the Portfolio in which the Fund invests is currently IBC
Financial Data, Inc.'s Tier-One Money Fund Average.
J. P. Morgan Investment Management Inc., a wholly-owned
subsidiary of J. P. Morgan, is a registered investment adviser
under the Investment Advisers Act of 1940, as amended, which
manages employee benefit funds of corporations, labor unions and
state and local governments and the accounts of other
institutional investors, including investment companies. Certain
of the assets of employee benefit accounts under its management
are invested in commingled pension trust funds for which Morgan
serves as trustee. J. P. Morgan Investment Management Inc.
advises Morgan on investment of the commingled pension trust
funds.
The Portfolio is managed by officers of Morgan who, in
acting for their customers, including the Portfolio, do not
discuss their investment decisions with any personnel of J. P.
Morgan or any personnel of other divisions of Morgan or with any
of its affiliated persons, with the exception of J. P. Morgan
Investment Management Inc. See "Portfolio Transactions" below
for a description of services provided to the Portfolio by J. P.
Morgan Investment Management Inc.
As compensation for the services rendered and related
expenses such as salaries of advisory personnel borne by Morgan
under the Advisory Agreement, the Portfolio has agreed to pay
Morgan a fee, which is computed daily and may be paid monthly,
equal to the annual rates of 0.20% of the Portfolio's average
daily of net assets up to $1 billion and 0.10% of net assets in
excess of $1 billion.
The advisory fees paid by the Portfolio to Morgan since the
Portfolio's commencement of operations in 1993 are as follows:
For the period July 12, 1993 (commencement of operations) through
November 30, 1993: $1,370,552. For the fiscal year ended
November 30, 1994: $3,423,576. For the fiscal year ended
November 30, 1995: $3,913,479.
Prior to December 1, 1995, the Money Market Fund invested
directly in portfolio securities and paid advisory fees to its
own investment adviser. For the eleven months ended November 30,
1995 and for the fiscal years ended December 31, 1994 and 1993,
fees paid to such adviser were $42,050, $15,126 and $6,297,
respectively.
The Glass-Steagall Act and other applicable laws generally
prohibit banks such as Morgan from engaging in the business of
underwriting or distributing securities, and the Board of
Governors of the Federal Reserve System has issued an
interpretation to the effect that under these laws a bank holding
company registered under the federal Bank Holding Company Act or
certain subsidiaries thereof may not sponsor, organize, or
control a registered open-end investment company continuously
engaged in the issuance of its shares. The interpretation does
not prohibit a holding company or a subsidiary thereof from
acting as investment advisor and custodian to such an investment
company. Morgan believes that it may perform the services for
the Portfolio contemplated by the Advisory Agreement without
violation of the Glass-Steagall Act or other applicable banking
laws or regulations. State laws on this issue may differ from
the interpretation of relevant federal law, and banks and
financial institutions may be required to register as dealers
pursuant to state securities laws. However, is possible that
future changes in either federal or state statutes and
regulations concerning the permissible activities of banks or
trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and
regulations, might prevent Morgan from continuing to perform such
services for the Portfolio.
If Morgan were prohibited from acting as investment advisor
to the Portfolio, it is expected that the Trustees of the
Portfolio would recommend to shareholders that they approve the
Portfolio entering into a new investment advisory agreement with
another qualified investment advisor selected by the Trustees.
Morgan also provides other services to the Portfolio outside
the scope of the Advisory Agreement. The Portfolio has entered
into an Administrative Services Agreement (the "Services
Agreement") with Morgan effective December 29, 1995, as amended
effective August 1, 1996, pursuant to which Morgan is responsible
for certain administrative and related services provided to the
Portfolio. The Services Agreement may be terminated at any time,
without penalty, by the Portfolio's Trustees or Morgan, in each
case on not more than 60 days' nor less than 30 days' written
notice to the other party.
Under the amended Services Agreement and the Co-
Administration Agreements (see "Portfolio Co-Administrator and
Exclusive Placement Agent" below), the Portfolio has agreed to
pay Morgan and FDI fees equal to the Portfolio's allocable share
of an annual complex-wide charge. This charge is calculated
daily based on the aggregate net assets of the Portfolio and
other portfolios (collectively the "Master Portfolios") in
accordance with the following annual schedule: 0.09% of the
first $7 billion of the Master Portfolios' aggregate average
daily net assets and 0.04% of the Master Portfolios' average
daily net assets in excess of $7 billion.
Under Administrative Services Agreements in effect from
December 29, 1995 through July 31, 1996, with Morgan, the
Portfolio paid Morgan a fee equal to its proportionate share of
an annual complex-wide charge. This charge was calculated daily
based on the aggregate net assets of the Master Portfolios in
accordance with the following schedule: 0.06% of the first $7
billion of the Master Portfolios' aggregate average daily net
assets, and 0.03% of the Master Portfolios' average daily net
assets in excess of $7 billion.
Prior to December 29, 1995, the Portfolio had entered into a
Financial and Fund Accounting Services Agreement with Morgan, the
provisions of which included the non-investment advisory
activities described above and, prior to September 1, 1995, also
included reimbursement of the Portfolio's usual and customary
expenses. The services fees paid by the Portfolio to Morgan
since the Portfolio's commencement of operations are as follows:
For the period July 12, 1993 (commencement of operations) through
November 30, 1993: $193,980. For the fiscal year ended November
30, 1994: $385,012. For the fiscal year ended November 30,
1995: $373,077.
PORTFOLIO CO-ADMINISTRATOR AND EXCLUSIVE PLACEMENT AGENT
FDI serves as the Portfolio's exclusive placement agent.
Under a Co-Administration Agreement dated August 1, 1996, FDI
also serves as the Portfolio's Co-Administrator. The Co-
Administration Agreement may be renewed or amended by the
Portfolio's Trustees without a shareholder vote. The Co-
Administration Agreement is terminable at any time without
penalty by a vote of a majority of the Portfolio's Trustees on
not more than 60 days' written notice nor less than 30 days'
written notice to the other party. The Co-Administrator may
subcontract for the performance of its obligations with the prior
consent of the Portfolio's Trustees, provided, however, that
unless the Portfolio expressly agrees in writing, the Co-
Administrator shall be fully responsible for the acts and
omissions of any subcontractor as it would for its own acts or
omissions. See "Investment Advisor and Administrative Services
Agent" above.
The administrative fees paid to Signature Broker-Dealer
Services, Inc. (which provided placement agent and administrative
services to the Portfolio prior to August 1, 1996) since the
Portfolio's commencement of operations are as follows: For the
period July 12, 1993 (commencement of operations) through
November 30, 1993: $32,869. For the fiscal year ended November
30, 1994: $165,519. For the fiscal year ended November 30,
1995: $176,717.
FUND ADMINISTRATOR
The Trust has separately retained the services of The
Managers Funds, L.P. as administrator (the "Fund Administrator").
The Fund has agreed to pay the Fund Administrator and shareholder
servicing agent for the Fund a fee of 0.25% of the Fund's average
daily net assets for these services. The Fund Administrator is
currently waiving all of this fee through at least May 31, 1996.
See "Management of the Fund and the Portfolio-Fund Administrator"
in the Prospectus and "Expenses" below.
DISTRIBUTOR
The Managers Funds, L.P. also serves as distributor (the
"Distributor") in connection with the offering of the Money
Market Fund's shares on a no-load basis. The Distributor bears
certain expenses associated with the distribution and sale of
shares of the Fund. The Distributor acts as agent in arranging
for the sale of the Fund's shares without sales commission or
other compensation and bears all advertising and promotion
expenses incurred in the sale of shares.
The Distribution Agreement between the Trust, on behalf of
the Fund, and the Distributor may be terminated by either party
under certain specified circumstances and will automatically
terminate on assignment. The Distribution Agreement may be
continued annually if specifically approved by the Trust's
Trustees or by a vote of the Fund's outstanding shares, including
a majority of the Trustees who are not "interested persons" of
the Trust or the Distributor, as such term is defined in the 1940
Act, cast in person at a meeting called for the purpose of voting
such approval.
CUSTODIAN, TRANSFER AGENT AND INDEPENDENT PUBLIC ACCOUNTANTS
State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02101, serves as the
Trust's and the Portfolio's Custodian. Pursuant to the Custodian
Contract with the Portfolio, the Custodian is responsible for
maintaining the books of account and records of portfolio
transactions and holding portfolio securities and cash.
Boston Financial Data Services, Inc. serves as the Transfer
Agent for the Fund. The independent accountants of the Fund are
Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts 02109.
The independent accountants of the Portfolio are Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036. Price Waterhouse LLP conducts an annual audit of the
financial statements of the Portfolio.
EXPENSES
From time to time, the Fund Administrator may agree
voluntarily to waive all or a portion of the fee it would
otherwise be entitled to receive from the Fund. The Fund
Administrator may decide to waive all or a portion of its fees
from the Fund for such reasons as attempting to make the Fund's
performance more competitive as compared to similar funds. The
effect of the fee waivers in effect at the date of this Statement
of Additional Information on the fees payable by the Fund is
reflected in the Illustrative Expense Information located in the
front of the Fund's Prospectus. Existing voluntary fee waivers
by the Fund Administrator may be terminated or reduced in amount
at any time, and solely at the discretion of the Fund
Administrator. Shareholders will be notified of any change at
the time that it becomes effective.
In addition to the fees payable to Pierpont Group, Inc.,
Morgan and FDI under the various agreements discussed above, the
Portfolio is responsible for usual and customary expenses
associated with its operations. Such expenses include
organization expenses, legal fees, accounting expenses, insurance
costs, the compensation and expenses of the Portfolio's Trustees,
registration fees under federal and foreign securities laws,
extraordinary expenses, custodian fees and brokerage expenses.
Under fee arrangements prior to September 1, 1995, Morgan was
responsible for reimbursements to the Portfolio and the
Portfolio's usual customary expenses described above (excluding
organization and extraordinary expenses, custodian fees and
brokerage expenses).
CODE OF ETHICS
The Board of Trustees and the Fund Administrator have
adopted a joint Code of Ethics under Rule 17j-1 of the 1940 Act.
The Code of Ethics requires generally that all employees of the
Fund Administrator preclear any personal securities investment
(with limited exceptions such as government securities). The
preclearance requirement and associated procedures are designed
to identify any substantive prohibition or limitation applicable
to the proposed investment. The substantive restrictions
applicable to all employees of the Fund Administrator include a
ban on trading securities based on information about the Fund's
trading. Morgan's personal trading rules require its employees
to pre-clear all securities trades (with limited exceptions) for
the account of the employee and certain persons associated with
the employee and to arrange for duplicate confirmations and
statements to be sent to Morgan.
NET ASSET VALUE
It is anticipated that the net asset value of each share of
the Money Market Fund will remain constant at $1.00. Although no
assurance can be given that it will be able to maintain such
value on a continuing basis, the Portfolio will, as described
below, employ specific investment policies and procedures to
accomplish this result.
The Portfolio relies on Rule 2a-7 under the 1940 Act to use
the amortized cost valuation method to value its securities,
which the Trustees of the Portfolio have determined constitutes
fair value for purposes of complying with the 1940 Act. The
amortized cost method of valuation involves valuing portfolio
securities at their cost at the time of purchase and thereafter
assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of interest rate fluctuations
on the market value of the securities. If fluctuating interest
rates cause the market value of the securities held by the
Portfolio to deviate more than 1/2 of 1% from their value
determined on the basis of amortized cost, the Trustees will
consider whether any action should be initiated to eliminate or
reduce material dilution or other unfair results to the Fund's
shareholders. Such action may include withdrawal in kind,
selling securities prior to maturity and utilizing a net asset
value as determined by using available market quotations.
Although the amortized cost method provides certainty in
valuation, it may result in periods during which the stated value
of an instrument is higher or lower than the price the Portfolio
would receive if the instrument were sold.
The Fund computes its net asset value once daily on Monday
through Friday. The net asset value will not be computed on the
day the following legal holidays are observed: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. On days when
U.S. trading markets close early in observance of these holidays,
the Fund and the Portfolio would expect to close for purchases
and redemptions at the same time. The days on which net asset
value is determined are the Fund's business days.
The net asset value of the Fund is equal to the net asset
value of the Fund's investment in the Portfolio, which is equal
to the Fund's pro rata share of the total investment of the Fund
and of any other investors in the Portfolio less the Fund's pro
rata share of the Portfolio's liabilities, plus any other Fund
assets less Fund liabilities.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 1, 1996, Resource Bank "controlled" (within the
meaning of the 1940 Act i.e., owned in excess of 25% of the
shares of) the Fund. An entity which "controls" a particular
Fund or Portfolio could have effective voting control over the
operations of that fund.
The following chart identifies those shareholders of record
on March 1, 1996 holding 5% or more of the outstanding shares of
the Fund. Certain of these shareholders are omnibus processing
organizations.
Resource Bank, Minneapolis, Minnesota (45%)
EAI 401(k) Plan, Norwalk, Connecticut (6%)
Idaho Trust Company, Boise, Idaho (6%)
PERFORMANCE DATA
From time to time, the Fund may quote performance in terms
of yield, actual distributions, total return, or capital
appreciation in reports, sales literature, and advertisements
published by the Fund. Current performance information for the
Fund may be obtained by calling the number provided on the cover
page of this Statement of Additional Information. See
"Performance Information" in the Prospectus.
YIELD QUOTATIONS. As required by regulation of the SEC,
current yield for the Money Market Fund is computed by
determining the net change exclusion of capital changes in the
value of a hypothetical pre-existing account having a balance of
one share at the beginning of a seven day calendar period,
dividing the net change in account value of the account at the
beginning of the period, and multiplying the return over the
seven-day period by 365/7. For purposes of the calculation, net
change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends
declared on both the original share and any such additional
shares, but does not reflect realized gains or losses or
unrealized appreciation or depreciation. Effective yield for the
Money Market Fund is computed by annualizing the seven-day return
with all dividends reinvested in additional Fund shares.
For the seven calendar days ended November 30, 1995, the
current yield and effective yield of the Money Market Fund were
3.94% and 4.02%, respectively. These figures reflect fee waivers
in effect during the relevant time period. In the absence of
such waivers, these figures would have been 3.74% and 3.81%,
respectively.
TOTAL RETURN QUOTATIONS. As required by regulations of the
SEC, the annualized total return of the Fund for a period is
computed by assuming a hypothetical initial payment of $1,000.
It is then assumed that all of the dividends and distributions by
the Fund over the period are reinvested. It is then assumed that
at the end of the period, the entire amount is redeemed. The
annualized total return is then calculated by determining the
annual rate required for the initial payment to grow to the
amount which would have been received upon redemption. As of
November 30, 1995, the Money Market Fund's annualized one-, five-
and ten-
year total returns were 4.92%, 3.93% and 5.58%, respectively.
Aggregate total returns, reflecting the cumulative
percentage change over a measuring period, may also be
calculated.
GENERAL. The Fund's performance will vary from time to time
depending upon market conditions, the composition of the
Portfolio, and its total operating expenses. Consequently, any
given performance quotation should not be considered
representative of the Fund's performance for any specified period
in the future. In addition, because performance will fluctuate,
it may not provide a basis for comparing an investment in the
Fund with certain bank deposits or other investments that pay a
fixed yield or return for a stated period of time.
Comparative performance information may be used from time to
time in advertising the Fund's shares, including data from Lipper
Analytical Services, Inc., Micropal, Inc., Ibbotson Associates,
IBC Financial Data, Inc. and Morningstar Inc.
ORGANIZATION OF THE PORTFOLIO
The Portfolio, in which all of the assets of the Fund are
invested, is organized as a trust under the laws of the State of
New York. The Portfolio's Declaration of Trust provides that the
Fund and other entities investing in the Portfolio (e.g., other
investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited
to circumstances in which both inadequate insurance existed and
the Portfolio itself was unable to meet its obligations.
PORTFOLIO TRANSACTIONS
J. P. Morgan Investment Management Inc., acting as agent for
Morgan, places orders for the Portfolio for all purchases and
sales of portfolio securities. Morgan enters into repurchase
agreements and reverse repurchase agreements and executes loans
of portfolio securities on behalf of the Portfolio. See
"Investment Objective and Policies."
Fixed income and debt securities are generally traded at a
net price with dealers acting as principal for their own accounts
without a stated commission. The price of the security usually
includes profit to the dealers. In underwritten offerings,
securities are purchased at a fixed price which includes an
amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. On occasion,
certain securities may be purchased directly from an issuer, in
which case no commissions or discounts are paid.
Portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to expected movements
in the general level of interest rates. The Portfolio may engage
in short-term trading consistent with its objective.
In connection with portfolio transactions for the Portfolio,
J.P. Morgan Investment Management Inc. intends to seek best price
and execution on a competitive basis for both purchases and sales
of securities.
The Portfolio has a policy of investing only in securities
with maturities of less than thirteen months, which policy will
result in high portfolio turnovers. Since brokerage commissions
are not normally paid on investments which the Portfolio makes,
turnover resulting from such investments should not adversely
affect the net asset value or net income of the Portfolio.
Portfolio securities will not be purchased from or through
or sold to or through the Portfolio's Administrator or Advisor or
the Fund's Administrator or Distributor or any "affiliated
person" as defined in the 1940 Act, of the Administrators,
Distributor or Advisor when such entities are acting as
principals, except to the extent permitted by law. In addition,
the Portfolio will not purchase securities during the existence
of any underwriting group relating thereto of which the Advisor
or an affiliate of the Advisor is a member, except to the extent
permitted by law.
On those occasions when Morgan deems the purchase or sale of
a security to be in the best interests of the Portfolio as well
as other customers including other investment companies managed
by Morgan, J.P. Morgan Investment Management Inc. to the extent
permitted by applicable laws and regulations, may, but is not
obligated to, aggregate the securities to be sold or purchased
for the Portfolio with those to be sold or purchased for other
customers in order to obtain best execution, including lower
brokerage commissions if appropriate. In such event, allocation
of the securities so purchased or sold, as well as any expense
incurred in the transaction, will be made by J. P. Morgan
Investment Management Inc. in the manner it considers to be most
equitable and consistent with Morgan's fiduciary obligations to
the Portfolio. In some instances, this procedure might adversely
affect the Portfolio.
TAX INFORMATION
The Fund intends to qualify each year as a regulated
investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order to so
qualify, a RIC must, among other things, (i) derive at least 90%
of its gross income from dividends, interest, payments with
respect to certain securities loans, gains from the sale of
securities, certain gains from foreign currencies, or other
income (including but not limited to gains from options, futures
or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii) derive
less than 30% of its gross income from gains from the sale or
other disposition of securities, options, futures, forward
contracts and certain investments in foreign currencies held for
less than three months; (iii) distribute at least 90% of its
dividend, interest and certain other taxable income ("Investment
Company Taxable Income") each year, (iv) at the end of each
fiscal quarter maintain at least 50% of the value of its total
assets in cash, government securities, securities of other
regulated investment companies, and other securities of issuers
which represent, with respect to each issuer, no more than 5% of
the value of the RIC's total assets and 10% of the outstanding
voting securities of such issuer; and (v) at the end of each
fiscal quarter have no more than 25% of its assets invested in
the securities (other than those of the U.S. Government or other
RICs) of any one issuer or of two or more issuers which the RIC
controls and which are engaged in the same, similar or related
trades and businesses. In any year in which a RIC distributes
90% of its Investment Company Taxable Income, it will not be
subject to corporate income tax on amounts distributed to its
shareholders.
If for any taxable year the Fund does not qualify as a RIC,
all of its taxable income (including its net capital gain) will
be subject to taxation at regular corporate rates without any
deduction for distributions to shareholders, and such
distributions will be taxable as ordinary dividend income to the
extent of the Fund's current and accumulated earnings and
profits. Such distributions generally will be eligible for the
dividends-received deduction in the case of corporate
shareholders.
Ordinary income distributions and distributions of net
realized short-term capital gains to shareholders who are liable
for federal income taxes will be taxed as ordinary dividend
income to such shareholders. Distributions of net long-term
capital gains to such shareholders are taxable as long-term
capital gains regardless of how long such shareholders have held
shares of the Fund. These provisions apply whether the dividends
and distributions are received in cash or accepted in shares.
Any loss realized upon the redemption of shares within 6 months
from the date of their purchase will be treated as a long term
capital loss to the extent of any distribution of net long-term
capital gains during such 6-month period. No loss will be
allowed on the sale of shares of the Fund to the extent the
shareholder acquired other Fund shares within 30 days prior to
the sale of the loss shares or 30 days after such sale.
Dividends and other distributions by the Fund may also be
subject to state and/or local taxes. Shareholders should consult
with their own tax advisers concerning the foregoing state and
local tax consequences of investing in the Fund. Additionally,
shareholders who are foreign persons should consult with their
own tax advisers concerning the foreign tax consequences of
investing in the Fund.
Under the federal income tax law, the Fund will be required
to report to the Internal Revenue Service all distributions of
taxable income and capital gains as well as gross proceeds from
all redemptions of the shares except in the case of certain
exempt shareholders. Under the backup withholding provisions of
the Code, such distributions and redemption proceeds may be
subject to the withholding of federal income tax at the rate of
31% in the case of non-exempt shareholders who fail to furnish
the Fund with their correct taxpayer identification numbers and
with required certifications regarding their status under the
federal income tax law, or with respect to those shareholders
whom the Internal Revenue Service notifies the Fund of certain of
the non-compliance. If these withholding provisions are
applicable, any distributions to, and proceeds received by,
shareholders, whether taken in cash or reinvested in shares, will
be reduced by the amounts required to be withheld.
The Code imposes a four percent nondeductible excise tax on
each RIC with respect to the amount, if any, by which it does not
meet distribution requirements specified under such tax law. The
Fund intends to comply with such distribution requirements and
thus does not expect to incur the four percent nondeductible
excise tax although it may not be possible for the Fund to avoid
this tax in all instances.
The foregoing discussion relates solely to U.S. federal
income tax law. Non-U.S. investors should consult their tax
advisers concerning the tax consequences of ownership of shares
of the Fund, including the possibility that distributions may be
subject to a 30% U.S. withholding tax (or a reduced rate of
withholding provided by treaty).
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations
currently in effect. For the complete provisions, reference
would be made to the pertinent Code sections and the Treasury
Regulations promulgated thereunder. The above discussion covers
only federal income tax considerations with respect to the Fund
and its shareholders. Foreign, state and local tax laws vary
greatly. Shareholders should consult their own tax advisers for
more information regarding the federal, foreign, state, and local
tax treatment of the Fund's distributions to shareholders and
with respect to their own tax situation.
FINANCIAL STATEMENTS
The audited Financial Statements and the Notes thereto for
the Fund, and the auditor's report of Coopers & Lybrand L.L.P.,
independent public accountants, are herein incorporated by
reference from the Managers Money Market Fund Annual Report dated
November 30, 1995 and December 31, 1994.
The Portfolio's audited Financial Statements and the Notes
thereto at November 30, 1995, and the report of Price Waterhouse
LLP, independent accountants, are herein incorporated by
reference from the Portfolio's Annual Report as filed with the
SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1.
APPENDIX A
Description of the highest commercial paper and other short-
term rating category assigned by Standard & Poor's Corporation
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch") and Duff and Phelps, Inc.
("Duff").
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of
safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus sign (+) designation.
The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Issuers of P-1 paper must have a
superior capacity for repayment of short-term promissory
obligations and ordinarily will be evidenced by leading market
positions in well established industries, high rates of return of
funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high
internal cash generation, and well established access to a range
of financial markets and assured sources of alternative
liquidity.
The rating Fitch-1 (Highest Grade) is the highest commercial
paper rating assigned by Fitch. Paper rated Fitch-1 is regarded
as having the strongest degree of assurance for timely payment.
The rating Duff-1 is the highest commercial paper rating
assigned by Duff. Paper rated Duff-1 is regarded as having very
high certainty of a timely payment with excellent liquidity
factors which are supported by ample asset protection. Risk
factors are minor.
_______________________________
1Trustee who is an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act).
