<PAGE>
THE MANAGERS FUNDS
MONEY MARKET FUND
Supplement dated May 1, 1996
to Prospectus dated May 1, 1996
The date of the Prospectus and Statement of Additional Information is changed
from April 1, 1996 to May 1, 1996.
The Prospectus is hereby supplemented as follows:
Effective May 1, 1996, and until further notice, the Fund Administrator has
agreed to absorb all Fund level expenses in excess of 0.05%, and to reimburse
the Fund for its pro rata share of expenses of the Portfolio in excess of
0.05%. Accordingly, the table on page 2 of this prospectus is revised as
follows:
ANNUAL OPERATING EXPENSES*:
Total
Management Other Operating
Fee Expenses Expenses
---------- -------- ---------
0.00% 0.10% 0.10%**
*Expenses are expressed as a percentage of average net assets of the Fund for
its most recent fiscal year, adjusted assuming (i) the Fund had invested all
of its assets in the Portfolio for the entire year and (ii) the Fund
Administrator had limited Fund level and Portfolio level expenses, after
expense reimbursements, to 0.05% and 0.05%, respectively. See "Management of
the Trust and Portfolio."
**Total Operating Expenses reflect the current waiver of all of the Fund's
administrative fees and an undertaking by the Fund Administrator to absorb
all Fund level expenses in excess of 0.05% of the Fund's average daily net
assets and all Portfolio level expenses in excess of 0.05% at least through
May 31, 1996. In the absence of such waiver and reimbursements, Other Expenses
and Total Operating Expenses, based on fiscal 1995 Fund average net assets of
$13 million and Portfolio average net assets of $2.9 billion, would be 0.80%
and 0.93%, respectively.
THE CURRENT FEE WAIVERS AND EXPENSE LIMITATIONS MAY BE MODIFIED OR TERMINATED
AT ANY TIME AT THE SOLE DISCRETION OF THE FUND ADMINISTRATOR. SHAREHOLDERS
WILL BE NOTIFIED OF ANY SUCH MODIFICATION OR TERMINATION, ON OR ABOUT THE
TIME IT BECOMES EFFECTIVE.
May 1, 1996
<PAGE>
THE MANAGERS FUNDS
MONEY MARKET FUND PROSPECTUS
DATED APRIL 1, 1996
MANAGERS MONEY MARKET FUND -- (the "Money Market Fund" or the "Fund") seeks
to maximize current income and maintain a high level of liquidity. It is
designed for investors who seek to preserve capital and earn current income from
a portfolio of high quality money market instruments.
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE MONEY MARKET PORTFOLIO (THE
"PORTFOLIO"), A DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO THROUGH
A TWO-TIER MASTER/FEEDER STRUCTURE, SOMETIMES KNOWN AS HUB AND SPOKE-REGISTERED
TRADEMARK-. HUB AND SPOKE IS A REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL
GROUP, INC. ("SIGNATURE"). SEE SPECIAL INFORMATION CONCERNING HUB AND SPOKE ON
PAGE 6.
This Prospectus sets forth concisely the information concerning the Fund that
a prospective investor ought to know before investing. It should be retained for
future reference. The Trust has filed with the Securities and Exchange
Commission a Statement of Additional Information ("SAI"), dated April 1, 1996,
which contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. A copy of the SAI may be
obtained without charge by contacting the Trust at 40 Richards Avenue, Norwalk,
Connecticut 06854, (800) 835-3879 or (203) 857-5321.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE U.S. GOVERNMENT, MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MORGAN") OR ANY OTHER BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY
CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS
REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED
BY THE INVESTOR. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO
DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning the
aggregate annual operating expenses of the Money Market Fund and the Portfolio.
Investors incur no sales load on purchases of shares or on reinvested dividends
and distributions, nor any deferred sales load upon redemption. There are no
redemption fees or Rule 12b-1 fees.
The Trustees of the Trust believe that at current asset levels the aggregate
per share expenses of the Fund and the Portfolio will be approximately equal to
and may be less than the expenses that the Fund would incur if it retained the
services of an investment adviser and invested its assets directly in portfolio
securities.
ANNUAL OPERATING EXPENSES*:
Total
Management Other Operating
Fee Expenses Expenses
---------- -------- ---------
0.13% 0.11% 0.24%**
* EXPENSES ARE EXPRESSED AS A PERCENTAGE OF AVERAGE NET ASSETS OF THE FUND
FOR ITS MOST RECENT FISCAL YEAR, ADJUSTED ASSUMING (i) THE FUND HAD
INVESTED ALL OF ITS ASSETS IN THE PORTFOLIO FOR THE ENTIRE YEAR AND (ii)
THE FUND ADMINISTRATOR HAD LIMITED FUND LEVEL EXPENSES TO 0.05% AFTER ANY
APPLICABLE EXPENSE REIMBURSEMENTS. SEE "MANAGEMENT OF THE FUND AND THE
PORTFOLIO."
** TOTAL OPERATING EXPENSES REFLECT THE WAIVER OF ALL OF THE FUND'S
ADMINISTRATIVE FEES AND AN UNDERTAKING BY THE MANAGERS FUNDS, L.P. (THE
"FUND ADMINISTRATOR") TO ABSORB ALL FUND LEVEL EXPENSES IN EXCESS OF 0.05%
OF THE FUND'S AVERAGE DAILY NET ASSETS AT LEAST THROUGH MAY 31, 1996. IN
THE ABSENCE OF SUCH WAIVER AND REIMBURSEMENTS, OTHER EXPENSES AND TOTAL
OPERATING EXPENSES, BASED ON FISCAL 1995 FUND AVERAGE NET ASSETS OF $13
MILLION AND PORTFOLIO AVERAGE NET ASSETS OF $2.9 BILLION, WOULD BE 0.80%
AND 0.93%, RESPECTIVELY.
THESE FEE WAIVERS AND EXPENSE LIMITATIONS MAY BE MODIFIED OR TERMINATED AT
ANY TIME AFTER MAY 31, 1996 AT THE SOLE DISCRETION OF THE FUND ADMINISTRATOR.
SHAREHOLDERS WILL BE NOTIFIED OF ANY SUCH MODIFICATION OR TERMINATION ON OR
ABOUT THE TIME IT BECOMES EFFECTIVE.
EXAMPLES
An investor would pay the following expenses on a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return, (2)
redemption at the end of each time period, and (3) continuation of any currently
applicable waivers of management fees. As noted above, the Fund does not charge
any redemption fees or deferred sales loads of any kind.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Money Market Fund . . . $3 $8 $14 $32
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses include the fees paid to the
2
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Fund Administrator under the Administration and Shareholder Services Agreement,
the fees paid to Morgan under the Portfolio's Administrative Services Agreement,
the fees paid to Signature Broker-Dealer Services Inc. ("SBDS") under the
Portfolio's Administration Agreement, the fees paid to Pierpont Group, Inc.
under the Portfolio Fund Services Agreement, the fees paid to State Street Bank
and Trust Company as custodian and transfer agent, and other usual and customary
expenses of the Fund and the Portfolio. For a more detailed description of
contractual fee arrangements and of the fees and expenses included in Other
Expenses, see "Management of the Fund and the Portfolio" and "Administration and
Shareholder Servicing; Distributor; Transfer Agent."
SUMMARY
GENERAL DESCRIPTION OF THE TRUST AND THE FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company organized as a Massachusetts business trust, currently
composed of the following ten separate series:
MANAGERS CAPITAL APPRECIATION FUND MANAGERS SHORT AND INTERMEDIATE BOND FUND
MANAGERS SPECIAL EQUITY FUND MANAGERS INTERMEDIATE MORTGAGE FUND
MANAGERS INCOME EQUITY FUND MANAGERS GLOBAL BOND FUND
MANAGERS INTERNATIONAL EQUITY FUND MANAGERS BOND FUND
MANAGERS SHORT GOVERNMENT FUND MANAGERS MONEY MARKET FUND
This Prospectus relates only to the Money Market Fund. A Prospectus for the
other series (the "Equity Funds" and the "Income Funds") can be obtained by
calling (800) 835-3879 or (203) 857-5321.
Each of the Funds has distinct investment objectives and strategies. There
is, of course, no assurance that a Fund will achieve its investment objectives.
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment in the Fund is $2,000 ($500 for IRAs and IRA
rollovers, $250 for spousal IRAs). For information on eligible investors and how
to purchase and redeem shares of the Fund, see "Purchase and Redemption of Fund
Shares."
FINANCIAL HIGHLIGHTS
The following table presents financial highlights for the Money Market Fund,
for the last eleven fiscal periods, through November 30, 1995. The information
has been derived from the financial statements of the Trust which have been
audited by independent public accountants Coopers & Lybrand L.L.P. for the years
ended December 31, 1993 and December 31, 1994, and the period January 1, 1995 to
November 30, 1995, and by other accountants prior to 1993, and should be read in
conjunction with such financial statements. See "Financial Statements" in the
SAI.
3
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<TABLE>
<CAPTION>
Managers Money Market Fund
Financial Highlights
For a share of beneficial interest outstanding throughout each period
Eleven months
ended Year ended December 31,
November 30, --------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------
Income from Investment
Operations:
Net investment income(d) 0.044 0.035 0.022 0.030 0.054 0.081 0.90 0.075
Net realized and unrealized
gain on investments -- -- -- -- 0.003 -- -- 0.010
-------- -------- -------- -------- -------- -------- -------- ------
Total from investment
operations 0.044 0.035 0.022 0.030 0.057 0.081 (0.090) 0.085
-------- -------- -------- -------- -------- -------- ------- ------
Less Distributions to
Shareholders from:
Net investment income (0.044) (0.035) (0.022) (0.030) (0.054) (0.081) (0.090) (0.075)
Net realized gain on
investments -- -- -- -- (0.003) -- -- (0.010)
-------- -------- -------- -------- -------- -------- -------- -------
Total distributions
to shareholders (0.044) (0.035) (0.022) (0.030) (0.057) (0.081) (0.090) (0.085)
-------- -------- -------- -------- -------- -------- -------------------
Net Asset Value, End
of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
- -------------------------------------------------------------------------------------------------------------------
Total Return (c) 4.51% 3.61% 2.48% 3.12% 5.35% 7.66% 8.73% 7.25%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to
average net assets(d) 1.13%(b) 0.73% 0.74% 0.67% 0.57% 0.27% 0.16% 0.16%
Ratio of net investment income
to average net assets(d) 4.85%(b) 3.84% 2.48% 3.05% 5.69% 8.09% 9.12% 7.35%
Net assets at end of period
(000's omitted) $11,072 $17,269 $7,368 $9,320 $4,868 $14,944 $83,743 $86,567
- -------------------------------------------------------------------------------------------------------------------
Expense Waiver(a)
- --------------
Ratio of total expenses to
average net assets 1.18%(b) 1.03% 0.99% 0.98% 1.06% 0.32% N/A N/A
Ratio of net investment income
to average net assets 4.80%(b) 3.54% 2.23% 2.74% 5.21% 8.04% N/A N/A
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
4
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Seven months
ended Year ended May 31,
December 31, ------------------------
1987 1987 1986
Net Asset Value, Beginning --------- -------- -------
of Period $ 1.000 $ 1.000 $ 1.000
--------- -------- -------
Income from Investment
Operations:
Net investment income(d) 0.042 0.063 0.070
Net realized and unrealized
gain on investments 0.001 0.001 --
-------- -------- -------
Total from investment
operations .043 0.064 0.070
-------- -------- -------
Less Distributions to
Shareholders from:
Net investment income (0.42) (0.63) (0.070)
Net realized gain on
investments (0.001) (0.001) --
------- -------- ------
Total distributions
to shareholders (0.043) (0.064) (0.070)
-------- -------- --------
Net Asset Value, End
of Period $ 1.000 $ 1.000 $ 1.000
-------- -------- --------
-------- -------- --------
- --------------------------------------------------------------------------
Total Return (c) 3.81% 5.83% 7.25%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Ratio of net expenses to
average net assets(d) 0.17%(b) 0.15% 0.18%
Ratio of net investment income
to average net assets(d) 6.99% 6.19% 7.67%
Net assets at end of period
(000's omitted) $103,041 $105,594 $70,869
- --------------------------------------------------------------------------
Expense Waiver(a)
- --------------
Ratio of total expenses to
average net assets N/A N/A N/A
Ratio of net investment income
to average net assets N/A N/A N/A
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
(a) Ratio information assuming no waiver of investment advisory and management
fees and/or administrative fees in effect for the period presented, if
applicable.
(b) Annualized.
(c) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(d) Does not reflect investment advisory and management fees paid directly to
the Manager for periods prior to May 1990.
5
<PAGE>
SPECIAL INFORMATION CONCERNING HUB AND SPOKE-REGISTERED TRADEMARK-
The Portfolio uses certain proprietary rights, know-how and financial services
referred to as Hub and Spoke. Hub and Spoke is a registered service mark of
Signature.
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund is an open-end management investment company
which seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, a separate registered investment company
with the same investment objective as the Fund. The investment objective of the
Fund or Portfolio may be changed only with the approval of the respective
holders of the outstanding voting securities of the Fund and the Portfolio, as
the case may be. Shareholders of the Fund shall receive 30 days prior written
notice before any such change. The use of Hub and Spoke has been approved by the
shareholders of the Fund. The Hub and Spoke investment fund structure has been
developed relatively recently, so shareholders should carefully consider this
investment approach.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio may sell shares of their own using a
different pricing structure than the Fund. Such different pricing structures may
result in differences in returns experienced by investors in other funds that
invest in the Portfolio. Such differences in returns are not uncommon and are
present in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from the Fund Administrator at (800)835-
3879.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution)
from the Portfolio, which may or may not be readily marketable. The distribution
in kind may result in the Fund having a less diversified portfolio of
investments or adversely affect the Fund's liquidity, and the Fund could incur
brokerage, tax or other charges in converting the securities to cash.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
6
<PAGE>
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the Securities and Exchange
Commission, whenever the Fund is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
impact on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see "Investment Objective and Policies," "Additional Information
and Risk Factors," and "Investment Restrictions." For more information about the
Portfolio's management and expenses, see "Management of the Fund and the
Portfolio."
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of each of the Fund and the Portfolio is described
below, together with the policies each employs in its efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the SAI under "Investment Objective and Policies."
There can be no assurance that the objective of the Fund or the Portfolio will
be achieved.
The Fund's investment objective is to maximize current income and maintain a
high level of liquidity. The Fund is designed for investors who seek to preserve
capital and earn current income from a portfolio of high quality money market
instruments. The Fund attempts to achieve its objective by investing all of its
investable assets in The Money Market Portfolio, a diversified open-end
management investment company having the same investment objective as the Fund.
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 high quality U.S. dollar-denominated securities which have
effective maturities of not more than thirteen months. The Portfolio's ability
to achieve its objective is affected by its high quality standards (discussed
below).
UNITED STATES GOVERNMENT OBLIGATIONS. The Portfolio may invest in obligations
issued or guaranteed by the U.S. Government and backed by the full faith and
credit of the United States. These securities include Treasury securities,
obligations of the Government National Mortgage Association, the Farmers
7
<PAGE>
Home Administration and the Export Import Bank. The Portfolio may also invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities where the Portfolio must look principally to the issuing or
guaranteeing agency for ultimate repayment; some examples of agencies or
instrumentalities issuing these obligations are the Federal Farm Credit System,
the Federal Home Loan Banks and the Federal National Mortgage Association.
BANK OBLIGATIONS. The Portfolio may invest in high quality U.S.
dollar-denominated 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 and are organized under
U.S. federal or state law, (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 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). These obligations may be supported by appropriated
but unpaid commitments of their member countries, and there is no assurance
these commitments will be undertaken or met in the future.
COMMERCIAL PAPER; BONDS. The Portfolio may invest in high quality commercial
paper and corporate bonds issued by U.S. corporations. The Portfolio may also
invest in bonds and commercial paper of foreign issuers if the obligation is
U.S. dollar-denominated and is not subject to foreign withholding tax.
ASSET-BACKED SECURITIES. The Portfolio may also invest in securities
generally referred to as asset-backed securities, which directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Asset-backed securities provide periodic payments that
generally consist of both interest and principal payments. Consequently, the
life of an asset-backed security varies with the prepayment experience of the
underlying debt instruments.
QUALITY INFORMATION. The Portfolio will limit its investments to those
securities which, in accordance with guidelines adopted by the Portfolio's
Trustees, present minimal credit risk. In addition, the Portfolio will not
purchase any security (other than a U.S. Government security) unless (i) it is
rated with the highest rating assigned to short-term debt by at least two
nationally recognized statistical rating organizations such as Moody's Investors
Services, Inc. ("Moody's") or Standard & Poor's Corporation ("Standard &
Poor's"), (ii) it is rated by only one agency with the highest such rating, or
(iii) it is not rated and is determined to be of comparable quality.
Determinations of comparable quality shall be made in accordance with procedures
established by the Portfolio's Trustees. For a more detailed discussion of
applicable quality requirements, see "Investment Objective and Policies" in the
SAI. These standards must be satisfied at the time an investment is made. If the
quality of the investment later declines
8
<PAGE>
below the quality required for purchase, the Portfolio shall dispose of the
investment, subject in certain circumstances to a finding by the Portfolio's
Trustees that disposing of the investment would not be in the Portfolio's best
interest.
The Portfolio may also invest in securities on a when-issued or delayed
delivery basis and in certain privately placed securities. The Portfolio may
also enter into repurchase and reverse repurchase agreements and loan its
portfolio securities.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may
purchase securities on a when-issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest accrues to the Portfolio until
settlement. At the time of settlement, a when-issued security may be valued
at less than its purchase price. The Portfolio maintains with the custodian a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. 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 these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established 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 the interest rate effective for
the term of the agreement. The term of the agreement usually ranges from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives as collateral securities with a market value at least equal to
the purchase price plus accrued interest, and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See "Illiquid Investments; Privately Placed and other
Unregistered Securities" below.
SECURITIES LENDING. Subject to applicable investment restrictions, the
Portfolio is permitted to lend its securities in an amount up to 331/3% of the
value of the Portfolio's net assets. The Portfolio may lend its securities 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,
9
<PAGE>
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 or Portfolio, Morgan, the Portfolio Administrator or the Distributor (each
as defined below under "Management of the Fund and the Portfolio"), unless
otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement. For
purposes of the Investment Company Act of 1940, it is considered a form of
borrowing by the Portfolio and, therefore, is a form of leverage. Leverage may
cause any gains or losses of the Portfolio to be magnified. For more
information, see "Investment Objective and Policies" in the SAI.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain U.S.
dollar-denominated foreign securities. Investment in securities of foreign
issuers and in obligations of foreign branches of domestic banks involves
somewhat different investment risks from those affecting securities of U.S.
domestic issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. The Portfolio may only invest in
foreign securities that are not subject to foreign withholding tax.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign
10
<PAGE>
investments made by the Portfolio must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 10% of the market value of the Portfolio's net assets would be in illiquid
investments. Subject to this fundamental policy limitation, the Portfolio may
acquire investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the Securities Act of
1933 (the "1933 Act") and cannot be offered for public sale in the United States
without first being registered under the 1933 Act. An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio. The
price the Portfolio pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by Morgan and
approved by the Trustees of the Portfolio. The Trustees of the Portfolio will
monitor Morgan's implementation of these guidelines on a periodic basis.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted,
are deemed fundamental policies, i.e., they may be changed only by a "vote of
the holders of a majority of the outstanding voting securities" (as defined in
the 1940 Act) of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same
investment objective and restrictions (such as the Portfolio). References below
to the Fund's investment restrictions also include the Portfolio's investment
restrictions.
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
Government securities, and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. The Fund is subject to
additional non-fundamental requirements governing non-tax exempt money market
funds. These non-fundamental requirements generally prohibit the Fund from
investing more than 5% of its total assets in the securities of any single
issuer, except obligations of the U.S. Government, its agencies and
instrumentalities.
The Fund may not (i) acquire any illiquid securities if as a result more than
11
<PAGE>
10% of the market value of its net assets would be in investments which are
illiquid, (ii) enter into reverse repurchase agreements exceeding, together with
any permitted borrowings, one-third of the market value of its total assets,
less certain liabilities, (iii) borrow money, except from banks for
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 borrowing, or
purchase securities while borrowings exceed 5% of its total assets; or mortgage,
pledge or hypothecate any assets except in connection with any such borrowings
in amounts up to 10% of the value of the Fund's net assets at the time of
borrowing; or (iv) invest more than 25% of its assets in any one industry,
except 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.
For a more detailed discussion of the above investment restrictions, as well
as a description of certain other investment restrictions, see "Investment
Restrictions" in the SAI.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
TRUSTEES. Information concerning the Trustees of the Fund and the Portfolio,
including their names, positions, and principal occupations during the past five
years, is contained in the SAI.
The Portfolio has entered into a Portfolio Fund Services Agreement with
Pierpont Group, Inc. to assist the Trustees of the Portfolio in exercising their
overall supervisory responsibilities for the Portfolio's affairs. The fees to be
paid under the agreement approximate the reasonable cost of Pierpont Group, Inc.
in providing these services. Pierpont Group, Inc. was organized in 1989 at the
request of the Trustees of The Pierpont Family of Funds for the purpose of
providing those services at cost to those funds. See "Trustees and Officers" in
the SAI. The principal offices of Pierpont Group, Inc. are located at 461 Fifth
Avenue, New York, New York 10017. See "Administration; Custodian and Transfer
Agent; and Distributor."
ADVISER. The Fund has not retained the services of an investment adviser
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Adviser. Morgan, with principal offices 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 a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through Morgan and other subsidiaries, offers a wide range of services
to governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management of over $179 billion (of which Morgan advises over $28
billion). Morgan provides investment advice and portfolio management services to
the Portfolio. Subject to the supervision of the Portfolio's Trustees, Morgan
makes
12
<PAGE>
the Portfolio's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages the Portfolio's investments. See
"Portfolio Investment Adviser and Administrative Services Agent" in the SAI.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. The following persons are primarily responsible for the
day-to-day management and implementation of Morgan's process for the Portfolio
(the inception date of each person's responsibility for the Portfolio and his
business experience for the past five years is indicated parenthetically):
Robert R. Johnson, Vice President (since June, 1988, employed by Morgan since
prior to 1991) and Daniel B. Mulvey, Vice President (since January, 1995,
employed by Morgan since September, 1991, previously securities trader,
Equitable Life Insurance Company).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.20% of the Portfolio's average daily net assets up to
$1 billion, and 0.10% of average daily net assets in excess of $1 billion.
Under a separate agreement, Morgan also provides financial, fund accounting
and administrative services to the Portfolio, including services related to tax
returns and financial reports. See "Portfolio Investment Adviser and
Administrative Services Agent" in the SAI.
ADMINISTRATION; CUSTODIAN AND TRANSFER AGENT; AND DISTRIBUTOR
PORTFOLIO ADMINISTRATOR. Under an Administration Agreement with the Portfolio,
Signature Broker-Dealer Services, Inc. ("SBDS") serves as the administrator for
the Portfolio (the "Portfolio Administrator"). In this capacity, SBDS
administers and manages all aspects of the Portfolio's day-to-day operations
subject "Adviser" and "Custodian." In connection with its responsibilities as
Portfolio Administrator, SBDS (i) furnishes ordinary clerical and related
services for day-to-day operations including certain recordkeeping
responsibilities; (ii) takes responsibility for compliance with all applicable
federal and state securities and other regulatory requirements; and (iii)
performs such administrative and managerial oversight of the activities of the
Portfolio's custodian as the Trustees may direct from time to time.
FUND ADMINISTRATOR. The Managers Funds, L.P. serves as the Fund's
administrator and shareholder servicing agent (the "Fund Administrator") and has
overall responsibility, subject to the review of the Trustees of the Trust, for
all aspects of managing the Fund's operations, including administration and
shareholder services to the Fund, its shareholders and certain institutions,
such as bank trust departments, dealers and registered investment advisers, that
advise or act as an intermediary with the Fund's shareholders ("Shareholder
Representatives"). At the date of this Prospectus, the Fund has agreed to pay a
13
<PAGE>
fee to the Fund Administrator at the rate of 0.25% per annum of the Fund's
average daily net assets; however, the Fund Administrator has agreed to a
voluntary waiver of its fees until at least May 31, 1996.
Administrative services include (i) preparation of Fund performance
information; (ii) responding to telephone and in-person inquiries from
shareholders and shareholder representatives regarding matters such as account
or transaction status, net asset value of Fund shares, Fund performance, Fund
services, plans and options, Fund investment policies and Fund distributions and
the taxation thereof; (iii) preparing, soliciting and gathering shareholder
proxies and otherwise communicating with shareholders in connection with
shareholder meetings; (iv) maintaining the Trust's registration with federal and
state securities regulators; (v) dealing with complaints and correspondence from
shareholders directed to or brought to the attention of the Fund Administrator;
(vi) supervising the operations of the Fund's Transfer Agent; and (vii) such
other administrative, shareholder and shareholder-related services as the
parties may from time to time agree to in writing.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company ("State
Street Bank"), 225 Franklin Street, Boston, Massachusetts 02101, serves as the
Fund's and the Portfolio's Custodian and the Fund's Transfer and Dividend
Disbursing Agent.
DISTRIBUTOR. The Managers Funds, L.P. serves as distributor of the shares of
the Fund. Its address is 40 Richards Avenue, Norwalk, Connecticut 06854.
PURCHASE AND REDEMPTION OF FUND SHARES
HOW TO PURCHASE FUND SHARES
Initial purchases of shares of the Fund may be made in a minimum amount of
$2,000 ($500 for IRAs and IRA rollovers, $250 for Spousal IRAs). Lower
minimum initial investments with accompanying automatic investment plans or
letters of intent may be accepted at the discretion of the Administrator. There
is no minimum for additional investments.
Investors may purchase shares of the Fund through their financial planner or
other investment professional who is (or who is associated with) an investment
adviser registered with the Securities and Exchange Commission (a "Registered
Investment Adviser") or directly from the Fund as indicated below. Shares may
also be purchased by bank trust departments on behalf of their clients, other
institutional investors such as corporations, endowment funds and charitable
foundations, and tax-exempt employee welfare, pension and profit-sharing plans.
The following shows the various methods for purchasing the Fund's shares. For
more complete instructions, see the account application.
14
<PAGE>
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C> <C>
MINIMUMS
Regular accounts: $2,000 No minimum
IRAs, IRA rollovers: $ 500 No minimum
Spousal IRAs $ 250 No minimum
METHOD
Through your Contact your investment Send additional funds to
investment adviser, bank or other your investment profess-
professional investment professional ional at the address ap-
pearing on your account
statement
Directly by mail Send your account applica- Send letter of instruction
tion and check (payable to and check (payable to
The Managers Funds) The Managers Funds)
to the address indicated on to The Managers Funds
the application c/o Boston Financial
Data Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
Please include your
account # on your check
Direct Federal Call (800)252-0682 to Call the Transfer Agent at
Funds or Bank Wire notify the Transfer Agent, (800) 252-0682 prior to
and instruct your bank to wiring additional funds
wire funds to:
ABA #011000028
State Street Bank &
Trust Company
Boston, MA 02101
BFN-The Managers Funds
AC 9905-001-5
FBO-Shareholder Name
By Telephone Only for established Call the Transfer Agent
accounts with ACH at (800) 252-0682.
privileges. Call Minimum investment: $100
(800) 252-0682 with
instructions for the
Transfer Agent.
Minimum investment: $100
</TABLE>
15
<PAGE>
The employees and their families of The Managers Funds, L.P. and selected
dealers and their authorized representatives who are engaged in the sale of Fund
shares, may purchase shares of the Fund without regard to a minimum initial
investment.
Certain states may require Registered Investment Advisers that purchase Fund
shares for customers in those states to register as broker-dealers.
Fund shares are offered and orders accepted on each business day (a day on
which the New York Stock Exchange ("NYSE") is open for trading). The Fund may
limit or suspend the offering of shares of the Fund at any time and may refuse,
in whole or in part, any order for the purchase of shares.
Purchase orders received by the Fund, c/o Boston Financial Data Services, Inc.
(the "Transfer Agent") at the address listed on the back cover of this
prospectus, prior to 4:00 p.m., New York Time, on any business day will receive
the offering price computed that day. See "Income, Dividends and Capital Gains
Distributions." The broker-dealer, omnibus processor or investment professional
is responsible for promptly transmitting orders to the Fund. The Fund cannot
accept orders transmitted to it at the address indicated on the cover page of
this prospectus, but will use its best efforts to promptly forward such orders
to the Transfer Agent for receipt no later than the next business day.
Federal funds or bank wires used to pay for purchase orders of the Fund must
be received in advance, except for certain processing organizations which have
entered into special arrangements with the Fund.
Purchases made by check are effected when the check is received, but
are accepted subject to collection at full face value in U.S. funds and must be
drawn in U.S. dollars on a U.S. bank. Third party checks which are payable to an
existing shareholder who is a natural person (as opposed to a corporation or
partnership) and endorsed over to the Fund or State Street Bank and Trust
Company will be accepted. To ensure that checks are collected by the Fund,
redemptions of shares purchased by check are not effected until 15 days after
the date of purchase.
If the check accompanying any purchase order does not clear, or if there are
insufficient funds in your bank account to enable an ACH, the transaction will
be canceled and you will be responsible for any loss the Fund incurs. For
current shareholders, the Fund can redeem shares from any identically registered
account in the Fund or any other series of the Trust as reimbursement for any
loss incurred. The Trust may prohibit or restrict all future purchases in the
Fund in the event of any nonpayment for shares.
In the interest of economy and convenience, share certificates will not be
issued. All share purchases are confirmed to the record holder and credited to
such holder's account on the Fund's books maintained by the Transfer Agent.
REDEEMING SHARES
Any redemption orders received by the Fund as indicated below before 4:00
16
<PAGE>
p.m. New York time on any business day will receive the net asset value
determined at the close of trading on the NYSE on that day. Payments for wire
redemption orders received prior to 1:00 p.m. will be sent out that day. The
Trust cannot accept redemption orders transmitted to it at the address indicated
on the cover page of the prospectus, but will use its best efforts to promptly
forward such orders to the Transfer Agent for receipt by the next business day.
If you are trading through a broker-dealer or investment adviser, such
investment professional is responsible for promptly transmitting orders. There
is no redemption charge. The Fund reserves the right to redeem shareholder
accounts (after 60 days notice) when the value of the Fund shares in the account
falls below $500 due to redemptions. Whether the Fund will exercise its right to
redeem shareholder accounts will be determined by the Fund Administrator on a
case-by-case basis.
METHOD INSTRUCTIONS
- -------------------------------------------------------------------------------
By mail-write to The Managers Funds, Send a letter of instruction which
c/o Boston Financial Data Services, Inc. specifies the name of the Fund,
P.O. Box 8517 dollar amount or number of shares to
Boston, MA 02266-8517 be sold, your name and account
number. This letter must be signed
by all owners of the shares in the
exact manner in which they appear on
the account. In the case of estates,
trusts, guardianships,
custodianships, corporations and
pension and profit sharing plans,
other supporting legal documentation
is required.
By telephone For shareholders who have elected
telephone redemption privileges on
their applications, telephone the
Fund at (800)252-0682.
By contacting
your investment professional
By writing a check For shareholders who have elected
to have this option, using special
checks provided by State Street Bank
and Trust Company, as discussed
under "Investor Services-
Checkwriting Privilege."
INVESTOR SERVICES
AUTOMATIC REINVESTMENT PLAN allows dividends or capital gains distributions to
be reinvested in additional shares, unless you elect to receive cash.
AUTOMATIC INVESTMENTS of preauthorized amounts from private checking accounts
can be made monthly, quarterly or annually. Your account will normally be
charged on the day you specify.
SYSTEMATIC WITHDRAWALS of $100 or more from the Fund can be made
monthly by shareholders.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any
17
<PAGE>
Fund to one or more other series of the Trust. Before investing in the Trust's
Equity Funds or Income Funds, shareholders must obtain a prospectus from the
Trust describing those funds.
INDIVIDUAL RETIREMENT ACCOUNTS, including SEP/IRAs and IRA rollovers, are
available to shareholders at no additional cost.
CHECKWRITING PRIVILEGE is available to shareholders of the Fund. Participating
shareholders must return a completed signature card and authorization form, and
will be provided a supply of checks. Checks may be drawn for amounts between
$500 and $500,000. When such a check is presented to State Street Bank for
payment, a sufficient number of full and fractional shares will be redeemed from
the shareholder's account to cover the amount of the check.
The check redemption privilege for withdrawal enables a shareholder to receive
dividends declared on the shares to be redeemed (up to and including the day of
redemption) until such time as the check is processed. Because of this, the
check redemption privilege is not appropriate for a complete liquidation of a
shareholder's account. If the amount of a withdrawal check is greater than the
value of the shares held in the shareholder's account the check will be returned
unpaid, and the shareholder may be subject to additional charges.
The Fund and State Street Bank each reserve the right at any time to suspend
or limit the procedure permitting withdrawals by check.
DIRECT DEPOSIT PURCHASE PLAN allows for Social Security or payroll checks, as
well as any other preauthorized recurring payment, to be automatically invested
in your account.
EXCHANGE PRIVILEGE permits shareholders of the Fund to exchange their shares
for shares of any of the other series of the Trust at the relative net asset
value per share. Exchange transactions may be made by writing to the Fund
(see "Redeeming Shares"), by contacting your investment professional, via the
Telephone Exchange Privilege (unless you have declined this option) or on your
signed account application. Call Investors Services at (800)252-0682 to utilize
the Telephone Exchange Privilege. Shareholders must receive a prospectus
describing the Equity Funds or Income Funds of the Trust before requesting an
exchange into one or more of those series. By requesting an exchange into one of
those series, shareholders are deemed to confirm receipt of the prospectus
describing the Trust's Equity Funds and/or Income Funds.
The exchange privilege is offered to shareholders for their convenience and
use consistent with their investment objectives. It is not offered as a
short-term market timing service. The Trust reserves the right to refuse
exchange orders from shareholders who have previously been advised that their
frequent use of the exchange privilege is, in the opinion of the Fund
Administrator, inconsistent with the orderly management of the Funds'
portfolios.
THE FUND AND ITS TRANSFER AGENT WILL EMPLOY REASONABLE PROCEDURES TO VERIFY
THE GENUINENESS OF TELEPHONIC REDEMPTION OR EXCHANGE REQUESTS. IF SUCH
18
<PAGE>
PROCEDURES ARE NOT FOLLOWED, THE FUND OR ITS TRANSFER AGENT MAY BE LIABLE FOR
ANY LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS. THESE PROCEDURES
INVOLVE REQUIRING CERTAIN PERSONAL IDENTIFICATION INFORMATION.
THE ABOVE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE FUND MAY BE LEGALLY
OFFERED, AND MAY BE TERMINATED OR MODIFIED BY THE FUND AT ANY TIME UPON 60 DAYS
WRITTEN NOTICE TO SHAREHOLDERS. NEITHER THE FUND, THE DISTRIBUTOR, THE FUND'S
CUSTODIAN, THE TRANSFER AGENT, NOR THEIR RESPECTIVE OFFICERS AND EMPLOYEES, WILL
BE LIABLE FOR ANY LOSS, EXPENSE OR COST ARISING OUT OF A TRANSACTION EFFECTED IN
ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN THIS PROSPECTUS EVEN IF
SUCH TRANSACTION RESULTS FROM ANY FRAUDULENT OR UNAUTHORIZED INSTRUCTIONS.
INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends and distributions of short-term capital gains or losses will
normally be declared daily on all settled shares (including purchases made with
immediately available funds prior to 3:00 p.m. on that day) and paid monthly on
the third business day prior to month end. Distributions of any long term
capital gains will normally be declared annually in December.
All dividends and distributions declared by the Fund will be reinvested in
additional shares of the Fund (unless the shareholder has elected to receive
dividends or distributions in cash) at net asset value. An election may be
changed by delivering written notice to the Fund at least ten business days
prior to the payment date.
In connection with the intention to maintain a constant $1.00 net asset value
per share, the Trustees of the Trust have approved the following procedures in
the event the Fund has a negative amount of net investment income on any day.
Such a negative amount could occur, for instance, upon default by an issuer of a
security held by The Money Market Portfolio. In such event, the Fund would first
offset the negative amount with respect to each shareholder account from the
dividends declared but unpaid during the month with respect to such account. If
and to the extent that such negative amount exceeds such declared but unpaid
dividends, the Trustees of the Trust would consider what other action might be
taken, including reducing the number of its outstanding shares by treating each
shareholder as having contributed to the capital of the Fund that number of full
and fractional shares in the account of such shareholder which represents its
proportion of the amount of such excess. Each shareholder will be deemed to have
agreed to such contribution in these circumstances by its investment in the
Fund.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses are accrued daily. The Portfolio values all portfolio securities by the
amortized cost
19
<PAGE>
method. This method attempts to maintain for the Fund a constant net asset value
per share of $1.00. No assurances can be given that this goal can be attained.
The Fund's net asset value is computed at 4:00 p.m., New York Time. See "Net
Asset Value" in the SAI for more information on valuation of portfolio
securities for the Portfolio.
PERFORMANCE INFORMATION
From time to time the Fund may advertise "yield" and/or "total return." THESE
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE.
YIELD
The Fund may advertise "current yield" and "effective yield." "Current yield"
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized," that is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment.
TOTAL RETURN
The Fund may include total return figures in its advertisements. In
calculating total return, the net asset value per share at the beginning of the
period is subtracted from the net asset value per share at the end of the period
(after assuming and adjusting for the reinvestment of any income dividends and
capital gains distributions), and the result is divided by the net asset value
per share at the beginning of the period to ascertain the total return
percentage.
The Fund also may include comparative performance information in advertising
or marketing the Fund's shares. Such performance information may include data
from industry publications, business periodicals, rating services and market
indices. For more detailed information on performance calculations and
comparisons, see "Performance Information" in the SAI.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without par
value, and currently offers ten series of its shares as described in the Trust's
prospectuses. The Trustees have the authority to create new series of shares in
addition to the existing ten series without the requirement of a vote of
shareholders of the Trust.
Shares of each series are entitled to one vote per share. Shareholders
have the right to vote on all matters on which, by law or the provisions of
the Trust's Declaration of Trust or by-laws, they may be entitled to vote. On
matters relating to all series and affecting all series in the same manner,
shareholders of all series are entitled to vote. On any matters affecting
only one series, only the
20
<PAGE>
shareholders of that series are entitled to vote. On matters relating to all the
series but affecting the series differently, separate votes by series are
required.
The Trust and its series are not required, and do not intend, to hold annual
meetings of shareholders, under normal circumstances. The Trustees or the
shareholders may call special meetings of the shareholders for action by
shareholder vote, including the removal of any or all of the Trustees. The
Trustees will call a special meeting of shareholders of the Fund upon written
request of the holders of at least 10% of the Fund's shares.
Under Massachusetts law, the shareholders and trustees of a business trust
may, in certain circumstances, be personally liable for the trust's obligations
to third parties. However, the Declaration of Trust provides, in substance, that
no shareholder or Trustee shall be personally liable for the Trust's obligations
to third parties, and that every written contract made by the Trust shall
contain a provision to that effect. The Declaration of Trust also requires the
Fund to indemnify shareholders and Trustees against such liabilities and any
related claims and expenses. The Trust will not indemnify a Trustee when the
loss is due to willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the Trustee's office.
Two lawsuits seeking class action status have been filed against the Managers
Intermediate Mortgage Fund and the Managers Short Government Fund, respectively,
The Managers Funds, L.P. and other defendants including the Trust. The
Intermediate Mortgage Fund suit was filed in the United States District Court
for the District of Connecticut in September, 1994, and names the Fund, the
Trust, The Managers Funds, L.P., Robert P. Watson, Piper Capital Management,
Inc., its parent company and Worth Bruntjen as defendants. A motion has been
filed to dismiss this action and there has been no decision yet from the court.
The Short Government Fund suit was filed in the United States District Court for
the District of Minnesota in November, 1994 and names that Fund, each of the
defendants in the Intermediate Mortgage Fund suit (with the exception of the
Intermediate Mortgage Fund), the Trustees and one officer of the Trust as
defendants. On November 24, 1995, the defendants' motion to dismiss was granted,
in part and denied, in part, and the plaintiff was granted leave to file an
amended complaint. The plaintiff filed an amended complaint on December 14, 1995
and the defendants have filed another motion to dismiss this action. In both of
these cases the plaintiffs seek unspecified damages based upon losses alleged in
the two series named above. Another non-class action lawsuit has been filed
against certain of the defendants, among others, and Managers Short and
Intermediate Bond Fund based on similar allegations. Management believes that
the cases are without merit and intends to defend vigorously against these
actions.
As of March 1, 1996, Resource Bank and Trust Company owned more than 25% of
the shares of the Fund.
TAX INFORMATION
The Fund has qualified and intends to continue to qualify as a regulated
investment company under the provisions of the Internal Revenue Code of 1986,
21
<PAGE>
as amended, under which the Fund is regarded as a separate regulated
investment company. The Portfolio intends to qualify as an association
treated as a partnership for federal income tax purposes. As such, the
Portfolio should not be subject to tax. The Fund's status as a regulated
investment company is dependent on, among other things, the Portfolio's
continued qualification as a partnership for federal income tax purposes.
All dividends and distributions designated as capital gains are generally
taxable to shareholders whether received in cash or additional shares.
Although distributions are generally taxable to a shareholder in the
taxable year in which the distribution is made, dividends declared in
October, November or December of a taxable year with a record date in such a
month and actually received during the following January, will be taxed as
though received by the shareholder on December 31 of such year.
Generally, the Fund is required to back-up withhold 31% of distributions
paid to a shareholder who fails to provide a social security or taxpayer
identification number and certify that such number is correct and that such
shareholder is not subject to, or is otherwise exempt from, back-up
withholding.
A shareholder should consult its own tax advisers for more information
regarding the Federal, foreign, state, and local tax treatment of such
shareholder with respect to its own tax situation. For more information
concerning taxes, see "Tax Information" in the SAI.
SHAREHOLDER REPORTS
Shareholders will receive annual and semi-annual reports which include
financial statements showing the results of operations, investment portfolio
and other information of the Fund and Portfolio. Shareholders will also
receive annual tax statements indicating the tax status of distributions made
during the year. Confirmations of transactions will be sent to shareholders
following purchases, redemptions or exchanges by the shareholder, and
quarterly statements of account will be sent to all shareholders.
22
