<PAGE>
As filed with the Securities and Exchange Commission on March 28, 1996
File Nos. 2-84012; 811-3752
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 36 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 38 /X/
------------------------
THE MANAGERS FUNDS
(Exact name of Registrant as Specified in Charter)
40 Richards Avenue, Norwalk, Connecticut 06854
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 855-2254
copy to:
Donald S. Rumery Joel H. Goldberg, Esq.
The Managers Funds, L.P. Shereff, Friedman, Hoffman & Goodman, LLP
40 Richards Avenue 919 Third Avenue
Norwalk, Connecticut 06854 New York, New York 10022
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on April 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Proposed Proposed
Securities Amount of Units Maximum Maximum Amount of
Being Being Offering Price Per Aggregate Registration
Registered Registered Unit Offering Price* Fee
- ---------- ---------- ---- --------------- ---
<S> <C> <C> <C> <C>
Units of beneficial 12,524,572 $23.97 $290,000 $100.00
interest (no par
value)
</TABLE>
This calculation has been made pursuant to Rule 24e-2 under the Investment
Company Act of 1940. The average price per unit of the Registrant's ten series
as of March 15, 1996 was $23.97. This number was utilized in the
above-referenced calculation in accordance with Rule 457(d) of the Securities
Act of 1933. Registrant, during its fiscal year ended December 31, 1995 (and
with respect to Managers Money Market Fund, November 30, 1995), redeemed or
repurchased 12,512,472 units (including 6,196,139 from Managers Money Market
Fund) which are being registered in accordance with Rule 24e-2. No previous
filing during Registrant's current fiscal years has utilized such redeemed or
repurchased units for purposes of a reduction in registration fee. 12,100
additional units (including 1,210 for Managers Money Market Fund) are being
registered for $100.00.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has previously elected to register an indefinite number of its shares of
beneficial interest. The Registrant filed a notice under such Rule for its
fiscal year ended December 31, 1995 on February 26, 1996, and with respect to
Managers Money Market Fund, for its fiscal year ended November 30, 1995 on
January 25, 1996.
<PAGE>
THE MANAGERS FUNDS
POST-EFFECTIVE AMENDMENT NO. 35
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
<TABLE>
<CAPTION>
Form N-1A Item Location
- --------------------------------------------- --------
<S> <C>
PART A -- PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis. . . . . . . . . . . Illustrative Expense Information;
Summary
Item 3. Condensed Financial
Information . . . . . . . . . Illustrative Expense Information;
Financial Highlights
Item 4. General Description of
Registrant. . . . . . . . . . Summary; Investment Objectives,
Policies and Restrictions (Equity
Funds, Income Funds); Investment Objectives and Policies
(Money Market Fund); Certain
Investment Techniques and
Associated Risks; Additional Investment Information and
Risk Factors (Money Maket Fund); Investment Restrictions
(Money Market Fund); Portfolio Turnover
Item 5. Management of the Fund. . . . Management of the Funds (Equity Funds and Income Funds);
Management of the Fund and Portfolio (Money Market Fund);
Portfolio Transactions and Brokerage; Special Information
Concerning Hub and Spoke (Money Market Fund)
Item 5A. Management's Discussion of
Fund Performance. . . . . . . Not Applicable
Item 6. Capital Stock and
Other Securities. . . . . . . Purchase and Redemption of Fund
Shares; Description of Shares,
Voting Rights and Liabilities; Tax
Information
Item 7. Purchase of Securities
Being Offered . . . . . . . . Purchase and Redemption of Fund
Shares
Item 8. Redemption or Repurchase. . . Purchase and Redemption of Fund
Shares
Item 9. Pending Legal Proceedings . . Description of Shares, Voting Rights and Liabilities
<PAGE>
Form N-1A Item Location
- --------------------------------------------- --------
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page. . . . . . . . . . Cover Page
Item 11. Table of Contents . . . . . . Table of Contents
Item 12. General Information and
History . . . . . . . . . . . Other Information
Item 13. Investment Objectives
and Policies. . . . . . . . . Investment Restrictions; Investment Objectives and Policies
(Money Market Fund); Portfolio
Turnover; Other Information
Item 14. Management of the Fund. . . . Trustees and Officers
Item 15. Control Persons and
Principal Holders
of Securities . . . . . . . . Trustees and Officers; Control
Persons and Principal Holders of
Securities
Item 16. Investment Advisory
and Other Services. . . . . . Management of the Funds; Fund Management
Agreement; Asset Manager Profiles; Investment Advisor
(Money Market Fund)
Item 17. Brokerage Allocation and
Other Practices . . . . . . . Portfolio Securities Transactions
Item 18. Capital Stock and
Other Securities. . . . . . . Control Persons and Principal
Holders of Securities
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . . . . Net Asset Value
Item 20. Tax Status. . . . . . . . . . Tax Information
Item 21. Underwriters. . . . . . . . . Administrative Services; Distribution
Agreements; Portfolio Administrator and Distributor
(Money Market Fund)
Item 22. Calculation of Performance
Data . . . . . . . . . . . . Performance Information; Performance Data (Money
Market Fund)
Item 23. Financial Statements. . . . . Financial Statements
</TABLE>
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
APRIL 1, 1996
EQUITY FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with ten different series (each, a "Fund" and collectively,
the "Funds"). Each Fund has distinct investment objectives and strategies. The
Funds' investment portfolios are managed by asset managers selected, subject to
the review and approval of the Trustees of the Trust, by The Managers Funds,
L.P. (the "Manager"). The Manager is also responsible for administering the
Trust and the Funds. This Prospectus describes the following Funds (the "Equity
Funds"):
MANAGERS CAPITAL APPRECIATION FUND--(the "Capital Appreciation Fund") seeks
long-term capital appreciation as its primary objective and income as its
secondary objective.
MANAGERS SPECIAL EQUITY FUND--(the "Special Equity Fund") seeks capital
appreciation by investing primarily in the securities of small to medium
capitalization companies expected to have superior earnings growth potential.
MANAGERS INCOME EQUITY FUND--(the "Income Equity Fund") seeks a high level
of current income by investing primarily in income producing equity securities.
MANAGERS INTERNATIONAL EQUITY FUND--(the "International Equity Fund") seeks
long-term capital appreciation as its primary objective and income as its
secondary objective by investing primarily in non-U.S. equity securities.
This Prospectus sets forth concisely the information concerning the Trust
and the Equity Funds 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 Funds 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.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES OF THE TRUST ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
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>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Illustrative Expense Information............................................. 3
Summary...................................................................... 4
Financial Highlights......................................................... 5
Investment Objectives, Policies and Restrictions............................. 10
Certain Investment Techniques and Associated Risks........................... 12
Portfolio Turnover........................................................... 16
Purchase and Redemption of Fund Shares....................................... 17
Management of the Funds...................................................... 24
Portfolio Transactions and Brokerage......................................... 28
Performance Information...................................................... 28
Description of Shares, Voting Rights and Liabilities......................... 29
Tax Information.............................................................. 31
Shareholder Reports.......................................................... 32
</TABLE>
2
<PAGE>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning annual
operating expenses of the Equity Funds. The Funds impose 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.
EQUITY FUNDS' ANNUAL OPERATING EXPENSES: (based on average daily net assets
during fiscal 1995)
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
FUND MANAGEMENT FEE EXPENSES* EXPENSES
- ---------------------------------------------- --------------- ------------- -------------
<S> <C> <C> <C>
Capital Appreciation Fund..................... 0.80% 0.56% 1.36%
Special Equity Fund........................... 0.90% 0.54% 1.44%
Income Equity Fund............................ 0.75% 0.70% 1.45%
International Equity Fund..................... 0.90% 0.68% 1.58%
</TABLE>
- ---------
*Other expenses reflect the expenses actually incurred by each Fund during the
year ended December 31, 1995. See "Management of the Funds-- Administration and
Shareholder Servicing; Distributor."
EXAMPLES
An investor would pay the following expenses on a $1,000 investment in the
respective Equity Funds 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
Funds do not charge any redemption fees or deferred sales loads of any kind.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Capital Appreciation Fund...................... $ 14 $ 43 $ 74 $ 164
Special Equity Fund............................ 15 46 79 172
Income Equity Fund............................. 15 46 79 174
International Equity Fund...................... 16 50 86 188
</TABLE>
3
<PAGE>
SUMMARY
GENERAL DESCRIPTION OF THE TRUST AND THE FUNDS
The Trust is a no-load, open-end, management investment company organized as
a Massachusetts business trust, composed of the following ten separate series:
<TABLE>
<S> <C>
Managers Capital Appreciation Fund Managers Short and Intermediate Bond Fund
Managers Special Equity Fund Managers Intermediate Mortgage Fund
Managers Income Equity Fund Managers Bond Fund
Managers International Equity Fund Managers Global Bond Fund
Managers Short Government Fund Managers Money Market Fund.
</TABLE>
This Prospectus relates to the Equity Funds. A Prospectus for the other
Funds (the "Income Funds" and the Money Market Fund) 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.
MANAGEMENT
The Trust is governed by the Trustees, who provide broad supervision over
the affairs of the Trust and the Funds. The Manager provides investment
management and administrative services for the Trust and the Funds. The assets
of each Fund are managed by one or more asset managers (each, an "Asset Manager"
and collectively, the "Asset Managers") selected, subject to the review and
approval of the Trustees, by the Manager. The assets of each Fund are allocated
by the Manager among the Asset Managers selected for that Fund. Each Asset
Manager has discretion, subject to oversight by the Manager and the Trustees, to
purchase and sell portfolio assets, consistent with each Fund's investment
objectives, policies and restrictions and the specific investment strategies
developed by the Manager. For its services, the Manager receives a management
fee from each Fund. A portion of the fee paid to the Manager is used by the
Manager to pay the advisory fees of the Asset Managers. See "Management of the
Funds" for more detailed information.
SPECIAL RISKS
There are certain risks associated with the investment policies of each of
the Equity Funds. For instance, to the extent that a Fund invests in the
securities of small to medium sized (by market capitalization) companies,
4
<PAGE>
or financial instruments related to such securities, the Fund may be exposed to
a higher degree of risk and price volatility because such investments may lack
sufficient liquidity to enable the Fund to effect sales at an advantageous time
or without a substantial drop in price. To the extent that a Fund invests in
securities of non-U.S. issuers or securities denominated or quoted in foreign
currencies, the Fund may face risks that are different from those associated
with investment in domestic U.S. dollar denominated or quoted securities,
including the effects of changes in currency exchange rates, political and
economic developments, the possible imposition of exchange controls,
governmental confiscation or restrictions, less availability of data on
companies and a less well developed securities industry as well as less
regulation of stock exchanges, brokers and issuers. In general, the value of
fixed-income securities will rise when interest rates fall, and fall when
interest rates rise, affecting the net asset value of a Fund. For more details
on the risks associated with certain investment techniques see "Certain
Investment Techniques and Associated Risks." Certain Funds experience high
annual portfolio turnover which may involve correspondingly greater brokerage
commissions and other transaction costs, and certain adverse tax consequences to
shareholders. See "Portfolio Turnover."
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment in the Trust is $2,000 per Fund ($500 for IRA
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 tables present financial highlights for each Equity Fund for
the last ten fiscal periods, or since inception if applicable, through December
31, 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 through December 31, 1995,
and by other accountants for periods prior to 1993, and should be read in
conjunction with such financial statements. See "Financial Statements" in the
SAI.
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- -------------------------------------------------------------------
MANAGERS CAPITAL APPRECIATION FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $23.25 $25.17 $24.67 $23.46
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.09 0.12 0.19 0.08
Net realized and unrealized gain (loss) on
investments 7.62 (0.49) 3.80 2.39
-------- -------- -------- --------
Total from investment operations 7.71 (0.37) 3.99 2.47
-------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.08) (0.12) (0.19) (0.07)
From net realized gain on investments (3.74) (1.39) (3.30) (1.19)
In excess of net realized gain on investments -- (0.04) -- --
-------- -------- -------- --------
Total distributions to shareholders (3.82) (1.55) (3.49) (1.26)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $27.14 $23.25 $25.17 $24.67
-------- -------- -------- --------
-------- -------- -------- --------
- ----------------------------------------------------------------------------------------------
Total Return (b) 33.39% (1.50)% 16.38% 10.50%
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) 1.36% 1.29% 1.18% 1.05%
Ratio of net investment income to average net
assets (a) 0.31% 0.53% 0.74% 0.33%
Portfolio turnover 134% 122% 131% 175%
Net assets at end of period (000's omitted) $83,353 $86,042 $69,358 $56,196
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
MANAGERS SPECIAL EQUITY FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $36.79 $38.90 $36.14 $34.49
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) (0.07) (0.01) 0.02 0.05
Net realized and unrealized gain (loss) on
investments 12.28 (0.76) 6.12 5.35
-------- -------- -------- --------
Total from investment operations 12.21 (0.77) 6.14 5.40
-------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (0.01) (0.05)
Net realized gain on investments (5.66) (1.34) (3.37) (3.70)
-------- -------- -------- --------
Total distributions to shareholders (5.66) (1.34) (3.38) (3.75)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $43.34 $36.79 $38.90 $36.14
-------- -------- -------- --------
-------- -------- -------- --------
- ----------------------------------------------------------------------------------------------
Total Return (b) 33.94% (1.99)% 17.05% 15.64%
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) 1.44% 1.37% 1.26% 1.29%
Ratio of net investment income (loss) to
average net assets (a) (0.16)% (0.06)% 0.07% 0.14%
Portfolio turnover 65% 66% 45% 54%
Net assets at end of period (000's omitted) $118,362 $111,584 $99,032 $53,641
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(a) Does not reflect investment advisory and management fees paid by shareholders directly to
the Manager prior to May 1990.
(b) For periods less than one year, returns are not annualized.
(c) Annualized.
(d) Not annualized.
(e) Calculated using the average shares outstanding during the year.
- -------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED MAY 31,
-------------------------------------------- DECEMBER 31, ---------------------
1991 1990 1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
$19.99 $21.84 $20.10 $17.38 $30.89 $30.55 $23.92
------- ---------- ------- ------- ----------- ------- -------
0.25 0.60 0.91 0.75 0.45 0.81 0.85
6.10 (0.98) 3.47 2.72 (2.37) 2.47 7.20
------- ---------- ------- ------- ----------- ------- -------
6.35 (0.38) 4.38 3.47 (1.92) 3.28 8.05
------- ---------- ------- ------- ----------- ------- -------
(0.27) (0.61) (0.91) (0.75) (0.47) (0.82) (0.83)
(2.61) (0.86) (1.73) -- (11.12) (2.12) (0.59)
-- -- -- -- -- -- --
------- ---------- ------- ------- ----------- ------- -------
(2.88) (1.47) (2.64) (0.75) (11.59) (2.94) (1.42)
------- ---------- ------- ------- ----------- ------- -------
$23.46 $19.99 $21.84 $20.10 $17.38 $30.89 $30.55
------- ---------- ------- ------- ----------- ------- -------
------- ---------- ------- ------- ----------- ------- -------
------------------------------------------------------------------------------------
31.97% (1.98)% 21.05% 19.23% (9.41)% 10.89% 34.39%
------------------------------------------------------------------------------------
1.31% 1.09% 0.38% 0.33% 0.24%(c) 0.17% 0.14%
1.07% 2.80% 4.04% 3.90% 3.22%(c) 2.85% 3.34%
259% 124% 120% 95% 190%(c) 160% 61%
$53,246 $45,801 $52,724 $60,551 $74,245 $135,764 $146,565
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED MAY 31,
-------------------------------------------- DECEMBER 31, -------------------
1991 1990 1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
$24.46 $32.45 $27.04 $22.97 $29.11 $29.56 $23.41
------- ---------- ------- ------- ----------- ------- -------
0.22 0.33 0.54 0.51 0.25 0.42 0.54
11.78 (5.44) 8.57 5.43 (3.67) 2.03 6.24
------- ---------- ------- ------- ----------- ------- -------
12.00 (5.11) 9.11 5.94 (3.42) 2.45 6.78
------- ---------- ------- ------- ----------- ------- -------
(0.23) (0.36) (0.64) (0.40) (0.25) (0.44) (0.53)
(1.74) (2.52) (3.06) (1.47) (2.47) (2.46) (0.10)
------- ---------- ------- ------- ----------- ------- -------
(1.97) (2.88) (3.70) (1.87) (2.72) (2.90) (0.63)
------- ---------- ------- ------- ----------- ------- -------
$34.49 $24.46 $32.45 $27.04 $22.97 $29.11 $29.56
------- ---------- ------- ------- ----------- ------- -------
------- ---------- ------- ------- ----------- ------- -------
----------------------------------------------------------------------------------
49.26% (16.05)% 32.76% 25.26% (12.03)% 7.92% 28.48%
----------------------------------------------------------------------------------
1.30% 1.19% 0.40% 0.60% 0.41%(c) 0.38% 0.48%
0.73% 1.22% 1.65% 1.20% 1.54%(c) 1.58% 2.23%
70% 67% 48% 62% 38%(c) 38% 151%
$40,616 $24,429 $37,316 $28,824 $21,769 $30,441 $29,103
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- -------------------------------------------------------------------
MANAGERS INCOME EQUITY FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $24.90 $27.89 $27.38 $28.62
------- ------- ---------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.87 0.80 0.81 0.99
Net realized and unrealized gain (loss) on
investments 7.47 (0.50) 2.54 1.72
------- ------- ---------- -------
Total from investment operations 8.34 0.30 3.35 2.71
------- ------- ---------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.86) (0.83) (0.76) (0.98)
Net realized gain on investments (3.95) (2.46) (2.08) (2.97)
------- ------- ---------- -------
Total distributions to shareholders (4.81) (3.29) (2.84) (3.95)
------- ------- ---------- -------
NET ASSET VALUE, END OF PERIOD $28.43 $24.90 $27.89 $27.38
------- ------- ---------- -------
------- ------- ---------- -------
- --------------------------------------------------------------------------------------------
Total Return (b) 34.36% 0.99% 12.40% 9.80%
- --------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) 1.45% 1.33% 1.32% 1.20%
Ratio of net investment income to average net
assets (a) 2.85% 3.06% 2.75% 3.52%
Portfolio turnover 36% 46% 41% 41%
Net assets at end of period (000's omitted) $37,807 $48,875 $40,965 $49,648
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
MANAGERS INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1995(E) 1994 1993 1992
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $36.35 $35.92 $26.52 $25.66
------- ------- ---------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a) 0.31 0.16 0.22 0.23
Net realized and unrealized gain (loss) on
investments 5.59 0.56 9.88 0.85
------- ------- ---------- -------
Total from investment operations 5.90 0.72 10.10 1.08
------- ------- ---------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.13) (0.08) (0.29) (0.22)
In excess of net investment income -- -- (0.11) --
From net realized gain on investments (2.15) -- (0.30) --
In excess of net realized gain on
investments -- (0.21) -- --
------- ------- ---------- -------
Total distributions to shareholders (2.28) (0.29) (0.70) (0.22)
------- ------- ---------- -------
NET ASSET VALUE, END OF PERIOD $39.97 $36.35 $35.92 $26.52
------- ------- ---------- -------
------- ------- ---------- -------
- ---------------------------------------------------------------------------------------------
Total Return (b) 16.24% 2.00% 38.20% 4.25%
- ---------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (a) 1.58% 1.49% 1.47% 1.45%
Ratio of net investment income to average net
assets (a) 0.80% 0.60% 0.78% 0.97%
Portfolio turnover 73% 22% 46% 51%
Net assets at end of period (000's omitted) $140,488 $86,924 $62,273 $23,129
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(a) Does not reflect investment advisory and management fees paid by shareholders directly to
the Manager prior to May 1990.
(b) For periods less than one year, returns are not annualized.
(c) Annualized.
(d) Not annualized.
(e) Calculated using the average shares outstanding during the year.
- -------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED MAY 31,
------------------------------------------- DECEMBER 31, --------------------
1991 1990 1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
$24.06 $30.23 $28.17 $23.59 $30.82 $28.25 $23.12
------- ------- ------- ------- ---------- ------- -------
1.11 1.48 1.68 1.45 0.82 1.49 1.48
5.82 (5.30) 4.77 4.84 (5.16) 3.31 5.51
------- ------- ------- ------- ---------- ------- -------
6.93 (3.82) 6.45 6.29 (4.34) 4.80 6.99
------- ------- ------- ------- ---------- ------- -------
(1.20) (1.45) (1.66) (1.43) (0.87) (1.54) (1.43)
(1.17) (0.90) (2.73) (0.28) (2.02) (0.69) (0.43)
------- ------- ------- ------- ---------- ------- -------
(2.37) (2.35) (4.39) (1.71) (2.89) (2.23) (1.86)
------- ------- ------- ------- ---------- ------- -------
$28.62 $24.06 $30.23 $28.17 $23.59 $30.82 $28.25
------- ------- ------- ------- ---------- ------- -------
------- ------- ------- ------- ---------- ------- -------
---------------------------------------------------------------------------------
29.33% (13.04)% 22.24% 26.10% 15.85% 16.95% 31.20%
---------------------------------------------------------------------------------
1.16% 0.80% 0.15% 0.17% 0.14%(c) 0.14% 0.20%
4.00% 5.40% 5.34% 5.47% 4.89%(c) 5.18% 6.20%
64% 57% 23% 26% 35%(c) 36% 33%
$70,077 $80,297 $116,103 $108,149 $108,581 $145,146 $84,986
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVEN MONTHS JANUARY 2, 1986
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED (COMMENCEMENT OF
-------------------------------------- DECEMBER 31, MAY 31, OPERATIONS) TO
1991 1990 1989 1988 1987 1987 MAY 31, 1986
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
$22.09 $26.12 $23.80 $21.74 $35.32 $26.53 $22.84
------- ------- ------- ------- ----------- -------- ------
0.36 0.34 (0.16) 0.02 0.03 0.17 0.15
3.64 (2.85) 3.77 2.12 (3.17) 10.97 3.67
------- ------- ------- ------- ----------- -------- ------
4.00 (2.51) 3.61 2.14 (3.14) 11.14 3.82
------- ------- ------- ------- ----------- -------- ------
(0.36) (0.13) -- (0.08) (0.08) (0.13) (0.13)
-- -- -- -- -- -- --
(0.07) (1.39) (1.29) -- (10.36) (2.22) --
-- -- -- -- -- -- --
------- ------- ------- ------- ----------- -------- ------
(0.43) (1.52) (1.29) (0.08) (10.44) (2.35) (0.13)
------- ------- ------- ------- ----------- -------- ------
$25.66 $22.09 $26.12 $23.80 $21.74 $35.32 $26.53
------- ------- ------- ------- ----------- -------- ------
------- ------- ------- ------- ----------- -------- ------
--------------------------------------------------------------------------------------
18.14% (9.68)% 15.10% 8.89% (11.63)% 44.10% 16.73%
--------------------------------------------------------------------------------------
1.69% 2.33% 2.77% 1.68% 1.20%(c) 0.99 % 1.27 %(c)
1.50 % 1.12 % (0.73 )% 0.12 % 0.28 %(c) 0.59 % 1.15 %(c)
158 % 78 % 117 % 88 % 159 %(c) 188 % 195 %(c)
$14,222 $9,871 $8,974 $7,337 $8,265 $11,613 $7,252
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objectives of a Fund may not be changed without approval of a
majority of the outstanding voting securities of that Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). There is no
assurance that these objectives will be achieved. Investors should refer to the
prospectus section entitled "Certain Investment Techniques and Associated Risks"
and to the "Other Information" section in the SAI for additional portfolio
management discussions and for a description of the ratings mentioned below that
are assigned by Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Group ("Standard & Poor's").
Each Fund is subject to certain investment restrictions which may not be
changed without the approval of the holders of a majority of that Fund's
outstanding voting securities.
The Equity Funds pursue their investment objectives primarily by investing
in "equity securities," which for this purpose consist of common stock,
securities convertible into common stock, such as bonds and preferred stocks,
American Depositary Receipts and securities such as rights and warrants which
permit the holder to purchase equity securities.
To the extent consistent with their investment objectives and policies, the
Equity Funds may also invest in fixed-income securities for current income and
capital preservation. Such fixed-income securities will have a maximum remaining
maturity of fifteen years. The Equity Funds will invest in fixed-income
securities issued by the U.S. government and its agencies and instrumentalities,
or corporate bonds or debentures that are rated not less than Aa by Moody's or
AA by Standard & Poor's, or, in the case of debt securities not rated by Moody's
or Standard & Poor's, of comparable quality as determined by the Asset Manager.
The Equity Funds may also invest in fixed-income securities for capital
appreciation. Fixed-income securities may have a fixed or variable rate. Any or
all of the Funds may at times for defensive purposes temporarily place all or a
portion of their assets in cash, short-term commercial paper, U.S. government
securities, high quality debt securities, including Eurodollar and Yankee Dollar
obligations, and obligations of banks when, in the judgment of the Fund's Asset
Manager, such investments are appropriate in light of economic or market
conditions. See "Other Information--Cash Equivalents" in the SAI. In addition to
these strategies, the International Equity Fund, as a temporary defensive
position policy, may invest in cash equivalents of foreign issuers or
denominated in foreign currencies and foreign government bonds.
10
<PAGE>
MANAGERS CAPITAL APPRECIATION FUND
The Fund's primary investment objective is to seek long-term capital
appreciation and its secondary objective is to seek income by investing in a
diversified portfolio of equity securities.
MANAGERS SPECIAL EQUITY FUND
The Fund's investment objective is to seek capital appreciation by investing
primarily in the equity securities of a diversified group of companies expected
to have superior earnings growth potential. The Fund's investments will tend to
be in the securities of companies having small to medium market capitalizations.
The Fund ordinarily invests at least 65% of its total assets in such equity
securities. In selecting securities for the Fund, the Asset Manager may purchase
securities of companies which are in the early stages of their corporate life
cycle or not yet well recognized, or in more established firms which are
experiencing accelerated earnings growth.
MANAGERS INCOME EQUITY FUND
The Fund's investment objective is to seek a high level of current income
from a diversified portfolio of income-producing equity securities. The Fund
ordinarily invests at least 65% of its total assets in income-producing equity
securities. The Fund does not intend to invest in securities of companies
without proven earnings.
MANAGERS INTERNATIONAL EQUITY FUND
The Fund's primary investment objective is to seek long-term capital
appreciation and its secondary objective is to seek income by investing
primarily in non-U.S. equity securities.
The Fund ordinarily invests at least 65% of its total assets in equity
securities of companies domiciled outside the United States, but up to a
combined total of 35% of its total assets may be invested in equity and
fixed-income securities of U.S. companies when, in the estimation of the Asset
Manager, expected returns from such securities exceed those of non-U.S. equity
securities. The Fund may invest in fixed-income securities denominated in
foreign currencies.
The Fund intends to diversify investments among countries and normally
intends to hold securities of non-U.S. companies in at least three countries.
Investments may be made in companies in developing as well as developed
countries. Currently, the Fund may invest in securities of foreign issuers
located in countries approved by the Fund's Board of Trustees. The
11
<PAGE>
Fund intends to invest in non-U.S. companies whose securities are traded on
exchanges located in the countries in which the issuers are principally based.
For a discussion of the risks associated with investing in foreign securities,
see "Certain Investment Techniques and Associated Risks-- Other
Securities--Foreign Securities."
CERTAIN INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
The following are descriptions of types of securities invested in by the
Equity Funds, certain investment techniques employed by the Funds and risks
associated with utilizing either the securities or the investment techniques.
Unless otherwise indicated, all of the Funds may invest in the indicated
securities and use the indicated investment techniques.
GENERAL RISKS ASSOCIATED WITH EQUITY FUNDS
The Equity Funds are subject to normal market risks. In an attempt to reduce
risk of loss of principal due to changes in the value of individual stocks, each
of the Equity Funds invests in a diversified portfolio of common stocks. Such
diversification does not eliminate all risks and investors should expect the net
asset value of their Equity Fund shares to fluctuate based on market conditions.
The securities of small to medium sized (by market capitalization)
companies, or financial instruments related to such securities, may have a more
limited market than the securities of larger companies. Accordingly, it may be
more difficult to effect sales of such securities at an advantageous time or
without a substantial drop in price than securities of a company with a large
market capitalization and broad trading market. In addition, securities of small
to medium sized companies may have greater price volatility as they are
generally more vulnerable to adverse market factors such as unfavorable economic
reports.
OTHER SECURITIES
FOREIGN SECURITIES. Investments in foreign securities involve risks that
differ from investments in securities of domestic issuers. Such risks may
include political and economic developments, the possible imposition of
withholding taxes, possible seizure or nationalization of assets, the possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the Fund's investments. In addition,
foreign countries may have less well developed securities markets, as well as
less regulation of stock exchanges and brokers and different auditing and
financial reporting standards. Not all foreign
12
<PAGE>
branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements. For additional information regarding the risks associated
with foreign branch issues, see "Other Information--Obligations of Domestic and
Foreign Banks" in the SAI. Investing in the fixed-income markets of developing
countries involves exposure to economies that are generally less diverse and
mature, and to political systems which may be less stable, than those of
developed countries. Foreign securities often trade with less frequency and
volume than domestic securities and therefore may exhibit greater price
volatility. Changes in foreign exchange rates will affect the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
securities that are not readily marketable ("illiquid securities"). These
securities, which may be subject to legal or contractual restrictions on their
resale, may involve a greater risk of loss to those Funds that purchase them.
Securities that are not registered for sale under the Securities Act of 1933, as
amended (the "1933 Act"), but are eligible for resale pursuant to Rule 144A
under the 1933 Act, will not be considered illiquid for purposes of this
restriction if the Asset Manager determines, subject to the review of the
Trustees, that such securities have a readily available market.
REPURCHASE AGREEMENTS. In a repurchase transaction, a Fund purchases a
security from a bank or a broker-dealer and simultaneously agrees to resell that
security to the bank or broker-dealer at an agreed upon price on an agreed-upon
date. The resale price reflects the purchase price plus an agreed upon rate of
interest. In effect, the obligation of the seller to repay the agreed-upon price
is secured by the value of the underlying security, which must at least equal
the repurchase price. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities. No
Fund may invest in repurchase agreements with a maturity of more than seven days
if the aggregate of such investments, along with other illiquid securities,
exceeds the Fund's limits on investments in illiquid securities. For more
information concerning repurchase agreements, see "Other Information--Repurchase
Agreements" in the SAI.
SECURITIES LENDING. Consistent with its investment objective and policies,
each Fund may lend its portfolio securities in order to realize additional
income. Any such loan will be continuously secured by collateral at least equal
in value to the value of the securities loaned. The risk of loss on such
transactions is mitigated because, if a borrower were to default, the
13
<PAGE>
collateral should satisfy the obligation. However, as with other extensions of
secured credit, loans of portfolio securities involve some risk of loss of
rights in the collateral should the borrower fail financially.
SEGREGATED ACCOUNTS. When a Fund has entered into transactions such as
reverse repurchase agreements or certain options, futures and forward
transactions, the Fund will establish a segregated account with its Custodian in
which it will maintain cash, U.S. government securities or other liquid
high-grade debt obligations equal in value to its obligations in respect to such
transaction.
HEDGING TECHNIQUES
Unless otherwise indicated, the Funds' portfolio managers may engage in the
following hedging techniques to seek to hedge all or a portion of a Fund's
assets against market value changes resulting from changes in market values,
interest rates or currency fluctuations. Hedging is a means of offsetting, or
neutralizing, the price movement of an investment by making another investment,
the price of which should tend to move in the opposite direction from the
original investment. The imperfect correlation in price movement between a
hedging instrument and the underlying security, currency, index, futures
contract or other investment may limit the effectiveness of a particular hedging
strategy.
A Fund's ability to establish and close out positions in futures contracts
and options on futures contracts will be subject to the existence of a liquid
secondary market. Although a Fund generally will purchase or sell only those
futures contracts and options thereon for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option or at any
particular time.
OPTIONS. Each Fund may write ("sell") covered put and covered call options
covering the types of financial instruments in which the Fund may invest
(including individual stocks, stock indices, futures contracts, forward foreign
currency exchange contracts and when-issued securities) to provide protection
against the adverse effects of anticipated changes in securities prices. A Fund
may also write covered put options and covered call options as a means of
enhancing its return through the receipt of premiums when the Fund's portfolio
manager determines that the underlying securities, indices or futures contracts
have achieved their potential for appreciation. By writing covered call options,
the Fund foregoes the opportunity to profit from an increase in the market price
of the underlying security, index or futures contract above the exercise price
except insofar as the premium represents such a profit. The risk involved in
writing covered
14
<PAGE>
put options is that there could be a decrease in the market value of the
underlying security, index or futures contract. If this occurred, the option
could be exercised and the underlying security, index or futures contract would
then be sold to the Fund at a higher price than its then current market value. A
Fund will write only "covered" options.
When writing call options, a Fund will be required to own the underlying
financial instrument, index or futures contract or own financial instruments or
indices whose returns are closely correlated with the returns of the financial
instrument, index or futures contract underlying the option. When writing put
options a Fund will be required to segregate with its custodian bank cash and/or
short-term high grade debt securities to meet its obligations under the put. By
covering a put or call option, the Fund's ability to meet current obligations,
to honor redemptions or to achieve its investment objectives may be impaired.
The Fund may also purchase put and call options to provide protection
against adverse price effects from anticipated changes in prevailing securities
prices. The purchase of a put option protects the value or portfolio holdings in
a falling market, while the purchase of a call option protects cash reserves
from a failure to participate in a rising market. In purchasing a call option,
the Fund would be in a position to realize a gain if, during the option period,
the price of the security, index or futures contract increased over the strike
price by an amount greater than the premium paid. It would realize a loss if the
price of the security, index or futures contract decreased, remained the same or
did not increase over the strike price during the option period by more than the
amount of the premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium would represent
a realized loss to the Fund.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, a Fund may treat the securities it
uses as cover for written OTC options as liquid provided it follows a specified
procedure. A Fund may sell OTC options only to qualified dealers who agree that
the Fund may repurchase any OTC options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the amount that the option is "in-the-money" (i.e., current
market value of the underlying security minus the option's strike price). For
more information concerning options transactions, see "Other
Information--Covered Put Options--Covered Call Options," and "--Puts and Calls"
in the SAI.
15
<PAGE>
FUTURES CONTRACTS. A Fund may buy and sell futures contracts as a hedge to
protect the value of the Fund's portfolio against changes in prices of the
financial instruments in which it may invest. There are several risks in using
futures contracts. One risk is that futures prices could correlate imperfectly
with the behavior of cash market prices of the instrument being hedged so that
even a correct forecast of general price trends may not result in a successful
transaction. Another risk is that the Fund's portfolio manager may be incorrect
in its expectation of future prices. There is also a risk that a secondary
market in the instruments that the Fund holds may not exist or may not be
adequately liquid to permit the Fund to close out positions when it desires to
do so. When buying or selling futures contracts the Fund will be required to
segregate cash and/or liquid high-grade debt obligations to meet its obligations
under these types of financial instruments. By so doing, the Fund's ability to
meet current obligations, to honor redemptions or to operate in a manner
consistent with its investment objectives may be impaired. See "Other
Information--Equity Index Futures Contracts" and "--Interest Rate Futures
Contracts" in the SAI.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A Fund's Asset Manager may
attempt to hedge the risk that a particular foreign currency may suffer a
substantial decline against the U.S. dollar by entering into a forward contract
to sell an amount of foreign currency approximating the value of some or all of
the Fund's portfolio securities denominated in such foreign currency. It may
also enter into such contracts to protect against losses resulting from changes
in foreign currency exchange rates between trade and settlement date. Such
contracts will have the effect of limiting any gains to the Fund resulting from
changes in such rates. Losses may also arise due to changes in the value of the
foreign currency or if the counterparty does not perform under the contract. See
"Other Information--Forward Foreign Currency Exchange Contracts" in the SAI.
PORTFOLIO TURNOVER
In carrying out the investment policies described in this Prospectus, each
Fund expects to engage in a substantial number of securities portfolio
transactions, and the rate of portfolio turnover will not be a limiting factor
when an Asset Manager deems it appropriate to purchase or sell securities for a
Fund. High portfolio turnover involves correspondingly greater brokerage
commissions for a Fund investing in Equity Securities and other transaction
costs which are borne directly by a Fund. In addition, high portfolio turnover
may also result in increased short-term capital gains which, when distributed to
shareholders, are treated for federal income tax
16
<PAGE>
purposes as ordinary income. See "Portfolio Transactions and Brokerage" and "Tax
Information." For the Equity Funds' portfolio turnover rates, see "Financial
Highlights."
PURCHASE AND REDEMPTION OF FUND SHARES
HOW TO PURCHASE FUND SHARES
Initial purchases of shares of the Funds, may be made in a minimum amount of
$2,000 per Fund ($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 Manager. There is no
minimum for additional investments, except for telephone Automated Clearing
House ("ACH") purchases.
Investors may purchase shares of the Trust 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 Trust 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 Trust's shares.
For more complete instructions, see the account application.
<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
<CAPTION>
METHOD
-------------------------
<S> <C> <C>
Through your investment Contact your investment Send additional funds to
professional advisor, bank or other your investment
investment professional professional at the
address appearing on your
account statement
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
METHOD
-------------------------
<S> <C> <C>
Direct by mail Send your account Send letter of
application and check instruction and check
(payable to The Managers (payable to The Managers
Funds) to the address Funds) to The Managers
indicated on the Funds
application c/o Boston Financial
Data Service, Inc.
P.O. Box 8517
Boston, MA 02266-8517
Please include your
account # on your check
Direct Federal Funds or Call (800) 252-0682 to Call the Transfer Agent
Bank Wire notify the Transfer at (800) 252-0682 prior
Agent, and instruct your to wiring additional
bank to wire funds to: funds
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 (800) Minimum investment: $100.
252-0682 with
instructions for the
Transfer Agent. Minimum
investment: $100.
</TABLE>
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. From time to
time the Trust's distributor may supply materials to
18
<PAGE>
Registered Investment Advisers to assist them in formulating an investment
program using the Trust for their clients. Such materials are designed to be
used and evaluated by investment professionals, do not contain investment advice
and are not available for distribution to the general public.
Certain investors may purchase or sell Fund shares through broker-dealers or
through other processing organizations who may impose transaction fees or other
charges in connection with providing this service. Shares purchased in this
fashion may be treated as a single account for purposes of the minimum initial
investment. Investors who do not wish to receive the services of a broker-dealer
or processing organization may consider investing directly with the Trust.
Shares held through a broker-dealer or processing organization may be
transferred into the investor's name by contacting the broker-dealer or
processing organization and the Trust's transfer agent. Certain processing
organizations may receive compensation from the Trust's Manager, Administrator
and/or an Asset Manager.
Trust 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 Trust may
limit or suspend the offering of shares of any or all of the Funds at any time
and may refuse, in whole or in part, any order for the purchase of shares.
Purchase orders received by the Trust, c/o Boston Financial Data Services at
the address listed on the back cover of this prospectus, prior to 4:00 p.m.,
Eastern Standard Time, on any business day will receive the offering price
computed that day. Orders received prior to 4:00 p.m. by certain processing
organizations which have entered into special arrangements with the Manager will
receive that day's offering price. The broker-dealer, omnibus processor or
investment professional, is responsible for promptly transmitting orders to the
Trust. The Trust 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 the next business day.
Federal Funds or Bank Wires used to pay for purchase orders must be received
by 3:00 p.m. the following business day, except for certain processing
organizations which have entered into special arrangements with the Trust.
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
19
<PAGE>
corporation or partnership) and endorsed over to a Fund or State Street Bank and
Trust Company will be accepted. To ensure that checks are collected by the
Trust, 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 Trust incurs. For
current shareholders, each Fund can redeem shares from any identically
registered account in such Fund or any other Fund in the Trust as reimbursement
for any loss incurred. The Trust may prohibit or restrict all future purchases
in the Trust 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 Trust's books maintained by the Transfer Agent.
SHARE PRICE AND VALUATION OF SHARES. The net asset value of shares of each
Fund is computed each business day, at the close of trading on the NYSE, and is
the net worth of the Fund (assets minus liabilities) divided by the number of
shares outstanding. Fund securities listed on an exchange are valued on the
basis of the last quoted sale price on the exchange where such securities
principally are traded on the valuation date, prior to the close of trading on
the NYSE, or, lacking any sales, on the basis of the last quoted bid price on
such principal exchange prior to the close of trading on the NYSE.
Over-the-counter securities for which market quotations are readily available
are valued on the basis of the last sale price or, lacking any sales, at the
last quoted bid price on that date prior to the close of trading on the NYSE.
Securities and other instruments for which market quotations are not readily
available are valued at fair value, as determined in good faith and pursuant to
procedures established by the Trustees. For further information, see "Net Asset
Value" in the SAI.
REDEEMING SHARES
Any redemption orders received by the Trust as indicated below before 4:00
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. Redemption orders
received after 4:00 p.m. will be redeemed at the net asset value determined at
the close of trading on the next business 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
20
<PAGE>
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 a Fund will exercise its right to
redeem shareholder accounts will be determined by the Manager on a case-by-case
basis.
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
- ------------------------------------------ ------------------------------------------
<S> <C>
By mail--write to The Managers Send a letter of instruction which
Funds, specifies the name of the Fund, dollar
c/o Boston Financial Data Services, amount or number of shares to be sold,
Inc. your name and account number. This letter
P.O. Box 8517 must be signed by all owners of the shares
Boston, MA 02266-8517 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 Trust at (800)
252-0682.
By contacting your investment professional
By writing a check (Managers Money Market For shareholders who have elected the
Fund shareholders only) checkwriting option with State Street Bank
and Trust Company, as discussed under
"Investor Services-- Checkwriting
Privilege."
</TABLE>
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 per Fund can be made monthly by
shareholders.
21
<PAGE>
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other Funds. Before investing in the Trust's 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 only to shareholders of the Trust's
Money Market Fund. Before investing in the Trust's Money Market Fund,
shareholders must obtain a prospectus from the Trust describing the Money Market
Fund and the conditions and limitations pertaining to this privilege.
Participating shareholders must return a completed signature card and
authorization form, and will be provided a supply of checks. Checks may be drawn
on State Street Bank 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 will be subject to additional charges.
Managers Money Market 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. The exchange privilege permits shareholders of any of
the Funds to exchange their shares for shares of any of the other Funds 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 Income Funds of the Trust before requesting
an exchange into one or more
22
<PAGE>
of those Funds. By requesting an exchange into one of those Funds, shareholders
are deemed to confirm receipt of the prospectus describing the Trust's 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 Manager,
inconsistent with the orderly management of the Funds' portfolios.
THE TRUST AND ITS TRANSFER AGENT WILL EMPLOY REASONABLE PROCEDURES TO VERIFY
THE GENUINENESS OF TELEPHONIC REDEMPTION OR EXCHANGE REQUESTS. IF SUCH
PROCEDURES ARE NOT FOLLOWED, THE TRUST 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 FUNDS MAY BE
LEGALLY OFFERED, AND MAY BE TERMINATED OR MODIFIED BY ONE OR MORE FUNDS AT ANY
TIME UPON 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS. NONE OF THE FUNDS, THE
DISTRIBUTOR, THE TRUST'S CUSTODIAN, OR 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 will normally be paid on the Equity Funds at the frequency
noted in the following table. Income dividends will normally be declared on the
fourth business day prior to the end of the dividend period, payable on the
following business day, to shareholders of record on the day prior to the
declaration date. Distributions of any capital gains will normally be paid
annually in December.
<TABLE>
<CAPTION>
FREQUENCY FUND
- ---------------------------------- ----------------------------------
<S> <C>
Monthly Income Equity
Annually Capital Appreciation, Special
Equity, International Equity
</TABLE>
All dividends and distributions declared by a Fund will be reinvested in
additional shares of the Fund at the net asset value (unless the shareholder has
elected to receive dividends or distributions in cash or invest them in
23
<PAGE>
shares of the Money Market Fund). An election may be changed by delivering
written notice to the Fund at least ten business days prior to the payment date.
MANAGEMENT OF THE FUNDS
TRUSTEES
Information concerning the Trustees, including their names, positions, terms
of office and principal occupations during the past five years, is contained in
the SAI.
INVESTMENT MANAGER
It is the Manager's responsibility to select, subject to review and approval
by the Trustees, the Asset Managers who have distinguished themselves by able
performance in their respective areas of expertise in asset management and to
continuously monitor their performance. The Manager and its corporate
predecessors have had over 20 years of experience in evaluating investment
advisers for individuals and institutional investors. In addition, the Manager
employs the services of a consultant specializing in appraisal and comparison of
investment managers to assist in evaluating asset managers. The Manager is also
responsible for conducting all operations of the Funds except those operations
contracted to the Custodian and to the Transfer Agent.
The Trust has received an exemptive order from the Securities and Exchange
Commission (the "SEC") permitting the Manager, subject to certain conditions, to
enter into sub-advisory agreements with Asset Managers approved by the Trustees
without obtaining shareholder approval. At meetings held on December 5, 1994 and
December 15, 1994, the shareholders of the Funds approved the operation of the
Trust in this manner. The order also permits the Manager, subject to the
approval of the Trustees but without shareholder approval, to employ new Asset
Managers for new or existing Funds, change the terms of particular sub-advisory
agreements or continue the employment of existing Asset Managers after events
that would cause an automatic termination of a sub-advisory agreement. Although
shareholder approval is not required for the termination of sub-advisory
agreements, shareholders of a Fund will continue to have the right to terminate
such agreements for the Fund at any time by a vote of the majority of the
outstanding shares of the Fund. Shareholders will continue to be notified of any
Asset Manager changes.
The following table sets forth the annual management fee rates currently
paid by each Equity Fund, the annual asset management fee rates paid by the
Manager to each Asset Manager for a particular Fund and the
24
<PAGE>
actual management fee paid during fiscal 1995, each expressed as a percentage of
the Fund's average daily net assets. The total management fees for the Capital
Appreciation Fund, the Income Equity Fund, the Special Equity Fund and the
International Equity Fund are higher than those paid by most other mutual funds.
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT FEE
PAID DURING THE
ASSET YEAR ENDED
TOTAL MANAGEMENT DECEMBER 31,
NAME OF FUND MANAGEMENT FEE FEE 1995
- ------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Capital Appreciation Fund...... 0.80% 0.40% 0.80%
Special Equity Fund............ 0.90% 0.50% 0.90%
Income Equity Fund............. 0.75% * 0.75%
International Equity Fund...... 0.90% 0.50% 0.90%
</TABLE>
- ------------------------
* The asset management fee paid to Scudder, Stevens & Clark, Inc. is 0.35% and
to Spare, Kaplan, Bischel & Associates is 0.40%.
ASSET MANAGERS
The following sets forth certain information about each of the Asset
Managers:
CAPITAL APPRECIATION FUND
Dietche & Field Advisers, Inc. ("Dietche")--The firm was formed in November
1984 and is owned by employees of the firm. As of December 31, 1995, assets
under management totaled $5.7 billion. Its address is 437 Madison Avenue, New
York, NY 21022.
Lincoln P. Field is the portfolio manager for the portion of the Capital
Appreciation Fund managed by Dietche. He is President of Dietche and one of the
founders of the firm.
Hudson Capital Advisers ("Hudson")--Hudson commenced operations in January
1987. The firm is a division of Fahnestock Viner Holdings Inc., a publicly held
Canadian company. As of December 31, 1995, assets under management totaled $900
million. Its address is 805 Third Avenue, New York, NY 10022.
Howard W. Shaun is the portfolio manager of the portion of the Capital
Appreciation Fund managed by Hudson. He is a Principal of Hudson, a position
which he has held since 1987.
25
<PAGE>
SPECIAL EQUITY FUND
Liberty Investment Management ("Liberty")--The firm was originally formed in
January 1976 and is currently wholly-owned by Herbert E. Ehlers. As of December
31, 1995, assets under management totaled $5.2 billion. Its address is 2502
Rocky Point Drive, Suite 500, Tampa, FL 33607.
Timothy G. Ebright is the portfolio manager of the portion of the Special
Equity Fund managed by Liberty. He is a Senior Vice President of Liberty, a
position he has held since 1988.
Pilgrim Baxter & Associates ("PBA")--The firm was formed in 1982 and is
owned by United Asset Management, a public company. As of December 31, 1995,
assets under management totaled over $7.1 billion. Its address is 1255 Drummers
Lane, Wayne, PA 19087.
Gary L. Pilgrim is the portfolio manager of the portion of the Special
Equity Fund managed by PBA. He is President and Chief Investment Officer of PBA,
and one of the founders of the original firm.
Westport Asset Management, Inc. ("Westport")--The firm was formed in July
1983 and is owned by Andrew J. Knuth and Ronald H. Oliver. As of December 31,
1995, assets under management totaled $520 million. Its address is 253 Riverside
Avenue, Westport, CT 06880.
Andrew J. Knuth is the portfolio manager of the portion of the Special
Equity Fund managed by Westport. He is the Chairman of Westport, and one of the
founders of the firm.
INCOME EQUITY FUND
Scudder, Stevens & Clark, Inc. ("Scudder")--The investment adviser was
founded in 1919, and was reorganized as a privately held corporation in 1985. As
of December 31, 1995, assets under management totaled $100 billion. Its address
is 345 Park Avenue, New York, NY 10154.
Robert T. Hoffman is the portfolio manager of the portion of the Income
Equity Fund managed by Scudder. He is a Managing Director of Scudder, and has
been with the firm since 1989.
Spare, Kaplan, Bischel & Associates ("SKB")--The firm was formed in August
1989 by a group of investment professionals who were formerly associated with
Merus Capital--The Bank of California, a wholly-owned subsidiary of Mitsubishi
Bank Ltd. As of December 31, 1995, assets under management totaled $2.6 billion.
Its address is 44 Montgomery Street, San Francisco, CA 94104.
26
<PAGE>
Anthony E. Spare is the portfolio manager of the portion of the Income
Equity Fund managed by SKB. He is Chief Investment Officer of SKB, and one of
the founders of the firm.
INTERNATIONAL EQUITY FUND
Scudder, Stevens & Clark, Inc.--See Income Equity Fund for a description.
William E. Holzer is the portfolio manager of the portion of the
International Equity Fund managed by Scudder. He is a Managing Director of
Scudder, a position he has held since 1980.
Lazard, Freres & Co. ("Lazard")--The firm is a New York limited partnership
founded in 1848. As of December 31, 1995, the firm had $20 billion under
management. Its address is One Rockefeller Plaza, New York, NY 10020.
John R. Reinsberg is the portfolio manager of the portion of the
International Equity Fund managed by LFAM. He is a General Partner of Lazard, a
position he has held since 1992. Prior to joining Lazard, he served in a similar
portfolio management capacity with General Electric Investment Co.
ADMINISTRATION AND SHAREHOLDER SERVICING; DISTRIBUTOR; TRANSFER AGENT
ADMINISTRATOR. The Managers Funds, L.P. serves as the Trust's administrator
(the "Administrator") and has overall responsibility, subject to the review of
the Trustees, for all aspects of managing the Trust's operations, including
administration and shareholder services to the Trust, its shareholders and
certain institutions, such as bank trust departments, dealers and registered
investment advisers, that advise or act as an intermediary with the Trust's
shareholders ("Shareholder Representatives"). Since March 1, 1995, the fee paid
to the Administrator has been at the rate of 0.25% per annum of each Equity
Fund's average daily net assets.
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 portfolio holdings 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
Administrator;
27
<PAGE>
(vi) supervising the operations of the Trust's Transfer Agent; and (vii) such
other administrative, shareholder and shareholder related services as the
parties may from time to time agree in writing.
DISTRIBUTOR. The Managers Funds, L.P. serves as distributor of the shares
of the Trust. Its address is 40 Richards Avenue, Norwalk, Connecticut 06854.
TRANSFER AGENT. State Street Bank and Trust Co. serves as the Trust's
Transfer Agent.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Asset Manager is responsible for decisions to buy and sell securities
for each Fund or component of a Fund that it manages, as well as for
broker-dealer selection in connection with such portfolio transactions. In the
case of securities traded on a principal basis, transactions are effected on a
"net" basis, rather than a transaction charge basis, with dealers acting as
principal for their own accounts without a stated transaction charge.
Accordingly, the price of the security may reflect an increase or decrease from
the price paid by the dealer together with a spread between the bid and asked
prices, which provides the opportunity for a profit or loss to the dealer.
Transactions in other securities are effected on a transaction charge basis
where the broker acts as agent and receives a commission in connection with the
trade. In effecting securities transactions, each Asset Manager is responsible
for obtaining best price and execution of orders. The dealer spread or broker's
commission charged in connection with a transaction is a component of price and
is considered together with other relevant factors. Any of the Funds may effect
securities transactions on a transaction charge basis through a broker-dealer
that is an affiliate of the Manager or of one of that Fund's Asset Managers in
accordance with procedures approved by the Trustees. However, no Asset Manager
for a Fund or its affiliated broker-dealer may act as principal in any portfolio
transaction for any Fund with which it is an affiliate, and no affiliate of the
Manager may act as principal in a portfolio transaction for any of the Funds.
PERFORMANCE INFORMATION
From time to time the Funds may advertise "yield" and/or "total return."
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE.
28
<PAGE>
YIELD
The Income Equity Fund may advertise "yield." Yield refers to income
generated by an investment in the Fund during a 30-day (or one month) period.
This income is then annualized. That is, the amount of income generated during
the period is assumed to be generated during each 30-day (or one month) period
over a one-year period and is shown as a percentage of the investment.
TOTAL RETURN
Each of the Funds 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.
A 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.
The Funds' annual reports contain additional performance information and are
available upon request without charge.
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 Prospectus. 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 Fund are entitled to one vote per share. Shareholders have
the right to vote on the election of the Trustees and on all other 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 Funds and affecting all
Funds in the same manner, shareholders of all Funds are entitled to vote. On any
matters affecting only one Fund, only the shareholders of that Fund are entitled
to vote. On matters relating to all the Funds but affecting the Funds
differently, separate votes by Fund are required.
29
<PAGE>
The Trust and its Funds 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 a Fund upon written
request of the holders of at least 10% of that 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 Manager 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 Manager, Robert P. Watson, Piper Capital Management, Inc., its parent
company, Worth Bruntjen and Evaluation Associates, Inc. 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
this action 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 funds 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.
30
<PAGE>
As of March 1, 1996, Huntington National Bank owned more than 25% of the
shares of the Special Equity Fund and Resource Bank and Trust Company owned more
than 25% of the shares of the Capital Appreciation Fund and Special Equity Fund.
TAX INFORMATION
THE FUNDS
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), under which each Fund is regarded as a separate regulated
investment company.
All dividends and distributions designated as capital gains are generally
taxable to shareholders whether received in cash or additional shares. If for
any taxable year a Fund complies with certain requirements, then some or all of
the dividends (excluding capital gain dividends) payable out of income of the
Fund that are attributable to dividends received from domestic corporations, may
qualify for the 70% dividends-received deduction available to corporations.
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, each 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.
Shareholders should consult their own tax advisers for more information
regarding the Federal, foreign, state, and local tax treatment with respect to
their own tax situation. For more information concerning taxes, see "Tax
Information" in the SAI.
31
<PAGE>
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 Funds in which they have invested. 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.
32
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
DATED APRIL 1, 1996
INCOME FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with ten different series (each, a "Fund" and collectively,
the "Funds"). Each Fund has distinct investment objectives and strategies. The
Funds' investment portfolios are managed by asset managers selected, subject to
the review and approval of the Trustees of the Trust, by The Managers Funds,
L.P. (the "Manager"). The Manager is also responsible for administering the
Trust and the Funds. This Prospectus describes the following five Funds (the
"Income Funds"):
MANAGERS SHORT GOVERNMENT FUND--(the "Short Government Fund") seeks high
current income while preserving capital by investing primarily in U.S.
government securities with an average maturity not exceeding three years.
MANAGERS SHORT AND INTERMEDIATE BOND FUND--(the "Short and Intermediate Bond
Fund") seeks high current income by investing in a portfolio of fixed-income
securities with an average portfolio maturity between one and five years.
MANAGERS INTERMEDIATE MORTGAGE FUND--(the "Intermediate Mortgage Fund")
seeks high current income by investing primarily in mortgage-related securities.
MANAGERS BOND FUND--(the "Bond Fund") seeks income by investing primarily in
fixed-income securities.
MANAGERS GLOBAL BOND FUND--(the "Global Bond Fund") seeks high total return,
through both income and capital appreciation, by investing primarily in domestic
and foreign fixed-income securities.
This Prospectus sets forth concisely the information concerning the Trust
and the Income Funds 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 Funds 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.
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES OF THE TRUST ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
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>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Illustrative Expense Information............................................. 3
Summary...................................................................... 4
Financial Highlights......................................................... 5
Investment Objectives, Policies and Restrictions............................. 11
Certain Investment Techniques and Associated Risks........................... 17
Portfolio Turnover........................................................... 26
Purchase and Redemption of Fund Shares....................................... 26
Management of the Funds...................................................... 33
Portfolio Transactions and Brokerage......................................... 36
Performance Information...................................................... 37
Description of Shares, Voting Rights and Liabilities......................... 38
Tax Information.............................................................. 39
Shareholder Reports.......................................................... 40
</TABLE>
2
<PAGE>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning annual
operating expenses of the Income Funds. The Funds impose 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.
INCOME FUNDS' ANNUAL OPERATING EXPENSES: (BASED ON AVERAGE DAILY NET ASSETS
DURING FISCAL 1995, AFTER EXPENSE REIMBURSEMENTS)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FUND FEE* EXPENSES** EXPENSES**
- -------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
Short Government Fund....................... 0.20 % 1.00 % 1.20 %
Short and Intermediate Bond Fund............ 0.50 % 1.00 % 1.50 %
Intermediate Mortgage Fund.................. 0.45 % 0.72 % 1.17 %
Bond Fund................................... 0.625 % 0.715 % 1.34 %
Global Bond Fund............................ 0.70 % 0.99 % 1.69 %
</TABLE>
- ---------
* The management fees reflect the fees payable by each Fund under the current
investment advisory agreements, except that in the case of the Short
Government Fund, the management fee also reflects a voluntary fee waiver by
the Manager. In the absence of such waiver, the management fee for this Fund
would be 0.45%.
** Other operating expenses reflect the expenses actually incurred by each Fund
during the year ended December 31, 1995, except for Global Bond Fund where
such expenses have been restated to reflect administrative fees currently in
effect for that Fund. With respect to the Short Government Fund, where no
administrative fee is currently being charged, such expenses reflect
voluntary fee waivers of administrative fees by the Manager. In the absence
of such waivers, other expenses would be 1.20% and the total operating
expenses would be 1.65%. See "Management of the Funds-Administration and
Shareholder Servicing; Distributor."
THESE FEE WAIVERS MAY BE MODIFIED OR TERMINATED AT ANYTIME AT THE SOLE
DISCRETION OF THE MANAGER. SHAREHOLDERS WILL BE NOTIFIED OF ANY SUCH
MODIFICATION OR TERMINATION AT THE TIME IT BECOMES EFFECTIVE.
EXAMPLES
An investor would pay the following expenses on a $1,000 investment in the
respective Income Funds 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
Funds do not charge any redemption fees or deferred sales loads of any kind.
3
<PAGE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Short Government Fund.......................... $ 12 $ 38 $ 66 $ 145
Short and Intermediate Bond Fund............... 15 47 82 179
Intermediate Mortgage Fund..................... 12 37 64 142
Bond Fund...................................... 14 42 73 161
Global Bond Fund............................... 17 53 92 200
</TABLE>
SUMMARY
GENERAL DESCRIPTION OF THE TRUST AND THE FUNDS
The Trust is a no-load, open-end, management investment company organized as
a Massachusetts business trust, composed of the following ten separate series:
<TABLE>
<S> <C>
Managers Capital Appreciation Fund Managers Short and Intermediate Bond Fund
Managers Special Equity Fund Managers Intermediate Mortgage Fund
Managers Income Equity Fund Managers Bond Fund
Managers International Equity Fund Managers Global Bond Fund
Managers Short Government Fund Managers Money Market Fund.
</TABLE>
This Prospectus relates to the Income Funds. A Prospectus for the other
Funds (the "Equity Funds" and the Money Market Fund) 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.
MANAGEMENT
The Trust is governed by the Trustees, who provide broad supervision over
the affairs of the Trust and the Funds. The Manager provides investment
management and administrative services for the Trust and the Funds. The assets
of each Fund are managed by one or more asset managers (each, an "Asset Manager"
and collectively, the "Asset Managers") selected, subject to the review and
approval of the Trustees, by the Manager. The assets of each Fund are allocated
by the Manager among the Asset Managers selected for that Fund. Each Asset
Manager has discretion, subject to oversight by the Manager and the Trustees, to
purchase and sell portfolio assets, consistent with each Fund's investment
objectives, policies and restrictions and the specific investment strategies
developed by the Manager. For its services, the Manager receives a management
fee from each Fund. A portion of the fee paid to the Manager is used by the
Manager to pay the advisory fees of the Asset Managers. See "Management of the
Funds" for more detailed information.
4
<PAGE>
SPECIAL RISKS
There are certain risks associated with the investment policies of each of
the Income Funds. For instance, to the extent that a Fund invests in securities
of non-U.S. issuers or denominated or quoted in foreign currencies, the Fund may
face risks that are different from those associated with investment in domestic
U.S. dollar denominated or quoted securities, including the effects of changes
in currency exchange rates, political and economic developments, the possible
imposition of exchange controls, governmental confiscation or restrictions, less
availability of data on companies and a less well developed securities industry
as well as less regulation of stock exchanges, brokers and issuers. To the
extent that a Fund invests in municipal obligations, the Fund is vulnerable to
the economic, business or political developments that might affect particular
municipal issuers or municipal obligations of a particular type. To the extent
that a Fund invests in mortgage-related or asset-backed securities, a loss could
be incurred if the payments or prepayments on those securities are made at rates
other than those anticipated at the time of purchase, or if the collateral
backing the securities is insufficient. In general, the value of fixed-income
securities, and consequently the Funds' net asset values, will rise when
interest rates fall, and fall when interest rates rise, affecting the net asset
value of a Fund. For more details on the risks associated with certain
securities and investment techniques see "Certain Securities and Investment
Techniques and Associated Risks." Certain Funds experience high annual portfolio
turnover which may involve correspondingly greater brokerage commissions and
other transaction costs, and certain adverse tax consequences to shareholders.
See "Portfolio Turnover."
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment is $2,000 per Fund ($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 tables present financial highlights for each Income Fund for
the last eleven fiscal periods, or since inception, if applicable, through
December 31, 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
through December 31, 1995, and by other accountants prior to 1993, and should be
read in conjunction with such financial statements. See "Financial Statements"
in the SAI.
5
<PAGE>
FINANCIAL HIGHLIGHTS (For a share of beneficial interest outstanding throughout
each period)
- -------------------------------------------------------------------
MANAGERS SHORT GOVERNMENT FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995(D) 1994 1993 1992
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $16.96 $19.35 $19.86 $20.35
---------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.98 0.86 1.28 1.26
Net realized and unrealized gain (loss) on
investments 0.63 (2.01) (0.53) (0.49)
---------- -------- ------- -------
Total from investment operations 1.61 (1.15) 0.75 0.77
---------- -------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.50) (1.17) (1.26) (1.26)
In excess of net investment income (0.31) (0.07) -- --
---------- -------- ------- -------
Total distributions to shareholders (0.81) (1.24) (1.26) (1.26)
---------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.76 $16.96 $19.35 $19.86
---------- -------- ------- -------
---------- -------- ------- -------
- --------------------------------------------------------------------------------------------
Total Return (b)(e) 9.71% (6.18)% 3.81% 3.90%
- --------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets
(a) 1.25% 0.97% 0.87% 0.76%
Ratio of net investment income to average net
assets (a) 5.62% 7.06% 8.71% 6.24%
Portfolio turnover 238% 140% 189% 168%
Net assets at end of period (000's omitted) $5,836 $10,263 $87,874 $142,874
- --------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver (f) 1.65% 1.03% 0.96% 0.83%
Ratio of net investment income to average net
assets, absent waiver (f) 5.22% 7.00% 8.62% 6.17%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
MANAGERS SHORT AND INTERMEDIATE BOND FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $18.06 $21.23 $20.89 $20.33 $19.43
---------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 1.28 1.45 1.38 1.69 1.50
Net realized and unrealized gain
(loss) on investments 1.45 (3.17) 0.34 0.57 0.88
---------- -------- ------- ------- -------
Total from investment
operations 2.73 (1.72) 1.72 2.26 2.38
---------- -------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.09) (1.37) (1.38) (1.70) (1.48)
In excess of net investment
income (0.03) (0.08) -- -- --
---------- -------- ------- ------- -------
Total distributions to
shareholders (1.12) (1.45) (1.38) (1.70) (1.48)
---------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $19.67 $18.06 $21.23 $20.89 $20.33
---------- -------- ------- ------- -------
---------- -------- ------- ------- -------
- ----------------------------------------------------------------------------------------------
Total Return (b)(e) 15.57% (8.37)% 8.49% 11.55% 12.78%
- ----------------------------------------------------------------------------------------------
Ratio of net expenses to average
net assets (a) 1.50% 1.05% 0.94% 0.86% 0.96%
Ratio of net investment income to
average net assets (a) 6.52% 7.11% 6.58% 8.33% 7.41%
Portfolio turnover 131% 57% 126% 117% 536%
Net assets at end of period (000's
omitted) $25,241 $30,956 $112,228 $72,031 $52,168
- ----------------------------------------------------------------------------------------------
Ratio of total expenses to average
net assets, absent waiver (f) N/A N/A N/A N/A 1.00%
Ratio of net investment income to
average net assets, absent waiver
(f) N/A N/A N/A N/A 7.37%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(a) Does not reflect investment advisory and management fees paid by shareholders directly to
the Manager for periods prior to May 1990.
(b) For periods less than one year, returns are not annualized.
(c) Annualized.
- -------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 15, 1987
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
------------------------------------------ DECEMBER 31,
1991 1990 1989 1988 1987
<S> <C> <C> <C> <C>
-------------------------------------------------------------
$19.86 $19.96 $19.85 $20.06 $20.00
------- ------- ------- ------- -------------
1.58 1.42 1.65 1.42 0.29
0.49 (0.03) 0.11 (0.21) (0.01)
------- ------- ------- ------- -------------
2.07 1.39 1.76 1.21 0.28
------- ------- ------- ------- -------------
(1.58) (1.49) (1.65) (1.42) (0.22)
-- -- -- -- --
------- ------- ------- ------- -------------
(1.58) (1.49) (1.65) (1.42) (0.22)
------- ------- ------- ------- -------------
$20.35 $19.86 $19.96 $19.85 $20.06
------- ------- ------- ------- -------------
------- ------- ------- ------- -------------
-------------------------------------------------------------
10.82% 7.07% 8.68% 5.90% 1.29%
-------------------------------------------------------------
0.58% 1.01% 0.56% 0.44% 1.82%(c)
6.08% 6.78% 8.34% 7.30% 6.77%(c)
84% 183% 235% 232% 578%(c)
$144,042 $27,683 $10,438 $27,056 $9,109
-------------------------------------------------------------
0.59% 2.84% N/A N/A N/A
8.25% 8.35% N/A N/A N/A
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED MAY 31,
--------------------------------- DECEMBER 31, ---------------------
1990 1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
$19.69 $19.32 $19.82 $19.89 $21.56 $21.59
------- ------- ------- ---------- ------- -------
1.57 1.70 1.70 1.02 1.80 2.08
(0.19) 0.37 (0.48) (0.06) (0.58) 0.58
------- ------- ------- ---------- ------- -------
1.38 2.07 1.22 0.96 1.22 2.66
------- ------- ------- ---------- ------- -------
(1.64) (1.70) (1.71) (1.03) (1.80) (2.09)
-- -- (0.01) -- (1.09) (0.60)
------- ------- ------- ---------- ------- -------
(1.64) (1.70) (1.72) (1.03) (2.89) (2.69)
------- ------- ------- ---------- ------- -------
$19.43 $19.69 $19.32 $19.82 $19.89 $21.56
------- ------- ------- ---------- ------- -------
------- ------- ------- ---------- ------- -------
------------------------------------------------------------------------
7.22% 10.61% 5.79% 4.67% 5.41% 12.70%
------------------------------------------------------------------------
0.56% 0.12% 0.10% 0.10%(c) 0.10% 0.09%
8.05% 8.81% 8.61% 9.00%(c) 8.70% 9.87%
477% 202% 348% 254%(c) 308% 274%
$115,223 $152,106 $192,706 $211,909 $221,298 $173,681
------------------------------------------------------------------------
0.58% N/A N/A N/A N/A N/A
%
8.03 N/A N/A N/A N/A N/A
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(d) Calculated using average shares outstanding method.
(e) Total return would have been lower had certain expenses not been reduced during the year.
(f) Ratio information assuming no fee waivers or reimbursements had been in effect during the
year.
(g) Not annualized.
- -------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
FINANCIAL HIGHLIGHTS (For a share of beneficial interest outstanding throughout
each period)
- -------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $14.20 $20.65 $21.13 $21.77
---------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.93 1.52 1.94 2.58
Net realized and unrealized gain (loss)
on investments 1.45 (6.56) 0.44 (0.40)
---------- -------- ------- -------
Total from investment operations 2.38 (5.04) 2.38 2.18
---------- -------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.03) (1.41) (2.28) (2.40)
In excess of net investment income (0.01) -- -- --
From net realized gain on investments -- -- (0.51) (0.42)
In excess of net realized gain on
investments -- -- (0.07) --
---------- -------- ------- -------
Total distributions to shareholders (1.04) (1.41) (2.86) (2.82)
---------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $15.54 $14.20 $20.65 $21.13
---------- -------- ------- -------
---------- -------- ------- -------
- ------------------------------------------------------------------------------------------
Total Return (b)(e) 17.27% (25.00)% 11.45% 10.50%
- ------------------------------------------------------------------------------------------
Ratio of net expenses to average net
assets (a) 1.17% 0.85% 0.75% 0.79%
Ratio of net investment income to average
net assets (a) 6.33% 8.37% 8.90% 11.30%
Portfolio turnover 506% 240% 253% 278%
Net assets at end of period (000's
omitted) $40,022 $55,986 $271,861 $115,885
- ------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver (f) N/A 0.92% 0.82% 0.84%
Ratio of net investment income to average
net assets, absent waiver (f) N/A 8.30% 8.83% 11.25%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
MANAGERS BOND FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993 1992
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $18.92 $22.18 $21.88 $22.60
---------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 1.44 1.59 1.49 1.48
Net realized and unrealized gain
(loss) on investments 4.23 (3.16) 0.98 0.23
---------- -------- ------- -------
Total from investment
operations 5.67 (1.57) 2.47 1.71
---------- -------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (1.46) (1.55) (1.50) (1.48)
Net realized gain on investments -- (0.14) (0.67) (0.95)
---------- -------- ------- -------
Total distributions to
shareholders (1.46) (1.69) (2.17) (2.43)
---------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $23.13 $18.92 $22.18 $21.88
---------- -------- ------- -------
---------- -------- ------- -------
- ----------------------------------------------------------------------------------
Total Return (b) 30.91% (7.25)% 11.56% 7.88%
- ----------------------------------------------------------------------------------
Ratio of net expenses to average
net assets (a) 1.34% 1.20% 1.15% 0.93%
Ratio of net investment income to
average net assets (a) 6.84% 7.28% 6.65% 6.61%
Portfolio turnover 46% 84% 373% 292%
Net assets at end of period (000's
omitted) $26,376 $30,760 $44,038 $39,117
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(a) Does not reflect investment advisory and management fees paid by shareholders
directly to the Manager for periods prior to May 1990.
(b) For periods less than one year, returns are not annualized.
(c) Annualized.
----------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 15, 1986
SEVEN MONTHS (COMMENCEMENT OF
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OPERATIONS) TO
-------------------------------------------- DECEMBER 31, MAY 31, MAY 31,
1991 1990 1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
$20.31 $20.19 $19.24 $19.68 $19.80 $19.62 $20.00
------- ------- ------- ------- ---------- -------- -----------
2.03 1.80 1.87 1.90 1.13 1.91 0.07
1.48 0.17 0.94 (0.43) (0.13) 0.17 (0.45)
------- ------- ------- ------- ---------- -------- -----------
3.51 1.97 2.81 1.47 1.00 2.08 (0.38)
------- ------- ------- ------- ---------- -------- -----------
(2.05) (1.85) (1.86) (1.91) (1.12) (1.90) --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
------- ------- ------- ------- ---------- -------- -----------
(2.05) (1.85) (1.86) (1.91) (1.12) (1.90) --
------- ------- ------- ------- ---------- -------- -----------
$21.77 $20.31 $20.19 $19.24 $19.68 $19.80 $19.62
------- ------- ------- ------- ---------- -------- -----------
------- ------- ------- ------- ---------- -------- -----------
-------------------------------------------------------------------------------------------
18.18% 10.19% 14.69% 7.38% 4.97% 10.02% (1.90)%
-------------------------------------------------------------------------------------------
0.69% 0.55% 0.19% 0.22% 0.19%(c) 0.26% 1.92%(c)
9.91% 9.06% 9.44% 9.66% 9.92%(c) 9.46% 8.40%(c)
172% 161% 144% 149% 151%(c) 202% --
$165,358 $119,118 $102,229 $81,222 $71,376 $86,325 $7,308
-------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A N/A N/A
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED MAY 31,
----------------------------------------- DECEMBER 31, ---------------------
1991 1990 1989 1988 1987 1987 1986
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
$20.95 $21.34 $20.54 $20.60 $21.61 $23.63 $22.22
------- ------- ------- ------- ----------- -------- -------
1.70 1.88 1.93 1.80 1.06 2.03 2.20
2.12 (0.33) 0.79 (0.05) (0.09) (0.43) 1.99
------- ------- ------- ------- ----------- -------- -------
3.82 1.55 2.72 1.75 0.97 1.60 4.19
------- ------- ------- ------- ----------- -------- -------
(1.72) (1.94) (1.92) (1.81) (1.07) (2.02) (2.20)
(0.45) -- -- -- (0.91) (1.60) (0.58)
------- ------- ------- ------- ----------- -------- -------
(2.17) (1.94) (1.92) (1.81) (1.98) (3.62) (2.78)
------- ------- ------- ------- ----------- -------- -------
$22.60 $20.95 $21.34 $20.54 $20.60 $21.61 $23.63
------- ------- ------- ------- ----------- -------- -------
------- ------- ------- ------- ----------- -------- -------
---------------------------------------------------------------------------------
19.04% 7.53% 13.10% 8.03% 4.41% 5.97% 19.61%
---------------------------------------------------------------------------------
1.02% 0.84% 0.26% 0.44% 0.29%(c) 0.25% 0.32%
7.82% 8.98% 9.37% 8.63% 8.91%(c) 8.50% 9.72%
182% 64% 94% 90% 101%(c) 154% 110%
$36,659 $31,648 $46,028 $31,241 $27,529 $35,496 $31,251
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(d) Not annualized.
(e) Total return would have been lower had certain expenses not been reduced
during the year.
(f) Ratio information assuming no fee waivers or reimbursements had been in
effect during the year.
----------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
FINANCIAL HIGHLIGHTS (For a share of beneficial interest outstanding throughout
each period)
- -------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 25, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
<S> <C> <C>
- ------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.10 $20.00
------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.95 0.48
Net realized and unrealized gain (loss) on
investments 2.66 (0.77)
------------- --------------
Total from investment operations 3.61 (0.29)
------------- --------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.93) (0.50)
In excess of net investment income (0.04) (0.11)
------------- --------------
Total distributions to shareholders (0.97) (0.61)
------------- --------------
NET ASSET VALUE, END OF PERIOD $21.74 $19.10
------------- --------------
------------- --------------
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
Total Return (a)(d) 19.08% (1.52)%
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of net expenses to average net assets 1.55% 1.73%(b)
Ratio of net investment income to average net
assets 5.07% 4.19%(b)
Portfolio turnover 214% 266%(c)
Net assets at end of period (000's omitted) $18,823 $9,520
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of total expenses to average net
assets, absent waiver (e) 1.69% 2.03%(b)
Ratio of net investment income to average net
assets, absent waiver (e) 4.93% 3.89%(b)
<CAPTION>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(a) For periods less than one year, returns are not annualized.
(b) Annualized.
(c) Not annualized.
(d) Total return would have been lower had certain expenses not been reduced during the periods
shown.
(e) Ratio information assuming no fee waivers or reimbursements had been in effect during the
periods shown.
- -------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objectives of a Fund may not be changed without approval of a
majority of the outstanding voting securities of that Fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). There is no
assurance that these objectives will be achieved. Investors should refer to the
prospectus section entitled "Certain Securities and Investment Techniques and
Associated Risks" and to the "Other Information" section in the SAI for
additional portfolio management discussions and for a description of the ratings
mentioned below that are assigned by Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Ratings Group ("Standard & Poor's").
Each Fund is subject to certain investment restrictions which may not be
changed without the approval of the holders of a majority of that Fund's
outstanding voting securities.
The Income Funds pursue their investment objectives primarily by investing
in various types of debt securities. Each Income Fund may purchase securities on
a when-issued basis, and, unless otherwise indicated, may engage in options and
futures transactions. The Short Government Fund, Short and Intermediate Bond
Fund and Bond Fund may invest, and the Intermediate Mortgage Fund will primarily
invest, in mortgage-related securities, including collateralized mortgage
obligations ("CMOs"), Interest Only ("IOs") and Principal Only ("POs")
mortgage-related securities. Such Funds may also purchase asset-backed
securities. The Funds will not purchase asset-backed or privately issued
mortgage-related securities rated less than AA by Standard and Poor's or the
equivalent. The Short Government Fund, Short and Intermediate Bond Fund,
Intermediate Mortgage Fund, Bond Fund and Global Bond Fund may enter into dollar
rolls. See "Certain Securities and Investment Techniques and Associated
Risks--Other Securities," "--Special Risks Associated with Asset-Backed and
Mortgage-Related Securities," "--When-Issued Securities," and "-- Hedging
Techniques."
As described below, certain Income Funds may invest in securities
denominated in currencies other than the U.S. dollar ("foreign securities")
including those denominated in European Currency Units (ECUs).
For the purposes of portfolio maturity limitations, a security which has an
interest rate that adjusts or re-sets periodically ("variable rate securities")
will be considered to have a maturity equal to the period of time remaining
until the next readjustment of the interest rate, and a mortgage-related
security will be deemed to have an average maturity equal to its average life as
determined by the Asset Manager based on the prepayment
11
<PAGE>
experience of the underlying mortgage pools. The maturity of a security with a
demand feature may be deemed to be the period of time remaining until the demand
feature is exercisable unless the Asset Manager believes that the demand feature
will probably not be exercised. If the rating of any security held by any Fund
is changed so that the instrument would no longer qualify for investment by the
Fund, the Fund will seek to dispose of the instrument as soon as is reasonably
practicable, in light of the circumstances and consistent with the interests of
the Fund.
Any or all of the Funds may at times for defensive purposes temporarily
place all or a portion of their assets in cash, short-term commercial paper,
U.S. government securities, high quality debt securities, including Eurodollar
and Yankee Dollar obligations, and obligations of banks when, in the judgment of
the Fund's Asset Manager, such investments are appropriate in light of economic
or market conditions. See "Other Information-- Cash Equivalents" in the SAI. The
following discussions of the individual Income Funds' objectives and policies is
modified by the above.
MANAGERS SHORT GOVERNMENT FUND
The Fund's investment objective is to seek high current income consistent
with the preservation of capital by investing in debt securities.
The Fund will maintain an overall maximum dollar-weighted average maturity
of three years or less. The Fund is not a money market fund and does not seek to
maintain a stable price per share. As a matter of operating policy, under normal
circumstances, the Fund will at all times have at least 65% of its total assets
invested in securities issued or guaranteed as to principal or interest by the
U.S. government, its agencies or instrumentalities. Up to 35% of the Fund's
total assets may be invested in corporate bonds and notes, debentures,
non-convertible fixed-income preferred stocks, eurodollar certificates of
deposit and eurodollar bonds. The Fund may invest a substantial portion of its
assets in mortgage-related securities (including CMOs, IOs and POs) that are
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
In addition, the Fund may invest in privately issued mortgage-related securities
(including CMOs, IOs and POs) and asset-backed securities. The Fund may also
invest in variable rate securities including inverse floating obligations. See
"Certain Securities and Investment Techniques and Associated Risks--General
Risks Associated with Income Funds" and "--Special Risks Associated with
Asset-Backed and Mortgage-Related Securities."
12
<PAGE>
The Fund may invest up to 10% of its assets in foreign securities, including
those issued by foreign governments. Investing in foreign securities may subject
the Fund to certain additional risks. The Fund may purchase options on
securities and futures contracts, write options on securities and futures
contracts it holds, buy and sell futures contracts on securities and securities
indices and foreign currencies, buy and sell interest rate futures contracts,
and enter into forward foreign currency exchange contracts. See "Certain
Securities and Investment Techniques and Associated Risks--Hedging Techniques"
and "--Other Securities--Foreign Securities."
The Fund will not purchase debt instruments, including cash equivalents,
that have been rated lower than A or the equivalent by Standard & Poor's or by
Moody's. In addition, the Fund's investments in privately issued mortgage-backed
securities and asset-backed securities will be limited to those rated AA or Aa,
respectively, by those agencies. Instruments denominated in currencies other
than the U.S. dollar will also be limited to those rated AAA or Aaa. The Fund
may purchase unrated securities in any of the above categories, provided that
such securities are of comparable quality to such rated instruments, as
determined by the Asset Manager.
MANAGERS SHORT AND INTERMEDIATE BOND FUND
The Fund's investment objective is to seek high current income by investing
in fixed-income securities having an average dollar-weighted portfolio maturity
between one and five years.
The Fund invests in obligations of the U.S. government, its agencies and
instrumentalities and corporate bonds, debentures, non-convertible fixed-income
preferred stocks, eurodollar certificates of deposit and eurodollar bonds. The
Fund may invest a substantial portion of its assets in mortgage-related
securities (including CMOs, IOs and POs) that are issued or guaranteed by the
United States government, its agencies or instrumentalities. In addition, the
Fund may invest in privately issued mortgage-related securities (including CMOs,
IOs and POs) and asset-backed securities. For a discussion of mortgage-related
and asset-backed securities and related risks, see "Certain Securities and
Investment Techniques and Associated Risks--Special Risks Associated with
Asset-Backed and Mortgage-Related Securities." Ordinarily, at least 65% of the
Fund's total assets will be invested in bonds.
The Fund may invest up to 10% of its assets in foreign securities. Investing
in foreign securities may subject the Fund to certain additional risks. See
"Certain Securities and Investment Techniques and Associated
13
<PAGE>
Risks--Other Securities-Foreign Securities" and "General Risks Associated with
Income Funds." The Fund may actively trade in the securities in which it
invests. See "Portfolio Turnover." The Fund may invest in securities that have a
fixed or variable rate interest, including inverse floaters. The Fund invests
primarily in securities rated investment grade by Moody's or Standard & Poor's
(or, if unrated, of comparable quality as determined by the Asset Manager),
including securities rated in the lowest investment grade category. Securities
rated in the lowest investment grade category have speculative characteristics
and changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to pay principal or interest on such securities than
on higher grade securities. In addition, the Fund may invest in securities rated
below investment grade, but rated at least Ba by Moody's or BB by Standard &
Poor's (or, if unrated, of comparable quality as determined by the Asset
Manager). The Fund does not expect to invest more than 5% of its net assets in
securities rated (or, if unrated, of comparable quality as determined by the
Asset Manager) lower than investment grade (sometimes referred to as "junk
bonds"). However, the rating of an issue of securities may be reduced subsequent
to the purchase of the securities by the Fund, and this may cause the amount of
below investment grade securities held by the Fund to exceed 5% of the Fund's
net assets. The downgrade will not require sale of the securities by the Fund,
but the Asset Manager will consider this event in its determination of whether
the Fund should continue to hold the securities. Investing in below investment
grade securities may subject the Fund to additional risks. See "Certain
Securities and Investment Techniques and Associated Risks--Special Risks
Associated with Lower-Rated Securities" in the Prospectus, and "Other
Information--Ratings of Debt Instruments" in the SAI.
MANAGERS INTERMEDIATE MORTGAGE FUND
The Fund's investment objective is to seek high current income by investing
primarily in mortgage-related securities.
Under normal circumstances, the Fund will invest at least 65% of the value
of its total assets in mortgage-related securities (including CMOs, IOs and POs)
issued by governments and government-related and private organizations, and the
Fund will invest more than 25% of its assets in the mortgage and mortgage
finance industry even during temporary defensive periods. Due to this
concentration, the Fund will be subject to certain risks peculiar to the
mortgage and mortgage finance industry. See "Certain Securities and Investment
Techniques and Associated Risks--Special
14
<PAGE>
Risks Associated with Asset-Backed and Mortgage-Related Securities" in the
Prospectus and "Other Information--Mortgage-Related Securities" in the SAI.
The Fund may invest up to 35% of the value of its total assets in (i)
non-mortgage-related securities issued or guaranteed by the United States
government, its agencies and instrumentalities, (ii) certificates of deposit,
bankers' acceptances and interest-bearing savings deposits of banks having total
assets of more than $1 billion and which are members of the Federal Deposit
Insurance Corporation, and (iii) commercial paper rated A-1 by Standard & Poor's
or P-1 by Moody's or, if not rated, issued by companies which have an
outstanding debt issue rated AAA by Standard & Poor's or Aaa by Moody's. It is
currently the operating policy of the Asset Manager to invest 100% of the Fund's
assets in securities issued by governments and government-related organizations
and securities rated AAA by Standard & Poor's or Aaa by Moody's or, if not
rated, that are of comparable quality as determined by the Asset Manager. In
addition, at any given time a portion of the Fund's assets may be in cash or may
be invested in repurchase agreements due to portfolio purchases and sales, and
to otherwise manage cash flows. The Fund may invest in securities that have a
fixed rate of interest and in variable rate securities, including inverse
floaters. The Fund may also enter into dollar rolls. In addition, the Fund may
write options on the securities held in its portfolio. See "Certain Securities
and Investment Techniques and Associated Risks--General Risks Associated with
Income Funds" and "--Other Securities--When-Issued Securities and Dollar Rolls,"
and "--Hedging Techniques."
The Fund will maintain a dollar-weighted average portfolio maturity of more
than three years but no more than ten years. In order to maintain a
dollar-weighted average portfolio maturity of from three to ten years, the Asset
Manager will monitor the prepayment experience of the underlying mortgage pools
of the Fund's mortgage-related securities and will purchase and sell securities
in order to shorten or lengthen the average maturity of the Fund's portfolio, as
appropriate.
MANAGERS BOND FUND
The Fund's investment objective is to seek income by investing in
fixed-income securities having a remaining maturity not greater than forty years
from the date of purchase by the Fund. The Fund invests in a diversified
portfolio of obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities as well as in corporate bonds, debentures,
preferred stocks, mortgage-related securities (including CMOs, IOs and POs),
asset-backed securities, eurodollar certificates of deposit and
15
<PAGE>
eurodollar bonds. The Fund may invest up to 10% of its assets in foreign
securities. Investing in foreign securities may subject the Fund to certain
additional risks. Ordinarily, at least 65% of the Fund's total assets will be
invested in bonds. The Fund may invest in both fixed and variable rate
securities, including inverse floating obligations. See "Certain Securities and
Investment Techniques and Associated Risks--General Risks Associated with Income
Funds," "--Special Risks Associated with Asset-Backed and Mortgage-Related
Securities," and "--Foreign Securities." Although the Fund expects to invest in
bonds with a full range of maturities, the average maturity of the Fund may be
adjusted in response to market conditions. The Fund will actively trade in the
securities in which it invests. See "Portfolio Turnover."
The Fund invests primarily in securities rated investment grade by Moody's
or Standard & Poor's (or, if unrated, of comparable quality as determined by the
Asset Manager), including securities rated in the lowest investment grade
category. Securities rated in the lowest investment grade category have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to pay principal or
interest on such securities than on higher grade securities. In addition, the
Fund may invest in securities rated below investment grade, but rated at least
Ba by Moody's or BB by Standard & Poor's (or, if unrated, of comparable quality
as determined by the Asset Manager). The Fund does not expect to invest more
than 5% of its net assets in securities rated (or, if unrated, of comparable
quality as determined by the Asset Manager) lower than investment grade
(sometimes referred to as "junk bonds"). However, the rating of an issue of
securities may be reduced subsequent to the purchase of the securities by the
Fund, and this may cause the amount of below investment grade securities held by
the Fund to exceed 5% of the Fund's net assets. The downgrade will not require
sale of the securities by the Fund, but the Asset Manager will consider this
event in its determination of whether the Fund should continue to hold the
securities. Investing in below investment grade securities may subject the Fund
to additional risks. See "Certain Securities and Investment Techniques and
Associated Risks--Special Risks Associated with Lower-Rated Securities" in the
Prospectus, and "Other Information--Ratings of Debt Instruments" in the SAI.
MANAGERS GLOBAL BOND FUND
The Fund's primary objective is to seek a high total return through both
income and capital appreciation by investing in a portfolio of domestic and
foreign fixed-income securities.
16
<PAGE>
The Fund ordinarily invests at least 65% of its assets in an actively
managed portfolio of domestic and foreign bonds issued by governments,
corporations and supranational organizations such as the World Bank, Asian
Development Bank, European Investment Bank and European Economic Community, all
of which will be rated investment grade as determined by Moody's or Standard &
Poor's, or, if unrated, of comparable quality as determined by the Asset
Manager. The Fund will invest in securities denominated in currencies other than
the U.S. dollar. Normally, investments will be made in a minimum of three
countries, one of which may be the United States. The Fund's weighted average
maturity will vary, but is generally expected to be ten years or less. The Fund
may engage in currency hedging strategies through the use of forward currency
exchange contracts, options and futures contracts. See "Certain Securities and
Investment Techniques and Associated Risks--Other Securities--Foreign
Securities" and "--Hedging Techniques."
The Global Bond Fund is "non-diversified," as that term is defined in the
1940 Act, but intends to qualify as a "regulated investment company" for federal
income tax purposes. This means, in general, that although more than 5% of the
Fund's total assets may be invested in the securities of any one issuer
(including a foreign government), at the close of each quarter of the Fund's
taxable year the aggregate amount of such holdings may not exceed 50% of the
value of its total assets, and no more than 25% of the value of its total assets
may be invested in the securities of a single issuer. To the extent that the
Fund holds the securities of a smaller number of issuers than if it were
"diversified" (as defined in the 1940 Act), the Fund will be subject to greater
risk than a fund that invests in a large number of securities, because changes
in the financial condition or market assessment of particular issuers may cause
greater fluctuations in the Fund's net asset value or adversely affect its total
return.
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES AND
ASSOCIATED RISKS
The following are descriptions of types of securities invested in by the
Funds, certain investment techniques employed by the Funds and risks associated
with utilizing either the securities or the investment techniques. Unless
otherwise indicated, all of the Funds may invest in the indicated securities and
use the indicated investment techniques.
GENERAL RISKS ASSOCIATED WITH INCOME FUNDS
The Income Funds are subject to normal interest rate, credit and market
risks. Market prices of fixed-income securities will fluctuate and
17
<PAGE>
will tend to vary inversely with changes in prevailing interest rates. If
interest rates increase from the time a security is purchased, such security, if
sold, might be sold at a price less than its purchase cost. Conversely, if
interest rates decline from the time a security is purchased, such security, if
sold, might be sold at a price greater than its purchase cost. Generally, the
longer an instrument's maturity, the more sensitive the instrument's price will
be to interest rate changes. In an attempt to reduce market risks resulting from
fluctuations in the principal value of debt obligations due to changes in
prevailing interest rates the Funds carefully monitor and seek to adjust the
maturities of their investments and may invest in variable rate securities. Such
investment techniques do not eliminate all risks and investors should expect the
value of their Fund shares to fluctuate based on interest rate, credit and
market conditions.
Duration measures the timing of a Fund's cash flow (i.e., principal and
interest payments) and is essentially a weighted average term-to-maturity where
cash flows are expressed in terms of their present value. Accordingly, duration
takes into account the time value of money in addition to the amount and timing
of all interim and final payments. Duration incorporates the size of the coupon
payments, the time to maturity, and the portfolio's yield to maturity into a
single composite index. The longer a Fund's duration, the more its price will
fluctuate, in percentage terms, in response to a given change in interest rates
and the greater the market risk. From time to time, the Income Funds may
advertise the duration of their portfolios.
SPECIAL RISKS ASSOCIATED WITH ASSET-BACKED AND
MORTGAGE-RELATED SECURITIES
MORTGAGE-RELATED SECURITIES. The Funds will be subject to prepayment risk
on mortgage-related securities. Prepayments of principal by mortgagors or
mortgage foreclosures may shorten the average life of the mortgage-related
securities remaining in a Fund's portfolio. Reinvestment of prepayments could
occur at lower interest rates than the original investment, thus decreasing the
yield of the Fund. In periods of rising interest rates, the rate of prepayment
tends to decrease, thereby lengthening the average life of a pool of
mortgage-related securities. Conversely, in periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the average life of
a pool. See "Other Information--Mortgage-Related Securities" in the SAI.
CMOs are obligations fully collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the mortgages
are passed through to the holders of the CMOs on the same
18
<PAGE>
schedule as they are received. Certain classes of CMOs have priority over others
with respect to the receipt of prepayments on the mortgages. Therefore,
depending on the type of CMOs in which a Fund invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of
mortgage-related securities. In other mortgage-related securities, all interest
payments go to one class of holders "Interest Only" or "IO"-and all of the
principal goes to a second class of holders-"Principal Only" or "PO." The yield
to maturity on an IO class is extremely sensitive to the rate of principal
prepayments on the related underlying mortgage assets, and a rapid rate of
principal payments will have a material adverse effect on yield to maturity. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, the Fund may fail to fully recoup its initial investment in these
securities, even when the securities are rated AA or the equivalent. Conversely,
if the underlying mortgage assets experience less than anticipated prepayments
of principal, the yield on a PO class would be materially adversely affected. As
interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. The value of the other mortgage-related securities
described herein (including POs), like other debt instruments, will tend to move
in the opposite direction from interest rates. In general, the Funds treat IOs
and POs as subject to the restriction on investments in illiquid instruments
except that IOs and POs issued by the U.S. government, its agencies and
instrumentalities and backed by fixed-rate mortgages may be excluded from this
limit if, in the judgment of the Asset Manager (subject to the oversight of the
Trustees) such IOs and POs are readily marketable.
ASSET-BACKED SECURITIES. Asset-backed securities, in which certain Funds
may invest, involve the passing through of payments on debt obligations
including automobile loans, credit card loans, home equity loans, computer
leases and other types of consumer loans. Generally, the obligations underlying
most asset-backed securities are unsecured. In the case of auto loans, the
underlying security interests in the automobiles are not transferred to the
entity issuing the asset-backed security. In addition, like mortgage-related
securities, asset-backed securities may be subject to the risk of prepayments of
the underlying obligations.
SPECIAL RISKS ASSOCIATED WITH LOWER-RATED SECURITIES
Generally, lower-rated debt securities and unrated securities of comparable
quality offer a higher current yield than is offered by higher-rated securities.
However, lower-rated debt securities involve greater risks, in that they are
especially subject to adverse changes in general conditions and in the
industries in which the issuers are engaged, to changes in the financial
condition of the issuers and to price fluctuation in response to
19
<PAGE>
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default. The market for lower-rated securities
may be thinner and less active than that for higher quality securities, which
may limit a Fund's ability to sell such securities at fair value in response to
changes in the economy or the financial markets. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower-rated securities, especially in a thinly traded
market. In addition, the prices for lower-rated debt securities may be affected
by legislative and regulatory developments.
OTHER SECURITIES
FOREIGN SECURITIES. Investments in foreign securities involve risks that
differ from investments in securities of domestic issuers. Such risks may
include political and economic developments, the possible imposition of
withholding taxes, possible seizure or nationalization of assets, the possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the Fund's investments. In addition,
foreign countries may have less well developed securities markets, as well as
less regulation of stock exchanges and brokers and different auditing and
financial reporting standards. Not all foreign branches of United States banks
are supervised or examined by regulatory authorities as are United States banks,
and such branches may not be subject to reserve requirements. For additional
information regarding the risks associated with foreign branch issues, see
"Other Information--Obligations of Domestic and Foreign Banks" in the SAI.
Investing in the fixed-income markets of developing countries involves exposure
to economies that are generally less diverse and mature, and to political
systems which may be less stable, than those of developed countries. Foreign
securities often trade with less frequency and volume than domestic securities
and therefore may exhibit greater price volatility. Changes in foreign exchange
rates will affect the value of those securities which are denominated or quoted
in currencies other than the U.S. dollar.
INVERSE FLOATING OBLIGATIONS. The Income Funds may invest up to 25% of
their assets in "inverse floating obligations" or "residual interest bonds"
(some of which are known as "support floaters"). These are variable rate
securities on which the interest rates typically decline as market rates
increase and increase as market rates decline. Such instruments can be expected
to be more volatile than fixed rate or other variable rate
20
<PAGE>
securities. For example, in periods of rising interest rates, the interest rate
on an inverse floating obligation will decline, accentuating the decrease in the
market value of the obligation. This has a similar effect on a Fund's net asset
value as if the Fund had created a degree of leverage in its portfolio. The net
asset value of a Fund which has invested a large percentage of its assets in
inverse floaters will tend to be more volatile in periods of fluctuating
interest rates than that of a Fund holding other types of variable rate and/or
fixed-rate securities. To seek to limit a Fund's volatility, the Asset Managers
may purchase inverse floaters with shorter term maturities or which contain
limitations on the extent to which the interest rate may vary. The Asset
Managers may also seek to limit volatility by diversifying the inverse floaters
in a Fund's portfolio by the type of underlying security and by the type of
index to which they are linked. See "Other Information-- Inverse Floating
Obligations" in the SAI.
MUNICIPAL SECURITIES. Municipal bonds are of three principal types: General
Obligation Bonds, generally issued by states, counties, cities, towns and
regional districts, the proceeds of which are used to fund a wide range of
public projects; Revenue Bonds, the principal security for which is generally
the net revenues derived from a particular facility, group of facilities or, in
some cases, the proceeds of a special excise or other specific revenue source;
and Industrial Development Bonds, which are considered municipal bonds if the
interest paid is exempt from federal income taxes, and which are issued by or on
behalf of public authorities to raise money to finance public facilities and
privately-operated facilities for business, manufacturing and housing.
Investments in municipal securities involve risks that differ from other
domestic securities. There could be economic, business or political developments
which might affect all municipal obligations of a similar type. For more
information concerning municipal securities and related risks, see "Other
Information--Municipal Bonds" in the SAI.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
securities that are not readily marketable ("illiquid securities"). These
securities, which may be subject to legal or contractual restrictions on their
resale, may involve a greater risk of loss to those Funds that purchase them.
Securities that are not registered for sale under the Securities Act of 1933, as
amended (the "1933 Act"), but are eligible for resale pursuant to Rule 144A
under the 1933 Act, will not be considered illiquid for purposes of this
restriction if the Asset Manager determines, subject to the review of the
Trustees, that such securities have a readily available market.
REPURCHASE AGREEMENTS. In a repurchase transaction, a Fund purchases a
security from a bank or a broker-dealer and simultaneously
21
<PAGE>
agrees to resell that security to the bank or broker-dealer at an agreed-upon
price on an agreed upon date. The resale price reflects the purchase price plus
an agreed upon rate of interest. In effect, the obligation of the seller to
repay the agreed-upon price is secured by the value of the underlying security,
which must at least equal the repurchase price. Repurchase agreements could
involve certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon a Fund's ability to dispose of
the underlying securities. No Fund may invest in repurchase agreements with a
maturity of more than seven days if the aggregate of such investments, along
with other illiquid securities, exceeds the Fund's limits on investments in
illiquid securities. For more information concerning repurchase agreements, see
"Other Information--Repurchase Agreements" in the SAI.
SECURITIES LENDING. Consistent with its investment objective and policies,
each Fund may lend its portfolio securities in order to realize additional
income. Any such loan will be continuously secured by collateral at least equal
in value to the value of the securities loaned. The risk of loss on such
transactions is mitigated because, if a borrower were to default, the collateral
should satisfy the obligation. However, as with other extensions of secured
credit, loans of portfolio securities involve some risk of loss of rights in the
collateral should the borrower fail financially.
WHEN-ISSUED SECURITIES AND DOLLAR ROLLS. Consistent with its investment
objectives and policies, each Fund may purchase or sell U.S. government or
municipal securities on a when-issued or delayed delivery basis. When-issued or
delayed delivery transactions are those where securities are purchased or sold
by a Fund with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous price and yield to the Fund at
the time of entering into the transaction. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund. However, the value of the Fund's assets will fluctuate with
the value of the security to be purchased. Accordingly, these transactions may
have a similar effect on a Fund's net asset value as if the Fund had created a
degree of leverage in its portfolio. See "Segregated Accounts" below.
When-issued securities may also be known as "TBAs."
In a dollar roll, a Fund sells securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type and
coupon) securities on a specified future date from the same party. During the
period between the sale and forward purchase, the Fund forgoes principal and
interest paid on the securities sold, and does not list the securities sold as
an asset on the Fund's books. The Fund realizes a
22
<PAGE>
capital gain on the difference between the current sales price and the forward
price for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale. A "covered roll"
is a specific type of dollar roll for which there is an offsetting cash position
or a cash equivalent security position which matures on or before the forward
settlement date of the dollar roll transaction.
Dollar rolls involve the risk that the market value of the securities
subject to the Fund's forward purchase commitment may decline in value below the
price of the securities the Fund has sold. In the event the buyer of securities
under a dollar roll files for bankruptcy or becomes insolvent, the Fund's use of
the proceeds of the current sale portion of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to purchase the similar securities in the
forward purchase transaction.
The Funds will engage in dollar roll transactions to enhance return and not
for the purpose of borrowing. Each dollar roll transaction is accounted for as a
sale of a portfolio security and a subsequent purchase of a substantially
similar security in the forward market.
SEGREGATED ACCOUNTS. Certain transactions, such as certain options, futures
and forward transactions, dollar rolls, or purchases of when-issued or delayed
delivery securities, may have a similar effect on a Fund's net asset value as if
the Fund had created a degree of leverage in its portfolio. However, if a Fund
enters into such a transaction, the Fund will establish a segregated account
with its Custodian in which it will maintain cash, U.S. government securities or
other liquid high-grade debt obligations equal in value to its obligations in
respect to such transaction.
HEDGING TECHNIQUES
Unless otherwise indicated, the Funds' portfolio managers may engage in the
following hedging techniques to seek to hedge all or a portion of a Fund's
assets against market value changes resulting from changes in market values,
interest rates or currency fluctuations. Hedging is a means of offsetting, or
neutralizing, the price movement of an investment by making another investment,
the price of which should tend to move in the opposite direction from the
original investment. The imperfect correlation in price movement between a
hedging instrument and the underlying security, currency, index, futures
contract or other investment may limit the effectiveness of a particular hedging
strategy.
A Fund's ability to establish and close out positions in futures contracts
and options on futures contracts will be subject to the existence of a
23
<PAGE>
liquid secondary market. Although a Fund generally will purchase or sell only
those futures contracts and options thereon for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular futures contract or option or at any
particular time.
OPTIONS. Each Fund may write ("sell") covered put and covered call options
covering the types of financial instruments in which the Fund may invest
(including individual stocks, stock indices, futures contracts, forward foreign
currency exchange contracts and when-issued securities) to provide protection
against the adverse effects of anticipated changes in securities prices. A Fund
may also write covered put options and covered call options as a means of
enhancing its return through the receipt of premiums when the Fund portfolio
manager determines that the underlying securities, indices or futures contracts
have achieved their potential for appreciation. By writing covered call options,
the Fund foregoes the opportunity to profit from an increase in the market price
of the underlying security, index or futures contract above the exercise price
except insofar as the premium represents such a profit. The risk involved in
writing covered put options is that there could be a decrease in the market
value of the underlying security, index or futures contract. If this occurred,
the option could be exercised and the underlying security, index or futures
contract would then be sold to the Fund at a higher price than its then current
market value. A Fund will write only "covered" options.
When writing call options, a Fund will be required to own the underlying
financial instrument, index or futures contract or own financial instruments or
indices whose returns are closely correlated with the returns of the financial
instrument, index or futures contract underlying the option. When writing put
options a Fund will be required to segregate with its custodian bank cash and/or
short-term high grade debt securities to meet its obligations under the put. By
covering a put or call option, the Fund's ability to meet current obligations,
to honor redemptions or to achieve its investment objectives may be impaired.
The Fund may also purchase put and call options to provide protection
against adverse price effects from anticipated changes in prevailing securities
prices. The purchase of a put option protects the value of portfolio holdings in
a falling market, while the purchase of a call option protects cash reserves
from a failure to participate in a rising market. In purchasing a call option,
the Fund would be in a position to realize a gain if, during the option period,
the price of the security, index or futures contract increased over the strike
price by an amount greater than the premium paid. It would realize a loss if the
price of the security, index or futures contract decreased,
24
<PAGE>
remained the same or did not increase over the strike price during the option
period by more than the amount of the premium paid. If a put or call option
purchased by the Fund were permitted to expire without being sold or exercised,
its premium would represent a realized loss to the Fund.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, a Fund may treat the securities it
uses as cover for written OTC options as liquid provided it follows a specified
procedure. A Fund may sell OTC options only to qualified dealers who agree that
the Fund may repurchase any OTC options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the amount that the option is "in-the-money" (i.e., current
market value of the underlying security minus the option's strike price). For
more information concerning options transactions, see "Other
Information--Covered Put Options--Covered Call Options," and "--Puts and Calls"
in the SAI.
FUTURES CONTRACTS. A Fund may buy and sell futures contracts as a hedge to
protect the value of the Fund's portfolio against changes in prices of the
financial instruments in which it may invest. There are several risks in using
futures contracts. One risk is that futures prices could correlate imperfectly
with the behavior of cash market prices of the instrument being hedged so that
even a correct forecast of general price trends may not result in a successful
transaction. Another risk is that the Fund's portfolio manager may be incorrect
in its expectation of future prices. There is also a risk that a secondary
market in the instruments that the Fund holds may not exist or may not be
adequately liquid to permit the Fund to close out positions when it desires to
do so. When buying or selling futures contracts the Fund will be required to
segregate cash and/or liquid high-grade debt obligations to meet its obligations
under these types of financial instruments. By so doing, the Fund's ability to
meet current obligations, to honor redemptions or to operate in a manner
consistent with its investment objectives may be impaired. See "Other
Information--Equity Index Futures Contracts" and "--Interest Rate Futures
Contracts" in the SAI.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A Fund's Asset Manager may
attempt to hedge the risk that a particular foreign currency may suffer a
substantial decline against the U.S. dollar by entering into a forward contract
to sell an amount of foreign currency approximating the value of some or all of
the Fund's portfolio securities denominated in such foreign currency. It may
also enter into such contracts to protect against losses resulting from changes
in foreign currency exchange rates between
25
<PAGE>
trade and settlement date. Such contracts will have the effect of limiting any
gains to the Fund resulting from changes in such rates. Losses may also arise
due to changes in the value of the foreign currency or if the counterparty does
not perform under the contract. See "Other Information--Forward Foreign Currency
Exchange Contracts" in the SAI.
PORTFOLIO TURNOVER
In carrying out the investment policies described in this Prospectus, each
Fund expects to engage in a substantial number of securities portfolio
transactions, and the rate of portfolio turnover will not be a limiting factor
when an Asset Manager deems it appropriate to purchase or sell securities for a
Fund. High portfolio turnover involves correspondingly greater transaction costs
which are borne directly by a Fund. In addition, high portfolio turnover may
also result in increased short-term capital gains which, when distributed to
shareholders, are treated for federal income tax purposes as ordinary income.
See "Portfolio Transactions and Brokerage" and "Tax Information." For the Income
Funds' portfolio turnover rates, see "Financial Highlights."
PURCHASE AND REDEMPTION OF FUND SHARES
HOW TO PURCHASE FUND SHARES
Initial purchases of shares of the Funds, may be made in a minimum amount of
$2,000 per Fund ($500 for IRAs and IRA rollovers, and $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 Manager. There is
no minimum for additional investments except for telephone Automated Clearing
House ("ACH") purchases.
Investors may purchase shares of the Trust 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 Trust 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 Trust's shares.
For more complete instructions, see the account application.
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------------- -------------------------
<S> <C> <C>
Minimums:
Regular accounts $2,000 No minimum
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
METHOD
-------------------------
<S> <C> <C>
IRAs, IRA rollovers 500 No minimum
Spousal IRAs 250 No minimum
<CAPTION>
METHOD
-------------------------
<S> <C> <C>
Through your investment Contact your investment Send additional funds to
professional advisor, bank or other your investment
investment professional professional at the
address appearing on your
account statement
Directly by mail Send your account Send letter of
application and check instruction and check
(payable to The Managers (payable to The Managers
Funds) to the address Funds) to
indicated on the The Managers Funds
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 Funds or Call (800) 252-0682 to Call the Transfer Agent
Bank Wire notify the Transfer at (800) 252-0682 prior
Agent, and instruct your to wiring additional
bank to wire funds to: funds
ABA #011000028
State Street Bank & Trust
Company
Boston, MA 02101
BFN--The Managers Funds
AC 9905-001-5
FBO--Shareholder Name
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
METHOD
-------------------------
<S> <C> <C>
By telephone Only for established Call the Transfer Agent
accounts with ACH at (800) 252-0682.
privileges. Call (800) Minimum investment: $100.
252-0682 with
instructions for the
Transfer Agent. Minimum
investment: $100.
</TABLE>
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 Funds 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. From time to
time the Trust's distributor may supply materials to Registered Investment
Advisers to assist them in formulating an investment program using the Trust for
their clients. Such materials are designed to be used and evaluated by
investment professionals, do not contain investment advice and are not available
for distribution to the general public.
Certain investors may purchase or sell Fund shares through broker-dealers or
through other processing organizations who may impose transaction fees or other
charges in connection with providing this service. Shares purchased in this
fashion may be treated as a single account for purposes of the minimum initial
investment. Investors who do not wish to receive the services of a broker-dealer
or processing organization may consider investing directly with the Trust.
Shares held through a broker-dealer or processing organization may be
transferred into the investor's name by contacting the broker-dealer or
processing organization and the Trust's transfer agent. Certain processing
organizations may receive compensation from the Trust's Manager, Administrator
and/or Asset Manager.
Trust 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 Trust may
limit or suspend the offering of shares of any or all of the Funds at any time
and may refuse, in whole or in part, any order for the purchase of shares.
Purchase orders received by the Trust, c/o Boston Financial Data Services at
the address listed on the back cover of this prospectus, prior to 4:00 p.m.
Eastern Standard Time, on any business day will receive the offering price
computed that day. The broker-dealer, omnibus processor or
28
<PAGE>
investment professional, is responsible for promptly transmitting orders to the
Trust. The Trust 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 must be received
by 3:00 p.m. the following business day, except for certain processing
organizations which have entered into special arrangements with the Trust.
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 a Fund or State Street Bank and Trust Company
will be accepted. To ensure that checks are collected by the Trust, 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 you bank account to enable an ACH, the transaction will be
canceled and you will be responsible for any loss the Trust incurs. For current
shareholders, each Fund can redeem shares from any identically registered
account in such Fund or any other Fund as reimbursement for any loss incurred.
The Trust may prohibit or restrict all future purchases in the Trust 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 Trust's books maintained by the Transfer Agent.
SHARE PRICE AND VALUATION OF SHARES. The net asset value of shares of each
Fund is computed each business day, at the close of trading on the NYSE, and is
the net worth of the Fund (assets minus liabilities) divided by the number of
shares outstanding. Fund securities listed on an exchange are valued on the
basis of the last quoted sale price on the exchange where such securities
principally are traded on the valuation date, prior to the close of trading on
the NYSE, or, lacking any sales, on the basis of the last quoted bid price on
such principal exchange prior to the close of trading on the NYSE.
Over-the-counter securities for which market quotations are readily available
are valued on the basis of the last sale price or, lacking any sales, at the
last quoted bid price on that date prior to the close of trading
29
<PAGE>
on the NYSE. Securities and other instruments for which market quotations are
not readily available are valued at fair value, as determined in good faith and
pursuant to procedures established by the Trustees. For further information, see
"Net Asset Value" in the SAI.
REDEEMING SHARES
Any redemption orders received by the Trust as indicated below before 4:00
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. Redemption orders
received after 4:00 p.m. will be redeemed at the net asset value determined at
the close of trading on the next business 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 a Fund will exercise its right to redeem shareholder
accounts will be determined by the Manager on a case-by-case basis.
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
- ----------------------------------------- -----------------------------------------
<S> <C>
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, dollar
P.O. Box 8517 amount or number of shares to be sold,
Boston, MA 02266-8517 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 Trust at
(800)252-0682.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
- ----------------------------------------- -----------------------------------------
By contacting your investment
professional
<S> <C>
By writing a check (Managers Money Market For shareholders who have elected the
Fund Shareholders only) checkwriting option with State Street
Bank and Trust Company, as discussed
under "Investor Services--Checkwriting
Privilege."
</TABLE>
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 per fund can be made monthly by
shareholders.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other Funds. Before investing in the Trust's Equity 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 only to shareholders of the Money Market
Fund. Before investing in the Trust's Money Market Fund, shareholders must
obtain a prospectus from the Trust describing the Money Market Fund and the
conditions and limitations pertaining to this privilege.
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 any of the Funds to exchange
their shares for shares of any of the other Funds 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 Money Market Fund of the Trust before requesting
an exchange into one or more of
31
<PAGE>
those Funds. By requesting an exchange into one of those Funds, shareholders are
deemed to confirm receipt of the prospectus describing the Trust's Equity Funds
or Money Market Fund, as the case may be.
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 Manager,
inconsistent with the orderly management of the Funds' portfolios.
THE TRUST AND ITS TRANSFER AGENT WILL EMPLOY REASONABLE PROCEDURES TO VERIFY
THE GENUINENESS OF TELEPHONIC REDEMPTION OR EXCHANGE REQUESTS. IF SUCH
PROCEDURES ARE NOT FOLLOWED, THE TRUST 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 FUNDS MAY BE
LEGALLY OFFERED, AND MAY BE TERMINATED OR MODIFIED BY ONE OR MORE FUNDS AT ANY
TIME UPON 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS. NONE OF THE FUNDS, THE
DISTRIBUTOR, THE TRUST'S CUSTODIAN, OR 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 will normally be paid on the Income Funds at the frequency
noted in the following table. Except for Short Government Fund, income dividends
will normally be declared on the fourth business day prior to the end of the
dividend period, payable on the following business day, to shareholders of
record on the day prior to the declaration date. Distributions of any capital
gains will normally be paid annually in December.
<TABLE>
<CAPTION>
FREQUENCY FUND
- ---------------------------------- ----------------------------------
<S> <C>
Monthly Short and Intermediate Bond,
Intermediate Mortgage, Bond
Quarterly Global Bond
Daily* Short Government
</TABLE>
- --------------
* Dividends declared daily and paid monthly on the third business day prior to
month end.
32
<PAGE>
All dividends and distributions declared by a Fund will be reinvested in
additional shares of the Fund (unless the shareholder has elected to receive
dividends or distributions in cash or invest them in shares of the Money Market
Fund, in which case the shareholder must receive a copy of the Money Market Fund
prospectus) 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.
MANAGEMENT OF THE FUNDS
TRUSTEES
Information concerning the Trustees, including their names, positions and
principal occupations during the past five years, is contained in the SAI.
INVESTMENT MANAGER
It is the Manager's responsibility to select, subject to review and approval
by the Trustees, the Asset Managers who have distinguished themselves by able
performance in their respective areas of expertise in asset management and to
continuously monitor their performance. The Manager and its corporate
predecessors have had over 20 years of experience in evaluating investment
advisers for individuals and institutional investors. In addition, the Manager
employs the services of a consultant specializing in appraisal and comparison of
investment managers to assist in evaluating asset managers. The Manager is also
responsible for conducting all operations of the Funds except those operations
contracted to the Custodian and to the Transfer Agent.
The Trust has received an exemptive order from the Securities and Exchange
Commission (the "SEC") permitting the Manager, subject to certain conditions, to
enter into sub-advisory agreements with Asset Managers approved by the Trustees
without obtaining shareholder approval. At meetings held on December 5, 1994 and
December 15, 1994, the shareholders of the Funds approved the operations of the
Trust in this manner. The order also permits the Manager, subject to the
approval of the Trustees but without shareholder approval, to employ new Asset
Managers for new or existing Funds, change the terms of particular sub-advisory
agreements or continue the employment of existing Asset Managers after events
that would cause an automatic termination of a sub-advisory agreement. Although
shareholder approval is not required for the termination of sub-advisory
agreements, shareholders of a Fund will continue to have the
33
<PAGE>
right to terminate such agreements for the Fund at any time by a vote of the
majority of the outstanding shares of the Fund. Shareholders will continue to be
notified of any Asset Manager changes.
The following table sets forth the maximum annual management fee rates
currently paid by each Income Fund, the annual asset management fee rates paid
by the Manager to each Asset Manager for a particular Fund and the actual
management fee paid during fiscal 1995, each expressed as a percentage of the
Fund's average daily net assets.
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT
TOTAL ASSET FEE PAID DURING
MANAGEMENT MANAGEMENT THE YEAR ENDED
NAME OF FUND FEE FEE DECEMBER 31, 1995
- ----------------------- ------------- ------------------------------ -------------------
<S> <C> <C> <C>
Short Government 0.45% 0.20% 0.20%*
Fund..................
Short and Intermediate 0.50% 0.25% 0.50%
Bond Fund.............
Intermediate Mortgage 0.45% 0.20% 0.45%
Fund..................
Bond Fund.............. 0.625% 0.25% 0.625%
Global Bond Fund....... 0.70% 0.35% on 1st $20 million, 0.70%
0.25% thereafter
</TABLE>
* Reflects voluntary fee waivers by the Manager which may be modified or
terminated at any time in the sole discretion of the Manager.
ASSET MANAGERS
The following sets forth certain information about each of the Asset
Managers:
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.("Jennison")--The firm was founded in 1969
and is a wholly-owned subsidiary of The Prudential Insurance Company of America.
As of December 31, 1995, assets under management totaled $28.9 billion. Its
address is One Financial Center, Boston, MA 02111
Thomas F. Doyle serves as the portfolio manager of the Short Government
Fund. He is a Director and Executive Vice President of Jennison, responsible for
fixed income portfolio management. He has been with Jennison since 1987.
34
<PAGE>
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc. ("SAW")--The firm, founded in 1933, is a
privately owned corporation with 21 directors (three of whom each own more than
10% equity in the firm). The firm offers equity, balanced and fixed income
management. As of December 31, 1995, the firm managed more than $29.4 billion in
assets. Its address is One Financial Center, Suite 26, Boston, MA 02111.
Howard B. Rubin serves as the portfolio manager of the Short and
Intermediate Bond Fund. He is a Director of SAW, responsible for fixed income
portfolio management. He has been with SAW since 1984.
INTERMEDIATE MORTGAGE FUND
Jennison Associates Capital Corp.--see Short Government Fund for a
description.
Michael Porreca and John Feingold are the portfolio managers of the
Intermediate Mortgage Fund. They are both Directors and Senior Vice Presidents
of Jennison, responsible for fixed income portfolio management. Mr. Porreca has
served in this capacity since November 1992; prior to that time he served in a
similar capacity with Dewey Square Investors. Mr. Feingold has been with
Jennison since January 1993. Prior to that time he served as a Director and head
of the CMO desk at Salomon Brothers.
BOND FUND
Loomis, Sayles & Company, Inc.--The firm was established in 1926 and is a
wholly-owned but autonomous subsidiary of New England Investment Companies. As
of December 31, 1995, assets under management totaled $44.2 billion. Its address
is One Financial Center, Boston, MA 02110.
Daniel J. Fuss, C.F.A., has been the Fund's co-portfolio manager since its
inception in 1984 and has been the sole portfolio manager since March 1993. He
is a Managing Director of Loomis, Sayles & Company, Inc., a position he has held
since 1976.
GLOBAL BOND FUND
Rogge Global Partners--The firm was established in 1984 and is 100% employee
owned. Olaf Rogge owns more than 5% of the firm. As of December 31, 1995, assets
under management totaled $3.6 billion. Its address is 5-6 St. Andrews Hill,
London, England EC4V-5BY.
Olaf Rogge has been the Fund's portfolio manager since the Fund's
commencement of operations. Mr. Rogge is Director and Principal of Rogge Global
Partners, which he founded in 1984.
35
<PAGE>
ADMINISTRATION AND SHAREHOLDER SERVICING; DISTRIBUTOR; TRANSFER AGENT
ADMINISTRATOR. The Managers Funds, L.P. serves as the Trust's administrator
(the "Administrator") and has overall responsibility, subject to the review of
the Trustees, for all aspects of managing the Trust's operations, including
administration and shareholder services to the Trust, its shareholders and
certain institutions, such as bank trust departments, dealers and registered
investment advisers, that advise or act as an intermediary with the Trust's
shareholders ("Shareholder Representatives"). Since March 1, 1995, the fee paid
to the Administrator has been at the rate of 0.25% per annum of each Income
Fund's average daily net assets, except for the Short Government Fund where the
administrator is currently waiving its fee of 0.20% and the Global Bond Fund
where the Administrator had waived a portion of its 0.20% fee until April 1,
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 portfolio holdings 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
Administrator; (vi) supervising the operations of the Trust's Transfer Agent;
and (vii) such other administrative, shareholder and shareholder related
services as the parties may from time to time agree in writing.
DISTRIBUTOR. The Managers Funds, L.P. serves as distributor of the shares
of the Trust. Its address is 40 Richards Avenue, Norwalk, CT 06854.
TRANSFER AGENT. State Street Bank and Trust Co. serves as the Trust's
Transfer Agent.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Asset Manager is responsible for decisions to buy and sell securities
for each Fund or component of a Fund that it manages, as well as for
broker-dealer selection in connection with such portfolio transactions. In the
case of securities traded on a principal basis, transactions are effected on a
"net" basis, rather than a transaction charge basis, with dealers acting as
principal for their own accounts without a stated transaction charge.
Accordingly, the price of the security may reflect an increase or
36
<PAGE>
decrease from the price paid by the dealer together with a spread between the
bid and asked prices, which provides the opportunity for a profit or loss to the
dealer. Transactions in other securities are effected on a transaction charge
basis where the broker acts as agent and receives a commission in connection
with the trade. In effecting securities transactions, each Asset Manager is
responsible for obtaining best price and execution of orders. The dealer spread
or broker's commission charged in connection with a transaction is a component
of price and is considered together with other relevant factors. Any of the
Funds may effect securities transactions on a transaction charge basis through a
broker-dealer that is an affiliate of the Manager or of one of that Fund's Asset
Managers in accordance with procedures approved by the Trustees. However, no
Asset Manager for a Fund or its affiliated broker-dealer may act as principal in
any portfolio transaction for any Fund with which it is an affiliate, and no
affiliate of the Manager may act as principal in a portfolio transaction for any
of the Funds.
PERFORMANCE INFORMATION
From time to time the Funds may advertise "yield" and or "total return."
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE.
YIELD
The Funds may advertise "yield." Yield refers to income generated by an
investment in the Fund during a 30-day (or one month) period. This income is
then annualized. That is, the amount of income generated during the period is
assumed to be generated during each 30-day (or one month) period over a one-year
period and is shown as a percentage of the investment.
TOTAL RETURN
Each of the Funds 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.
A 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,
37
<PAGE>
rating services and market indices. For more detailed information on performance
calculations and comparisons, see "Performance Information" in the SAI.
The Trust's annual report contains additional performance information and is
available upon request without charge.
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 Fund are entitled to one vote per share. Shareholders have
the right to vote on the election of the Trustees and on all other 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 Funds and affecting all
Funds in the same manner, shareholders of all Funds are entitled to vote. On any
matters affecting only one Fund, only the shareholders of that Fund are entitled
to vote. On matters relating to all the Funds but affecting the Funds
differently, separate votes by Fund are required.
The Trust and its Funds 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 a Fund upon written
request of the holders of at least 10% of that 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.
38
<PAGE>
Two lawsuits seeking class action status have been filed against the
Managers Intermediate Mortgage Fund and the Managers Short Government Fund,
respectively, the Manager 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 Manager, 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 this action
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 funds 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. Certain individual customers, who are potentially members of the class
of plaintiffs in the two class action lawsuits referred to above, have asserted
that they may file similar lawsuits against certain of the defendants based on
similar claims, but have not done so.
TAX INFORMATION
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), under which each Fund is regarded as a separate regulated
investment company.
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.
39
<PAGE>
Generally, each 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.
Shareholders should consult their own tax advisers for more information
regarding the Federal, foreign, state, and local tax treatment with respect to
their 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 Funds in which they have invested. 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.
40
<PAGE>
THE MANAGERS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 1, 1996
40 Richards Avenue, Norwalk, Connecticut 06854
Investor Services: (800) 835-3879
This Statement of Additional Information relates to the Managers Capital
Appreciation Fund, Income Equity Fund, Special Equity Fund, International Equity
Fund, (collectively the "Equity Funds") and the Managers Short Government Fund,
Short and Intermediate Bond Fund, Intermediate Mortgage Fund, Bond Fund, and
Global Bond Fund (collectively the "Income Funds"), (each a "Fund" and
collectively the "Funds") of The Managers Funds, a no-load, open-end management
investment company, organized as a Massachusetts business trust (the "Trust").
Additional Information regarding the Managers Money Market Fund is contained in
a separate Money Market Fund Statement of Additional Information.
This Statement of Additional Information is not a prospectus; it should be
read in conjunction with the Prospectuses of the Funds, dated April 1, 1996,
copies of which may be obtained without charge by contacting the Trust at 40
Richards Avenue, Norwalk, CT 06854 (800) 835-3879 or (203) 857-5321.
This Statement of Additional Information is authorized for distribution to
prospective investors only if preceded or accompanied by effective prospectuses
for the Funds.
<PAGE>
TABLE OF CONTENTS
I. INVESTMENT RESTRICTIONS 3
II. PORTFOLIO TURNOVER 6
III. TRUSTEES AND OFFICERS 7
IV. MANAGEMENT OF THE FUNDS 9
V. FUND MANAGEMENT AGREEMENT 11
VI. ASSET MANAGER PROFILES 15
VII. ADMINISTRATIVE SERVICES; DISTRIBUTION
ARRANGEMENTS 18
VIII. PORTFOLIO SECURITIES TRANSACTIONS 18
IX. NET ASSET VALUE 20
X. TAX INFORMATION 21
XI. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANT 25
XII. CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES 26
XIII. OTHER INFORMATION 27
XIV. PERFORMANCE INFORMATION 44
XV. FINANCIAL STATEMENTS 47
2
<PAGE>
I. INVESTMENT RESTRICTIONS
Except as described below, the following investment restrictions are
fundamental and may not be changed with respect to any Fund without the approval
of a majority of the outstanding voting securities of the Fund, as such term is
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
Provided that nothing in the following investment restrictions shall prevent the
Trust from investing all or substantially all of a Fund's assets in an open-end
management investment company, or a series thereof, with the same investment
objective or objectives as such Fund, no Fund may:
1. Invest in securities of any one issuer (other than securities issued
by the U.S. Government, its agencies and instrumentalities), if immediately
after and as a result of such investment the current market value of the
holdings of its securities of such issuer exceeds 5% of its total assets; except
that up to 25% of the value of the Intermediate Mortgage Fund's total assets may
be invested without regard to this limitation. The Global Bond Fund may invest
up to 50% of its assets in bonds issued by foreign governments which may include
up to 25% of such assets in any single government issuer.
2. Invest more than 25% of the value of its total assets in the
securities of companies primarily engaged in any one industry (other than the
United States Government, its agencies and instrumentalities). Such
concentration may occur incidentally as a result of changes in the market value
of portfolio securities, but such concentration may not result from investment;
provided, however, that the Intermediate Mortgage Fund will invest more than 25%
of its assets in the mortgage and mortgage-finance industry even during
temporary defensive periods. Neither finance companies as a group nor utility
companies as a group are considered a single industry for purposes of this
restriction.
3. Acquire more than 10% of the outstanding voting securities of any one
issuer.
4. Borrow amounts in excess of 5% of its total assets taken at cost or at
market value, whichever is lower. It may borrow only from banks as a temporary
measure for extraordinary or emergency purposes. It will not mortgage, pledge
or in any other manner transfer any of its assets as security for any
indebtedness.
5. Invest in securities of an issuer which together with any predecessor,
has been in operation for less than three years if, as a result, more than 5% of
its total assets would then be invested in such securities.
6. Invest more than 15%, of the value of its net assets in illiquid
instruments including, but not limited to, securities for which there are no
readily available market quotations, dealer (OTC)
3
<PAGE>
options, assets used to cover dealer options written by it, repurchase
agreements which mature in more than 7 days, variable rate industrial
development bonds which are not redeemable on 7 days demand and investments in
time deposits which are non-negotiable and/or which impose a penalty for early
withdrawal.
7. Invest in companies for the purpose of exercising control or
management.
8. Purchase or sell real estate; provided, however, that it may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein.
9. Purchase or sell physical commodities, except that each Fund may
purchase or sell options and futures contracts thereon.
10. Engage in the business of underwriting securities issued by others.
11. Participate on a joint or a joint and several basis in any trading
account in securities. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of The
Managers Funds, L.P. or any portfolio manager in order to save brokerage costs
or to average prices shall not be considered a joint securities trading account.
12. Make loans to any person or firm; provided, however, that the making
of a loan shall not be construed to include (i) the acquisition for investment
of bonds, debentures, notes or other evidences of indebtedness of any
corporation or government entity which are publicly distributed or of a type
customarily purchased by institutional investors (which are debt securities,
generally rated not less than Baa by Moody's or BBB by Standard & Poor's,
privately issued and purchased by such entities as banks, insurance companies
and investment companies), or (ii) the entry into "repurchase agreements." It
may lend its portfolio securities to broker-dealers or other institutional
investors if, as a result thereof, the aggregate value of all securities loaned
does not exceed 33-l/3% of its total assets, except that there is no such
percentage limitation with respect to the Short Government Fund. See "Other
Information -- Loan Transactions."
13. Purchase the securities of other Funds or investment companies except
(i) in connection with a merger, consolidation, acquisition of assets or other
reorganization approved by its shareholders, (ii) for shares in the Money Market
Fund in accordance with an order of exemption issued by the Securities and
Exchange Commission (the "SEC"), and (iii) each Fund, may purchase securities of
investment companies where no underwriter or dealer's commission or profit,
other than customary broker's commission, is involved and only if immediately
thereafter not more than (a) 3% of such company's total outstanding voting stock
is owned by the Fund, (b) 5% of the Fund's total assets, taken at market value,
would be invested in any one such
4
<PAGE>
company or (c) 10% of the Fund's total assets, taken at market value, would be
invested in such securities.
14. Purchase from or sell portfolio securities to its officers, trustees
or other "interested persons" (as defined in the l940 Act) of the Fund,
including its portfolio managers and their affiliates, except as permitted by
the l940 Act.
15. Purchase or retain the securities of an issuer if, to the Trust's
knowledge, one or more of the directors, trustees or officers of the Trust, or
the portfolio manager responsible for the investment of the Trust's assets or
its directors or officers, individually own beneficially more than l/2 of l% of
the securities of such issuer and together own beneficially more than 5% of such
securities.
16. Issue senior securities.
Unless otherwise provided, for purposes of investment restriction (2)
above, relating to industry concentration, the term "industry" shall be defined
by reference to the SEC Industry Codes set forth in the Directory of Companies
Required to File Annual Reports with the Securities and Exchange Commission.
In addition to the foregoing investment restrictions which may not be
changed without shareholder approval, the Funds are subject to the following
operating policies which may be amended by the Trust's Board of Trustees.
Pursuant to these operating policies, no Fund may:
1. Invest in real estate limited partnership interests.
2. Invest in oil, gas or mineral leases.
3. Invest more than 5% of its net assets in warrants or rights, valued at
the lower of cost or market, nor more than 2% of its net assets in warrants or
rights (valued on the same basis) which are not listed on the New York or
American Stock Exchanges.
4. Purchase a futures contract or an option thereon if, with respect to
positions in futures or options on futures which do not represent bona fide
hedging, the aggregate initial margin and premiums paid on such positions would
exceed 5% of the Fund's net asset value. The Money Market Fund may not purchase
futures contracts or options thereon.
5. Purchase securities on margin, except for such short-term credits as
are necessary for clearance of portfolio transactions; provided, however, that
each Fund may make margin deposits in connection with futures contracts or other
permissible investments.
6. Effect short sales of securities, except that the Global Opportunity
Fund may engage in short sales against the box in an amount up to 5% of its
total assets.
5
<PAGE>
7. Write or sell uncovered put or call options. The security underlying
any put or call purchased or sold by a Fund must be of a type the Fund may
purchase directly, and the aggregate value of the obligations underlying the
puts may not exceed 50% of the Fund's total assets.
II. PORTFOLIO TURNOVER
Generally, securities are purchased for the Managers Capital Appreciation
Fund, Special Equity Fund, Income Equity Fund, and International Equity Fund for
investment purposes and not for short-term trading profits. However, these
Funds may dispose of securities without regard to the time they have been held
when such action, for defensive or other purposes, appears advisable to their
portfolio managers.
For the fiscal year ended December 31, 1995, the portfolio turnover rate
for the Capital Appreciation Fund was 134%, the Income Equity Fund 36%, the
Special Equity Fund 65%, and the International Equity Fund 73%. For the fiscal
year ended December 31, 1994, the portfolio turnover rate for the Capital
Appreciation Fund was 122%, the Income Equity Fund 46%, the Special Equity Fund
66%, and the International Equity Fund 22%.
For the fiscal year ended December 31, 1995, the annual portfolio turnover
rate for the Short Government Fund was 238%, the Short and Intermediate Bond
Fund 131% and the Bond Fund 46%. The higher than 100% turnover rate for the
Short and Intermediate Bond Fund was due to sales of portfolio investments to
meet shareholder redemptions. For the fiscal year ended December 31, 1994, the
portfolio turnover rate for the Short Government Fund was 140%, the Short and
Intermediate Bond Fund 57%, the Bond Fund 84% and the Global Bond Fund 214%.
The higher than 100% portfolio turnover rates for the Short Government Fund and
Global Bond Fund were due to sales of portfolio instruments made to meet
redemptions.^
The Intermediate Mortgage Fund generally engages in a significant amount of
trading of securities held for less than one year. Accordingly, it can be
expected that the Fund will generally have a higher incidence of short-term
capital gains, which is taxable as ordinary income, than might be expected from
investment companies which invest substantially all of their funds on a long-
term basis. The Intermediate Mortgage Fund's rates of portfolio turnover for
the years ended December 31, 1995 and December 31, 1994 were 506% and 240%,
respectively.
With the exception of the Intermediate Mortgage Fund, the higher portfolio
turnover rates for the Income Funds are not expected to result in significantly
higher brokerage fees because the securities primarily purchased and sold by
these Funds are usually traded on a principal basis with no commission paid.
The added costs from
6
<PAGE>
brokerage fees and the possibility of more highly taxed short-term capital gains
with respect to the Intermediate Mortgage Fund are weighed against the
anticipated gains from trading.
The Bond, Short and Intermediate Bond and Short Government Funds trade more
actively to realize gains through market timing and/or to increase yields on
investments by trading to take advantage of short-term market variations. This
policy generally results in higher portfolio turnover for these Funds.
III. TRUSTEES AND OFFICERS
The Trust is governed by the Trustees who provide broad supervision over
the affairs of the Trust and the Funds. 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 Trustees' dates of birth. References to The Managers
Funds, L.P., the Manager of the Trust, should be read to apply to Evaluation
Associates Investment Management Company, the predecessor of The
Managers Funds, L.P., for periods prior to August 17, 1990.
NAME, ADDRESS AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------- ----------------------------------------
ROBERT P. WATSON(1) President and Trustee of The Managers
40 Richards Avenue Funds; Chairman and Chief Executive
Norwalk, CT 06854 Officer, Evaluation Associates
Chief Executive Officer, Investment Management Company
President, Trustee (predecessor of The Managers Funds,
L.P.) (prior to June 1988 and from
August 1989 to August 1990); Partner,
The Managers Funds, L.P. (since August
Date of birth: 1/21/34 1990); Executive Vice President,
Evaluation Associates, Inc. (June 1988
to August 1989).
WILLIAM W. GRAULTY Practicing Attorney (1977 to present);
65 LaSalle Road Executive Vice President and Head of
West Hartford, CT 06107 Trust Division, The Connecticut Bank
Trustee and Trust Company, N.A. (1956 to 1976);
President, American Bankers Association,
Date of birth: 12/30/23 Trust Division (1974 to 1975); President
Connecticut Bankers Association, Trust
Division (1966 to 1968).
MADELINE H. McWHINNEY President, Dale, Elliott & Company
24 Blossom Cove (management consultants) (1977 to
Middletown, NJ 07701 present); Assistant Vice President and
Trustee Financial Economist, Federal Reserve
Bank of New York (1943 to 1973); Trustee
Date of birth: 3/11/22 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).
- -------------------------
(1)Trustee who is an "interested person" of the Trust (as defined in Section
2(a)(19) of the 1940 Act).
7
<PAGE>
NAME, ADDRESS AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------- ----------------------------------------
STEVEN J. PAGGIOLI Executive Vice President and Director,
479 West 22nd Street Wadsworth & Associates, Inc.(1986 to
New York, NY 10011 present); Vice President, Secretary and
Trustee Director, First Fund Distributors, Inc.
Date of birth: 4/3/50 (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 present),
University of Massachusetts Associate Professor of Finance
School of Management (1980-1985), Ph.D. Director (Acting)
Amherst, MA 01003 (1985 to 1986), Chairman (Acting)
Trustee Department of General Business and
Date of birth: 5/10/47 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 Managers
40 Richards Avenue Funds, L.P. (December 1994 to present)
Norwalk, CT 06854 Vice President, Signature Financial
Treasurer (Principal Financial Group (March 1990 to December 1994)
and Accounting Officer) Vice President, The Putnam Companies
(August 1980 to March 1990).
KATHLEEN WOOD Vice President (July 1992 to present)
40 Richards Avenue and Assistant Vice President (August
Norwalk, CT 06854 1989 to June 1992), The Managers Funds,
Secretary and Assistant Treasurer L.P.; Analyst, Evaluation Associates,
Inc. (May 1986 to August 1989).
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to Present)
40 Richards Avenue and Assistant Vice President (July
Norwalk, CT 06854 1986 to June 1992), The Managers Funds,
Assistant Treasurer/Assistant L.P.; Accountant, Gintel Co. (June
Secretary 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:
8
<PAGE>
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Registrant and Fund Complex
Name of Trustee from Trust Paid to Trustees
--------------- ------------- ---------------------------
<S> <C> <C>
William W. Graulty $13,000 $13,000
Madeline H. McWhinney 13,200 13,200
Steven J. Paggioli 13,750 13,750
Thomas R. Schneeweis 13,750 13,750
</TABLE>
As indicated above, certain of the Trust's officers also hold positions
with The Managers Funds, L.P., the Manager of the Trust. All Trustees and
officers as a group owned less than 1% of the shares of any of the Funds
outstanding on the date of this Statement of Additional Information.
IV. MANAGEMENT OF THE FUNDS
The Trust is governed by the Trustees, who provide broad supervision over
the affairs of the Trust and the Funds. The Trust has engaged the services of
The Managers Funds, L.P. (the "Manager") as investment manager and administrator
to each of the Funds. The assets of the Funds, are managed by asset managers
(each, an "Asset Manager" and collectively, the "Asset Managers") selected by
the Manager, subject to the review and approval of the Trustees. The Trust has
also retained the services of the Manager as administrator to carry out the day-
to-day administration of the Trust and the Funds.
The Manager recommends Asset Managers for each Fund to the Trustees based
upon its continuing quantitative and qualitative evaluation of the Asset
Managers' skills in managing assets pursuant to specific investment styles and
strategies. Unlike many other mutual funds, the Funds are not associated with
any one portfolio manager, and benefit from independent specialists carefully
selected from the investment management industry. Short-term investment
performance, by itself, is not a significant factor in selecting or terminating
an Asset Manager, and the Manager does not expect to recommend frequent changes
of Asset Managers. The Trust has obtained from the SEC an order permitting the
Manager, subject to certain conditions, to enter into sub-advisory agreements
with Asset Managers approved by the Trustees but without the requirement of
shareholder approval. At meetings held on December 5, 1994 and December 15,
1994, the shareholders of the Funds approved the operation of the Trust in this
manner. Pursuant to the terms of the order, the Manager is to be able, subject
to the approval of the Trustees but without shareholder approval, to employ new
Asset Managers for new or existing Funds, change the terms of particular sub-
advisory agreements or continue the employment of existing Asset Managers after
events that under the 1940 Act and the sub-advisory agreements would be an
automatic termination of the agreement. Although shareholder approval will not
be required for the termination of sub-advisory agreements, shareholders of a
Fund will continue to have the right to terminate such agreements for the Fund
at any time by a vote of a majority of outstanding voting securities of the
Fund. The Manager and its corporate predecessor have had 20 years of experience
in evaluating investment advisers for
9
<PAGE>
individuals and institutional investors. Evaluation Associates, Incorporated,
which acts as consultant to the Manager, together with its predecessors, has
been engaged in the business of rendering portfolio manager evaluation,
selection and supervisory services to a broad spectrum of institutional clients
since 1970.
The assets of each Fund are allocated by the Manager among the Asset
Managers selected for that Fund. Each Asset Manager has discretion, subject to
oversight by the Trustees, and the Manager, to purchase and sell portfolio
assets, consistent with each Fund's investment objectives, policies and
restrictions and specific investment strategies developed by the Manager. For
its services, the Manager receives a management fee from each Fund. A part of
the fee paid to the Manager is used by the Manager to pay the advisory fees of
the Asset Managers.
Generally, no Asset Manager provides any services to any Fund except asset
management and related recordkeeping services. However, an Asset Manager or its
affiliated broker-dealer may execute portfolio transactions for a Fund and
receive brokerage commissions in connection therewith as permitted by Section
17(e) of the 1940 Act.
An Asset Manager may also serve as a discretionary or non-discretionary
investment adviser to one or more clients of Evaluation Associates, Incorporated
(which acts as consultant to the Manager) and to management or advisory accounts
unrelated in any manner to The Managers Funds, L.P. or its affiliates. The
advisory agreement with each Asset Manager (each, an "Asset Management
Agreement") requires the Asset Manager of a Fund to provide fair and equitable
treatment to such Fund in the selection of portfolio investments and the
allocation of investment opportunities, but does not obligate the Asset Manager
to give such Fund exclusive or preferential treatment.
Although the Asset Managers make investment decisions for the Funds
independent of those for their other clients, it is likely that similar
investment decisions will be made from time to time. When a Fund and another
client of an Asset Manager are simultaneously engaged in the purchase or sale of
the same security, the transactions are, to the extent feasible and practicable,
averaged as to price and allocated as to amount between the Portfolio and the
other client(s) pursuant to a formula considered equitable by the Asset
Managers. In specific cases, this system could have detrimental effect on the
price or volume of the security to be purchased or sold, as far as the Fund is
concerned. However, the Trustees believe, over time, that coordination and the
ability to participate in volume transactions should be to the benefit of such
Fund.
The Board of Trustees and the Manager have adopted a joint Code of Ethics
under Rule 17j-1 of the 1940 Act (the "Code"). The Code generally requires
employees of the Manager to 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
10
<PAGE>
applicable to all employees of the Manager include a ban on trading securities
based on information about the Funds' trading.
V. FUND MANAGEMENT AGREEMENT
The Trust has entered into a Fund Management Agreement (the "Fund
Management Agreement") with The Managers Funds, L.P. (the "Manager") which, in
turn, has entered into Asset Management Agreements with each of the Asset
Managers selected for the Funds.
The Manager is a Delaware limited partnership. Its general partner is a
corporation that is wholly owned by Robert P. Watson, President and a Trustee of
the Trust.
Under the Fund Management Agreement, the Manager is required to (i)
supervise the general management and investment of the assets and securities
portfolio of each Fund; (ii) provide overall investment programs and strategies
for each Fund; (iii) select and evaluate the performance of Asset Managers for
each Fund and allocate the Fund's assets among such Asset Managers; (iv) provide
financial, accounting and statistical information required for registration
statements and reports with the SEC; and (v) provide the Trust with the office
space, facilities and personnel necessary to manage and administer the
operations and business of the Trust, including compliance with state and
federal securities and tax laws, shareholder communications and recordkeeping.
The Fund Management Agreement runs from year to year so long as its
continuance is approved at least annually by the Trustees or by a 1940 Act
majority vote of the shareholders of each Fund and those Trustees who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the agreements (the "Disinterested
Trustees"). Any amendment to the Fund Management Agreement must be approved by
a 1940 Act majority vote of the shareholders of the relevant Fund and by the
majority vote of the Trustees. The Fund Management Agreement is subject to
termination, without penalty, by the Disinterested Trustees or by a 1940 Act
majority vote of the shareholders of each Fund on 60 days written notice to the
Manager or by the Manager on 60 days written notice to the Fund, and terminates
automatically if assigned.
The following table sets forth the annual management fee rates currently
paid by each Fund to the Manager, together with the portion of the management
fee that is retained by the Manager as compensation for its services, each
expressed as a percentage of the Fund's average net assets. The remainder of
portion of the the management fee is paid to the Asset Managers. Individual
Asset Manager fees are set forth in the Prospectuses under the heading
"Management of the Funds - Investment Manager," and vary, including in some
cases among Asset Managers of a single Fund.
11
<PAGE>
<TABLE>
<CAPTION>
Weighted Average
of the Manager's
portion of the
Total Management Total Management
Name of Fund Fee Fee
- ------------ ---------------- ----------------
<S> <C> <C>
Capital Appreciation 0.80% 0.40%
Fund
Income Equity Fund 0.75% 0.375%
Special Equity Fund 0.90% 0.40%
International Equity 0.90% 0.40%
Fund
Short Government 0.20% 0.00%
Fund*
Short and 0.50% 0.25%
Intermediate Bond
Fund
Intermediate Mortgage Fund 0.45% 0.25%
Bond Fund 0.625% 0.375%
Global Bond Fund 0.70% 0.35%
</TABLE>
* Reflects voluntary fee waiver by the Manager which may be modified or
terminated at any time in the sole discretion of the Manager. In the absence of
such waiver, the maximum total management fee payable by the Short Government
Fund would be 0.45% and the weighted average of the Manager's portion of the
total management fee would be 0.25%.
The amount of each Fund's management fee that is retained by the Manager
may vary for a Fund due to changes in the allocation of assets among its Asset
Managers, the effect of an increase in the Fund's net asset value on the fees
payable to its Asset Managers, and/or the implementation, modification or
termination of voluntary fee waivers by the Manager and/or one or more of the
Asset Managers. Given the asset management arrangements currently in effect,
the Manager's portion of the Income Equity Fund and the Short Government Fund's
total management fees would not exceed 0.40% and 0.25%, respectively.
During the fiscal years ended December 31, 1993, 1994 and 1995, the Funds
paid the following fees to the Manager under the Fund Management Agreement and
the Manager paid the following fees to each Asset Manager under the Asset
Management Agreements:
12
<PAGE>
<TABLE>
<CAPTION>
January 1, 1995-December 31, 1995 January 1, 1994-December 31, 1994
--------------------------------- ---------------------------------
Fee Paid Fee Paid
Approximate to Asset Approximate to Asset
Fee paid Fee Retained Manager by Fee Paid Fee Retained Manager by
Name of Fund/Asset Manager to Manager by Manager Manager/1 to Manager by Manager Manager/1
-------------------------- ---------- ------------ --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND $635,588 $318,716 $669,940 $335,074
Dietche & Field Advisers, Inc. $156,119 $163,850
Hudson Capital Advisers $160,753 $171,017
INCOME EQUITY FUND $299,824 $150,565 $339,061 $170,110
Scudder, Stevens & Clark, Inc. $74,220 $83,842
Spare, Kaplan, Bischel &
Associates $75,039 $85,108
SPECIAL EQUITY FUND $977,869 $435,343 $972,495 $468,413
Liberty Investment Management
Inc. $187,691 $194,588
Pilgrim Baxter & Associates/5 $190,981 $33,634
Westport Asset Management, Inc. $163,854 $160,027
INTERNATIONAL EQUITY FUND $948,514 $422,512 $728,272 $323,639
Lazard Freres & Co/6 $215,232 N/A
Scudder, Stevens & Clark, Inc. $310,770 $404,633
SHORT GOVERNMENT FUND $15,835 N/A $197,692 $109,438
Jennison Associates Capital
Corp/2 $15,835 $2,338
SHORT AND INTERMEDIATE BOND FUND $128,254 $64,209 $433,531 $217,375
Standish, Ayer & Wood $34,464 $84,716
INTERMEDIATE MORTGAGE FUND $214,141 $118,967 $646,916 $439,614
Jennison Associates Capital
Corp/3 $95,174 $23,470
<CAPTION>
January 1, 1993-December 31, 1993
----------------------------------------
Fee Paid
Approximate to Asset
Fee Paid Fee Retained Manager by
Name of Fund/Asset Manager to Manager by Manager Manager/1
-------------------------- ---------- ------------ ----------
<S> <C> <C> <C>
CAPITAL APPRECIATION FUND $470,692 $236,068
Dietche & Field Advisers, Inc. $112,852
Hudson Capital Advisers $121,772
INCOME EQUITY FUND $361,561 $181,142
Scudder, Stevens & Clark, Inc. $86,719
Spare, Kaplan, Bischel &
Associates $93,700
SPECIAL EQUITY FUND $603,770 $269,597
Liberty Investment Management
Inc. $117,455
Pilgrim Baxter & Associates/5 N/A
Westport Asset Management, Inc. $121,340
INTERNATIONAL EQUITY FUND $296,117 $132,014
Lazard Freres & Co/6 N/A
Scudder, Stevens & Clark, Inc. $164,103
SHORT GOVERNMENT FUND $485,933 $348,811
Jennison Associates Capital
Corp/2 N/A
SHORT AND INTERMEDIATE BOND FUND $458,038 $229,285
Standish, Ayer & Wood $89,380
INTERMEDIATE MORTGAGE FUND $839,106 $602,208
Jennison Associates Capital
Corp/3 N/A
</TABLE>
13 & 14
<PAGE>
<TABLE>
<CAPTION>
January 1, 1995-December 31, January 1, 1994-December 31, January 1, 1993-December 31,
----------------------------- ----------------------------- -----------------------------
1995 1994 1993
---- ---- ----
Approxi Fee Approxi Fee Approxi Fee
-mate Paid to -mate Paid to -mate Paid to
Fee Asset Fee Asset Fee Asset
Name of Fund/Asset Fee Retained Manager Fee Retained Manager Fee Retained Manager
- ------------------ Paid to by by Paid to by by Paid to by by
Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager
------- -------- -------- ------- -------- --------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
/1 /1 /1
BOND FUND $162,594 $97,557 $237,886 $142,664 $242,156 $145,583
Loomis, Sayles &
Company, Inc. $65,037 $95,222 $85,262
GLOBAL BOND FUND $86,482 $43,466 $52,093 $27,100 N/A N/A
Rogge Global Partners/4 $43,016 $24,993 N/A
</TABLE>
1/ Does not reflect payments made to asset managers whose relationship with a
Fund has been terminated.
2/ Portfolio manager hired during 1994. Reflects waiver of a portion of
management fees by the Manager. In the
absence of such waiver, the Manager would have received an additional
$94,966, $29,861 and $19,793 for the fiscal
years ended December 31, 1993, December 31, 1994 and December 31, 1995,
respectively.
3/ Portfolio manager hired during 1994. Reflects waiver of a portion of
management fees by the Manager. In the
absences of such waiver, the Manager would have received an additional
$115,723 and $130,528 for the
fiscal years ended December 31, 1994 and December 31, 1993, respectively.
4/ Fund commenced operation during 1994.
5/ Portfolio manager hired during 1994.
6/Portfolio manager hired during 1995.
15
<PAGE>
VOLUNTARY FEE WAIVERS AND EXPENSE LIMITATION
From time to time, the Manager may agree voluntarily to waive all or a
portion of the fee it would otherwise be entitled to receive from a Fund. The
Manager may waive all or a portion of its fee for a number of reasons such as
passing on to the Fund and its shareholders the benefit of reduced portfolio
management fees resulting from (i)_a reallocation of Fund assets among Asset
Managers, (ii)_negotiation by the Manager of a lower fee payable to an Asset
Manager, or (iii)_a voluntary waiver by an Asset Manager of all or a portion of
the fees it would otherwise be entitled to receive from the Manager with respect
to the Fund. The Manager may also decide to waive all or a portion of its fees
from a Fund for other reasons, such as attempting to make a 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 management
fees payable by the Funds is reflected in the tables above and in the
Illustrative Expense Information located in the front of the Prospectuses of the
Equity Funds and the Income Funds. Voluntary fee waivers by the Manager or by
any Asset Manager may be terminated or reduced in amount at any time and solely
in the discretion of the Manager or Asset Manager concerned. Shareholders will
be notified of any change on or about the time that it becomes effective.
VI. ASSET MANAGER PROFILES
The Asset Managers for each Fund are set forth in the respective
Prospectuses. Assets of each of the Equity Funds are currently allocated among
more than one Asset Manager to provide diversification among investment
strategies. However, not all Asset Managers with whom Asset Management
Agreements are in effect will be funded at all times. As of the date of this
Statement of Additional Information, the following are the Asset Managers for
each Fund. These Asset Managers have no affiliations with the Funds or with the
Manager, although they may also serve as Asset Managers to clients of Evaluation
Associates, Incorporated.
The following information regarding the names of all controlling persons of
each Asset Manager and the basis of such control has been supplied by such Asset
Manager.
CAPITAL APPRECIATION FUND
HUDSON CAPITAL ADVISERS
The firm is a division of Fahnestock & Co. Inc., which is a wholly-owned
subsidiary of Fahnestock Viner Holding Inc., a publicly held Canadian company.
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DIETCHE & FIELD ADVISERS, INC.
Dietche & Field Advisers, Inc. was formed in November 1984 and is owned by
employees of the firm.
INCOME EQUITY FUND
SPARE, KAPLAN, BISCHEL & ASSOCIATES
The firm is owned 95% by the ten principals (Anthony E. Spare, Kenneth J.
Kaplan, Andrew W. Bischel, James G. McCluskey, Mark E. McKee, Susan L. Grivas,
Shelley H. Mann, Jerome J. Paolini, Giri Bogavelli and Lesley R. Zimmer) and 5%
by outside investors.
SCUDDER, STEVENS & CLARK, INC.
Scudder, Stevens & Clark, Inc. is a privately-held Delaware corporation.
Daniel Pierce is the Chairman of the Board and Edmond D. Villani is the
President of Scudder. Stephen R. Beckwith, Lynn Birdsong, Nicholas Bratt,
Cuyler W. Findlay, Jerard K. Hartman, Douglas M. Loudon, John T. Packard, Juris
Padegs, Cornelia M. Small, O. Robert Theurkauf, and David B. Watts are the other
members of the Board of Directors of Scudder. The principal occupation of each
of the above named individuals is serving as a Managing Director of Scudder.
All of the outstanding voting and non-voting securities of Scudder are held
of record by Stephen R. Beckwith, Daniel Pierce, O. Robert Theurkauf and Edmund
D. Villani in their capacity as representatives (the "Representatives") of the
beneficial owners of such securities, pursuant to a Security Holders' Agreement
among Scudder, the beneficial owners of securities of Scudder, and the
Representatives. Pursuant to such Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocation will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and non-voting
stock; all Principals own non-voting stock.
SPECIAL EQUITY FUND
LIBERTY INVESTMENT MANAGEMENT, INC. (formerly Eagle Asset Management, Inc.)
Liberty Investment Management, Inc. is a 100% owned by Herbert E. Ehlers.
PILGRIM BAXTER & ASSOCIATES
Pilgrim Baxter & Associates is owned by United Asset Management, a public
company.
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WESTPORT ASSET MANAGEMENT, INC.
Westport Asset Management, Inc. is owned by Andrew J. Knuth (5l%) and by
Ronald H. Oliver (49%), each of whom is active as a portfolio manager/analyst.
INTERNATIONAL EQUITY FUND
SCUDDER, STEVENS & CLARK, INC.
(See INCOME EQUITY FUND)
LAZARD, FRERES & CO.
Lazard, Freres & Co. is a New York general partnership founded in 1848.
The general partners are Norman Eig, Herbert W. Gullquist, Eduardo Haim, Robert
P. Morgenthau, John R. Reese, John R. Reinsberg and Alexander E. Zagoreos.
SHORT GOVERNMENT FUND
JENNISON ASSOCIATES CAPITAL CORP.
Jennison Associates Capital Corp. is a wholly-owned subsidiary of The
Prudential Securities Company of America.
SHORT AND INTERMEDIATE BOND FUND
STANDISH, AYER & WOOD, INC.
Edward H. Ladd, Director and Chairman, George W. Noyes, Director and
President, and Dolores S. Driscoll, Managing Director and Vice President, each
owns more than 10% of the outstanding voting securities of Standish. Davis B.
Clayson, Managing Director and Vice President, David W. Murray, Director,
Treasurer and Vice President, Richard C. Doll, Director and Vice President,
Maria D. O'Malley, Director and Vice President, and Richard S. Wood, Director,
Vice President and Secretary, each own more than 5% of the outstanding voting
securities of Standish. Caleb F. Aldrich, Nicholas S. Battelle, Walter M. Cabot,
David H. Cameron, Karen K. Chandor, Lawrence H. Coburn, James E. Hollis, III,
Laurence A. Manchester, Arthur H. Parker, Howard B. Rubin, Austin C. Smith,
James J. Sweeney and Ralph S. Tate are each a Director and Vice President of
Standish. Each owns less than 5% of the outstanding voting securities of
Standish.
INTERMEDIATE MORTGAGE FUND
JENNISON ASSOCIATES CAPITAL CORP.
(See SHORT GOVERNMENT FUND)
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BOND FUND
LOOMIS, SAYLES & COMPANY, INC.
The New England owns 92% of Loomis, Sayles (which operates independently)
with the remaining 8% owned by about 70 professionals.
GLOBAL BOND FUND
ROGGE GLOBAL PARTNERS, INC.
Rogge Global Partners, Inc. is 100% employee owned. Olaf Rogge owns more
than 5% of the firm.
VII. ADMINISTRATIVE SERVICES; DISTRIBUTION ARRANGEMENTS
The Trust has also retained the services of The Managers Funds, L.P. as
administrator (the "Administrator").
The Managers Funds, L.P. also serves as distributor (the "Distributor") in
connection with the offering of each Fund's shares on a no-load basis. The
Distributor bears certain expenses associated with the distribution and sale of
shares of the Funds. The Distributor acts as agent in arranging for the sale of
each 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 and the Distributor may be
terminated by either party under certain specified circumstances and will
automatically terminate on assignment in the same manner as the Fund Management
Agreement. The Distribution Agreement may be continued annually if specifically
approved by the Trustees or by a vote of the Trust's outstanding shares,
including a majority of the Trustees who are not "interested persons" of the
Trust or the respective Distributor, as such term is defined in the 1940 Act,
cast in person at a meeting called for the purpose of voting on such approval.
VIII. PORTFOLIO SECURITIES TRANSACTIONS
The Asset Management Agreements between the Manager and the Asset Managers
provide, in substance, that in executing portfolio transactions and selecting
brokers or dealers, the principal objective of each Asset Manager is to seek
best price and execution. It is expected that securities will ordinarily be
purchased in the primary markets, and that in assessing the best net price and
execution available to the applicable Fund, the Asset Manager shall consider all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis).
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In addition, the Asset Managers, in selecting brokers^ to execute
particular transactions and in evaluating the best net price and execution
available, are authorized by the Trustees to consider the "brokerage and
research services" (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934), provided by the broker. The Asset Managers
are also authorized to cause a Fund to pay a commission to a broker^ who
provides such brokerage and research services for executing a portfolio
transaction which is in excess of the amount of commission another broker^ would
have charged for effecting that transaction. The ^Asset Managers^ must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided viewed in
terms of that particular transaction or in terms of all the accounts over which
the ^Asset Manager exercises investment discretion. Brokerage and research
services received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by each Asset Manager. The Funds may
purchase and sell portfolio securities from dealers who provide the Fund with
research services.
The Trustees will periodically review the total amount of commissions paid
by each Fund to determine if the commissions paid over representative periods of
time were reasonable in relation to commissions being charged by other brokers
and the benefits to each Fund of using particular brokers or dealers. It is
possible that certain of the services received by the Asset Manager attributable
to a particular transaction will primarily benefit one or more other accounts
for which investment discretion is exercised by the Asset Managers.
The fees of the Asset Managers are not reduced by reason of their receipt
of such brokerage and research services. Generally, no Asset Manager provides
any services to any Fund except portfolio investment management and related
record-keeping services. However, an Asset Manager for a particular Fund or its
affiliated broker-dealer may execute portfolio transactions for such Fund and
receive brokerage commissions for doing so in accordance with Section 17(e) of
the 1940 Act and the procedures adopted by the Trustees in accordance with the
rules thereunder. An Asset Manager for a Fund or its affiliated broker-dealers
may not act as principal in any portfolio transaction for any Fund with which it
is affiliated.
In allocating portfolio transactions for a Fund among several broker-
dealers, an Asset Manager may, but is not required to, take into account any
sales of shares of that Fund by the broker-dealer or by an affiliate of the
broker-dealer.
For the fiscal year ended december 31, 1995, the aggregate brokerage
commissions paid by each of the funds incurring any such commissions were
$283,673 for the capital appreciation fund, $119,418 for the special equity
fund, $69,964 for the income equity fund and $421,365 for the international
equity fund. For the fiscal year ended December 31, 1994, the aggregate
brokerage commissions paid by each of
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the Funds incurring any such commissions were $276,975 for the Capital
Appreciation Fund, $117,854 for the Special Equity Fund, $73,083 for the Income
Equity Fund, $109,595 and for the International Equity Fund. For the fiscal year
ended December 31, 1993, the aggregate brokerage commissions paid by each of the
Funds incurring any such commissions was $185,230 for the Capital Appreciation
Fund, $133,593 for the Special Equity Fund, $75,019 for the Income Equity Fund,
and $101,090 for the International Equity Fund.
During the fiscal year ended December 31, 1995, the Capital Appreciation
Fund paid brokerage commissions totaling $41,584 to Fahnestock &
Co.("Fahnestock"), an affiliated broker-dealer of Hudson Capital Advisers which
served as an Asset Manager. During the fiscal year ended December 31, 1994, the
Capital Appreciation Fund paid brokerage commissions totaling $69,584 to
Fahnestock. During the fiscal year ended December 31, 1993, the Capital
Appreciation Fund paid brokerage commissions totaling $60,366 to Fahnestock.
The brokerage commissions paid to Fahnestock by the Capital Appreciation Fund
represented 15% of the total brokerage commissions paid by those funds during
the fiscal year ended December 31, 1995; 25% during the fiscal year ended
December 31, 1994; and 33% during the fiscal year ended December_31,_1993. Such
commissions were paid in connection with portfolio transactions the dollar
amount of which represented 16%, 22% and 16%, respectively, of the aggregate
dollar amount of all portfolio transactions involving the payment of commissions
by the Fund during those fiscal years. Brokerage commissions were paid to
Fahnestock in compliance with procedures established by the Trustees, pursuant
to which the commissions were determined to be comparable to commissions charged
by other brokers for similar transactions and by Fahnestock to similarly
situated clients.
IX. NET ASSET VALUE
The net asset value of the shares of each Fund is determined each day on
which the New York Stock Exchange ("NYSE") is open for trading (a "Pricing
Day"). The weekdays that the NYSE is expected to be closed are New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Assets of the Funds are valued as follows:
Equity securities listed on an exchange are valued on the basis of the last
quoted sale price on the exchange where such securities principally are traded
on the valuation date, prior to the close of trading on the NYSE, or, lacking
any sales, on the basis of the last bid price on such principal exchange prior
to the close of trading on the NYSE. A security which is listed or traded on
more than one exchange is valued at the quotation on the exchange determined by
the Asset Manager to be the primary market for such security. Over-the-counter
securities for which market quotations are readily available are valued on the
basis of the last bid price on that date prior to the close of trading on the
NYSE. Securities and other instruments for which market quotations are not
readily available are valued at
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fair value, as determined in good faith by the Asset Manager pursuant to
procedures established by the Trustees.
Fixed-income securities generally are valued at the last quoted bid price
prior to the close of trading on the NYSE. Fixed-income securities for which
quoted prices are not readily available will be valued at fair market value, as
determined in good faith by the Asset Manager pursuant to procedures established
by the Trustees. Certain foreign fixed-income securities are valued at the last
quoted sale price.
Trading of securities owned by a Fund, particularly the International
Equity Fund and Global Bond Fund, for which the principal trading market is a
foreign securities exchange may occur on days other than Pricing Days.
Accordingly, the values of securities in a Fund's portfolio may be subject to
changes on such days, which changes would not be reflected in the Fund's net
asset value until the next Pricing Day. In addition, trading on foreign
securities exchanges may not take place on all Pricing Days. Generally
securities traded on foreign securities exchanges will be valued for net asset
value purposes at the close of the principal exchange on which they are traded,
which may not be the same time that the Fund's net asset values are determined.
If an event occurs after the close of a principal exchange that is likely to
affect the valuation of a particular security trading on that exchange, such
security may be valued at fair value, as determined in good faith by the Asset
Manager pursuant to procedures established by the Trustees.
For purposes of determining the net asset value of any Fund which holds
non-dollar denominated portfolio instruments, all assets and liabilities
initially expressed in foreign currency values will be converted into U.S.
dollar values at the mean between the bid and offered quotations of such
currencies against U.S. dollars as last quoted by any recognized dealer. If
such quotations are not available, the rate of exchange will be determined in
accordance with policies established in good faith by the Trustees. Gains or
losses between trade and settlement dates resulting from changes in exchange
rates between the U.S. dollar and a foreign currency are borne by the Fund. To
protect against such losses, the International Equity Fund, and Global Bond
Fund may enter into forward foreign currency exchange or futures contracts,
which will also have the effect of limiting any such gains. See "Other
Information--Foreign Currency Exchange Contracts."
X. TAX INFORMATION
Each 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
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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, as well as 90% of its net tax-exempt
interest income; (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 and
90% of its net tax-exempt interest income, it will not be subject to corporate
income tax on amounts distributed to its shareholders.
If for any taxable year a Fund does not qualify as a RIC, all of its
taxable income (including its net capital gain) will be subject to tax at
regular corporate rates without any deduction for distributions to shareholders,
and such distributions will be taxable as ordinary dividends to the extent of
such 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.
If for any taxable year a Fund complies with certain requirements, then
some or all of the dividends (excluding capital gain distributions) payable out
of income of the Fund that are attributable to dividends received from domestic
corporations may qualify for the 70% dividends-received deduction available to
corporations.
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 a 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 six 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 six-month period. No loss will be allowed on the sale of shares of
a 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.
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Dividends and other distributions by any 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 a
Fund. Additionally, shareholders who are foreign persons should consult with
their own tax advisers concerning the foreign tax consequences of investing in a
Fund.
All of the Funds except for International Equity Funds may invest in
futures contracts or options. Certain options, futures contracts and options on
futures contracts are "section 1256 contracts." Any gains or losses on section
1256 contracts are generally considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of each taxable year are treated for federal income tax purposes as being
sold on such date for their fair market value. The resultant paper gains or
losses are also treated as 60/40 gains or losses. When the section 1256 contract
is subsequently disposed of, the actual gain or loss will be adjusted by the
amount of any preceding year-end gain or loss. The use of section 1256
contracts may force a Fund to distribute to shareholders paper gains that have
not yet been realized in order to avoid federal income tax liability.
The International Equity, Short Government and Bond Funds may invest in
obligations (such as zero coupon bonds) which are issued with original issue
discount ("OID"). Under the code, OID is accrued even in the absence of cash
payments. Accordingly, the International Equity, Short Government and Bond
Funds may be required to sell some of their assets in order to satisfy the
distribution requirements applicable to RICs.
Foreign currency gains or losses on non-U.S. dollar denominated bonds and
other similar debt instruments and on any non-U.S. dollar denominated futures
contracts, options and forward contracts ^ generally will be treated as ordinary
income or loss.
Certain hedging transactions undertaken by a Fund may result in "straddles"
for federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund. In addition, losses realized by the
Fund on positions that are part of a straddle may be deferred, rather than being
taken into account in calculating taxable income for the taxable year in which
such losses are realized. Because only a few regulations implementing the
straddle rules have been promulgated, the tax consequences of hedging
transactions to the Fund are not entirely clear. The hedging transactions may
increase the amount of short-term capital gain realized by the Fund which is
taxed as ordinary income when distributed to shareholders. The Fund may make
one or more of the elections available under the Code which are applicable to
straddles. If the Fund makes any of the elections, the amount, character and
timing of the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to the elections
made. The rules applicable under certain of the elections operate to accelerate
the recognition of gains or losses from the affected straddle positions.
Because application of the
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straddle rules may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders, and which will
be taxed to shareholders as ordinary income or long-term capital gain in any
year, may be increased or decreased substantially as compared to a fund that did
not engage in such hedging transactions.
The 30% limit on gains from the sale of certain assets held for less than
three months and the diversification requirements applicable to each Fund's
assets may limit the extent to which each Fund will be able to engage in
transactions in options, futures contracts or options on futures contracts.
The International Equity, Global Bond, Bond, Short and Intermediate Bond
and Short Government Funds may be subject to a tax on dividend or interest
income received from securities of a non-U.S. issuer withheld by a foreign
country at the source. The United States has entered into tax treaties with
many foreign countries which entitle the Funds to a reduced rate of tax or
exemption from tax on such income. It is impossible to determine the effective
rate of foreign tax in advance since the amount of each Fund's assets to be
invested within various countries is not known. If more than 50% of such a
Fund's total assets at the close of a taxable year consists of stock or
securities in foreign corporations, the Fund may elect to pass through to its
shareholders the foreign income taxes paid thereby. In such case, the
shareholders would be treated as receiving, in addition to the distributions
actually received by the shareholders, their proportionate share of foreign
income taxes paid by the Fund, and will be treated as having paid such foreign
taxes. The shareholders will be entitled to deduct or, subject to certain
limitations, claim a foreign tax credit with respect to, such foreign income
taxes. It should be noted that only shareholders who itemize deductions may
deduct foreign income taxes paid by them.
Shareholders of each Fund will be notified each year of the amounts and tax
status of dividends and distributions from their Fund. The notification will
contain information for corporate shareholders of the Funds that are subject to
federal income taxation of the extent to which, if any, the dividends paid by
each Fund qualify for a deduction for dividends received. Despite such
notification, the dividends-received deduction will not be available if the
corporate shareholder has held shares of a Fund for less than 46 days and will
be reduced to the extent that the acquisition of the shares was financed with
indebtedness.
Under the federal income tax law, each 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 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
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
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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 Funds of
certain other 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 regulated
investment company with respect to the amount, if any, by which such company
does not meet distribution requirements specified under such tax law. Each 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 Funds 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 a Fund, including the possibility that
distributions may be subject to a 30% United States 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 should 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 Funds and their
shareholders. Foreign, state and local tax laws vary greatly, especially with
regard to the treatment of exempt-interest dividends. Shareholders should
consult their own tax advisers for more information regarding the Federal,
foreign, state, and local tax treatment of each Fund's shareholders and with
respect to their own tax situation.
XI. CUSTODIAN, TRANSFER AGENT AND INDEPENDENT PUBLIC ACCOUNTANT
State Street Bank and Trust Company ("State Street" or the "Custodian"),
1776 Heritage Drive, North Quincy, Massachusetts, as Custodian for all the
Funds, is responsible for holding all cash assets and all portfolio securities
of the Funds, releasing and delivering such securities as directed by the Funds,
maintaining bank accounts in the names of the Funds, receiving for deposit into
such accounts payments for shares of the Funds, collecting income and other
payments due the Funds with respect to portfolio securities and paying out
monies of the Funds. In addition, when any of the Funds trade in futures
contracts and those trades would require the deposit of initial margin with a
futures commission merchant ("FCM"), the Fund will enter into a separate special
custodian agreement with a custodian in the name of the FCM which agreement will
provide that the
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FCM will be permitted access to the account only upon the Fund's default under
the contract.
The Custodian is authorized to deposit securities in securities
depositories or to use the services of sub-custodians, including foreign sub-
custodians, to the extent permitted by and subject to the regulations of the
Securities and Exchange Commission.
Boston Financial Data Services, Inc. serves as the Transfer Agent for each
of the Funds.
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, is the independent public accountant for each of the Funds.
XII. 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 Capital Appreciation
Fund and Special Equity Fund and Huntington National Bank (U.S.) "controlled"
the Special Equity Fund^. An entity which "controls" a particular Fund 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 any of the Funds. Certain
of these shareholders are omnibus processing organizations.
CAPITAL APPRECIATION FUND
Huntington National Bank, Columbus, Ohio (5%)
Resource Bank, Minneapolis, Minnesota (33%)^
Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (8%)
SPECIAL EQUITY FUND
Huntington National Bank, Columbus, Ohio (29%)
Resource Bank, Minneapolis, Minnesota (25%)
Charles Schwab & Co., Inc., San Francisco, California (7%)
INCOME EQUITY FUND
Huntington National Bank, Columbus, Ohio (24%)
Charles Schwab & Co., Inc., San Francisco, California (10%)
Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (8%)
INTERNATIONAL EQUITY FUND
Huntington National Bank, Columbus, Ohio (10%)
Resource Bank, Minneapolis, Minnesota (17%)
Charles Schwab & Co., Inc., San Francisco, California (24%)
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Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (10%)
SHORT GOVERNMENT FUND
Huntington Trust Co., Charleston, West Virginia (14%)
Charles Schwab & Co., Inc., San Francisco, California (6%)
Technoserve Pension Plan, Norwalk, Connecticut (5%)
SHORT AND INTERMEDIATE BOND FUND
Huntington National Bank, Columbus, Ohio (6%)
Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (13%)
INTERMEDIATE MORTGAGE FUND
Resource Bank, Minneapolis, Minnesota (5%)
BOND FUND
^The Trust Company of the South, Burlington, North Carolina (8%)
Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (13%)
Charles Schwab & Co., Inc., San Francisco, California (9%)
GLOBAL BOND FUND
Charles Schwab & Co., Inc., San Francisco, California (17%)
Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (20%)
Bank of Waukegan, Waukegan, Michigan (5%)
All shareholders are entitled to one vote for each share held. There is no
cumulative voting. Accordingly, the holder or holders of more than 50% of the
shares of the Trust would be able to elect all the Trustees. With respect to
the election of Trustees and ratification of accountants the shareholders of
separate Funds vote together; they generally vote separately by Fund on other
matters.
XIII. OTHER INFORMATION
Following is a description of various financial instruments and other terms
referred to in the prospectus and statement of additional information.
ASSET-BACKED SECURITIES -- Through the use of trusts and special purpose
corporations, various types of assets, primarily automobile and credit card
receivables and home equity loans, have been securitized in pass-through
structures similar to mortgage pass-through structures or in a pay-through
structure similar to the CMO structure. A Fund may invest in these and other
types of asset-backed securities that may be developed in the future. Asset-
backed
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securities present certain risks that are not presented by mortgage-backed
securities. Primarily, these securities do not have the benefit of a security
interest in the related collateral. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of states
and federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, the security interests in
the underlying automobiles are often not transferred when the pool is created,
with the resulting possibility that the collateral could be resold. In general,
these types of loans are of shorter average life than mortgage loans and are
less likely to have substantial prepayments.
BANKERS ACCEPTANCES -- Bankers acceptances are short-term credit
instruments used to finance the import, export, transfer or storage of goods.
They are termed "accepted" when a bank guarantees their payment at maturity.
Eurodollar bankers acceptances are U.S. dollar denominated bankers acceptances
"accepted" by foreign branches of major U.S. commercial banks.
CASH EQUIVALENTS -- Cash equivalents include certificates of deposit,
bankers acceptances, government obligations, commercial paper, short-term
corporate debt securities and repurchase agreements.
CERTIFICATES OF DEPOSIT -- Certificates of deposit are issued against funds
deposited in a bank (including eligible foreign branches of U.S. banks), are for
a definite period of time, earn a specified rate of return and are normally
negotiable.
COMMERCIAL PAPER -- Commercial paper refers to promissory notes
representing an unsecured debt of a corporation or finance company which matures
in less than nine (9) months. Eurodollar commercial paper refers to notes
payable by European issuers in U.S. dollars.
COVERED CALL OPTIONS -- The Equity Funds, other than the International
Equity Fund each may write covered call options on individual stocks, equity
indices and futures contracts, including equity index futures contracts. The
Income Funds each may write covered call options on individuals bonds and on
interest rate futures contracts. With the exception of the Short Government
Fund and the Intermediate Mortgage Fund, all written call options must be listed
on a national securities exchange or futures exchange. The Short Government
Fund and the Intermediate Mortgage Fund may write unlisted options in negotiated
transactions. (See "Dealer Options and "Puts and Calls".) The Funds will not
change these policies until this Statement of Additional Information has been
appropriately supplemented, and existing shareholders will be notified of such a
change in the next regular report to them.
A call option is a short-term contract (ordinarily having a duration of
nine months or less) which gives the purchaser of the option, in return for a
premium paid, the right to buy, and the writer the obligation to sell, the
underlying security, financial instrument,
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index or futures contract at the exercise price at any time prior to the
expiration of the option, regardless of the market price of the security,
financial instrument, index or futures contract during the option period. A
call option is "covered" if the Fund writing the option owns, (or has the
immediate right to acquire without the payment of additional consideration), the
underlying security or financial instrument, owns financial instruments whose
returns are closely correlated with the financial instruments on which the
option is written or segregates with the Custodian sufficient cash and/or
short-term high quality securities to meet its obligations under the call.
In order to terminate its obligation under an outstanding option which it
has written, a Fund may make a "closing purchase transaction" I.E., purchase a
call option on the same financial instrument, index or futures contract with
the same exercise price and the same expiration date. The Fund will realize a
gain or loss from a closing purchase transaction if the amount paid to purchase
a call option is less or more, respectively, than the amount received from the
sale thereof. A Fund may not effect a closing purchase transaction with respect
to a written option after it has been notified of the exercise of the option.
When a security, financial instrument, index or futures contract underlying a
covered call option is sold from a Fund's portfolio, the Fund must effect a
closing purchase transaction so as to close out any existing covered call option
on that security, financial instrument, index or futures contract. A closing
purchase transaction may be made only on an exchange which provides a secondary
market for an option with the same exercise price and expiration date. There is
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange may exist. If a Fund is unable to effect a closing
purchase transaction, the Fund will not be able to sell the underlying security,
financial instrument, index or futures contract until the option expires.
The writing of option contracts is a highly specialized activity which
involves investment techniques and risks different than those ordinarily
associated with investment companies. A Fund pays brokerage commissions in
connection with writing covered call options (or covered put options as
discussed below) and effecting closing purchase transactions, as well as for
purchases and sales of the underlying security, financial instrument, index or
futures contract. The writing of covered call options could result in
significant increases in a Fund's portfolio turnover rate, especially during
periods when market prices of the underlying security, financial instrument,
index or futures contract appreciate. See "Portfolio Turnover."
COVERED PUT OPTIONS -- The Equity Funds, except for the International
Equity Fund, may write covered put options on individual stocks, equity indices
and equity index futures contracts. The Income Funds, may write covered put
options on individual bonds and on interest rate futures contracts.
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A put option is a short-term contract (ordinarily having a
duration of nine months or less) which gives the purchaser of the
option, in return for a premium paid, the right to sell, and the
writer the obligation to buy, the underlying security, financial
instrument, index or futures contract at the exercise price at any
time prior to the expiration of the option, regardless of the market
price of the financial instrument, index or futures contract during
the option period. A put option is "covered" if the Fund writing the
option segregates with the Custodian sufficient cash and/or short-term
high quality securities to meet its obligations under the put (or
holds a put option on the same underlying security or financial
instrument at an equal or greater exercise price with the same
expiration date). The writer of a put option assumes the risk of a
decrease in the value of the underlying security, financial
instrument, index or futures contract. If such a decrease occurred,
the option could be exercised and the underlying security, financial
instrument, index or futures contract would then be sold to the writer
at a price higher than its then current market value.
A Fund may enter into closing purchase transactions on put
options I.E., purchase a put option on the same financial instrument,
index or futures contract with the same exercise price and the same
expiration date. The Fund will realize a gain or loss from a closing
purchase transaction if the amount paid to purchase a put option is
less or more than the amount received from the sale thereof. A Fund
may not effect a closing purchase transaction with respect to a
written option after it has been notified of the exercise of the
option. When the security, financial instrument, index, or futures
contract underlying a covered put option is sold from the Fund's
portfolio, the Fund must effect a closing purchase transaction to
close out any existing put option on that security or other
instrument. A closing purchase transaction may be made only on an
exchange which provides a secondary market for an option with the same
exercise price and expiration date. There is no assurance that a
liquid secondary market on an exchange will exist for any particular
option, or at any particular time, and for some options no secondary
market on an exchange may exist.
DEALER OPTIONS -- Also known as OTC options, these are puts and
calls for which the strike price, expiration and premium are privately
negotiated. See "Other Information -- Puts and Calls." The Short
Government Fund and the Intermediate Mortgage Fund may engage in
dealer options, but only with major financial institutions who are
member banks of the Federal Reserve System and approved as primary
dealers in United States government securities by the Federal Reserve
Bank of New York, and whose creditworthiness and financial strength
are judged by the Asset Manager to be at least as good as that of
financial institutions to which the Fund may loan portfolio
securities. See "Other Information -- Loan Transactions."
EQUITY INDEX FUTURES CONTRACTS -- The Capital Appreciation Fund,
Income Equity Fund and Special Equity Fund may enter into equity index
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futures contracts. An equity index futures contract is an agreement
by the Fund to buy or sell an index relating to equity securities at a
specified date and price. No payment is made when the Fund buys a
futures contract and neither the index nor any securities are
delivered when the Fund sells a futures contract. Instead, the Fund
makes a deposit called an "initial margin" equal to a percentage of
the contract's value. Payment is made when the contract expires unless
an offsetting transaction has been entered into. Equity index futures
contracts will be used only as a hedge against anticipated changes in
the level of stock prices or otherwise to the extent transactions
permitted to entities exempt from the definition of the term commodity
pool operator. See "Investment Restrictions."
EURODOLLAR BONDS -- U.S. dollar-denominated bonds or debentures
issued outside the United States.
EUROPEAN CURRENCY UNIT BONDS -- The European Currency Unit
("ECU") is a basket of European currencies consisting of specified
amounts of the currencies of ten members of the European community.
The ECU is used by members as their budgetary currency to determine
official claims and debts. It fluctuates with the daily exchange rate
changes of the constituent currencies. The ECU is now defined by the
following ten currencies: German Deutschmark, British Pound, French
Franc, Italian Lira, Dutch Guilder, Belgian Franc, Luxembourg Franc,
Finish Kroner, Irish Pound, and Greek Drachma. ECU bonds are bonds or
debentures denominated in ECUs.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS -- The value of the assets
of the International Equity Fund, Global Bond Fund, and the value of
any foreign securities of other Funds, will be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and such Funds may incur costs in connection with
conversions between various currencies.
The Funds will not hold foreign currency except in connection
with the purchase and sale of foreign portfolio securities. Each Fund
may enter into currency exchange transactions at the time of purchase
or sale of a security by buying or selling a currency on a spot (I.E.,
cash) basis at the spot rate prevailing in the foreign currency
exchange market. Alternatively, when a Fund enters into a contract for
the purchase or sale of a security denominated in a foreign currency,
it may desire to fix the expected cost or proceeds of the transaction
relative to another currency through forward contracts to purchase or
sell foreign currencies ("forward contracts").
A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract
agreed upon the parties, at a price set at the time of the contract.
The forward contract may be denominated in U.S. dollars or may be a
"cross-currency" contract where the forward contract is denominated in
a currency other than U.S. dollars. These contracts are traded
directly between currency traders (usually large commercial banks) and
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their customers. The Custodian will segregate cash or marketable
securities in an amount not less than the value of each Fund's total
assets committed to forward contracts. If the value of the securities
segregated declines, additional cash or securities will be added on a
daily basis, i.e, "marked to market," so that the segregated amount
will not be less than the amount of each Fund's commitments with
respect to such contracts. Generally, the Funds will not enter into
forward contracts with a term of greater than 90 days.
At the maturity of a forward contract, a Fund may either accept
or deliver the foreign currency or may terminate the obligation under
the forward contract by purchasing an "offsetting" forward contract
with the same currency trader obligating the Fund to sell or purchase,
on the same maturity date, the same amount of the foreign currency.
If a Fund engages in an offsetting transaction, the Fund will incur a
gain or a loss to the extent that there has been movement in forward
contract prices. For example, should currency prices decline during
the period between entering into a forward contract for the sale of a
foreign currency and the date the Fund enters into an offsetting
contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent the price of the currency the Fund has
agreed to sell exceeds the price of the currency it has agreed to
purchase. Should currency prices increase, the Fund will suffer a loss
to the extent the price of the currency the Fund has agreed to
purchase exceeds the price of the currency the Fund has agreed to
sell. If a Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract with respect to the
foreign currency.
To the extent that a Fund enters into foreign currency futures
contracts, it will be subject to similar risk considerations. For
more information concerning futures contracts, see "Certain Securities
and Investment Techniques and Related Risks -- Hedging Techniques --
Futures Contracts" in the Prospectuses.
The forecasting of currency movements is extremely difficult and
the successful execution of a hedging strategy is highly uncertain.
Moreover, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a hedging
transaction. For example, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of a security is less
than the amount of foreign currency the Fund is obligated to deliver
and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Foreign currency exchange transactions do not eliminate
fluctuations in the underlying prices of the securities. They simply
establish rates of exchange for some future point in time.
Additionally, although such transactions may tend to minimize the risk
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of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain which might result
should the value of such currency increase.
The International Equity Fund does not intend to enter into
forward contracts on a regular or continuous basis, and will not do so
if, as a result, the Fund would have more than 25% of the value of its
respective total assets committed to such contracts. The other Funds,
except for the Global Bond Fund, do not intend to enter into forward
contracts on a regular or continuous basis, and will not do so if, as
a result, the Fund would have more than 5% of the value of its total
assets committed to such contracts. The Funds, except for the Global
Bond Fund, will also not enter into forward contracts or maintain a
net exposure in such contracts where the Funds would be obligated to
deliver an amount of foreign currency in excess of the value of the
Fund's portfolio securities or other assets denominated in that
currency. The Global Bond Fund may enter into forward contracts,
unless, as a result, more than 50% of value of the Fund's total assets
would be committed to such contracts.
INTEREST RATE FUTURES CONTRACTS -- The Income Funds may enter
into interest rate futures contracts. An interest rate futures
contract is an agreement by the Fund to buy or sell fixed-income
securities at a specified date and price. No payment is made when the
Fund buys a futures contract and no securities are delivered when the
Fund sells a futures contract. Instead, the Fund makes a deposit
called an "initial margin" equal to a percentage of the contract's
value. Payment or delivery is made when the contract expires unless an
offsetting transaction has been entered into. Futures contracts will
be used only as a hedge against anticipated interest rate changes or
otherwise to the extent permitted to entities exempt from the
definition of the term commodity pool operator. See "Investment
Restrictions."
INVERSE FLOATING OBLIGATIONS -- These are variable rate
securities on which interest rates typically decline as market rates
increase and increase as market rates decline. The Funds typically
purchase such issues directly from the issuing agency. The market for
such obligations is liquid to the extent of the active participation
in the secondary market of securities dealers and a variety of
investors.
LOAN TRANSACTIONS -- Loan transactions involve the lending of
securities to a broker-dealer or institutional investor for its use in
connection with short sales, arbitrages or other securities
transactions. Loans of portfolio securities of a Fund will be made
(if at all) in strictest conformity with applicable federal and state
rules and regulations. The purpose of a loan transaction is to afford
a Fund the opportunity to continue to earn income in addition to the
income on the securities loaned.
The Trustees understand that it is the current view of the staff
of the SEC that a Fund is permitted to engage in loan transactions
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only if the following conditions are met: (1) the Fund must receive
100% collateral in the form of cash or cash equivalents, e.g., U.S.
Treasury bills or notes, from the borrower; (2) the borrower must
increase the collateral whenever the market value of the loaned
securities (determined on a daily basis) rises above the level of the
collateral; (3) the Fund must be able to terminate the loan after
notice, at any time; (4) the Fund must receive reasonable interest on
the loan or a fee from the borrower, as well as amounts equivalent to
any dividends, interest or other distributions on the securities
loaned and any increase in market value; (5) the Fund may pay only
reasonable fees in connection with the loan; (6) voting rights on the
securities loaned may pass to the borrower; however, if a material
event affecting the investment occurs, the Trustees must be able to
terminate the loan and vote proxies or enter into an alternative
arrangement with the borrower to enable the Trustees to vote proxies.
Excluding items (1) and (2), these practices may be amended by the
Trustees from time to time as regulatory provisions permit.
While there may be delays in recovery of loaned securities or
even a loss of rights in collateral supplied should the borrower fail
financially, loans will be made only to firms deemed by the Trustees
to be of good standing and will not be made unless, in the judgment of
the Fund's Asset Manager made pursuant to standards adopted by the
Trustees, the consideration to be earned from such loans would justify
the risk. Such loan transactions are referred to in this Statement of
Additional Information as "qualified" loan transactions.
The cash collateral acquired through loan transactions may be
invested in any obligation in which the applicable Fund is authorized
to invest in accordance with its investment objectives. The
investment of the cash collateral in other obligations subjects that
investment as well as the security loaned to market forces, I.E.,
capital appreciation or depreciation, just like any other portfolio
security.
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities or
pass-throughs are certificates issued by governmental, government-
related and private organizations which are backed by pools of
mortgage loans. These mortgage loans are made by lenders such as
savings and loan institutions, mortgage bankers, commercial banks and
others to residential home buyers throughout the United States. The
securities are "pass-through" securities because they provide
investors with monthly payments which in effect are a "pass-through"
of the monthly payments of principal and interest made by the
individual borrowers on the underlying mortgages, net of any fees paid
to the issuer or guarantor of the pass-through certificates. The
principal governmental issuer of such securities is the Government
National Mortgage Association (GNMA), which is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban
Development. Government-related issuers include the Federal Home Loan
Mortgage Corporation (FHLMC), a corporate instrumentality of the
United States created pursuant to an act of Congress which is owned
entirely by Federal Home Loan Banks, and the Federal National Mortgage
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Association (FNMA), a government sponsored corporation owned entirely
by private stockholders. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers
and other secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may be the
originators of the underlying mortgage loans as well as the guarantors
of the mortgage-related securities.
(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes").
Ginnie Maes represent an undivided interest in a pool of mortgages
that are insured by the Federal Housing Administration or the Farmers
Home Administration or guaranteed by the Veterans Administration.
Ginnie Maes entitle the holder to receive all payments (including
prepayments) of principal and interest owed by the individual
mortgagors, net of fees paid to the GNMA and to the issuer which
assembles the mortgage pool and passes through the monthly mortgage
payments to the certificate holders (typically, a mortgage banking
firm), regardless of whether the individual mortgagor actually makes
the payment. Because payments are made to certificate holders
regardless of whether payments are actually received on the underlying
mortgages, Ginnie Maes are of the "modified pass-through" mortgage
certificate type. The GNMA is authorized to guarantee the timely
payment of principal and interest on the Ginnie Maes. The GNMA
guarantee is backed by the full faith and credit of the United States,
and the GNMA has unlimited authority to borrow funds from the U.S.
Treasury to make payments under the guarantee. The market for Ginnie
Maes is highly liquid because of the size of the market and the active
participation in the secondary market of securities dealers and a
variety of investors.
(2) FHLMC Mortgage Participation Certificates ("Freddie Macs").
Freddie Macs represent interests in groups of specified first lien
residential conventional mortgages underwritten and owned by the
FHLMC. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by the FHLMC. The FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. In cases where the FHLMC has not
guaranteed timely payment of principal, the FHLMC may remit the amount
due on account of its guarantee of ultimate payment of principal at
any time after default on an underlying mortgage, but in no even later
than one year after it becomes payable. Freddie Macs are not
guaranteed by the United States or by any of the Federal Home Loan
Banks and do not constitute a debt or obligation of the United States
or of any Federal Home Loan Bank. The secondary market for Freddie
Macs is highly liquid because of the size of the market and the active
participation in the secondary market of the FHLMC, securities dealers
and a variety of investors.
(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes"). Fannie Maes represent an undivided interest in a pool of
conventional mortgage loans secured by first mortgages or deeds of
trust, on one family, or two to four family, residential properties.
The FNMA is obligated to distribute scheduled monthly installments of
principal and interest on the mortgages in the pool, whether or not
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received, plus full principal of any foreclosed or otherwise
liquidated mortgages. The obligation of the FNMA under its guaranty is
solely the obligation of the FNMA and is not backed by, nor entitled
to, the full faith and credit of the United States.
(4) Mortgage-related securities issued by private organizations.
Pools created by non-governmental issuers generally offer a higher
rate of interest than government and government-related pools because
there are no direct or indirect government guarantees of payments in
such pools. However, timely payment of interest and principal of
these pools is often partially supported by various forms of insurance
or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. Such insurance
and guarantees and the creditworthiness of the issuers thereof will be
considered in determining whether a mortgage-related security meets a
Fund's investment quality standards. There can be no assurance that
the private insurers can meet their obligations under the policies.
Certain Funds may buy mortgage-related securities without insurance or
guarantees if through an examination of the loan experience and
practices of the poolers the Asset Manager of the Fund determines that
the securities meet the Fund's quality standards. Although the market
for such securities is becoming increasingly liquid, securities issued
by certain private organizations may not be readily marketable.
The market value of mortgage-related securities depends on, among
other things, the level of interest rates, the certificates' coupon
rates and the payment history of the mortgagors of the mortgages in
the underlying pool of mortgages.
MUNICIPAL BONDS -- For purposes of the investment restrictions
set forth in the section entitled "Investment Restrictions," the
identification of the "issuer" of municipal bonds which are not
general obligation bonds is made by the Asset Manager on the basis of
the characteristics of the obligation as either general obligation,
revenue or industrial development bonds, the most significant of which
is the source of the funds for the payment of principal and interest
on such securities.
Although the Funds do not currently invest more than 25% of their
assets in municipal bonds issued by public housing authorities, state
and local housing finance authorities, and municipal utilities systems
and industrial development and pollution control bonds, they may do so
at some point in the future. Since such municipal bonds are not
general obligations of the issuer, they may be more subject to
political and economic changes which may impair their ability to make
interest and principal payments.
The liquidity of lease rental obligations will be determined
based on a variety of factors which may include, among others: (1) the
frequency of trades and quotes for the obligation; (2) the number of
dealers willing to purchase or sell the security and the number of
other potential buyers; (3) the willingness of dealers to undertake to
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make a market in the security; (4) the nature of the marketplace
trades, including, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer; and
(5) the rating assigned to the obligation by an established rating
agency or the Asset Manager.
Generally, industrial development bonds are not backed by the
credit of any governmental or public authority. The Funds may invest
in uncollateralized industrial development bonds which the Asset
Manager has determined to be of a quality equivalent to bonds rated
not less than A by Moody's or Standard & Poor's. The Funds may invest
in industrial development bonds collateralized by letters of credit
issued by banks having stockholders' equity in excess of $100 million
as of the date of their most recently published statement of financial
condition. The Funds may also invest in variable rate industrial
development bonds, most of which permit the holder thereof to receive
the principal amount on demand upon seven days notice.
Municipal notes include Tax Anticipation Notes, issued to finance
working capital needs of municipalities; Revenue Anticipation Notes,
issued in expectation of receipt of other types of revenue; Bond
Anticipation Notes, issued to provide interim financing until long-
Term bond financing can be arranged; Construction Loan Notes, sold to
provide construction financing; and Tax-Exempt Commercial Paper, a
short-term obligation with a stated maturity of 365 days or less
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in
anticipation of longer-term financing. The Funds may invest in
municipal bonds carrying a guarantee or insured by the U.S. government
as to the payment of principal and interest, or which are fully
collateralized by an escrow of U.S. government securities. Such
collateralized bonds are commonly known as defeasance bonds.
OBLIGATIONS OF DOMESTIC AND FOREIGN BANKS -- Banks are subject to
extensive governmental regulations which may limit both the amounts
and types of loans and other financial commitments which may be made
and interest rates and fees which may be charged. The profitability
of the banking industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations
under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry
and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit.
PUTS AND CALLS -- In addition to writing covered call options and
covered put options, and engaging in closing purchase transactions
with respect thereto as described above, the Equity Funds, other than
the International Equity Fund may purchase options on individual
stocks, equity indices and equity index futures contracts and the
Income Funds may purchase options on individual bonds and on interest
rate future contracts. A put option (sometimes called a "standby
commitment") gives the purchaser of such option, upon payment of a
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premium, the right to deliver a specified amount of a financial
instrument or index or futures contract on or before a fixed date at a
predetermined price. A call option (sometimes called a "reverse
standby commitment") gives the purchaser of the option, upon payment
of a premium, the right to call upon the writer to deliver a specified
amount of a financial instrument, index or futures contract on or
before a fixed date, at a predetermined price.
A Fund may purchase put and call options to provide protection
against the adverse affects of changes in the general level of prices
in the markets in which the Fund operates. In purchasing a call
option, the Fund would be in a position to realize a gain if, during
the option period, the price of the financial instrument, index or
futures contract increased by an amount in excess of the premium paid.
It would realize a loss if the price of the financial instrument,
index or futures contract declined or remained the same or did not
increase during the period by more than the amount of the premium. By
purchasing a put option, the Fund would be in a position to realize a
gain if, during the option period, the price of the financial
instrument, index or futures contract declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
financial instrument, index or futures contract increased or remained
the same or did not decrease during that period by more than the
amount of the premium. If a put or call option purchased by the Fund
were permitted to expire without being sold or exercised, its premium
would then represent a realized loss to the Fund.
The Fund may dispose of an option which it has purchased by
entering into a "closing sale transaction" with the writer of the
option. A closing sale transaction terminates the obligation for the
writer of the option and does not result in the ownership of an
option. The Fund realizes a profit or loss from a closing sale
transaction if the premium received from the transaction is more or
less than the cost of the option.
RATINGS OF COMMERCIAL PAPER -- Commercial paper rated A-1 by
Standard & Poor's Ratings Group ("S&P") has the following
characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated A or better. The issuer
has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for
unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position with the industry.
The reliability and quality of management are unquestioned. Relative
strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Services, Inc. ("Moody's"). Among the factors
considered by Moody's in assigning ratings are the following: (1)
evaluation of the management of the issuer; (2) economic evaluation
of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3)
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evaluation for the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-
term debt; (6) trend of earning over a period of ten years; (7)
financial strength of a parent company and the relationships which
exist with the issuer; and (8) recognition by the management of
obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations.
RATINGS OF DEBT INSTRUMENTS -- The four highest ratings of
Moody's for debt instruments: Aaa, Aa, A, and Baa are considered to be
investment grade. Debt rated Aaa is judged by Moody's to be of the
best quality. Debt rated Aa is judged to be of high quality by all
standards. Together with the Aaa group, such debt comprises what is
generally known as high-grade debt. Moody's states that debt rated Aa
is rated lower than the best debt because margins of protection or
other elements make long-term risks appear somewhat larger than for
Aaa debt. Debt which is rated A by Moody's possesses many favorable
investment attributes and is considered "upper medium grade
obligations." Factors giving security to principal and interest of A-
rated debt are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future. Debt
that is rated Baa is neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such debt
lacks outstanding investment characteristics and, in fact, has
speculative characteristics as well. Debt that is rated Ba is judged
to have speculative elements and a future which cannot be considered
to be well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
The four highest ratings (investment grade) of S&P for debt
instruments are AAA, AA, A, and BBB. Debt rated AAA has the highest
rating assigned by S&P to an obligation. Capacity to pay interest and
repay principal is extremely strong. Debt rated AA has a very strong
capacity to pay interest and repay principal and differs from the
highest rated issues only in a small degree. Debt rated A has a
strong capacity to pay principal and interest, although it is somewhat
more susceptible to the adverse effects of changes in circumstances
and economic conditions. Debt rated BBB is considered on the
borderline between definitely sound obligations and obligations where
the speculative element begins to predominate. Debt rated BB is
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of
speculation among the bonds deemed to be speculative.
The Bond Fund and the Short and Intermediate Bond Fund may
each invest without limitation in debt securities that are rated as
low as BB by S&P or Ba by Moody's. Such securities are frequently
referred to as "junk bonds." Fixed-income securities are subject to
40
<PAGE>
the risk of an issuer's inability to meet principal and interest
payments on the obligations ("credit risk") and may also be subject to
price volatility due to such factors as interest rate sensitivity,
market perception of the creditworthiness of the issuer and general
market liquidity ("market risk"). Junk bonds are more likely to react
to developments affecting market and credit risk than are more highly-
rated securities, which react primarily to movements in the general
level of interest rates.
Lower-rated debt obligations also present risks based on
payment expectations. If an issuer calls the obligation for
redemption, a Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors.
Also, as the principal value of bonds moves inversely with movements
in interest rates, in the event of rising interest rates the value of
a Fund's portfolio may decline proportionately more than a portfolio
consisting of higher-rated securities. If a Fund experiences
unexpected net redemptions, it may be forced to sell its higher-rated
bonds, resulting in a decline in the overall credit quality of the
Fund's portfolio and increasing the exposure of the Fund to the risks
of lower-rated securities. Investments in zero coupon bonds may be
more speculative and subject to greater fluctuations in value due to
changes in interest rates than income-bearing bonds.
During the fiscal year ended December 31, 1995, the weighted
average ratings of the debt obligations held by the Bond Fund and the
Short and Intermediate Bond Fund, expressed as a percentage of each
Fund's total investments, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL INVESTMENTS OF:
-----------------------------------
SHORT AND
INTERMEDIATE
RATINGS BOND FUND BOND FUND
-------- --------- ---------
<S> <C> <C>
Government and
AAA/Aaa 18% 64%
AA/Aa 7% 5%
A/A 14% 8%
BBB/Baa 51% 15%
BB/Ba 10 8%
</TABLE>
RATINGS OF MUNICIPAL NOTES -- Moody's ratings for state and
municipal notes and other short-term loans are designated "Moody's
Grade" (MIG). This distinctive designation is in recognition of the
differences between short-term credit risk and long-term risk.
Factors affecting liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in bond risk are of lesser importance in the short run.
MIG-1 Loans are of the best quality, enjoy strong protection from
established cash flow of funds for their services or from established
and broad based access to the market for refinancing or both. MIG-2
41
<PAGE>
Loans are of high quality with ample margins of protection, although
not as large as in the preceding group.
REPURCHASE AGREEMENTS -- Pursuant to guidelines approved and
periodically reviewed by the Trustees, a Fund may enter into
repurchase agreements with such banking institutions and securities
dealers as have been approved by the Trustees. A Fund may enter into
repurchase agreements as a short-term investment of its idle cash in
order to earn income. A repurchase agreement, which provides a means
for the Fund to earn income on funds for periods as short as
overnight, is an arrangement under which the purchaser (I.E., the
Fund) purchases a U.S. Government security ("Government Obligation")
and the seller agrees, at the time of sale, to repurchase the
Government Obligation at a specified time and price. The repurchase
price may be higher than the purchase price, the difference being
income to the Fund, or the purchase and repurchase prices may be the
same, with interest at a stated rate due to the Fund, together with
the repurchase price on repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Government Obligation
subject to the repurchase agreement. Government Obligations will be
held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from the Fund to the seller of the Government Obligation subject
to the repurchase agreement. The Funds' investment restriction which
limits lending by the Funds specifically exempts repurchase
transactions. It is not clear whether a court would consider the
Government Obligation purchased by the Fund subject to a repurchase
agreement as being owned by the Fund or as being collateral for a loan
by the Fund to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
Government Obligation before the repurchase of the Government
Obligation under a repurchase agreement, the Fund may encounter delay
and incur costs before being able to sell the security. Delays may
involve loss of interest or decline in price of the Government
Obligation. If the court characterizes the transaction as a loan and
the Fund has not perfected a security interest in the Government
Obligation, the Fund may be required to return the Government
Obligation to the seller's assets and be treated as an unsecured
creditor of the seller. As an unsecured creditor, the Fund would be
at risk of losing some or all of the principal and income involved in
the transaction. As with any unsecured debt obligation purchased for
a Fund, the Trustees seek to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the
obligor, in this case the seller of the Government Obligation. Apart
from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the Government
Obligation, in which case the Fund may incur a loss if the proceeds to
the Fund of the sale to a third party are less than the repurchase
price. However, if the market value of the Government Obligation
subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the
Government Obligation to deliver additional securities so that the
market value of all securities subject to the repurchase agreement
42
<PAGE>
will equal or exceed the repurchase price. The seller may not be
contractually bound to deliver additional securities.
In addition to repurchase agreements with respect to U.S.
Government Obligations described above, the Intermediate Mortgage Fund
may also invest in repurchase agreements pertaining to the types of
securities in which it may invest.
RIGHTS AND WARRANTS -- Rights are short-term warrants issued in
conjunction with new stock issues. Warrants give the holder the right
to purchase an issuer's securities at a stated price during a stated
term. The Funds' ability to invest in rights and warrants is limited
by their operating policies--see "Investment Restrictions."
SHORT SALES -- When a Fund makes a short sale, it sells a
security it does not own in anticipation of a decline in market price.
The proceeds from the sale are retained by the broker until the Fund
replaces the borrowed security. To deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in
so doing, the Fund will become obligated to replace the security
borrowed at its market price at the time of replacement, whatever that
price may be. The Fund may have to pay a premium to borrow the
security. The Fund may, but will not necessarily, receive interest on
such proceeds. The Fund must pay to the broker any dividends or
interest payable on the security until it replaces the security. The
Fund's obligation to replace the security borrowed will be secured by
collateral deposited with the broker, consisting of cash or U.S.
government securities or liquid high-grade debt obligations acceptable
to the broker.
If the price of a security sold short increases between the time
of the short sale and the time the Fund replaces the borrowed
security, the Fund will incur a loss, and if the price declines during
this period, the Fund will realize a capital gain. Any realized
capital gain will be decreased, and any incurred loss increased, by
the amount of transaction costs and any premium, dividend, or interest
which the Fund may have to pay in connection with such short sale.
U.S. GOVERNMENT SECURITIES -- Securities issued or guaranteed by
the U.S. Government include a variety of Treasury securities that
differ only with respect to their interest rates, maturities and dates
of issuance. Treasury Bills have maturities of one year or less,
Treasury Notes have maturities of one to ten years and Treasury Bonds
generally have maturities of greater than ten years at the date of
issuance.
U.S. Government agencies or instrumentalities which issue or
guarantee securities include, but are not limited to, the Federal
Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration, Governmental
National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal
43
<PAGE>
Land Banks, Maritime Administration, the Tennessee Valley Authority,
District of Columbia Armory Board, the Inter-American Development
Bank, the Asian-American Development Bank, the Student Loan Marketing
Association and the International Bank for Reconstruction and
Development.
Obligations of U.S. Government agencies and instrumentalities may
or may not be supported by the full faith and credit of the United
States. Some are backed by the right of the issuer to borrow from the
Treasury; others by discretionary authority of the U.S. Government to
purchase the agencies' obligations; while still others, such as the
Student Loan Marketing Association, are supported only by the credit
of the instrumentality. In the case of securities not backed by the
full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for
ultimate repayment, and may not be able to assert or claim against the
United States itself in the event the agency or instrumentality does
not meet its commitment.
VARIABLE RATE SECURITIES -- Variable rate securities are debt
securities which have no fixed coupon rate. The amount of interest to
be paid to the holder typically is contingent upon another specified
rate, such as the yield on 90-day Treasury bills. Variable rate
securities may also include debt with an interest rate which resets in
the opposite direction of the rate of the index upon which it is
contingent. See "Other Information - Inverse Floating Obligations."
"WHEN-ISSUED" SECURITIES--Certain of the Funds may, from time to
time, purchase securities on a "when-issued" basis. The price of
"when-issued" securities is fixed at the time the commitment to
purchase is made, but delivery and payment for the "when-issued"
securities take place at a later date. Normally, the settlement date
occurs within one to two months of the date of purchase. During the
period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. Such transactions
therefore involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in
addition the risk of decline in value of the Fund's other assets.
While "when-issued" securities may be sold prior to the settlement
date, the Fund intends to purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment
reasons. At the time the Fund makes the commitment to purchase a
security on a "when-issued" basis, it will record the transaction and
reflect the value of the security in determining its net asset value.
Each Fund will establish a segregated account in which it will
maintain cash and marketable securities equal in value to commitments
for "when-issued" securities. Such segregated securities either will
mature or, if necessary, be sold on or before the settlement date.
Purchase and sale of securities on a "forward commitment" basis
includes purchase of "when-issued" securities and involves a
commitment by a Fund to purchase or sell particular securities with
payment and delivery to take place at some future date, normally one
44
<PAGE>
to two months after the date of the transaction. As with "when-
issued" securities, these transactions involve certain risks to a
Fund, but they also enable a Fund to hedge against anticipated changes
in interest rates and prices.
XIV. PERFORMANCE INFORMATION
TOTAL RETURN COMPUTATIONS As indicated in the Prospectus, the
Funds may include in advertisements or sales literature certain total
return and yield information computed in the manner described in the
Prospectus. The following chart sets forth the average annual total
return quotations for each of the Funds for certain specified periods
of time ending December 31, 1995.
<TABLE>
<CAPTION>
Annual
-ized
Since
Commen-
cement
Annual- Annual- of
ized 5 ized 10 Opera- Commence-
NAME OF FUND 1 Year Years Years tions ment Date
------------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Capital Appreciation Fund 33.39% 17.39% 14.25% 15.52% 6/30/84
Income Equity Fund 34.36% 16.70% 12.86% 14.30% 10/31/84
Special Equity Fund 33.94% 21.54% 15.62% 15.64% 6/30/84
International Equity Fund 16.24% 15.08% 14.46% 14.46% 12/31/85
Short Government Fund 9.71% 4.24% NA 5.37% 10/31/87
Short & Int. Bond Fund 15.57% 7.64% 7.69% 8.95% 6/30/84
Intermediate Mortgage Fund 17.27% 5.05% NA 7.53% 5/31/86
Bond Fund 30.91% 11.71% 10.52% 11.94% 6/30/84
Global Bond Fund 19.08 NA NA 9.28% 3/25/94
</TABLE>
* The performance figures shown are calculated beginning with each Fund's
first full month of operation, with the exception of the Global Bond Fund which
is shown as of its actual inception dates. Rates of return for the Funds are
net of all direct fees and expenses and (except for the Global Bond Fund) have
been restated to show the effect that each Fund's present advisory fee expenses
would have had on performance.
The average annual total return ("T") is computed by using the redeemable
value of the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n=ERV.
YIELD COMPUTATIONS (Income Equity Fund and the Income Funds). As indicated
in the Prospectus, the Equity and the Income Funds, may advertise or include in
sales literature yield quotations based on a 30-day period. "Yield" refers to
income generated by an investment in the Fund during the 30-day (or one-month)
period. Yield is computed by dividing the net investment income per share
earned during the
45
<PAGE>
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a - b 6
-------
YIELD = 2[(c*d + 1) - 1]
For these purposes, a equals dividends and interest earned during the period; b
equals expenses accrued for the period (net of reimbursements); c equals the
average daily number of shares outstanding during the period that were entitled
to receive dividends; and d equals the maximum offering price per share on the
last day of the period.
The figure is then annualized. That is, the amount of income generated
during the 30-day (or one-month) period is assumed to be generated each month
over a 12-month period and is shown as a percentage of the investment. The
Funds' yield figures are based on historical earnings and are not intended to
indicate future performance. For the 30-day period ended December 31, 1995, the
annualized yield of the Income Equity Fund and each of the Income Funds, was as
follows:
Annualized Yield
Fund at 12/31/95
- ---- ----------------
Income Equity Fund 2.7%
Short Government Fund 4.6%
Short and Intermediate
Bond Fund 5.0%
Intermediate Mortgage Fund 5.6%
Bond Fund 5.7%
Global Bond Fund 5.0%
PERFORMANCE COMPARISONS
As set forth in the Prospectus, the performance of any of the Funds may be
compared to the performance of other mutual funds having similar objectives,
expressed as a ranking prepared by independent services or publications that
monitor the performance of mutual funds such as Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc., CDA/Weisenberger and IBC/Donoghue's Money Fund
Report. In addition, any Fund's performance may be compared to that of various
unmanaged indices such as the Standard & Poor's 500 Stock Price Index or the Dow
Jones Industrial Average.
"Lipper-Fixed Income Fund Performance Analysis" is a monthly publication
prepared by Lipper, which tracks net assets, total return, principal return and
yield on approximately 950 fixed income mutual funds offered in the United
States. Lipper also prepares the "Lipper Composite Index," a performance
benchmark based upon the average performance of publicly offered stock funds,
bond funds, and money market funds as reported by Lipper.
46
<PAGE>
Morningstar, Inc., a widely used independent research firm, also ranks
mutual funds by overall performance, investment objectives and assets.
CDA/Wiesenberger publishes "Mutual Funds Update", a monthly compilation of
total returns and other statistical information on over 2,500 mutual funds.
From time to time, in reports and sales literature, the Funds may compare
their performance, risk quality and liquidity characteristics to money market
funds, treasury bills and notes, GIC's and various indices of unmanaged
securities. Charts may be shown depicting the relative yield and risk
relationships between the Fund and these indices. In general, instruments with
shorter maturities or durations tend to be less risky (have lower price
volatility) than those with longer maturities or durations. Risk and yield tend
to be greater for corporate issues than for government securities or money
market funds. Money market funds invest only in high quality instruments that
are denominated in United States dollars and that have relatively short periods
to maturity. Accordingly, money market funds tend to have fairly low risk and
price volatility. The indices used, and the basis for these comparisons, may
include:
The IBC/Donoghue Money Market Fund Index, prepared by the Donoghue
Organization, Inc. in "Donoghue's Money Market Fund Report", a weekly
publication which tracks net assets, yield, maturity and portfolio holdings on
approximately 700 money market funds offered in the U.S. Yields quoted on the
Donoghue index are based on a 30-day period.
Two-year Treasury notes or one-year Treasury bills, as quoted in the Wall
Street Journal or by other financial institutions such as T. Rowe Price
Associates, Inc. Yields on these indices are generally higher than on money
market funds, but carry higher risk due to their longer durations.
Three Year GIC index, as quoted in the Wall Street Journal and prepared by
T. Rowe Price Associates, Inc. In general, GICs will be riskier than comparable
maturity government issues or money funds, and will have a higher yield. While
GICs do carry "guarantees" as to the repayment of principal, these guarantees
are only backed by the company which underwrites the contract, and could
possibly default. In addition, GICs can be considered illiquid due to their
contractual terms; however their price volatility is relatively stable as a
result of this.
Unmanaged government and corporate indices published by Merrill Lynch,
Pierce, Fenner & Smith, Inc. Indices which may be compared to the Short
Government Fund include the Merrill Lynch 1-10 Year High Quality Corporate Bond
Index and the Corporate Master Index. These indices are published in the Wall
Street Journal as well as in Merrill Lynch's "Taxable Bond Indices", a monthly
publication which lists
47
<PAGE>
principal, coupon and total return on over 100 different taxable indices tracked
by Merrill Lynch.
XV. FINANCIAL STATEMENTS
The audited Financial Statements and the Notes thereto for The Managers
Funds, and the auditor's reports of Coopers & Lybrand L.L.P., independent public
accountants, are herein incorporated by reference from The Managers Funds'
Annual Reports dated December 31, 1995 and December 31, 1994.^
48
<PAGE>
THE MANAGERS FUNDS
MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 1, 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 40 Richards
Avenue, Norwalk, CT 06854 (800) 835-3879 or (203) 857-5321.
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
April 1, 1996, copies of which may be obtained without charge by contacting the
Trust at 40 Richards Avenue, Norwalk, CT 06854 (800) 835-3879 or (203) 857-5321.
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.
1
<PAGE>
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 11
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
1
<PAGE>
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 structure sometimes
referred to as Hub and Spoke-Registered Trademark-. Prior to December 1, 1995,
the Fund operated as a free-standing mutual fund and not through Hub and Spoke.
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 Hub and Spoke 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
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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 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
4
<PAGE>
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.
5
<PAGE>
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.
6
<PAGE>
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 August 17, 1990.
NAME, ADDRESS AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------------------------------------------------------------------
ROBERT P. WATSON(1) President and Trustee of The Managers
40 Richards Avenue Funds; Chairman and Chief Executive
Norwalk, CT 06854 Officer, Evaluation Associates
Chief Executive Officer, President, Investment Management Company
Trustee (predecessor of The Managers Funds,
Date of birth: 1/21/34 L.P.) (prior to 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).
- --------------------------------------------------------------------------------
WILLIAM W. GRAULTY Practicing Attorney (1977 to present);
65 LaSalle Road Executive Vice President and Head of
West Hartford, CT 06107 Trust Division, The Connecticut Bank and
Trustee Trust Company, N.A. (1956 to 1976);
President, American Bankers Association,
Date of birth: 12/30/23 Trust Division (1974 to 1975); President
Connecticut Bankers Association, Trust
Division (1966 to 1968).
--------------------------
(1)Trustee who is an "interested person" of the Trust (as defined in Section
2(a)(19) of the 1940 Act).
7
<PAGE>
NAME, ADDRESS AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------------------------------------------------------------------
MADELINE H. McWHINNEY President, Dale, Elliott & Company
24 Blossom Cove (management consultants) (1977 to
Middletown, NJ 07701 present); Assistant Vice President and
Trustee Financial Economist, Federal Reserve
Bank of New York (1943 to 1973); Trustee
Date of birth: 3/11/22 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 Director,
479 West 22nd Street Wadsworth & Associates, Inc. (1986 to
New York, NY 10011 present); Vice President, Secretary and
Trustee Director, First Fund Distributors, Inc.
Date of birth: 4/3/50 (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 present),
University of Massachusetts School of Associate Professor of Finance
Management (1980-1985), Ph.D. Director (Acting)
Amherst, MA 01003 (1985 to 1986), Chairman (Acting)
Trustee Department of General Business and
Date of birth: 5/10/47 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 present);
Norwalk, CT 06854 Director of Marketing, Hyperion Capital
Vice President 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 Managers
40 Richards Avenue Funds, L.P. (December 1994 to present)
Norwalk, CT 06854 Vice President, Signature Financial
Treasurer (Principal Financial and Group (March 1990 to December 1994)
Accounting Officer) Vice President, The Putnam Companies
(August 1980 to March 1990).
- --------------------------------------------------------------------------------
KATHLEEN WOOD Vice President (July 1992 to present)
40 Richards Avenue and Assistant Vice President (August
Norwalk, CT 06854 1989 to June 1992), The Managers Funds,
Secretary and Assistant Treasurer L.P.; Analyst, Evaluation Associates,
Inc. (May 1986 to August 1989).
- --------------------------------------------------------------------------------
8
<PAGE>
NAME, ADDRESS AND POSITION WITH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------------------------------------------------------------------
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to Present)
40 Richards Avenue and Assistant Vice President (July 1986
Norwalk, CT 06854 to June 1992), The Managers Funds, L.P.;
Assistant Treasurer/Assistant Accountant, Gintel Co. (June 1980 to
Secretary 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:
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Registrant and Fund Complex
Name of Trustee from Fund Paid to Trustees
- --------------- ------------ ---------------------------
<S> <C> <C>
William W. Graulty $350 $13,000
Madeline H. McWhinney 356 13,200
Steven J. Paggioli 370 13,750
Thomas R. Schneeweis 370 13,750
</TABLE>
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; Limited Partner, Galen Partners L.P.
and Vice Chairman, Galen Associates, since 1990; Chief Executive Officer, Galen
Associates and General Partner, Galen Partners L.P., until 1991. 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; Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group, since 1986. His address is 77 West 66 Street,
New York, NY 10017. Birthdate March 17, 1934.
(1) Mr. Healey is an "interested person" of the Portfolio as that term is
defined in the 1940 Act.
9
<PAGE>
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.
<TABLE>
<CAPTION>
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
- -------------------------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*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 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 Signature Broker-Dealer
Services, Inc. ("SBDS"), a wholly-owned subsidiary of Signature Financial Group,
Inc. ("Signature"). 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 Signature Broker-Dealer Services, Inc., 6 St.
James Avenue, Boston, Massachusetts 02116.
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.
10
<PAGE>
PHILIP W. COOLIDGE; President; Chairman, Chief Executive Officer and
President, Signature since December 1988 and SBDS since April 1989.
JOHN R. ELDER; Treasurer; Vice President, Signature since April 1995;
Treasurer, Phoenix Family of Mutual Funds prior to April 1995.
THOMAS M. LENZ; Secretary; Vice President and Associate General Counsel,
Signature since November 1989; Assistant Secretary, SBDS since February 1991.
JAMES E. HOOLAHAN; Vice President; Senior Vice President, Signature since
December 1989.
DAVID G. DANIELSON; Assistant Treasurer; Assistant Manager, Signature since
May 1991; Graduate Student, Northeastern University from April 1990 to March
1991.
LINDA T. GIBSON; Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since June 1991; Assistant Secretary SBDS since November
1992; Law Student, Boston University School of Law prior to May 1992.
MOLLY S. MUGLER; Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since December 1988; Assistant Secretary, SBDS since April
1989.
SUSAN JAKUBOSKI; Assistant Secretary and Assistant Treasurer; Manager and
Senior Fund Administrator, Signature and Signature (Cayman) (since August 1994);
Assistant Treasurer, SBDS (since September 1994); Fund Compliance Administrator,
Concord Financial Group, Inc. (from November 1990 to August 1994); Senior Fund
Accountant, Neuberger & Berman Management Incorporated (since prior to 1990).
Her address is P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman,
Cayman Islands, B.W.I.
ANDRES E. SALDANA; Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since November 1992; Assistant Secretary, SBDS since
September 1993; Attorney, Ropes & Gray from September 1990 to November 1992.
DANIEL E. SHEA; Assistant Treasurer; Assistant Manager of Fund
Administration, Signature since November 1993; Supervisor and Senior Technical
Advisor, Putnam Investments since prior to 1990.
Mssrs. Coolidge, Elder, Hoolahan, Lenz, Daniels, Saldana and Shea and Mss.
Gibson, Mugler and Jakuboski hold similar positions for other investment
companies for which SBDS or an affiliate serves as principal underwriter.
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, 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.
11
<PAGE>
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 a fund's 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/Donoghue's 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.
12
<PAGE>
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 with Morgan effective December 29, 1995, pursuant to which
Morgan is responsible for certain financial, fund accounting and administrative
services provided to the Portfolio. The services provided by Morgan as services
agent under the agreement include, but are not limited to, monitoring the
accounting activities of the Portfolio's custodian, preparing tax returns and
financial reports, coordinating annual audits, developing budgets, calculating
the daily partnership allocation, and providing related services.
Under the Administrative Services Agreement, the Portfolio has agreed to
pay Morgan a fee equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of
the Portfolio and other registered investment companies for which Morgan acts as
Advisor (collectively the "Master Portfolios") in accordance with the following
annual schedule: 0.06% of the first $7 billion of the Master Portfolios'
aggregate average daily net assets and 0.03% of the Master Portfolios' aggregate
average daily net assets in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share that its net
assets bear to the total net assets of the Master Portfolios and the investors
in the Master Portfolios for which Morgan provides similar services. Under the
agreement, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. The 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.
13
<PAGE>
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 ADMINISTRATOR AND EXCLUSIVE PLACEMENT AGENT
SBDS serves as the Portfolio's Administrator and in that capacity
administers and manages all aspects of the Portfolio's day-to-day operations
subject to the supervision of the Trustees of the Portfolio, except as set forth
under "Investment Advisor and Administrative Services Agent" and "Custodian."
In connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain record keeping responsibilities; (ii) takes responsibility for
compliance with all applicable federal and state securities and other regulatory
requirements including, without limitation, preparing and mailing and filing
(but not paying for) registration statements and proxy statements for the
Portfolio and all required reports on behalf of the Portfolio; (iii) performs
such administrative and managerial oversight of the activities of the
Portfolio's custodian as the Portfolio's Trustees may direct from time to time.
Under the Portfolio's Administration Agreement, the Portfolio has agreed to
pay SBDS a fee equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of
the Master Portfolios in accordance with the following annual schedule: 0.03%
of the first $7 billion of the Master Portfolios' aggregate average daily net
assets and 0.01% of the Master Portfolios' aggregate average daily net assets in
excess of $7 billion. The portion of this charge payable by the Portfolio is
determined by the proportionate share that its net assets bear to the total net
assets of the Master Portfolios and the investors in the Master Portfolios for
which SBDS provides similar related services.
The administrative fees paid to SBDS 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.
The Administration Agreement may be renewed or amended by the Portfolio's
Trustees without a shareholder vote. The Administration Agreement is terminable
at any time without penalty by a vote of a majority of the Trustees of the
Portfolio on not more than 60 days' written notice nor less than 30 days'
written notice to the other party. SBDS may subcontract for the performance of
its obligations under the Administration Agreement only if the Trustees approve
such subcontract and find the subcontracting party to be qualified to perform
the obligations sought to be subcontracted, provided, however, that unless the
Portfolio expressly agrees in writing, SBDS shall be fully responsible for the
acts and omissions of any subcontractor as it would for its own acts or
omissions.
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,
14
<PAGE>
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 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 after May
31, 1996, 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 SBDS
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
15
<PAGE>
responsible for reimbursements to the Portfolio for SBDS's fees as Portfolio
Administrator 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.
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<PAGE>
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%)
Benefits Resource, Bridgeport, 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 absense 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
17
<PAGE>
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/Donoghue 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.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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.
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THE MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------------- ---------------------------------------- ------------------- ------------- --------------
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITY (0.1%)
$ 3,573 Bank One Auto Trust, Series 1995-A,
Class A-1............................. 04/15/96 6.362% $ 3,572,937
--------------
CERTIFICATE OF DEPOSIT -- DOMESTIC (0.7%)
25,000 Wachovia Bank & Trust Co., N.A.......... 02/09/96 7.070 25,000,906
--------------
CERTIFICATES OF DEPOSIT -- FOREIGN (30.7%)
39,500 Bank of Montreal (Chicago).............. 12/05/95 5.770 39,500,043
101,891 Bank of Montreal (New York)............. 12/01/95 5.937 101,891,000
31,000 Bank of Nova Scotia..................... 02/06/96 5.750 31,000,000
160,000 Banque National de Paris Ltd............ 12/07/95 - 03/25/96 5.740 - 5.790 160,000,000
29,000 Commerzbank U.S. Finance Inc............ 12/01/95 5.760 29,000,000
125,000 Dai-ichi Kangyo Bank Ltd................ 12/05/95 - 02/02/96 5.990 - 6.260 125,016,993
150,000 Fuji Bank Ltd........................... 12/06/95 - 01/12/96 6.000 - 6.180 150,000,935
112,000 Industrial Bank of Japan Ltd............ 01/16/96 - 02/14/96 6.120 - 6.310 112,005,520
110,000 Mitsubishi Bank Ltd..................... 12/27/95 5.900 110,000,000
21,000 National Bank, Australia................ 10/02/96 5.750 20,978,104
7,000 Sanwa Bank Ltd.......................... 01/16/96 6.080 7,000,000
86,000 Societe Generale N.Y.................... 12/18/95 - 04/12/96 5.750 - 6.600 86,010,561
50,000 Sumitomo Bank Ltd....................... 01/26/96 6.100 50,000,000
--------------
Total Certificates of Deposit - Foreign 1,022,403,156
--------------
COMMERCIAL PAPER -- DOMESTIC (19.1%)
31,000 Ameritech Corp.......................... 12/28/95 5.590 30,870,033
86,400 AT&T Corp............................... 12/01/95 5.620 86,400,000
25,000 Associate Corp. of North America........ 12/01/95 5.910 25,000,000
32,000 Bankers Trust Corp...................... 03/13/96 5.670 31,480,880
50,000 C.I.T. Group Holdings Inc............... 03/18/96 5.620 49,157,000
21,215 Campbell Soup Co........................ 02/01/96 5.900 20,999,432
39,775 Chevron Transportation Corp............. 12/06/95 - 12/19/95 5.700 - 5.730 39,700,761
17,200 Dupont (E.I.) de Nemours & Co., Inc..... 07/24/96 5.500 16,579,844
29,200 Exxon Asset Management.................. 12/08/95 5.710 29,167,580
50,000 First Chicago Corp...................... 12/05/95 5.770 49,967,944
85,500 Ford Motor Corp......................... 12/15/95 5.620 85,313,135
153,000 General Electric Capital Corp........... 12/04/95 - 12/29/95 5.710 - 5.760 152,698,789
3,755 Georgia Municipal Electric Co........... 12/08/95 5.710 3,750,831
4,720 Koch Industries Inc..................... 12/01/95 5.900 4,720,000
7,160 Lilly, Eli & Co......................... 12/04/95 5.620 7,156,647
5,000 Raytheon Co............................. 12/12/95 5.750 4,991,215
--------------
Total Commercial Paper - Domestic 637,954,091
--------------
COMMERCIAL PAPER -- FOREIGN (17.5%)
56,737 ABN - AMRO Bank N.V..................... 12/05/95 5.700 56,701,067
97,000 Abbey National, North America........... 12/22/95 5.610 96,682,568
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
15
<PAGE>
THE MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------------- ---------------------------------------- ------------------- ------------- --------------
COMMERCIAL PAPER -- FOREIGN (CONTINUED)
<C> <S> <C> <C> <C>
$ 70,985 Bayerische Vereinsbank.................. 12/01/95 5.930% $ 70,985,000
4,500 BFCE U.S. Finance Corp.................. 02/20/96 5.690 4,442,389
82,000 Commonwealth Bank of Australia.......... 12/20/95 5.600 81,757,644
127,500 Deutsche Bank Financial, Inc............ 12/05/95 - 02/02/96 5.665 - 5.750 127,163,964
20,000 Electricite De France................... 04/04/96 5.610 19,610,417
23,000 Ontario Hydro........................... 04/09/96 5.620 22,533,228
40,000 Royal Bank of Canada.................... 03/28/96 5.654 39,258,698
62,828 UBS Finance (Delaware), Inc............. 12/05/95 5.750 62,787,860
--------------
Total Commercial Paper - Foreign 581,922,835
--------------
CORPORATE BONDS (2.0%)
15,000 Abbey National Treasury Services PLC.... 12/20/95 7.350 14,998,777
52,000 Ford Motor Credit Co.................... 12/11/95 - 03/25/96 5.000 - 6.125 51,931,711
--------------
Total Corporate Bonds 66,930,488
--------------
EURO DOLLAR CERTIFICATES OF DEPOSIT (0.1%)
4,000 Mitsubishi Trust & Banking Corp......... 01/16/96 6.140 4,000,051
--------------
FLOATING RATE NOTES (12.1%) (a)
25,000 Boatmens First National Bank, (resets
monthly to one month LIBOR Rate -1
basis point).......................... 06/12/96 5.802 25,000,000
15,000 Colorado National Bank, (resets monthly
to one month LIBOR Rate -2 basis
points)............................... 04/17/96 5.792 14,998,859
175,000 Federal National Mortgage Association,
(resets daily to one month LIBOR Rate
-19 basis points)..................... 10/11/96 5.622 174,835,927
50,000 First Bank N.A., (resets monthly to one
month LIBOR Rate -3 basis points)..... 03/08/96 5.782 49,998,736
140,000 Student Loan Marketing Association,
(resets monthly to one month LIBOR
Rate -17 basis points)................ 07/01/96 5.662 139,941,677
--------------
Total Floating Rate Notes 404,775,199
--------------
TIME DEPOSITS -- FOREIGN (3.0%)
100,000 Dresdner Bank, Grand Cayman............. 12/01/95 5.937 100,000,000
--------------
U.S. TREASURY OBLIGATIONS (1.7%)
6,772 United States Treasury Bills............ 12/14/95 - 03/21/96 5.160 - 5.590 6,708,660
50,000 United States Treasury Notes............ 04/15/96 - 05/15/96 7.375 - 9.375 50,513,279
--------------
Total U.S. Treasury Obligations 57,221,939
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
16
<PAGE>
THE MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL AMOUNT MATURITY/
(IN THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- -------------------- ---------------------------------------- ------------------- ------------- --------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (17.3%)
$ 36,941 Federal Farm Credit Bank................ 12/02/96 5.400% $ 36,940,800
5,000 Federal Home Loan Bank.................. 04/24/96 6.420 5,007,303
139,923 Federal Home Loan Mortgage Corp......... 12/01/95 - 12/20/95 5.690 - 5.800 139,820,551
394,970 Federal National Mortgage Association... 12/05/95 - 12/06/96 5.390 - 6.460 393,432,114
--------------
Total U.S. Government Agency Obligations 575,200,768
--------------
REPURCHASE AGREEMENT (0.1%)
2,470 Goldman Sachs Repurchase Agreement dated
11/30/95 due 12/01/95, proceeds
$2,470,401 (collateralized by
$2,263,000 U.S. Treasury Notes 9.125%,
due 05/15/99 valued at $2,519,872)
(cost $2,470,000)..................... 12/01/95 5.850 2,470,000
--------------
TOTAL INVESTMENTS (104.4%)
3,481,452,370
LIABILITIES IN EXCESS OF OTHER ASSETS (-4.4%)
(146,496,954)
--------------
NET ASSETS (100.0%) $3,334,955,416
--------------
--------------
</TABLE>
(a) The coupon rate shown on floating or adjustable rate securities represents
the rate at the end of the reporting period. The due date on these types of
securities reflects the final maturity date.
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Amortized Cost and Value $3,481,452,370
Cash 1,788
Receivable for Investments Sold 29,211,142
Interest Receivable 11,598,272
Prepaid Expenses 24,736
--------------
Total Assets 3,522,288,308
--------------
LIABILITIES
Payable for Investments Purchased 186,732,650
Advisory Fee Payable 420,879
Custody Fee Payable 83,329
Administration Fee Payable 15,676
Fund Services Fee Payable 12,892
Accrued Expenses 67,466
--------------
Total Liabilities 187,332,892
--------------
NET ASSETS
Applicable to Investors' Beneficial Interests $3,334,955,416
--------------
--------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
$173,636,796
Interest
EXPENSES
Advisory Fee $ 3,913,479
Custodian Fees and Expenses 545,910
Financial and Fund Accounting Services Fee 373,077
Fund Services Fee 261,045
Administration Fee 176,717
Professional Fees and Expenses 71,200
Trustees' Fees and Expenses 66,978
Miscellaneous 47,677
------------
(5,456,083)
Total Expenses
------------
168,180,713
NET INVESTMENT INCOME
1,573,477
NET REALIZED GAIN ON INVESTMENTS
------------
$169,754,190
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS
------------
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED NOVEMBER
30,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 168,180,713 $ 94,288,128
Net Realized Gain (Loss) on Investments 1,573,477 (57,650)
---------------- ----------------
Net Increase in Net Assets Resulting from
Operations 169,754,190 94,230,478
---------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS
Contributions 17,654,676,133 13,334,979,866
Withdrawals (17,137,148,786) (13,481,612,327)
---------------- ----------------
Net Increase (Decrease) from Investors'
Transactions 517,527,347 (146,632,461)
---------------- ----------------
Total Increase (Decrease) in Net Assets 687,281,537 (52,401,983)
NET ASSETS
Beginning of Fiscal Year 2,647,673,879 2,700,075,862
---------------- ----------------
End of Fiscal Year $ 3,334,955,416 $ 2,647,673,879
---------------- ----------------
---------------- ----------------
- ----------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 12, 1993
FOR THE FISCAL YEAR ENDED NOVEMBER 30, (COMMENCEMENT
--------------------------------------- OF OPERATIONS) THROUGH
1995 1994 NOVEMBER 30, 1993
------------------ ------------------ -----------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.19% 0.20% 0.19%(a)
Net Investment Income 5.77% 3.90% 2.98%(a)
Decrease Reflected in Expense Ratio due to
Expense Reimbursements by Morgan - 0.00%(b) -
</TABLE>
- ------------------------
(a) Annualized
(b) Less than 0.01%
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as amended, (the "Act") as a no-load, diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Portfolio commenced operations on July 12, 1993. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio.
The following is a summary of the significant accounting policies of the
Portfolio:
a)Investments are valued at amortized cost which approximates market value.
The amortized cost method of valuation values a security at its cost at
the time of purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instruments.
The Portfolio's custodian or designated subcustodians, as the case may be
under triparty repurchase agreements, takes possession of the collateral
pledged for investments in repurchase agreements on behalf of the
Portfolio. It is the policy of the Portfolio to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the Portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances,
in the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
b)Securities transactions are recorded on a trade date basis. Investment
income consists of interest income, which includes the amortization of
premiums and discounts. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot
identification.
c)The Portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the Portfolio will be subject to
taxation on its share of the Portfolio's ordinary income and capital
gains. It is intended that the Portfolio's assets will be managed in such
a way that an investor in the Portfolio will be able to satisfy the
requirements of Subchapter M of the Internal Revenue Code. The cost of
securities is the same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a)The Portfolio has an investment advisory agreement with Morgan Guaranty
Trust Company of New York ("Morgan"). Under the terms of the investment
advisory agreement, the Portfolio pays Morgan at an annual rate of 0.20%
of the Portfolio's average daily net assets up to $1 billion and 0.10% on
any excess over $1 billion. For the fiscal year ended November 30, 1995,
this fee amounted to $3,913,479.
21
<PAGE>
THE MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
b)The Portfolio has retained Signature Broker - Dealer Services, Inc.
("Signature") to serve as Administrator and exclusive placement agent.
Signature provides administrative services necessary for the operations of
the Portfolio, furnishes office space and facilities required for
conducting the business of the Portfolio and pays the compensation of the
Portfolio's officers affiliated with Signature. The agreement provides for
a fee to be paid to Signature at an annual fee rate determined by the
following schedule: 0.01% of the first $1 billion of the aggregate average
daily net assets of the Portfolio and the other portfolios subject to the
Administration Agreement, 0.008% of the next $2 billion of such net
assets, 0.006% of the next $2 billion of such net assets, and 0.004% of
such net assets in excess of $5 billion. The daily equivalent of the fee
rate is applied each day to the net assets of the Portfolio. For the
fiscal year ended November 30, 1995, Signature's fee for these services
amounted to $176,717.
Effective December 29, 1995, the Administration Agreement was amended such
that the fee charged would be equal to the Portfolio's proportionate share
of a complex-wide fee based on the following annual schedule: 0.03% on the
first $7 billion of the aggregate average daily net assets of the
Portfolio and the other portfolios subject to this agreement (the "Master
Portfolios") and 0.01% on the aggregate average daily net assets of the
Master Portfolios in excess of $7 billion. The portion of this charge
payable by the Portfolio is determined by the proportionate share its net
assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios.
c)Until August 31, 1995, the Portfolio had a Financial and Fund Accounting
Services Agreement with Morgan under which Morgan received a fee for
overseeing certain aspects of the administration and operation of the
Portfolio and which was also designed to provide an expense limit for
certain expenses of the Portfolio. This fee was calculated at 0.03% of the
Portfolio's average daily net assets. For the nine month period ended
August 31, 1995, the fee for these services amounted to $373,077. From
September 1, 1995 until December 28, 1995, an interim agreement between
the Portfolio and Morgan provided for the continuation of the oversight
functions that were outlined under the prior agreement and that Morgan
should bear all of its expenses incurred in connection with these
services.
Effective December 29, 1995, the Portfolio entered into an Administrative
Services Agreement with Morgan under which Morgan is responsible for
overseeing certain aspects of the administration and operation of the
Portfolio. Under the Agreement, the Portfolio has agreed to pay Morgan a
fee equal to its proportionate share of an annual complex-wide charge.
This charge is calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.06%
on the first $7 billion of the Master Portfolios' aggregate net assets and
0.03% of the aggregate net assets in excess of $7 billion. The portion of
this charge payable by the Portfolio is determined by the proportionate
share that the Portfolio's net assets bear to the net assets of the Master
Portfolios and other investors in the Master Portfolios for which Morgan
provides similar services.
d)The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the Trustees in exercising their overall supervisory
responsibilities for the Portfolio's affairs. The
22
<PAGE>
THE MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
Trustees of the Portfolio represent all the existing shareholders of
Group. The Portfolio's allocated portion of Group's costs in performing
its services amounted to $261,045 for the fiscal year ended November 30,
1995.
e)An aggregate annual fee of $65,000 is paid to each Trustee for serving as
a Trustee of The Pierpont Funds, The JPM Institutional Funds and their
corresponding Portfolios. The Trustees' Fees and Expenses shown in the
financial statements represent the Portfolio's allocated portion of the
total fees and expenses. Prior to April 1, 1995, the aggregate annual
Trustee Fee was $55,000. The Trustee who serves as Chairman and Chief
Executive Officer of these Funds and Portfolios also serves as Chairman of
Group and received compensation and employee benefits from Group in his
role as Group's Chairman. The allocated portion of such compensation and
benefits included in the Fund Services Fee shown in the financial
statements was $33,500.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Money Market Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Money Market Portfolio (the "Portfolio")
at November 30, 1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the supplementary data for each of the two years in the period then ended and
for the period July 12, 1993 (commencement of operations) through November 30,
1993, in conformity with generally accepted accounting principles. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 23, 1996
24
<PAGE>
PART C -- OTHER INFORMATION
Information required to be included in Part C of the registration statement
is set forth under the appropriate Item, so numbered, in Part C to this Post-
Effective Amendment.
5
<PAGE>
THE MANAGERS FUNDS POST-EFFECTIVE
AMENDMENT NO. 36 TO REGISTRATION STATEMENT
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Part A:
With reference to each of The Managers:
Capital Appreciation Fund
Income Equity Fund
Special Equity Fund
International Equity Fund
Short Government Fund
Short and Intermediate Bond Fund
Intermediate Mortgage Fund
Bond Fund
Global Bond Fund
Money Market Fund
FINANCIAL HIGHLIGHTS
For the fiscal years (or portions thereof) (audited) from
commencement of operations to December 31, 1995 (November 30,
1995, with respect to Managers Money Market Fund).
Part B:
With reference to each of The Managers:
Capital Appreciation Fund
Income Equity Fund
Special Equity Fund
International Equity Fund
Short Government Fund
Short and Intermediate Bond Fund
Intermediate Mortgage Fund
Bond Fund
Global Bond Fund
Money Market Fund
1
<PAGE>
At December 31, 1995 (audited) and with respect to Managers Money
Market Fund, at November 30, 1995 (audited):
Schedule of Investments
Statement of Assets and Liabilities
For the fiscal year ended December 31, 1995 (audited) and with
respect to Managers Money Market Fund, at November 30, 1995
(audited):
Statement of Changes in Net Assets
For the fiscal years ended December 31, 1995 (audited) and
December 31, 1994 (audited), and with respect to Managers Money
Market Fund, for the eleven months ended November 30, 1995
(audited):
Statement of Operations
Notes to Financial Statements
For the fiscal years (or portions thereof) from commencement of
operations to December 31, 1995 (audited) and with respect to
Managers Money Market Fund, for the eleven months ended November
30, 1995 (audited):
Statements of Finical Highlights
With respect to The Money Market Portfolio:
At November 30, 1995 (audited):
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
(b) Exhibits
1. (A) Declaration of Trust dated November 23, 1987.
Incorporated by reference to PEA 20.
1. (B) Amendment to Declaration of Trust dated May 12, 1993.
Incorporated by reference to PEA 32.
1. (C) Amendment to Declaration of Trust dated June 30, 1993.
Incorporated by reference to PEA 32.
2
<PAGE>
2. By-Laws of the Trust.
Incorporated by reference to PEA 20.
3. Not Applicable.
4. Instruments Defining Rights of Shareholders
Incorporated by reference to PEA 34.
5.(A) Fund Management Agreement dated August 17, 1990 between
EAIMC Partners, L.P. (now "The Managers Funds, L.P.") and
the Trust.
Incorporated by reference to PEA 32.
(B) Asset Management Agreements between The Managers Funds, L.P.
and each of the Asset Managers identified in the
Registration Statement. Incorporated by reference to PEA
32.
6. Form of Distribution Agreement between The Managers Funds
and The Managers Funds, L.P. Incorporated by reference to
PEA 28.
7. Not Applicable.
8. Form of Custodian Agreement with State Street Bank and
Trust. Incorporated by reference to PEA 28.
9.(A) Transfer Agency Agreement between The Managers Funds and
State Street Bank and Trust Company. Incorporated by
reference to PEA 33.
(B) Form of Administration and Shareholder Servicing Agreement
between the Trust and The Managers Funds, L.P. Incorporated
by reference to PEA 28.
(C) Form of License Agreement Relating to Use of Name between
The Managers Funds and The Managers Funds, L.P.
Incorporated by reference to PEA 28.
10. Opinion and Consent of Shereff, Friedman, Hoffman & Goodman,
L.L.P.*
11. Consents of Independent Accountants.*
(A) Consent of Coopers & Lybrand L.L.P.
(B) Consent of Price Waterhouse LLP
12. Not Applicable.
3
<PAGE>
13. Not Applicable.
14. Not Applicable.
15. Not Applicable.
16. Computation of Performance Quotations.
Incorporated by reference to PEA 19.
17. Financial Data Schedules
18. (1) Powers of Attorney for:
William W. Graulty
Madeline H. McWhinney
Steven J. Paggioli
Thomas R. Schneeweis
Robert P. Watson
Donald S. Rumery
Kathleen Wood
Incorporated by reference to PEA 31.
(2) Powers of Attorney for the Trustees of The
Money Market Portfolio:
Michael P. Mallardi
Frederick S. Addy
William G. Burns
Matthew Healey
Arthur C. Eschenlauer
Incorporated by reference to PEA 35.
- -------------
* Included as an exhibit to this filing.
ITEM 25. Persons Controlled by or under Common Control with Registrant
None.
ITEM 26. Number of Holders of Securities
As of March 1, 1996, the shares of beneficial interest of each Fund were
held of record by the number of holders indicated below:
NUMBER OF
FUND NAME RECORD HOLDERS
- -----------------------------------------------------------
Capital Appreciation Fund................. 1,309
Income Equity Fund........................ 1,055
Special Equity Fund....................... 1,383
International Equity Fund................. 2,207
Short Government Fund..................... 469
Short and Intermediate Bond Fund.......... 976
4
<PAGE>
Intermediate Mortgage Fund................ 1,469
Bond Fund................................. 881
Global Bond Fund.......................... 790
Money Market Fund......................... 667
ITEM 27. Indemnification
The following sections of the Registrant's Declaration of Trust, dated
November 23, 1987, which relate to indemnification of Trustees, officers and
others by the Trust and to exemption from personal liability of Trustees,
officers and others, also relate to indemnification:
Sections 2.9(d),(f)
Sections 4.1 - 4.3
Section 8.3(b)
These Sections are reproduced below.
SECTION 2.9. MISCELLANEOUS POWERS. The Trustee shall have the power to:
(d) purchase, and pay for out of Trust Property, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, Investment Advisers,
Distributors, selected dealers or independent contractors of the Trust against
all claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability; . . . (f) to the extent permitted
by law, indemnify any person with whom the Trust has dealings, including the
Investment Adviser, Distributor, Transfer Agent and selected dealers, to such
extent as the Trustees shall determine;
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
-------------------------------------
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with the Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person, and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust or any Series, he shall not, on account thereof, be held to any personal
liability. The Trust or
5
<PAGE>
Series shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The rights accruing to a Shareholder under this
Section 4.1 shall not exclude any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict the right of the
Trust to indemnify or reimburse a Shareholder in any appropriate situation even
though not specifically provided herein.
SECTION 4.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his office or for his failure to act in good
faith in the reasonable belief that his action was in the best interests of the
Trust. Notwithstanding anything in this Article IV or elsewhere in this
Declaration to the contrary and without in any way increasing the liability of
the Trustees beyond that otherwise provided in this Declaration, no Trustee
shall be liable to the Trust or to any Shareholder, Trustee, officer, employee
or agent for monetary damages for breach of fiduciary duty as a Trustee;
provided that such provision shall not eliminate or limit the liability of a
Trustee (i) for any breach of the Trustee's duty of loyalty to the Trust or its
Shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, or (iii) for any transaction
from which the Trustee derived an improper personal benefit.
SECTION 4.3. MANDATORY INDEMNIFICATION. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust shall be indemnified by the Trust or any Series to the
fullest extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he became involved as a
party or otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
or other, including appeals), actual or threatened; the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
6
<PAGE>
(b) No indemnification shall be provided hereunder to a Trustee
or officer:
(i) against any liability to the Trust or the Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement involving a final
adjudication as provided in paragraph (b)(i) resulting in a payment by
a Trustee or officer, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office:
(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon a review of readily available facts (as opposed
to a full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter by
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in paragraph (a) of
this Section 4.3 may be advanced by the Trust or any Series prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the
7
<PAGE>
recipient, or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act on
the matter), or an independent legal counsel in a written opinion,
shall determine, based upon a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not
(i) an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or proceeding.
SECTION 8.3. AMENDMENT PROCEDURE. (b) No amendment may be made under
this Section 8.3 which would change any rights with respect to any Shares of the
Trust or of any Series by reducing the amount payable thereon upon liquidation
of the Trust or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of the holders of two-thirds of the
Shares outstanding and entitled to vote, or by such other vote as may be
established by the Trustees with respect to any Series of Shares. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
ITEM 28. Business and Other Connections of Investment Advisers
The business and other connections of the officers and directors of
The Managers Funds, L.P. (the Registrant's Manager), and the asset managers of
the Registrant are listed in schedules A and D of their respective ADV Forms as
currently on file with the Commission, the texts of which Schedules are hereby
incorporated herein by reference. The file numbers of said ADV Forms are as
follows:
The Managers Funds, L.P. -- 801-19215
Dietche & Field Advisers, Inc. -- 801-20033
Liberty Investment Management -- 801-21343
Hudson Capital Advisers -- 801-31427
Jennison Associates Capital Corp. -- 801-5608
Lazard Freres Asset Management -- 801-6568
Loomis, Sayles & Company, Inc. -- 801-17000
Pilgrim Baxter Associates -- 801-19165RC
Rogge Global Partners, Inc. -- 801-25482
Scudder, Stevens & Clark, Inc. -- 801-252
Spare, Kaplan, Bischel & Associates -- 801-35258
Standish, Ayer & Wood Inc. -- 801-584
Westport Asset Management, Inc. -- 801-21845
8
<PAGE>
ITEM 29. Principal Underwriter
(a) The Managers Funds, L.P. ("TMF") acts as principal underwriter for the
Registrant. TMF does not currently act as principal underwriter
for any other investment company. TMF's address is 40 Richards
Avenue, Norwalk, Connecticut 06854.
(b) The business and other connections of the officers and directors
of The Managers Funds, L.P. (formerly EAIMC Partners, L.P.) (the
Registrant's Manager), are listed in Schedules A and D of its ADV
Form as currently on file with the Commission, the text of which
Schedules are hereby incorporated herein by reference. The file
number of said ADV Form is 801-19215.
(c) Not Applicable.
ITEM 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 promulgated thereunder
are maintained in the following locations:
RULE 31A-1
(a) Records forming the basis for financial statements of Registrant are
kept at the principal offices of SSB, Managers, Adviser & AM (see legend below).
Legend: Managers -- The Managers Funds
40 Richards Avenue
Norwalk, Connecticut 06854
SSB -- State Street Bank
and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Adviser -- The Managers Funds, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854
AM -- Asset Managers (see
Statement of Additional
Information section
entitled "Asset Manager
Profiles" for the name,
address and a description
of the asset managers of
each Fund)
9
<PAGE>
(b) Managers Records:
(1) SSB -- Journals containing daily record of securities transactions,
receipts and deliveries of securities and receipts and
disbursements of cash.
(2) SSB -- General and auxiliary ledgers
(3) Not Applicable
(4) Managers -- Corporate Documents
(5) AM -- Brokerage orders
(6) AM -- Other portfolio purchase orders
(7) SSB -- Contractual commitments
(8) SSB and Managers -- Trial balances
(9) AM -- Reasons for brokerage allocations
(10) AM -- Persons authorizing purchases and sales
(11) Managers and AM -- Files of advisory material
(c) Not applicable
(d) Adviser -- Broker/dealer records, to the extent applicable
(e) Not applicable
(f) Adviser and AM -- Investment adviser records
ITEM 31. Management Services
Not Applicable.
ITEM 32. Undertakings
(a) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
10
<PAGE>
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The Registrant shall furnish to each person to whom a prospectus is
delivered a copy of the Registrant's latest annual report to shareholders, upon
request and without charge.
(c) If requested to do so by the holders of at least 10% of the
Registrant's outstanding shares, the Registrant will call a meeting of
shareholders for the purpose of voting upon the removal of a trustee or trustees
and the Registrant will assist communications with other shareholders as
required by Section 16(c) of the Investment Company Act of 1940.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to its Registration Statement on Form N-1A to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Norwalk,
and the State of Connecticut on this 25th day of March, 1996.
THE MANAGERS FUNDS
By:/s/Robert P. Watson
-------------------
Robert P. Watson
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registrant's Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Robert P. Watson Trustee and March 25, 1996
- --------------------
Robert P. Watson President (Principal
Executive Officer)
/s/ Donald S. Rumery Principal Financial March 25, 1996
- --------------------
Donald S. Rumery and Accounting
Officer
/s/ William W. Graulty Trustee March 25, 1996
- ----------------------
William W. Graulty
/s/ Madeline H. McWhinney Trustee March 25, 1996
- -------------------------
Madeline H. McWhinney
/s/ Steven J. Paggioli Trustee March 25, 1996
- ----------------------
Steven J. Paggioli
/s/ Thomas R. Schneeweis Trustee March 25, 1996
- ------------------------
Thomas R. Schneeweis
12
<PAGE>
SIGNATURES
The Money Market Portfolio has duly caused this Post-Effective Amendment to
the Registration Statement on Form N1-1 ("Registration Statement") of The
Managers Funds (the "Trust") to be signed on its behalf by the undersigned,
thereto duly authorized, in George Town, Grand Cayman, Cayman Islands, on the
28th day of March, 1996.
THE MONEY MARKET PORTFOLIO
By:
/s/ Susan Jakuboski, Assistant Secretary and Assistant Treasurer
- ----------------------------------------------------------------
Susan Jakuboski, Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Trust's Registration Statement has been signed below by the following
persons in the capacities indicated on the 28th day of March, 1996.
PHILIP W. COOLIDGE*
Philip W. Coolidge, President of the Portfolio
/s/ Susan Jakuboski
- -------------------
Susan Jakuboski, Assistant Secretary and Chief Financial and Accounting Officer
of the Portfolio
MATTHEW HEALEY*
Matthew Healey, Chairman and Chief Executive Officer of the Portfolio
F.S. ADDY*
F.S. Addy, Trustee of the Portfolio
WILLIAM G. BURNS*
William G. Burns, Trustee of the Portfolio
ARTHUR C. ESCHENLAUER*
Arthur C. Eschenlauer, Trustee of the Portfolio
MICHAEL P. MALLARDI*
Michael P. Mallardi, Trustee of the Portfolio
- ------------------------------------
*By /s/ Susan Jakuboski
-------------------
Susan Jakuboski, as attorney-in-fact pursuant to a power of attorney filed
herewith.
<PAGE>
Number Exhibit Index Page
- ------ ------------- ----
10 Opinion and Consent of Shereff, Fried-
man Hoffman & Goodman, L.L.P.
11 Consents of Independent Accountants:
(A) Consent of Coopers & Lybrand L.L.P.
(B) Consent of Price Waterhouse LLP
<PAGE>
Exhibit 10
March 21, 1996
The Managers Funds
40 Richards Avenue
Norwalk, Connecticut 06854
Dear Sirs:
The Managers Funds, a Massachusetts business trust (the "Trust"), is filing
with the Securities and Exchange Commission (the "Commission") Post-Effective
Amendment No. 36 ("PEA 36") to its Registration Statement under the Securities
Act of 1933, as amended (the "Act") on Form N-1A (Securities Act File No. 2-
84012 and 811-3752), relating to the registration under the Act of 12,524,572
additional shares of beneficial interest (the "Additional Shares"), which are to
be offered and sold by the Trust in the manner and on the terms set forth in the
Prospectus of the Trust current and effective under the Act at the time of sale.
Of the Additional Shares, 6,196,139 are previously outstanding shares of the
Trust's shares of beneficial interest of the Money Market Fund Series, which
were redeemed by the Trust during that series' fiscal year ended November 30,
1995, and 6,316,333 are previously outstanding shares of the Trust's shares of
beneficial interest of its other series, which were redeemed by the Trust during
those series' fiscal year ended December 31, 1995. According to PEA 36, none of
the Additional Shares have previously been used by the Trust for reduction
pursuant to paragraph (a) of Rule 24e-2 under the Investment Company Act of 1940
(the "1940 Act") in previous filings of post-effective amendments to the Trust's
Registration Statement during the current fiscal years, or for reduction
pursuant to paragraph (c) of Rule 24f-2 under the 1940 Act during the Trust's
fiscal years, of the registration fee payable by the Trust for the registration
of shares for sale under the Act.
We have, as counsel, participated in various proceedings relating to the
Trust and to the Additional Shares. We have examined copies, either certified
or otherwise proven to our satisfaction to be genuine, of the Trust's
Declaration of Trust and By-Laws, as currently in effect, and a certificate
dated March 21, 1996 issued by the Secretary of State of the Commonwealth of
Massachusetts, certifying the existence of the Trust. We have also reviewed the
Trust's Registration Statement on Form N-1A and are generally familiar with the
business affairs of the Trust.
Based upon the foregoing, it is our opinion that:
1. The Trust has been duly organized and is legally existing under the
laws of the Commonwealth of Massachusetts.
2. The Trust is authorized to issue an unlimited number of its shares of
beneficial interest.
<PAGE>
3. Subject to the effectiveness under the Act of PEA 36 and compliance
with applicable state securities laws, upon the issuance of the Additional
Shares for a consideration of not less than the net asset value thereof as
required by the 1940 Act and in accordance with the terms of the Trust's
Registration Statement, such Additional Shares will be legally issued and
outstanding and fully paid and non-assessable. However, we note that as set
forth in the Registration Statement, the Trust's shareholders might, under
certain circumstances, be liable for transactions effected by the Trust.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Part of PEA 36 and with any state securities commission
where such filing is required. In giving this consent we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Act.
We are members of the Bar of the State of New York and do not hold
ourselves out as being conversant with the laws of any jurisdiction other than
those of the United States of America and the State of New York. We note that
we are not licensed to practice law in the Commonwealth of Massachusetts, and to
the extent that any opinion herein involves the laws of the Commonwealth of
Massachusetts, such opinion should be understood to be based solely upon our
review of the documents referred to above, the published statutes of the
Commonwealth of Massachusetts and, where applicable, published cases, rules or
regulations of regulatory bodies of that Commonwealth.
Very truly,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
---------------------------------------------
Shereff, Friedman, Hoffman & Goodman, LLP
<PAGE>
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Managers Funds:
We consent to the inclusion in Post-Effective Amendment No. 36 to the
Registration Statement of the The Managers Funds on Form N-1A (Securities Act of
1933 File No. 2-84012) of our reports dated February 16, 1996 (except for
Managers Money Market Fund which report is dated December 18, 1995) on our
audits of the financial statements and the financial highlights of: Managers
Capital Appreciation Fund, Managers Income Equity Fund, Managers Special Equity
Fund, Managers International Equity Fund, Managers Global Bond Fund, Managers
Short Government Fund, Managers Short and Intermediate Bond Fund, Managers
Intermediate Mortgage Fund, Managers Bond Fund and Managers Money Market Fund,
which reports are included in the Annual Reports to shareholders for the fiscal
year ended December 31, 1995, (except for Managers Money Market Fund which is
for the year ended November 30, 1995) and which reports are also incorporated by
reference in the Registration Statement. We also consent to the reference to
our Firm under the captions "Financial Highlights," "Custodian, Transfer Agent
and Independent Public Accountant," and "Financial Statements" in the
Registration Statement.
/s/ Coopers + Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 25, 1996
<PAGE>
EXHIBIT 11(B)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post Effective
Amendment No. 36 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 23, 1996, relating to the financial
statements and supplementary data of The Money Market Portfolio appearing in the
November 30, 1995 Annual Report, which are also incorporated by reference onto
this Registration Statement. We also consent to the reference to us under the
headings "Custodian, Transfer Agent and Independent Public Accountant" and
"Financial Statements" in the Statement of Additional Information.
/s/Price Waterhouse LLP
- -----------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
March 21, 1996
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<PAGE>
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<PERIOD-END> DEC-31-1995
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<NET-INVESTMENT-INCOME> (177)
<REALIZED-GAINS-CURRENT> 12657
<APPREC-INCREASE-CURRENT> 18944
<NET-CHANGE-FROM-OPS> 31423
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 14466
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<NUMBER-OF-SHARES-SOLD> 47782
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<SHARES-REINVESTED> 8768
<NET-CHANGE-IN-ASSETS> 6778
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 978
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<GROSS-EXPENSE> 1568
<AVERAGE-NET-ASSETS> 108652
<PER-SHARE-NAV-BEGIN> 36.79
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 12.28
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<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> MANAGERS INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 123314
<INVESTMENTS-AT-VALUE> 142625
<RECEIVABLES> 1532
<ASSETS-OTHER> 161
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 144317
<PAYABLE-FOR-SECURITIES> 1066
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2763
<TOTAL-LIABILITIES> 3829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121037
<SHARES-COMMON-STOCK> 3515
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 26
<ACCUMULATED-NET-GAINS> 171
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19307
<NET-ASSETS> 140488
<DIVIDEND-INCOME> 2255
<INTEREST-INCOME> 505
<OTHER-INCOME> (257)
<EXPENSES-NET> 1663
<NET-INVESTMENT-INCOME> 840
<REALIZED-GAINS-CURRENT> 7273
<APPREC-INCREASE-CURRENT> 7273
<NET-CHANGE-FROM-OPS> 15385
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 435
<DISTRIBUTIONS-OF-GAINS> 7196
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 67067
<NUMBER-OF-SHARES-REDEEMED> 42910
<SHARES-REINVESTED> 365
<NET-CHANGE-IN-ASSETS> 24651
<ACCUMULATED-NII-PRIOR> 186
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 949
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1663
<AVERAGE-NET-ASSETS> 105390
<PER-SHARE-NAV-BEGIN> 36.35
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 5.59
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 2.15
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 39.97
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> MANAGERS BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 25498
<INVESTMENTS-AT-VALUE> 26896
<RECEIVABLES> 726
<ASSETS-OTHER> 225
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27847
<PAYABLE-FOR-SECURITIES> 1065
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 406
<TOTAL-LIABILITIES> 1471
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25973
<SHARES-COMMON-STOCK> 1140
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1026)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1398
<NET-ASSETS> 26376
<DIVIDEND-INCOME> 106
<INTEREST-INCOME> 2022
<OTHER-INCOME> 0
<EXPENSES-NET> 349
<NET-INVESTMENT-INCOME> 1779
<REALIZED-GAINS-CURRENT> (177)
<APPREC-INCREASE-CURRENT> 5729
<NET-CHANGE-FROM-OPS> 7331
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1792
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13247
<NUMBER-OF-SHARES-REDEEMED> 24125
<SHARES-REINVESTED> 953
<NET-CHANGE-IN-ASSETS> (4384)
<ACCUMULATED-NII-PRIOR> 73
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 163
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 349
<AVERAGE-NET-ASSETS> 26015
<PER-SHARE-NAV-BEGIN> 18.92
<PER-SHARE-NII> 1.44
<PER-SHARE-GAIN-APPREC> 4.23
<PER-SHARE-DIVIDEND> 1.46
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.13
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> MANAGERS SHORT GOVERNMENT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 5711
<INVESTMENTS-AT-VALUE> 5746
<RECEIVABLES> 110
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5866
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30
<TOTAL-LIABILITIES> 30
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19146
<SHARES-COMMON-STOCK> 329
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13354)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45
<NET-ASSETS> 5836
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 544
<OTHER-INCOME> 0
<EXPENSES-NET> 99
<NET-INVESTMENT-INCOME> 445
<REALIZED-GAINS-CURRENT> 193
<APPREC-INCREASE-CURRENT> 112
<NET-CHANGE-FROM-OPS> 750
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 228
<DISTRIBUTIONS-OF-GAINS> 142
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3538
<NUMBER-OF-SHARES-REDEEMED> 8548
<SHARES-REINVESTED> 203
<NET-CHANGE-IN-ASSETS> (4427)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 219
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 36
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 131
<AVERAGE-NET-ASSETS> 7917
<PER-SHARE-NAV-BEGIN> 16.96
<PER-SHARE-NII> 0.98
<PER-SHARE-GAIN-APPREC> 0.63
<PER-SHARE-DIVIDEND> 0.50
<PER-SHARE-DISTRIBUTIONS> 0.31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.76
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> MANAGERS SHORT AND INTERMEDIATE BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 24914
<INVESTMENTS-AT-VALUE> 25001
<RECEIVABLES> 596
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25611
<PAYABLE-FOR-SECURITIES> 241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129
<TOTAL-LIABILITIES> 370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39996
<SHARES-COMMON-STOCK> 1283
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 42
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14801)
<ACCUM-APPREC-OR-DEPREC> 88
<NET-ASSETS> 25241
<DIVIDEND-INCOME> 25
<INTEREST-INCOME> 2032
<OTHER-INCOME> 0
<EXPENSES-NET> 385
<NET-INVESTMENT-INCOME> 1671
<REALIZED-GAINS-CURRENT> (777)
<APPREC-INCREASE-CURRENT> 2833
<NET-CHANGE-FROM-OPS> 3727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1480
<DISTRIBUTIONS-OF-GAINS> 36
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9665
<NUMBER-OF-SHARES-REDEEMED> 18442
<SHARES-REINVESTED> 852
<NET-CHANGE-IN-ASSETS> (5715)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (328)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 128
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 385
<AVERAGE-NET-ASSETS> 25651
<PER-SHARE-NAV-BEGIN> 18.06
<PER-SHARE-NII> 1.28
<PER-SHARE-GAIN-APPREC> 1.45
<PER-SHARE-DIVIDEND> 1.09
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.67
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> MANAGERS INTERMEDIATE MORTGAGE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 46211
<INVESTMENTS-AT-VALUE> 47060
<RECEIVABLES> 360
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 47437
<PAYABLE-FOR-SECURITIES> 7039
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 376
<TOTAL-LIABILITIES> 7415
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 119240
<SHARES-COMMON-STOCK> 2575
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 19
<ACCUMULATED-NET-GAINS> (80098)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 899
<NET-ASSETS> 40022
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3568
<OTHER-INCOME> 0
<EXPENSES-NET> 555
<NET-INVESTMENT-INCOME> 3013
<REALIZED-GAINS-CURRENT> 2259
<APPREC-INCREASE-CURRENT> 2503
<NET-CHANGE-FROM-OPS> 7775
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3253
<DISTRIBUTIONS-OF-GAINS> 19
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3468
<NUMBER-OF-SHARES-REDEEMED> 25457
<SHARES-REINVESTED> 1522
<NET-CHANGE-IN-ASSETS> (15964)
<ACCUMULATED-NII-PRIOR> 419
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 555
<AVERAGE-NET-ASSETS> 47587
<PER-SHARE-NAV-BEGIN> 14.20
<PER-SHARE-NII> 0.93
<PER-SHARE-GAIN-APPREC> 1.45
<PER-SHARE-DIVIDEND> 1.04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.54
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> MANAGERS GLOBAL BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 17256
<INVESTMENTS-AT-VALUE> 18227
<RECEIVABLES> 716
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18969
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 146
<TOTAL-LIABILITIES> 146
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18107
<SHARES-COMMON-STOCK> 866
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 132
<ACCUMULATED-NET-GAINS> (99)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 947
<NET-ASSETS> 18823
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 818
<OTHER-INCOME> 0
<EXPENSES-NET> 191
<NET-INVESTMENT-INCOME> 627
<REALIZED-GAINS-CURRENT> 211
<APPREC-INCREASE-CURRENT> 1062
<NET-CHANGE-FROM-OPS> 1900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 628
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12840
<NUMBER-OF-SHARES-REDEEMED> 5243
<SHARES-REINVESTED> 425
<NET-CHANGE-IN-ASSETS> 9303
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 67
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 86
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 209
<AVERAGE-NET-ASSETS> 12355
<PER-SHARE-NAV-BEGIN> 19.10
<PER-SHARE-NII> 0.95
<PER-SHARE-GAIN-APPREC> 2.66
<PER-SHARE-DIVIDEND> 0.93
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.74
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> MANAGERS MUNICIPAL BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6
<TOTAL-LIABILITIES> 6
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> (528)
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (59)
<ACCUMULATED-NET-GAINS> 587
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 394
<OTHER-INCOME> 0
<EXPENSES-NET> 79
<NET-INVESTMENT-INCOME> 315
<REALIZED-GAINS-CURRENT> 928
<APPREC-INCREASE-CURRENT> (398)
<NET-CHANGE-FROM-OPS> 845
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 316
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 271
<NUMBER-OF-SHARES-REDEEMED> 12270
<SHARES-REINVESTED> 44
<NET-CHANGE-IN-ASSETS> (11426)
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 44
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12
<AVERAGE-NET-ASSETS> 6115
<PER-SHARE-NAV-BEGIN> 21.63
<PER-SHARE-NII> 1.00
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> 1.03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 22.67
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> MANAGERS SHORT MUNICIPAL FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34
<TOTAL-LIABILITIES> 34
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1549
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 16
<ACCUMULATED-NET-GAINS> (1533)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30
<OTHER-INCOME> 0
<EXPENSES-NET> 27
<NET-INVESTMENT-INCOME> 3
<REALIZED-GAINS-CURRENT> (22)
<APPREC-INCREASE-CURRENT> 49
<NET-CHANGE-FROM-OPS> 30
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 78
<NUMBER-OF-SHARES-REDEEMED> 2541
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 2447
<ACCUMULATED-NII-PRIOR> 939
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27
<AVERAGE-NET-ASSETS> 1505
<PER-SHARE-NAV-BEGIN> 19.41
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> 0.23
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 19.43
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
