As filed with the Securities and Exchange Commission on October 15, 1997
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. 40 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 42 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) 857-5321
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)
_ on (date) pursuant to paragraph (b)
_ 60 days after filing pursuant to paragraph (a)(1)
_ on April 1, 1997 pursuant to paragraph (a)(1)
X 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
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
Money Market Fund series for that series' fiscal year ended November 30, 1996 on
January 24, 1997, and for its other nine series for their fiscal year ended
December 31, 1996 on May 1, 1997.
THE MANAGERS FUNDS
POST-EFFECTIVE AMENDMENT NO. 40
CROSS REFERENCE SHEET
(as required by Rule 481(a))
Form N-1A Item Location
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 Market Fund); Risk
Factors and Special
Considerations;Investment Restrictions;
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
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 ; 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
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
Item 23. Financial Statements...........Financial Statements
PART C -- Other Information
Information required to be included in Part C of the registration
statementis set forth under the appropriate Item, so numbered, in Part C to this
Post-Effective Amendment.
The Managers Funds
INCOME EQUITY FUND
CAPITAL APPRECIATION FUND
SPECIAL EQUITY FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
- ------------------------
PROSPECTUS
DATED DECEMBER 29, 1997
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
DATED DECEMBER 29, 1997
EQUITY FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with eleven 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 INCOME EQUITY FUND--(the "Income Equity Fund") seeks a high level
of current income by investing primarily in income producing equity securities.
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 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.
MANAGERS EMERGING MARKETS EQUITY FUND--(the "Emerging Markets Equity Fund")
seeks long-term capital appreciation by investing primarily in companies in
countries considered to be emerging or developing by the World Bank or the
United Nations.
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 December 29, 1997, 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Illustrative Expense Information ....................................... 3
Summary ................................................................ 4
Financial Highlights ................................................... 5
Investment Objectives, Policies and Restrictions ....................... 10
Certain Investment Techniques and Associated Risks ..................... 13
Portfolio Turnover ..................................................... 18
Purchase and Redemption of Fund Shares ................................. 18
Management of the Funds ................................................ 26
Portfolio Transactions and Brokerage ................................... 30
Performance Information ................................................ 31
Description of Shares, Voting Rights and Liabilities ................... 32
Tax Information ........................................................ 33
Shareholder Reports .................................................... 34
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, exchange fees
or Rule 12b-1 fees.
EQUITY FUNDS' ANNUAL OPERATING EXPENSES: (based on average daily net assets
during fiscal 1996)
TOTAL
MANAGEMENT OTHER OPERATING
FUND FEE EXPENSES* EXPENSES
---- ---------- --------- ---------
Income Equity Fund** ..................... 0.75% 0.70% 1.45%
Capital Appreciation Fund** .............. 0.80% 0.51% 1.31%
Special Equity Fund ...................... 0.90% 0.53% 1.43%
International Equity Fund ................ 0.90% 0.61% 1.51%
Emerging Markets Equity Fund*** .......... 1.15% 0.84% 1.99%
- --------------------
*Other Expenses reflect the expenses actually incurred by each Fund during
the year ended December 31, 1996, restated for a new transfer agent fee
arrangement in effect beginning October 1, 1997. See "Management of the
Funds--Administration and Shareholder Servicing; Distributor; Transfer
Agent."
**A portion of the brokerage commissions that each of these Funds pays is used
to reduce Fund expenses. These reductions had a de minimis impact on the
expenses of Managers Income Equity Fund, however, in the case of Managers
Capital Appreciation Fund, in the absense of such expense reductions, Other
Expenses would have been 0.56% and Total Operating Expenses would have been
1.36%.
***Other Expenses and Total Operating Expenses are estimated based on estimated
average net assets for the current fiscal year ending November 30, 1998 of
$50,000,000.
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.
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
Income Equity Fund ......................... $15 $46 $79 $174
Capital Appreciation Fund .................. 13 42 72 158
Special Equity Fund ........................ 15 45 78 171
International Equity Fund .................. 15 48 82 180
Emerging Markets Equity Fund ............... 20 62 -- --
The above expense table is designed to assist investors in understanding
the various direct and indirect costs and expenses that investors in the Fund
bear.
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 eleven
separate series:
Managers Income Equity Fund Managers Short and Intermediate Bond Fund
Managers Capital Appreciation Fund Managers Intermediate Mortgage Fund
Managers Special Equity Fund Managers Bond Fund
Managers International Equity Fund Managers Global Bond Fund
Managers Emerging Markets Equity Fund Managers Money Market Fund
Managers Short Government Fund
This Prospectus relates to the Equity Funds. For more complete information
about the other Funds (the "Income Funds" and the Money Market Fund) call (800)
835-3879 or (203) 857-5321. Read the prospectus carefully before you invest.
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, or
financial instruments related to such securities, the
4
<PAGE>
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. Investments in securities of
issuers in emerging market countries may involve a heightened degree of risk and
many may be considered speculative. 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
IRAs). For information on eligible investors, arrangements for lower minimum
investments 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,
except Managers Emerging Markets Equity Fund, for the last eleven fiscal
periods, or since inception, if applicable, through June 30, 1997. Financial
Highlights for Emerging Markets Equity is not presented as it had not commenced
operations as of the date of this Prospectus. 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, 1996, and by other accountants for the
periods prior to 1993, and should be read in conjunction with such financial
statements. The information for each Equity Fund except Managers Emerging
Markets Equity Fund for the six months ended June 30, 1997 is unaudited. See
"Financial Statements" in the SAI.
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS INCOME EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 ----------------------
- --
(UNAUDITED) 1996 1995
1994
- -------------------------------------------------------------------------------
- --
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $30.49 $28.43 $24.90
$27.89
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (c) 0.39 0.76 0.87
0.80
Net realized and unrealized gain (loss)
on investments 4.17 3.97 7.47
(0.50)
------ ------ ------ ----
- --
Total from investment operations 4.56 4.73 8.34
0.30
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From investment income (0.40) (0.76) (0.86)
(0.83)
From net realized gain on investments -- (1.91) (3.95)
(2.46)
------ ------ ------ ----
- --
Total distributions to shareholders (0.40) (2.67) (4.81)
(3.29)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $34.65 $30.49 $28.43
$24.90
====== ====== ======
======
- -------------------------------------------------------------------------------
- ---
Total Return (d) 15.06% 17.08% 34.36%
0.99%
- -------------------------------------------------------------------------------
- ---
Ratio of expenses to average net assets(c) 1.35%(b)(e) 1.44%(b) 1.45%
1.33%
Ratio of net investment income to average
net assets(c) 2.46%(e) 2.63% 2.85%
3.06%
Portfolio turnover 21%(f) 33% 36%
46%
Average commission rate(a) $0.06 $0.06 --
- --
Net assets at end of period (000's omitted) $62,874 $53,063 $37,807
$48,875
==============================================================================
===
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS INCOME EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $27.38 $28.62 $24.06
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (c) 0.81 0.99 1.11
Net realized and unrealized gain (loss)
on investments 2.54 1.72 5.82
------ ------ ------
Total from investment operations 3.35 2.71 6.93
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From investment income (0.76) (0.98) (1.20)
From net realized gain on investments (2.08) (2.97) (1.17)
------ ------ ------
Total distributions to shareholders (2.84) (3.95) (2.37)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $27.89 $27.38 $28.62
====== ====== ======
- --------------------------------------------------------------------------------
Total Return (d) 12.40% 9.80% 29.33%
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.32% 1.20% 1.16%
Ratio of net investment income to average
net assets(c) 2.75% 3.52% 4.00%
Portfolio turnover 41% 41% 64%
Average commission rate(a) -- -- --
Net assets at end of period (000's omitted) $40,965 $49,648 $70,077
================================================================================
</TABLE>
<TABLE>
<CAPTION>
SEVEN MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER
31,
----------------------------------------------
- -
1990 1989 1988 1987
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $30.23 $28.17 $23.59
$30.82
------ ------ ------ -----
- -
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (c) 1.48 1.68 1.45 0.82
Net realized and unrealized gain (loss)
on investments (5.30) 4.77 4.84
(5.16)
------ ------ ------ -----
- -
Total from investment operations (3.82) 6.45 6.29
(4.34)
------ ------ ------ -----
- -
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From investment income (1.45) (1.66) (1.43)
(0.87)
From net realized gain on investments (0.90) (2.73) (0.28)
(2.02)
------ ------ ------ -----
- -
Total distributions to shareholders (2.35) (4.39) (1.71)
(2.89)
------ ------ ------ -----
- -
NET ASSET VALUE, END OF PERIOD $24.06 $30.23 $28.17
$23.59
====== ====== ======
======
- --------------------------------------------------------------------------------
- -
Total Return (d) (13.04)% 22.24% 26.10%
15.85%
- --------------------------------------------------------------------------------
- -
Ratio of expenses to average net assets(c)0.80% 0.15% 0.17%
0.14%(e)
Ratio of net investment income to average
net assets(c) 5.40% 5.34% 5.47%
4.89%(e)
Portfolio turnover 57% 23% 26%
35%(e)
Average commission rate(a) -- -- --
- --
Net assets at end of period (000's omitted) $80,297 $116,103 $108,149
$108,581
================================================================================
==
</TABLE>
MANAGERS CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 ----------------------
- ----
(UNAUDITED) 1996 1995
1994
- --------------------------------------------------------------------------------
- -----
<S> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.34 $27.14 $23.25
$25.17
------ ------ ------ -
- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(c) (0.02) 0.09 0.09
0.12
Net realized and unrealized gain (loss)
on investments 1.35 3.66 7.62
(0.49)
------ ------ ------ -
- -----
Total from investment operations 1.33 3.75 7.71
(0.37)
------ ------ ------ -
- -----
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.10) (0.08)
(0.12)
From net realized gain on investments -- (4.45) (3.74)
(1.39)
In excess of net realized gain
on investments -- -- --
(0.04)
------ ------ ------ -
- -----
Total distributions to shareholders -- (4.55) (3.82)
(1.55)
------ ------ ------ -
- -----
NET ASSET VALUE, END OF PERIOD $27.67 $26.34 $27.14
$23.25
====== ====== ======
======
- --------------------------------------------------------------------------------
- ------
Total Return(d) 5.09% 13.73% 33.39%
(1.50)%
- --------------------------------------------------------------------------------
- ------
Ratio of expenses to average net assets(c) 1.26%(b)(e) 1.33%(b) 1.36%
1.29%
Ratio of net investment income to average
net assets(c) (0.13)%(e) 0.34% 0.31%
0.53%
Portfolio turnover 134%(f) 172% 134%
122%
Average commission rate(a) $0.06 $0.06 --
- --
Net assets at end of period (000's omitted) $98,939 $101,282 $83,353
$86,042
================================================================================
=====
</TABLE>
MANAGERS CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1992 1991
- -----------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $24.67 $23.46 $19.99
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(c) 0.19 0.08 0.25
Net realized and unrealized gain (loss)
on investments 3.80 2.39 6.10
------ ------ ------
Total from investment operations 3.99 2.47 6.35
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.19) (0.07) (0.27)
From net realized gain on investments (3.30) (1.19) (2.61)
In excess of net realized gain
on investments -- -- --
------ ------ ------
Total distributions to shareholders (3.49) (1.26) (2.88)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $25.17 $24.67 $23.46
====== ====== ======
- --------------------------------------------------------------------------------
Total Return(d) 16.38% 10.50% 31.97%
- --------------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.18% 1.05% 1.31%
Ratio of net investment income to average
net assets(c) 0.74% 0.33% 1.07%
Portfolio turnover 131% 175% 259%
Average commission rate(a) -- -- --
Net assets at end of period (000's omitted) $69,358 $56,196 $53,246
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
SEVEN
MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER
31,
---------------------------------------------
- ---
1990 1989 1988
1987
- --------------------------------------------------------------------------------
- ---
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.84 $20.10 $17.38
$30.89
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(c) 0.60 0.91 0.75
0.45
Net realized and unrealized gain (loss)
on investments (0.98) 3.47 2.72
(2.37)
------ ------ ------ ----
- --
Total from investment operations (0.38) 4.38 3.47
(1.92)
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.61) (0.91) (0.75)
(0.47)
From net realized gain on investments (0.86) (1.73) --
(11.12)
In excess of net realized gain
on investments -- -- --
- --
------ ------ ------ ----
- --
Total distributions to shareholders (1.47) (2.64) (0.75)
(11.59)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $19.99 $21.84 $20.10
$17.38
====== ====== ======
======
- --------------------------------------------------------------------------------
- --
Total Return(d) (1.98)% 21.05% 19.23%
(9.41)%
- --------------------------------------------------------------------------------
- --
Ratio of expenses to average net assets(c) 1.09% 0.38% 0.33%
0.24%(e)
Ratio of net investment income to average
net assets(c) 2.80% 4.04% 3.90%
3.22%(e)
Portfolio turnover 124% 120% 95%
190%(e)
Average commission rate(a) -- -- --
- --
Net assets at end of period (000's omitted)$45,801 $52,724 $60,551
$74,245
================================================================================
==
<FN>
(a) All funds are now required to disclose their average commission rate per
share for security trades on which commissions are charged. The amount may
vary from period to period and from fund to fund depending on the mix of
trades executed in various markets where trading practices and commissions
rate structures may differ.
(b) The Funds have entered into arrangements with one or more third-party
broker-dealers who have paid a portion of each of the Fund's respective
expenses. Absent these expense reductions, the ratio of expenses to average
net assets for the six months ended June 30, 1997 and the year ended
December 31, 1996 would have been 1.36% and 1.44%, respectively, for
Managers Income Equity Fund and 1.33% and 1.38%, respectively, for
Managers Capital Appreciation Fund. Such payments were used to reduce the
custodian expense for Managers Income Equity Fund, and the custodian and
transfer agent expenses for Managers Capital Appreciation Fund.
(c) Does not reflect investment advisory and management fees paid by
shareholders directly to the Manager prior to May 1990.
(d) For periods less than one year, returns are not annualized.
(e) Annualized.
</FN>
</TABLE>
6-7
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS SPECIAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 ----------------------
- --
(UNAUDITED) 1996 1995(b)
1994
- --------------------------------------------------------------------------------
- ----
<S> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $50.95 $43.34 $36.79
$38.90
------ ------ ------ -
- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.02 (0.00) (0.07)
(0.01)
Net realized and unrealized gain (loss)
on investments 5.04 10.68 12.28
(0.76)
------ ------ ------ -
- -----
Total from investment operations 5.06 10.68 12.21
(0.77)
------ ------ ------ -
- -----
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- --
- --
From net realized gain on investments -- (3.07) (5.66)
(1.34)
------ ------ ------ -
- -----
Total distributions to shareholders -- (3.07) (5.66)
(1.34)
------ ------ ------ -
- -----
NET ASSET VALUE, END OF PERIOD $56.01 $50.95 $43.34
$36.79
====== ====== ======
======
- --------------------------------------------------------------------------------
- ------
Total Return(d) 9.93% 24.75% 33.94%
(1.99)%
- --------------------------------------------------------------------------------
- ------
Ratio of expenses to average net assets(c) 1.35%(f)(e) 1.43% 1.44%
1.37%
Ratio of net investment income (loss) to
average net assets(c) 0.12%(e) (0.10)% (0.16)%
(0.06)%
Portfolio turnover 24%(g) 56% 65%
66%
Average commission rate(a) $0.05 $0.05 --
- --
Net assets at end of period (000's omitted) $492,885 $271,433 $118,362
$111,584
================================================================================
======
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS SPECIAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $36.14 $34.49 $24.46
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.02 0.05 0.22
Net realized and unrealized gain (loss)
on investments 6.12 5.35 11.78
------ ------ ------
Total from investment operations 6.14 5.40 12.00
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.01) (0.05) (0.23)
From net realized gain on investments (3.37) (3.70) (1.74)
------ ------ ------
Total distributions to shareholders (3.38) (3.75) (1.97)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $38.90 $36.14 $34.49
====== ====== ======
- --------------------------------------------------------------------------------
- --
Total Return(d) 17.05% 15.64% 49.26%
- --------------------------------------------------------------------------------
- --
Ratio of expenses to average net assets(c) 1.26% 1.29% 1.30%
Ratio of net investment income (loss) to
average net assets(c) 0.07% 0.14% 0.73%
Portfolio turnover 45% 54% 70%
Average commission rate(a) -- -- --
Net assets at end of period (000's omitted) $99,032 $53,641 $40,616
===================================================================== =========
</TABLE>
<TABLE>
<CAPTION>
SEVEN
MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER
31,
---------------------------------------------
- ---
1990 1989 1988
1987
- --------------------------------------------------------------------------------
- ---
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $32.45 $27.04 $22.97
$29.11
------ ------ ------ ---
- ---
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.33 0.54 0.51
0.25
Net realized and unrealized gain (loss)
on investments (5.44) 8.57 5.43
(3.67)
------ ------ ----- --
- ----
Total from investment operations (5.11) 9.11 5.94
(3.42)
------ ------ ------ --
- ----
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.36) (0.64) (0.40)
(0.25)
From net realized gain on investments (2.52) (3.06) (1.47)
(2.47)
------ ------ ------ --
- ----
Total distributions to shareholders (2.88) (3.70) (1.87)
(2.72)
------ ------ ------ --
- ----
NET ASSET VALUE, END OF PERIOD $24.46 $32.45 $27.04
$22.97
====== ====== ======
======
- --------------------------------------------------------------------------------
- ----
Total Return(d) (16.05)% 32.76% 25.26%
(12.03)%
- --------------------------------------------------------------------------------
- ----
Ratio of expenses to average net assets(c) 1.19% 0.40% 0.60%
0.41%(e)
Ratio of net investment income (loss) to
average net assets(c) 1.22% 1.65% 1.20%
1.54%(e)
Portfolio turnover 67% 48% 62%
38%(e)
Average commission rate(a) -- -- --
- --
Net assets at end of period (000's omitted) $24,429 $37,316 $28,824
$21,769
================================================================================
====
</TABLE>
MANAGERS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 ----------------------
- --
(UNAUDITED) 1996 1995(b)
1994
- --------------------------------------------------------------------------------
- ----
<S> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $43.69 $39.97 $36.35
$35.92
------ ------ ------ -
- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.37 0.32 0.31
0.16
Net realized and unrealized gain (loss)
on investments 5.22 4.76 5.59
0.56
------ ------ ------ -
- -----
Total from investment operations 5.59 5.08 5.90
0.72
------ ------ ------ -
- -----
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.33) (0.13)
(0.08)
In excess of net investment income -- -- --
- --
From net realized gain on investments -- (1.03) (2.15)
- --
In excess of net realized gain
on investments -- -- --
(0.21)
------ ------ ------ -
- -----
Total distributions to shareholders -- (1.36) (2.28)
(0.29)
------ ------ ------ -
- -----
NET ASSET VALUE, END OF PERIOD $49.28 $43.69 $39.97
$36.35
====== ====== ======
======
- --------------------------------------------------------------------------------
- ------
Total Return(d) 12.79% 12.77% 16.24%
2.00%
- --------------------------------------------------------------------------------
- ------
Ratio of expenses to average net assets(c) 1.47%(f)(e) 1.53% 1.58%
1.49%
Ratio of net investment income to
average net assets(c) 1.75%(e) 0.97% 0.80%
0.60%
Portfolio turnover 20%(g) 30% 73%
22%
Average commission rate(a) $0.04 $0.03 --
- --
Net assets at end of period (000's omitted) $348,164 $269,568 $140,488
$86,924
================================================================================
======
</TABLE>
MANAGERS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.52 $25.66 $22.09
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.22 0.23 0.36
Net realized and unrealized gain (loss)
on investments 9.88 0.85 3.64
------ ------ ------
Total from investment operations 10.10 1.08 4.00
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.29) (0.22) (0.36)
In excess of net investment income (0.11) -- --
From net realized gain on investments (0.30) -- (0.07)
In excess of net realized gain
on investments -- -- --
------ ------ ------
Total distributions to shareholders (0.70) (0.22) (0.43)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $35.92 $26.52 $25.66
====== ====== ======
- --------------------------------------------------------------------------------
Total Return(d) 38.20% 4.25% 18.14%
- --------------------------------------------------------------------------------
- -
Ratio of expenses to average net assets(c) 1.47% 1.45% 1.69%
Ratio of net investment income to
average net assets(c) 0.78% 0.97% 1.50%
Portfolio turnover 46% 51% 158%
Average commission rate(a) -- -- --
Net assets at end of period (000's omitted) $62,273 $23,129 $14,222
================================================================================
==
</TABLE>
<TABLE>
<CAPTION>
SEVEN
MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER
31,
----------------------------------------------
- -----
990 1989 1988 1987
- --------------------------------------------------------------------------------
- --
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.12 $23.80 $21.74
$35.32
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.34 (0.16) 0.02
0.03
Net realized and unrealized gain (loss)
on investments (2.85) 3.77 2.12
(3.17)
------ ------ ------ ----
- --
Total from investment operations (2.51) 3.61 2.14
(3.14)
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.13) -- (0.08)
(0.08)
In excess of net investment income -- -- --
- --
From net realized gain on investments (1.39) (1.29) --
(10.36)
In excess of net realized gain
on investments -- -- --
- --
------ ------ ------ ----
- --
Total distributions to shareholders (1.52) (1.29) (0.08)
(10.44)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $22.09 $26.12 $23.80
$21.74
====== ====== ======
======
- --------------------------------------------------------------------------------
- --
Total Return(d) (9.68)% 15.10% 8.89%
(11.63)%
- --------------------------------------------------------------------------------
- --
Ratio of expenses to average net assets(c) 2.33% 2.77% 1.68%
1.20%(e)
Ratio of net investment income to
average net assets(c) 1.12% (0.73)% 0.12%
0.28%(e)
Portfolio turnover 78% 117% 88%
159%(e)
Average commission rate(a) -- -- --
- --
Net assets at end of period (000's omitted) $9,871 $8,974 $7,337
$8,265
================================================================================
==
<FN>
(a) All funds are now required to disclose their average commission rate per
share for security trades on which commissions are charged. The amount may
vary from period to period and from fund to fund depending on the mix of
trades executed in various markets where trading practices and commissions
rate structures may differ.
(b) Calculated using the weighted average shares outstanding during the year.
(c) Does not reflect investment advisory and management fees paid by
shareholders directly to the Manager prior to May 1990.
(d) For periods less than one year, returns are not annualized.
(e) Annualized.
(f) The Funds have entered into arrangements with one or more third-party
broker-dealers who have paid a portion of each Fund's respective custodian
expenses. Absent these expense reductions, the ratio of expenses to average
net assets for the six months ended June 30, 1997, would have been 1.36% and
1.47%, respectively, for Managers Special Equity and Managers International
Equity.
(g) Not annualized.
</FN>
</TABLE>
8-9
<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.
Each of the Equity Funds may invest a portion of its cash balances in shares of
unaffiliated money market mutual funds, when the Manager determines that such
investments offer higher net yields (after considering all direct and indirect
fees and expenses) than direct investments in cash equivalent securities. 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 and Emerging Markets Equity
10
<PAGE>
Fund, as a temporary defensive position policy, may invest in cash equivalents
of foreign issuers, foreign government bonds or other non-U.S. dollar
denominated cash equivalents.
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 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 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 emerging markets as well as developed
countries. The Fund intends to invest in non-U.S. companies whose securities are
traded on exchanges located in
11
<PAGE>
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--Emerging Markets."
MANAGERS EMERGING MARKETS EQUITY FUND
The Fund's investment objective is to seek long term capital appreciation
by investing primarily in equity securities of companies in emerging markets.
The Fund ordinarily invests at least 65% of its total assets in equity
securities of companies considered to be in emerging markets, but up to a
combined total of 35% of its total assets may be invested in equity and fixed
income securities of companies that are not in emerging markets, including U.S.
companies, when, in the estimation of an Asset Manager, expected returns from
such securities exceed those of emerging market securities. The Fund may invest
in fixed income securities denominated in foreign currencies. The Fund is
designed for long-term investors who want exposure to the potential for rapid
growth associated with emerging markets.
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 emerging markets as well as developed
countries. THE FUND DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM NOR IS THE
FUND SUITABLE FOR ALL INVESTORS. For a discussion of the risks associated with
investing in foreign securities, see "Certain Investment Techniques and
Associated Risks-Other Securities-Foreign Securities and -Emerging Markets."
The Manager considers an emerging market to be any country which is
generally considered to be an emerging or developing country by the World Bank,
the International Finance Corporation, the United Nations or its authorities.
These countries can generally include every country in the world except
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Japan, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland,
United Kingdom and the United States. The Fund seeks to invest in those emerging
countries in which the economies are developing strongly and in which the
markets are becoming more sophisticated. The Fund does not intend to invest in
any emerging country where the foreign currency is not freely convertible into
U.S. dollars, unless the Fund has obtained the necessary governmental licensing
to convert such currency or if the Fund has received a sanctioned contractual
guarantee to protect such investment against loss of the currency's external
value. See "Other Information--Foreign Currency Considerations" in the SAI.
12
<PAGE>
A company in an emerging market is one that: (i) has its principal
securities trading market in an emerging market country; (ii) is organized under
the laws of an emerging market; (iii) derives 50% or more of its total revenue
from either goods produced, sales made or services performed in emerging
markets; or (iv) has at least 50% of its assets located in emerging markets.
The Asset Managers of the Fund will not routinely attempt to hedge the
Fund's foreign currency exposure. However, the Asset Managers may from time to
time engage in foreign currency exchange transactions if, based on fundamental
research, technical factors, and their experience and judgement, they believe
the transactions would be in the Fund's best interest.
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
13
<PAGE>
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. Since the Fund's investments in foreign securities involve foreign
currencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage.
Moreover, the settlement periods of foreign securities, which are often
longer than those for securities of U.S. issuers, may affect portfolio
liquidity. In buying and selling securities on foreign exchanges, purchasers
normally pay fixed commissions that are generally higher than the negotiated
commissions charged in the United States. In addition, there is generally less
government supervision and regulation of securities exchanges, brokers and
issuers located in foreign countries than in the United States.
EMERGING MARKETS SECURITIES. The Emerging Markets Equity Fund invests, and
the International Equity Fund invests to a lesser extent, in equity securities
of companies in emerging markets. Such securities may involve a high degree of
risk and many may be considered speculative. These investments carry all of the
risks, including currency fluctuations, of investing in securities of foreign
issuers described in this Prospectus to a heightened degree. These heightened
risks include (i) greater risk of expropriation, confiscatory taxation,
nationalization, and social, political and economic stability; (ii) the small
current size of the markets for securities of emerging markets issuers and the
currently low or non-existent volume of trading, resulting in lack of liquidity
and in price volatility; (iii) certain national policies which may restrict a
14
<PAGE>
Fund's investment opportunities including restrictions on investing in issuers
or industries deemed sensitive to relevant national interests; and (iv) the
absence of developed legal structures governing private or foreign investment
and private property.
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 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
15
<PAGE>
its Custodian in which it will maintain cash and/or liquid securities 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 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.
16
<PAGE>
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
other liquid 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.
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
17
<PAGE>
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 securities 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 purposes as ordinary income.
See "Portfolio Transactions and Brokerage" and "Tax Information." For the Equity
Funds' portfolio turnover rates, see "Financial Highlights."
18
<PAGE>
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). Arrangements can also be made to open accounts
with a $500 or $250 initial investment and an agreement to invest at least $50
or $100, respectively, per month until the minimum is attained. Call
(800)835-3879 for more information on these arrangements. 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.
19
<PAGE>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------ ----------------------
Minimums:
Regular accounts $2,000 (or lower, as No minimum
described above)
IRAs, IRA rollovers,
SEP and SIMPLE IRAs $500 No minimum
METHOD
------------
Through your Contact Send additional funds
investment professional your investment advi- to your investment pro-
sor, bank or other fessional at the address
investment professional appearing on your
account statement
Direct by mail Send your account Send letter of instruc-
application and check tion
(payable to The and check (payable to
Managers Funds) to the The Managers Funds)
address indicated on to
the application The Managers Funds
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) 358-7668 to Call the Transfer Agent
Bank Wire notify the Transfer at (800) 358-7668 prior
Agent, and instruct to wiring additional
your bank to wire U.S. funds
funds to:
ABA #011000028
State Street Bank &
Trust Company
Boston, MA 02101
BFN--The Managers
Funds
AC 9905-001-5
FBO--Shareholder Name
By telephone Only for established Call the Transfer Agent
accounts with ACH priv- at (800) 252-0682
ileges. Call (800) 252- Minimum investment
0682 with instructions $100
for the Transfer Agent
20
<PAGE>
The employees and their families of The Managers Funds, L.P. and selected
dealers and their authorized representatives who are engaged in the sale of Fund
shares, may purchase shares of the Fund without regard to a minimum initial
investment.
Certain states may require Registered Investment Advisers that purchase
Fund shares for customers in those states to register as broker-dealers. 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 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.
21
<PAGE>
Federal Funds or Bank Wires used to pay for purchase orders must be in U.S.
dollars and 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, or exchanges from such shares, are not effected
until 15 days after the date of purchase, unless arrangements are made with the
Administrator.
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.
22
<PAGE>
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. No interest
will accrue on amounts represented by uncashed redemption (or distribution)
checks.
METHOD INSTRUCTIONS
------ ------------
By mail--write to Send a letter of instruction which
The Managers Funds specifies the name of the Fund, dol-
c/o Boston Financial Data Services, lar amount or number of shares to be
Inc. sold, your name and account number.
P.O. Box 8517 This letter must be signed by all
Boston, MA 02266-8517 owners of the shares in the exact
manner in which they appear on the
account.
In the case of estates, trusts,
guardianships, custodianships, cor-
porations 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 For shareholders who have elected
Market Fund shareholders only) the checkwriting option with State
Street Bank and Trust company, see
"Investor Services--Checkwriting
Privilege" below.
23
<PAGE>
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. The amount you specify will
automatically be deducted from your bank account and invested 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, or can also be done through the Automatic Investment
service above. Before investing in the Trust's Income Funds, shareholders must
obtain a prospectus from the Trust describing those Funds.
INDIVIDUAL RETIREMENT ACCOUNTS, including SEP and SIMPLE IRAs, IRA
rollovers and 403(b) accounts, 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.
24
<PAGE>
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.
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 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 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
25
<PAGE>
on the day prior to the declaration date. Distributions of any capital gains
will normally be paid annually in December.
FREQUENCY FUND
--------- ----
Monthly Income Equity Fund
Annually Capital Appreciation Fund,
Special Equity Fund,
International Equity Fund
Emerging Markets Equity Fund
All dividends and distributions declared by a Fund will be reinvested in
additional shares of the Fund at the net asset value on the "Ex-dividend" date
(unless the shareholder has elected to receive dividends or distributions in
cash or invest them in 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. 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-
26
<PAGE>
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 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 each expressed as a
percentage of the Fund's average daily net assets.
TOTAL ASSET
MANAGEMENT MANAGEMENT
NAME OF FUND FEE FEE
------------ ---------- ----------
Income Equity Fund ................................. 0.75% 0.35%
Capital Appreciation Fund .......................... 0.80% 0.40%
Special Equity Fund ................................ 0.90% 0.50%
International Equity Fund .......................... 0.90% 0.50%
Emerging Markets Equity Fund ....................... 1.15% 0.75%
- ----------------
ASSET MANAGERS
The following sets forth certain information about each of the Asset
Managers:
INCOME EQUITY FUND
Scudder, Kemper Investments, Inc. ("Scudder")--The investment adviser was
founded in 1919, and was reorganized as a privately held corporation in 1985.
Scudder is owned by Zurich Group. As of December 31, 1996, assets under
management totaled $115 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.
Chartwell Investment Partners, L.P. (Chartwell)--The firm was founded in
1997, and is a limited partnership which is controlled by Bobcat Partners, L.P.,
which is controlled by John McNiff, James Croney, Jr. and Michael Kennedy. As of
September 1997 assets under management totaled approximately $819 million. Its
address is 1235 Westlakes Drive, Suite 330, Berwyn, PA 19312.
Chartwell employs a team approach to manage their portion of the Income
Equity Fund.
27
<PAGE>
CAPITAL APPRECIATION FUND
Essex Investment Management Company, Inc. ("Essex")--The firm was formed in
1976 and is owned by employees of the firm. As of December 31, 1996, assets
under management totaled $4.1 billion. Its address is 125 High Street, Boston,
MA 02110.
Joseph C. McNay and Donald V. Dougherty serve as the portfolio managers of
the portion of the Capital Appreciation Fund managed by Essex. Mr. McNay is the
Chairman and Chief Investment Officer of Essex, a position he has held since the
firm's inception. Mr. Dougherty has served as a Vice President and portfolio
manager of Essex since 1994; prior to that time he served in a similar capacity
with Putnam Investments.
Husic Capital Management ("Husic")--Husic commenced operations in 1986. The
firm is a limited partnership which is 100% owned by Frank J. Husic. As of
December 31, 1996, assets under management totaled approximately $4.1 billion.
Its address is 555 California Street, Suite 2900, San Francisco, CA 94104.
Frank J. Husic is the portfolio manager of the portion of the Capital
Appreciation Fund managed by Husic. He has been President and Chief Investment
Officer of Husic since the firm's inception.
SPECIAL EQUITY FUND
Liberty Investment Management ("Liberty")--The firm was originally formed
in 1976 and is a division of Goldman Sachs Asset Managment. As of December 31,
1996, assets under management totaled $5.6 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, 1996,
assets under management totaled over $14.7 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.
28
<PAGE>
Oliver. As of December 31, 1996, assets under management totaled $825 million.
Its address is 253 River side 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.
Kern Capital Management, LLC ("KCM") - The firm was founded in 1997, and is
a Delaware limited liability company which is controlled by Robert E. Kern,
David G. Kern, and Fremont Investment Advisors, Inc., a subsidiary of Fremont
Investments, Inc. and affiliated with The Fremont Group. As of September
1997, assets under management totaled approximately $200 million. The firm's
address is 114 West 47th Street, Suite 1926, New York, NY 10036.
Robert E. Kern is the portfolio manager of the portion of the Special Equity
Fund managed by KCM. He has been the Managing Member, Chairman, and Chief
Executive Officer since the firm's inception. Prior to KCM's formation, he
served as Senior Vice President with Fremont Investment Advisors from April
to August 1997, and as a Director with Morgan Grenfell Capital Management, Inc.
from September 1986 to April 1997.
INTERNATIONAL EQUITY FUND
Scudder, Kemper Investments, 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 Asset Management Co. ("Lazard")--The firm is a New York
limited liability company founded in 1848. As of December 31, 1996, the firm had
$38 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 Lazard. He is a Managing Director 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.
EMERGING MARKETS EQUITY FUND
[to come once asset managers chosen]
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"). The Administrator is paid 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
29
<PAGE>
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, 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, provided that the Asset
Manager may cause a Fund to pay a commission for brokerage and research services
which is in excess of the commission another broker would have charged for the
same transaction if the Asset Manager determines in good faith that the
commission is reasonable in relation to the value of the brokerage and research
services provided, viewed in terms of the particular transaction or in terms of
all of the accounts over which the Asset Manager has investment discretion. 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
30
<PAGE>
that Fund's Asset Managers in accordance with procedures approved by the
Trustees. However, unless an exemptive order is obtained from the Securities and
Exchange Commission, 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 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.
31
<PAGE>
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value, and currently offers eleven 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 eleven series without the requirement of a
vote of shareholders of the Trust.
Shares of each Fund are entitled to one vote per share. Share- holders 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.
Two lawsuits seeking class action status have been filed against Managers
Intermediate Mortgage Fund, Managers Short Government Fund, the Investment
Manager and the Trust, among other defendants. In both of these cases, the
plaintiffs seek unspecified damages based upon losses alleged in the two funds
named above. In the suit relating to Managers Short Government Fund, after
plaintiff amended the complaint, a second motion to dismiss was filed. In that
action, the parties have now entered into a preliminary agreement to settle all
claims by
32
<PAGE>
the purported class. However, the parties have not finalized their settlement
nor have they obtained the required court approvals. For these and other
reasons, there can be no assurance that the settlement will be consummated. In
addition, a non-class action lawsuit based on similar allegations has been filed
by a customer against certain of the defendants named in the class action
lawsuits, as well as Managers Short and Intermediate Bond Fund. Certain other
customers, who are potentially members of the plaintiff class in each of the two
class action lawsuits referred to above, have asserted that they may file
similar lawsuits based on similar claims, but have not done so. Management
continues to believe that it has meritorious defenses and, if the cases are not
settled, Management intends to defend vigorously against these actions.
As of September 23, 1997, Resource Bank and Trust Company owned more than
25% of the shares of Managers Capital Appreciation Fund and customers of Charles
Schwab & Co. owned more than 25% of the shares of the Managers 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.
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.
33
<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.
34
<PAGE>
NOTES
35
<PAGE>
NOTES
36
<PAGE>
<PAGE>
THE MANAGERS FUNDS
[LOGO OMITTED]
WHERE LEADING MONEY MANAGERS CONVERGE
FUND DISTRIBUTOR
THE MANAGERS FUNDS, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
CUSTODIAN
State Street Bank and Trust
Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Shereff, Friedman, Hoffman &
Goodman, LLP
919 Third Avenue
New York, New York 10022
TRANSFER AGENT
Boston Financial Data
Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800)252-0682
THE MANAGERS FUNDS
EQUITY FUNDS:
- ------------
INCOME EQUITY FUND
Scudder, Kemper Investments, Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management
Company, Inc.
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder, Kemper Investments, Inc.
Lazard, Freres Asset
Management Co.
EMERGING MARKETS
EQUITY FUND
INCOME FUNDS:
- ------------
MONEY MARKET FUND
J.P. Morgan
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE
FUND
Jennison Associates Capital Corp.
BOND FUND
Loomis, Sayles & Company, Inc.
GLOBAL BOND FUND
Rogge Global Partners
SHORT GOVERNMENT FUND
SHORT AND INTERMEDIATE
BOND FUND
INTERMEDIATE MORTGAGE FUND
BOND FUND
GLOBAL BOND FUND
- ------------------------
PROSPECTUS
dated December 29, 1997
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
The Managers Funds
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
DATED DECEMBER 29, 1997
INCOME FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with eleven 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 December 29, 1997, 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
PAGE
------
Illustrative Expense Information ........................................ 3
Summary ................................................................. 4
Financial Highlights .................................................... 5
Investment Objectives, Policies and Restrictions ........................ 11
Certain Investment Techniques and Associated Risks ...................... 18
Portfolio Turnover ...................................................... 25
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
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, exchange fees
or Rule 12b-1 fees.
INCOME FUNDS' ANNUAL OPERATING EXPENSES: (based on average daily net
assets during fiscal 1996, after expense reimbursements)
TOTAL
MANAGEMENT OTHER OPERATING
FUND FEE* EXPENSES** EXPENSES**
---- ---------- ---------- ----------
Short Government Fund 0.20% 1.13% 1.33%
Short and Intermediate Bond Fund 0.50% 0.99% 1.49%
Intermediate Mortgage Fund 0.45% 0.77% 1.22%
Bond Fund 0.625% 0.75% 1.38%
Global Bond Fund 0.70% 0.92% 1.62%
- --------------------
*The Management Fee 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 Expenses reflect the expenses actually incurred by each Fund during the
year ended December 31, 1996, restated to reflect new transfer agency
arrangements in effect October 1, 1997. The expenses shown do not reflect
current asset levels for the Funds or the fund family, and are not necessarily
indicative of the current expense ratios. With respect to the Short Government
Fund, where no administrative fee is currently being charged, such expenses
reflect a voluntary waiver of administrative fees by the Manager. In the
absence of all such waivers, Other Expenses would be 1.33% and the Total
Operating Expenses would be 1.78%. See "Management of the Funds--
Administration and Shareholder Servicing; Distributor; Transfer Agent."
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.
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
Short Government Fund ................. $14 $42 $73 $160
Short and Intermediate Bond Fund ...... 15 47 81 178
Intermediate Mortgage Fund ............ 12 39 67 148
Bond Fund ............................. 14 44 76 166
Global Bond Fund ...................... 16 51 88 192
The above expense table is designed to assist investors in understanding
the various direct and indirect costs and expenses that investors in the Fund
bear.
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 eleven separate
series:
Managers Income Equity Fund Managers Short Government Fund
Managers Capital Appreciation Fund Managers Short and Intermediate Bond Fund
Managers Special Equity Fund Managers Intermediate Mortgage Fund
Managers International Equity Fund Managers Bond Fund
Managers Emerging Markets Equity Fund Managers Global Bond Fund
Managers Money Market Fund
This Prospectus relates to the Income Funds. For more complete information
about the other Funds (the "Equity Funds" and the Money Market Fund) call (800)
835-3879 or (203) 857-5321. Read the Prospectus carefully before you invest.
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
4
<PAGE>
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 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). For
information on eligible investors, arrangements for lower minimum investments
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 June
30, 1997. 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, 1996,
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>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------
(UNAUDITED) 1996 1995(D) 1994
- --------------------------------------------------------------------------------
- --
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.40 $17.76 $16.96 $19.35
------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.51 1.02 0.98 0.86
investments (0.11) (0.37) 0.63 (2.01)
------- ------ ------ ------
Total from investment operations 0.40 0.65 1.61 (1.15)
------- ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.51) (1.01) (0.50) (1.17)
In excess of net investment income -- -- (0.31) (0.07)
------- ------ ------ ------
Total distributions to shareholders (0.51) (1.01) (0.81) (1.24)
------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $17.29 $17.40 $17.76 $16.96
------- ------ ------ ------
- --------------------------------------------------------------------------------
- -
Total Return(b) (e) 2.34% 3.89% 9.71%
(6.18)%
- --------------------------------------------------------------------------------
- -
Ratio of net expenses to average net assets(a) 1.13%(c) 1.17% 1.25% 0.97%
average net assets(a) 5.81%(c) 5.85% 5.62% 7.06%
Portfolio turnover 34%(b) 169% 238% 140%
Net assets at end of period(000's omitted) $5,070 $6,113 $5,836 $10,263
- --------------------------------------------------------------------------------
- ---
Ratio of total expenses to average net
assets, absent waiver(f) 1.58%(c) 1.62% 1.65% 1.03%
Ratio of net investment income to
average net assets, absent waiver(f) 5.36%(c) 5.40% 5.22% 7.00%
================================================================================
==
</TABLE>
- --------------------------------------------------------------------------------
MANAGERS SHORT GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
- ---
1993 1992 1991 1990
- --------------------------------------------------------------------------------
- -
<S> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.86 $20.35 $19.86
$19.96
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.28 1.26 1.58
1.42
Net realized and unrealized gain (loss) on
investments (0.53) (0.49) 0.49
(0.03)
------ ------ ------ ----
- --
Total from investment operations 0.75 0.77 2.07
1.39
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.26) (1.26) (1.58)
(1.49)
In excess of net investment income -- -- --
- --
------ ------ ------ ----
- --
Total distributions to shareholders (1.26) (1.26) (1.58)
(1.49)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $19.35 $19.86 $20.35
$19.86
------ ------ ------ ----
- --
- --------------------------------------------------------------------------------
- ----
Total Return(b) (e) 3.81% 3.90% 10.82%
7.07%
- --------------------------------------------------------------------------------
- ---
Ratio of net expenses to average net assets(a) 0.87% 0.76% 0.58%
1.01%
Ratio of net investment income to
average net assets(a) 8.71% 6.24% 6.08%
6.78%
Portfolio turnover 189% 168% 84%
183%
Net assets at end of period(000's omitted) $87,874 $142,874 $144,042
$27,683
- --------------------------------------------------------------------------------
- ---
Ratio of total expenses to average net
assets, absent waiver(f) 0.96% 0.83% 0.59%
2.84%
Ratio of net investment income to
average net assets, absent waiver(f) 8.62% 6.17% 8.25%
8.35%
================================================================================
===
YEAR ENDED FOR THE
PERIOD
DECEMBER 31, OCTOBER 15,
1987
------------------ (COMMENCEMENT
OF
1989 1988 DECEMBER 31,
1987
- --------------------------------------------------------------------------------
- --
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.85 $20.06 $20.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.65 1.42 0.29
Net realized and unrealized gain (loss) on
investments 0.11 (0.21) (0.01)
------ ------ ------
Total from investment operations 1.76 1.21 0.28
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.65) (1.42) (0.22)
In excess of net investment income -- -- --
------ ------ ------
Total distributions to shareholders (1.65) (1.42) (0.22)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $19.96 $19.85 $20.06
------ ------ ------
- --------------------------------------------------------------------------------
- --
Total Return(b) (e) 8.68% 5.90% 1.29%
- --------------------------------------------------------------------------------
- --
Ratio of net expenses to average net assets(a) 0.56% 0.44% 1.82%(c)
Ratio of net investment income to
average net assets(a) 8.34% 7.30% 6.77%(c)
Portfolio turnover 235% 232% 578%(c)
Net assets at end of period(000's omitted) $10,438 $27,056 $9,109
- --------------------------------------------------------------------------------
- --
Ratio of total expenses to average net
assets, absent waiver(f) N/A N/A N/A
Ratio of net investment income to
average net assets, absent waiver(f) N/A N/A N/A
================================================================================
==
</TABLE>
<TABLE>
<CAPTION>
MANAGERS SHORT AND INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 -----------------------
- -
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------
- ---
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.45 $19.67 $18.06
$21.23
------ ------ ------ ----
- --
Net investment income(a) 0.54 1.03 1.28
1.45
Net realized and unrealized gain
(loss) on investments (0.08) (0.24) 1.45
(3.17)
------ ------ ------ ----
- --
Total from investment operations 0.46 0.79 2.73
(1.72)
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.50) (1.01) (1.09)
(1.37)
In excess of net investment income -- -- (0.03)
(0.08)
------ ------ ------ ----
- --
Total distributions to shareholders (0.50) (1.01) (1.12)
(1.45)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $19.41 $19.45 $19.67
$18.06
------ ------ ------ ----
- --
- --------------------------------------------------------------------------------
- ---
Total Return(b) (e) 2.35% 4.15% 15.57%
(8.37)%
- --------------------------------------------------------------------------------
- ----
Ratio of net expenses to average net assets(a) 1.45%(c) 1.45% 1.50%
1.05%
Ratio of net investment income to
average net assets(a) 5.60%(c) 5.43% 6.52%
7.11%
Portfolio turnover 51%(b) 96% 131%
57%
Net assets at end of period(000's omitted) $16,540 $22,380 $25,241
$30,956
- --------------------------------------------------------------------------------
- ----
Ratio of total expenses to average net
assets, absent waiver(f) N/A N/A N/A
N/A
Ratio of net investment income to
average net assets, absent waiver(f) N/A N/A N/A
N/A
================================================================================
====
YEAR ENDED DECEMBER 31,
-------------------------------------
- ----
1993 1992 1991 1990
- --------------------------------------------------------------------------------
- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.89 $20.33 $19.43
$19.69
------ ------ ------ ---
- ---
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.38 1.69 1.50
1.57
Net realized and unrealized gain
(loss) on investments 0.34 0.57 0.88
(0.19)
------ ------ ------ ---
- ---
Total from investment operations 1.72 2.26 2.38
1.38
------ ------ ------ ---
- ---
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.38) (1.70) (1.48)
(1.64)
In excess of net investment income -- -- --
- --
------ ------ ------ ---
- ---
Total distributions to shareholders (1.38) (1.70) (1.48)
(1.64)
------ ------ ------ ---
- ---
NET ASSET VALUE, END OF PERIOD $21.23 $20.89 $20.33
$19.43
------ ------ ------ ---
- ---
- --------------------------------------------------------------------------------
- --------
Total Return(b) (e) 8.49% 11.55% 12.78%
7.22%
- --------------------------------------------------------------------------------
- -----
Ratio of net expenses to average net assets(a) 0.94% 0.86% 0.96%
0.56%
Ratio of net investment income to
average net assets(a) 6.58% 8.33% 7.41%
8.05%
Portfolio turnover 126% 117% 536%
477%
Net assets at end of period(000's omitted) $112,228 $72,031 $52,168
$115,223
- --------------------------------------------------------------------------------
- ----
Ratio of total expenses to average net
assets, absent waiver(f) N/A N/A 1.00%
0.58%
Ratio of net investment income to
average net assets, absent waiver(f) N/A N/A 7.37%
8.03%
================================================================================
====
YEAR ENDED SEVEN MONTHS
YEAR
DECEMBER 31, ENDED
ENDED
---------------- DECEMBER 31, MAY
31,
1989 1988 1987
1987
- --------------------------------------------------------------------------------
- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.32 $19.82 $19.89
$21.56
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.70 1.70 1.02
1.80
Net realized and unrealized gain
(loss) on investments 0.37 (0.48) (0.06)
(0.58)
------ ------ ------ ----
- --
Total from investment operations 2.07 1.22 0.96
1.22
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.70) (1.71) (1.03)
(1.80)
In excess of net investment income -- (0.01) --
(1.09)
------ ------ ------ ----
- --
Total distributions to shareholders (1.70) (1.72) (1.03)
(2.89)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $19.69 $19.32 $19.82
$19.89
------ ------ ------ ----
- --
- --------------------------------------------------------------------------------
- ----
Total Return(b) (e) 10.61% 5.79% 4.67%
5.41%
- --------------------------------------------------------------------------------
- ----
Ratio of net expenses to average net assets(a) 0.12% 0.10% 0.10%(c)
0.10%
Ratio of net investment income to
average net assets(a) 8.81% 8.61% 9.00%(c)
8.70%
Portfolio turnover 202% 348% 254%(c)
308%
Net assets at end of period(000's omitted) $152,106 $192,706 $211,909
$221,298
- --------------------------------------------------------------------------------
- ----
Ratio of total expenses to average net
assets, absent waiver(f) N/A N/A N/A
N/A
Ratio of net investment income to
average net assets, absent waiver(f) N/A N/A N/A
N/A
================================================================================
====
<FN>
(a) Does not reflect investment advisory and management fees paid
by shareholders directly to the Manager for periods prior to May 1990.
(b) Not annualized.
(c) Annualized.
(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.
</FN>
</TABLE>
6 & 7
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 -----------------------
- -
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------
- --
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.17 $15.54 $14.20
$20.65
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.44 0.87 0.93
1.52
Net realized and unrealized gain
(loss) on investments 0.02 (0.38) 1.45
(6.56)
------ ------ ------ ----
- --
Total from investment operations 0.46 0.49 2.38
(5.04)
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.42) (0.86) (1.03)
(1.41)
In excess of net investment income -- -- (0.01)
- --
From net realized gain on investments -- -- --
- --
In excess of net realized gain on investments -- -- --
- --
------ ------ ------ ----
- --
Total distributions to shareholders (0.42) (0.86) (1.04)
(1.41)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $15.21 $15.17 $15.54
$14.20
------ ------ ------ -----
- -
- --------------------------------------------------------------------------------
- -------
Total Return(b) (d) 3.09% 3.33% 17.27%
(25.00)%
- --------------------------------------------------------------------------------
- -------
Ratio of net expenses to average net assets(a) 1.24%(c) 1.19% 1.17%
0.85%
Ratio of net investment income to
average net assets(a) 5.76%(c) 5.78% 6.33%
8.37%
Portfolio turnover 223%(b) 232% 506%
240%
Net assets at end of period(000's omitted) $22,097 $24,846 $40,022
$55,986
- --------------------------------------------------------------------------------
- ---
Ratio of total expenses to average net
assets, absent waiver (e) N/A N/A N/A
0.92%
Ratio of net investment income to
average net assets, absent waiver(e) N/A N/A N/A
8.30%
================================================================================
====
YEAR ENDED DECEMBER 31,
-------------------------------------
- -
1993 1992 1991 1990
- --------------------------------------------------------------------------------
- --
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.13 $21.77 $20.31
$20.19
------ ------ ------ ---
- ---
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.94 2.58 2.03
1.80
Net realized and unrealized gain
(loss) on investments 0.44 (0.40) 1.48
0.17
------ ------ ------ ---
- ---
Total from investment operations 2.38 2.18 3.51
1.97
------ ------ ------ ---
- ---
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2.28) (2.40) (2.05)
(1.85)
In excess of net investment income -- -- --
- --
From net realized gain on investments (0.51) (0.42) --
- --
In excess of net realized gain on investments (0.07) -- --
- --
------ ------ ------ ---
- ---
Total distributions to shareholders (2.86) (2.82) (2.05)
(1.85)
------ ------ ------ ---
- ---
NET ASSET VALUE, END OF PERIOD $20.65 $21.13 $21.77
$20.31
------ ------ ------ ---
- ---
- --------------------------------------------------------------------------------
- -----
Total Return(b) (d) 11.45% 10.50% 18.18%
10.19%
- -------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 0.75% 0.79% 0.69%
0.55%
Ratio of net investment income to
average net assets(a) 8.90% 11.30% 9.91%
9.06%
Portfolio turnover 253% 278% 172%
161%
Net assets at end of period(000's omitted) $271,861 $115,885 $165,358
$119,118
- --------------------------------------------------------------------------------
- -----
Ratio of total expenses to average net
assets, absent waiver (e) 0.82% 0.84% N/A
N/A
Ratio of net investment income to
average net assets, absent waiver(e) 8.83% 11.25% N/A
N/A
================================================================================
====
YEAR ENDED SEVEN MONTHS
YEAR
DECEMBER 31, ENDED
ENDED
----------------- DECEMBER 31, MAY
31,
1989 1988 1987
1987
- --------------------------------------------------------------------------------
- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.24 $19.68 $19.80
$19.62
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.87 1.90 1.13
1.91
Net realized and unrealized gain
(loss) on investments 0.94 (0.43) (0.13)
0.17
------ ------ ------ ----
- --
Total from investment operations 2.81 1.47 1.00
2.08
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.86) (1.91) (1.12)
(1.90)
In excess of net investment income -- -- --
- --
From net realized gain on investments -- -- --
- --
In excess of net realized gain on investments -- -- --
- --
------ ------ ------ ----
- --
Total distributions to shareholders (1.86) (1.91) (1.12)
(1.90)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $20.19 $19.24 $19.68
$19.80
------ ------ ------ ----
- --
- --------------------------------------------------------------------------------
- ----
Total Return(b) (d) 14.69% 7.38% 4.97%
10.02%
- --------------------------------------------------------------------------------
- ----
Ratio of net expenses to average net assets(a) 0.19% 0.22% 0.19%(c)
0.26%
Ratio of net investment income to
average net assets(a) 9.44% 9.66% 9.92%(c)
9.46%
Portfolio turnover 144% 149% 151%(c)
202%
Net assets at end of period(000's omitted) $102,229 $81,222 $71,376
$86,325
- --------------------------------------------------------------------------------
- ----
Ratio of total expenses to average net
assets, absent waiver (e) N/A N/A N/A
N/A
Ratio of net investment income to
average net assets, absent waiver(e) N/A N/A N/A
N/A
================================================================================
====
</TABLE>
MANAGERS BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED YEAR ENDED DECEMBER
31,
JUNE 30, 1997 -----------------------
- -
(UNAUDITED) 1996 1995 1994
- --------------------------------------------------------------------------------
- ---
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.83 $23.13 $18.92
$22.18
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.71 1.35 1.44
1.59
Net realized and unrealized gain
(loss) on investments 0.17 (0.29) 4.23
(3.16)
------ ------ ------ ----
- --
Total from investment operations 0.88 1.06 5.67
(1.57)
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.72) (1.36) (1.46)
(1.55)
Net realized gain on investments -- -- --
(0.14)
------ ------ ------ ----
- --
Total distributions to shareholders (0.72) (1.36) (1.46)
(1.69)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $22.99 $22.83 $23.13
$18.92
====== ====== ======
======
- --------------------------------------------------------------------------------
- ---
Total Return(b) (d) 3.96% 4.97% 30.91%
(7.25)%
- --------------------------------------------------------------------------------
- -----
Ratio of expenses to average net assets(a) 1.31%(c) 1.36% 1.34%
1.20%
Ratio of net investment income to
average net assets(a) 6.33%(c) 6.13% 6.84%
7.28%
Portfolio turnover 8%(b) 72% 46%
84%
Net assets at end of period (000's omitted) $34,604 $31,819 $26,376
$30,760
================================================================================
====
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991 1990
- --------------------------------------------------------------------------------
- -
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.88 $22.60 $20.95
$21.34
------ ------ ------ ---
- ---
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.49 1.48 1.70
1.88
Net realized and unrealized gain
(loss) on investments 0.98 0.23 2.12
(0.33)
------ ------ ------ ---
- ---
Total from investment operations 2.47 1.71 3.82
1.55
------ ------ ------ ---
- ---
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1.50) (1.48) (1.72)
(1.94)
Net realized gain on investments (0.67) (0.95) (0.45)
- --
------ ------ ------ ---
- ---
Total distributions to shareholders (2.17) (2.43) (2.17)
(1.94)
------ ------ ------ ---
- ---
NET ASSET VALUE, END OF PERIOD $22.18 $21.88 $22.60
$20.95
====== ====== ======
======
- --------------------------------------------------------------------------------
- -----
Total Return(b) (d) 11.56% 7.88% 19.04%
7.53%
- --------------------------------------------------------------------------------
- ----
Ratio of expenses to average net assets(a) 1.15% 0.93% 1.02%
0.84%
Ratio of net investment income to
average net assets(a) 6.65% 6.61% 7.82%
8.98%
Portfolio turnover 373% 292% 182%
64%
Net assets at end of period (000's omitted) $44,038 $39,117 $36,659
$31,648
================================================================================
=====
YEAR ENDED SEVEN MONTHS
YEAR
DECEMBER 31, ENDED
ENDED
------------------- DECEMBER 31, MAY
31,
1989 1988 1987
1987
- --------------------------------------------------------------------------------
- --
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.54 $20.60 $21.61
$23.63
------ ------ ------ ----
- --
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.93 1.80 1.06
2.03
Net realized and unrealized gain
(loss) on investments 0.79 (0.05) (0.09)
(0.43)
------ ------ ------ ----
- --
Total from investment operations 2.72 1.75 0.97
1.60
------ ------ ------ ----
- --
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1.92) (1.81) (1.07)
(2.02)
Net realized gain on investments -- -- (0.91)
(1.60)
------ ------ ------ ----
- --
Total distributions to shareholders (1.92) (1.81) (1.98)
(3.62)
------ ------ ------ ----
- --
NET ASSET VALUE, END OF PERIOD $21.34 $20.54 $20.60
$21.61
====== ====== ======
======
- --------------------------------------------------------------------------------
- --
Total Return(b) (d) 13.10% 8.03% 4.41%
5.97%
- --------------------------------------------------------------------------------
- --
Ratio of expenses to average net assets(a) 0.26% 0.44% 0.29%(c)
0.25%
Ratio of net investment income to
average net assets(a) 9.37% 8.63% 8.91%(c)
8.50%
Portfolio turnover 94% 90% 101%(c)
154%
Net assets at end of period (000's omitted) $46,028 $31,241 $27,529
$35,496
================================================================================
==
<FN>
(a) Does not reflect investment advisory and management fees paid
by shareholders directly to the Manager for periods prior to May 1990.
(b) Not annualized.
(c) Annualized.
(d) Total return would have been lower had certain expenses not been reduced
during the year.
(e) Ratio information assuming no fee waivers or reimbursements had been in
effect during the year.
</FN>
</TABLE>
8 & 9
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 ----------------
(UNAUDITED) 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $21.74 $19.10
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.49 1.21 0.95
Net realized and unrealized
gain (loss) on investments (0.84) (0.27) 2.66
------ ------ ------
Total from investment operations (0.35) 0.94 3.61
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.87) (0.93)
In excess of net investment income -- -- (0.04)
From net realized gain on investments -- (0.41) --
------ ------ ------
Total distributions to shareholders -- (1.28) (0.97)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $21.05 $21.40 $21.74
====== ====== ======
- ------------------------------------------------------------------------
Total Return(a)(d) (1.64)% 4.39% 19.08%
- -------------------------------------------------------------------------
Ratio of net expenses to average
net assets 1.70%(b) 1.57% 1.55%
Ratio of net investment income to
average net assets 5.00%(b) 4.98% 5.07%
Portfolio turnover 131%(c) 202% 214%
Net assets at end of period
(000's omitted) $16,931 $16,852 $18,823
- --------------------------------------------------------------------------
Ratio of total expenses to average
net assets, absent waiver(e) N/A 1.60% 1.69%
Ratio of net investment income to
average net assets, absent waiver(e) N/A 4.95% 4.93%
==========================================================================
FOR THE PERIOD
MARCH 25, 1994
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31,
1994
- --------------------------------------------------------------------------------
- ------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.48
Net realized and unrealized
gain (loss) on investments (0.77)
------
Total from investment operations (0.29)
------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.50)
In excess of net investment income (0.11)
From net realized gain on investments --
------
Total distributions to shareholders (0.61)
------
NET ASSET VALUE, END OF PERIOD $19.10
======
- -------------------------------------------------------
Total Return(a)(d) (1.52)%
- ---------------------------------------------------------
Ratio of net expenses to average
net assets 1.73%(b)
Ratio of net investment income to
average net assets 4.19%(b)
Portfolio turnover 266%(c)
Net assets at end of period
(000's omitted) $9,520
- --------------------------------------------------------------
Ratio of total expenses to average
net assets, absent waiver(e) 2.03%(b)
Ratio of net investment income to
average net assets, absent waiver(e) 3.89%(b)
==============================================================
<FN>
(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.
</FN>
</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 resets 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
11
<PAGE>
equal to its average life as determined by the Asset Manager based on the
prepayment 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. In addition, each of the Funds may invest a portion of its
cash balances in shares of unaffiliated money market mutual funds when the
Manager determines that such investments offer higher net yields (after
considering all direct and indirect fees and expenses) than direct investments
in cash equivalent securities. 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 float-
12
<PAGE>
ing 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."
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.
13
<PAGE>
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
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
14
<PAGE>
industry. See "Certain Securities and Investment Techniques and Associated
Risks--Special 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 P1 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
15
<PAGE>
CMOs, IOs and POs), asset-backed securities, eurodollar certificates of deposit
and eurodollar bonds. The Fund may invest up to 10% of its total assets in
non-U.S. dollar denominated 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. As of June 30, 1997, the Fund's weighted average duration was 10.8
years. 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.
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<PAGE>
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.
The Fund ordinarily invests at least 65% of its total 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.
17
<PAGE>
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 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,
however, in general a Fund with a longer average duration (e.g. the Bond Fund)
will experience greater net asset value fluctuation in response to interest rate
changes than a Fund with a shorter duration. 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.
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<PAGE>
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 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.
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<PAGE>
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 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
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<PAGE>
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 collateral
should satisfy the obligation. However, as
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<PAGE>
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." 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 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.
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<PAGE>
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 and/or liquid securities 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 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,
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<PAGE>
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
other liquid 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, 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
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<PAGE>
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 securities 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 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."
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<PAGE>
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). Arrangements can be made to open accounts with
a $500 or $250 initial investment and an agreement to invest at least $50 or
$100, respectively, per month until the minimum is attained. Call (800)835-3879
for more information on these arrangements. 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.
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<PAGE>
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 (or lower, as No minimum
described above)
IRAs, IRA rollovers, $500 No minimum
SEP and SIMPLE IRAs
METHOD
------
Through your Contact your investment Send additional funds to
investment professional advisor, bank or other your investment
professional
investment professional at the address appearing
on
your account statement
Direct by mail Send your account applica- Send letter of instruction
tion and check (payable to and check (payable to The
The Managers Funds) to Managers Funds) to The
the address indicated on Managers Funds
the application c/o Boston Financial Data
Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
Please include your
account
number on your check
Direct Federal Funds Call (800) 358-7668 to Call the Transfer Agent at
or Bank Wire notify the Transfer Agent, (800) 358-7668 prior to
and instruct your bank to writing additional funds
wire U.S. funds to:
ABA #011000028
State Street Bank &
Trust Company
Boston, MA 02101
BFN--The Managers Funds
AC 9905-001-5
FBO--Shareholder Name
By telephone Only for established Call the Transfer Agent at
accounts with ACH privi- (800) 252-0682
leges. Call (800) 252-0682 Minimum investment: $100
with instructions for the
Transfer Agent
</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.
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<PAGE>
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 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 in U.S.
dollars and 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
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<PAGE>
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, or exchanges from such shares,
are not effected until 15 days after the date of purchase, unless arrangements
are made with the Administrator.
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 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.
29
<PAGE>
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. No interest will accrue on amounts represented by uncashed redemption (or
distribution) checks.
<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,
guardian-
ships, 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 For shareholders who have elected
the
Market Fund Shareholders only) checkwriting option with State
Street
Bank and Trust Company, see
"Investor Services--Checkwriting
Privilege" below.
</TABLE>
INVESTOR SERVICES
AUTOMATIC REINVESTMENT PLAN allows dividends or capital gains distributions
to be reinvested in additional shares, unless you elect to receive cash.
30
<PAGE>
AUTOMATIC INVESTMENTS of preauthorized amounts from private checking
accounts can be made monthly, quarterly or annually. The amount you specify will
automatically be deducted from your bank account and invested 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 or can be done through the Automatic Investment
service above. Before investing in the Trust's Equity Funds, shareholders must
obtain a prospectus from the Trust describing those Funds.
INDIVIDUAL RETIREMENT ACCOUNTS, including SIMPLE and SEP IRAs, IRA
rollovers and 403(b) accounts, 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.
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 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.
31
<PAGE>
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 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.
FREQUENCY FUND
--------- ----
Monthly Short and Intermediate Bond Fund,
Intermediate Mortgage Fund, Bond Fund
Quarterly Global Bond Fund
Daily* Short Government Fund
- --------------------
*Dividends declared daily and paid monthly on the third business day prior to
month end.
All dividends and distributions declared by a Fund will be reinvested in
additional shares of the Fund at net asset value on the "Ex-Dividend" date
(unless the shareholder has elected to receive dividends or distributions in
cash or invest them in 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.
32
<PAGE>
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. 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 be
notified of any Asset Manager changes.
33
<PAGE>
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, each expressed as a percentage of the Fund's average daily
net assets.
TOTAL
MANAGEMENT
TOTAL ASSET FEE PAID DURING
MANAGEMENT MANAGEMENT THE YEAR ENDED
NAME OF FUND FEE FEE DECEMBER 31, 1996
----------- ---------- ---------- -----------------
Short Government
Fund .................... 0.45% 0.20% 0.20%*
Short and Intermediate
Bond Fund ............... 0.50% 0.25% 0.50%
Intermediate Mortgage
Fund .................... 0.45% 0.20% 0.45%
Bond Fund .................... 0.625% 0.25% 0.625%
Global Bond Fund ............. 0.70% 0.35% on 1st 0.70%
$20 million,
0.25% thereafter
- --------------------
*Reflects voluntary fee waivers by the Manager which may be modified or
terminated at any time at 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, 1996, assets under management totaled $33.1 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.
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc. ("SAW")--The firm, founded in 1933, is a
privately owned corporation with 19 directors (two of whom each own more than
10% equity in the firm). The firm offers equity, balanced and fixed income
management. As of December 31, 1996, the firm managed
34
<PAGE>
more than $30.6 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, 1996, assets under management totaled $50.5 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 plc.--The firm was established in 1984 and is owned
by United Asset Management, a public company. As of December 31, 1996, assets
under management totaled $3.9 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 Managing Director and Principal
Executive of Rogge Global Partners, which he founded in 1984.
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, sub-
35
<PAGE>
ject 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"). The Administrator is
paid 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%.
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 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 securi-
36
<PAGE>
ties 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, unless an exemptive order is
obtained from the Securities and Exchange Commission 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, 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.
37
<PAGE>
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value, and currently offers eleven 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 eleven 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.
Two purported class action lawsuits have been filed in the federal district
courts in Connecticut and Minnesota against Managers Intermediate Mortgage Fund
and Managers Short Government Fund, the Manager, the former portfolio manager
and certain other affiliates and affiliated individuals. The plaintiffs allege
that, from May 1, 1992 to June 13, 1994 and from May 10, 1993 to September 12,
1994, for the two Funds, respectively, defendants violated the Securities Act of
1933, the Securities Exchange
38
<PAGE>
Act of 1934, the Investment Company Act of 1940, and common law by, among other
things, failing to disclose adequately the Funds' investment strategies and
risks associated with an investment in the Funds. Plaintiffs allege that they
suffered unspecified damages based on losses incurred over the course of the
respective class periods.
The Managers Funds, its affiliates and affiliated individuals, as well as
certain of the other defendants, have filed motions to dismiss these actions, on
the basis that, among other grounds, the relevant prospectus fully disclosed the
Funds' respective investment strategies and all material risks related to an
investment in these Funds, including, but not limited to, the risk of loss of
principal. There has been no decision yet from the court relating to Managers
Intermediate Mortgage Fund motion. In the case involving Managers Short
Government Fund, the motion to dismiss was granted in part, and defendants again
moved for dismissal after plaintiff amended the complaint. In that action, the
parties have now entered into a preliminary agreement to settle all claims by
the purported class. However, the parties have not finalized their settlement
nor have they obtained the required court approvals. For these and other
reasons, there can be no assurance that the settlement will be consummated.
In addition, a non-class action lawsuit based on similar allegations has
been filed by a customer against certain of the defendants named in the class
action lawsuits, as well as Managers Short and Intermediate Bond Fund. Certain
other customers, who are potentially members of the plaintiff class in each of
the two class action lawsuits referred to above, have asserted that they may
file similar lawsuits based on similar claims, but have not done so. Despite
management's efforts to resolve all of the pending lawsuits, it believes that it
has meritorious defenses and, if the cases are not settled, it intends to defend
against the actions vigorously.
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
39
<PAGE>
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.
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
WHERE LEADING MONEY MANAGERS CONVERGE
Fund Distributor
The Managers Funds, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
Custodian
State Street Bank and Trust
Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Legal Counsel
Shereff, Friedman, Hoffman &
Goodman, LLP
919 Third Avenue
New York, New York 10022
Transfer Agent
Boston Financial Data
Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800)252-0682
The Managers Funds
EQUITY FUNDS:
INCOME EQUITY FUND
Scudder Kemper Investments, Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management
Company, Inc.
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard, Fre`res Asset
Management Co.
EMERGING MARKETS
EQUITY FUND
INCOME FUNDS:
MONEY MARKET FUND
J.P. Morgan
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE
FUND
Jennison Associates Capital Corp.
BOND FUND
Loomis, Sayles & Company, Inc.
GLOBAL BOND FUND
Rogge Global Partners
MONEY MARKET FUND
- ------------------------
PROSPECTUS
dated December 29, 1997
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
The Managers Funds
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
DATED DECEMBER 29, 1997
MONEY MARKET FUND
MANAGERS MONEY MARKET FUND -- (the "Money Market Fund" or the "Fund") seeks
to maximize current income and maintain a high level of liquidity. It is
designed for investors who seek to preserve capital and earn current income from
a portfolio of high quality money market instruments.
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIO OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE PRIME MONEY MARKET PORTFOLIO (THE
"PORTFOLIO"), A DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO THROUGH
A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE "SPECIAL INFORMATION
CONCERNING INVESTMENT STRUCTURE" ON PAGE 8.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor ought to know before investing. It should be
retained for future reference. The Trust has filed with the Securities and
Exchange Commission a Statement of Additional Information ("SAI"), dated
December 29, 1997, which contains more detailed information about the Trust and
the Fund and is incorporated into this Prospectus by reference. A copy of the
SAI may be obtained without charge by contacting the Trust at 40 Richards
Avenue, Norwalk, Connecticut 06854, (800) 835-3879 or (203) 857-5321.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE U.S. GOVERNMENT, MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MORGAN") OR ANY OTHER BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY
CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS
REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED
BY THE INVESTOR. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO
DO SO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
PAGE
-----
Illustrative Expense Information ...................................... 3
Summary ............................................................... 4
Financial Highlights .................................................. 5
Special Information Concerning Investment Structure ................... 8
Investment Objective and Policies ..................................... 9
Additional Investment Information and Risk Factors .................... 11
Investment Restrictions ............................................... 15
Management of the Fund and the Portfolio .............................. 16
Purchase and Redemption of Fund Shares ................................ 18
Net Asset Value ....................................................... 24
Performance Information ............................................... 25
Description of Shares, Voting Rights and Liabilities .................. 26
Tax Information ....................................................... 27
Shareholder Reports ................................................... 28
2
<PAGE>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning the
aggregate annual operating expenses of the Money Market Fund and the Portfolio.
Investors incur no sales load on purchases of shares or on reinvested dividends
and distributions, nor any deferred sales load upon redemption. There are no
redemption fees, exchange fees or Rule 12b-1 fees.
The Trustees of the Trust believe that at current asset levels the
aggregate per share expenses of the Fund and the Portfolio will be approximately
equal to and may be less than the expenses that the Fund would incur if it
retained the services of an investment adviser and invested its assets directly
in portfolio securities.
ANNUAL OPERATING EXPENSES* (AFTER FEE WAIVER):
The expenses set forth below reflect a waiver by the Fund Administrator
of its fee of 0.25%. See "Management of the Fund and the Portfolio."
TOTAL
MANAGEMENT OTHER OPERATING
FEE EXPENSES EXPENSES
---------- -------- ---------
0.12% 0.38% 0.50%
- --------------
* OTHER EXPENSES AND TOTAL OPERATING EXPENSES ARE EXPRESSED AS A PERCENTAGE OF
AVERAGE NET ASSETS OF THE FUND FOR ITS FISCAL YEAR ENDED NOVEMBER 30, 1996,
AND HAVE BEEN RESTATED TO REFLECT THE FEE WAIVER AND THE ABSENCE OF ANY
EXPENSE REIMBURSEMENT IN EFFECT ON THE DATE OF THIS PROSPECTUS. THESE
NUMBERS DO NOT REFLECT CURRENT ASSETS OF EITHER THE FUND OR THE FUND FAMILY
AND ARE THEREFORE NOT NECESSARILY INDICATIVE OF WHAT A SHAREHOLDER MAY PAY.
IN THE ABSENCE OF THE FEE WAIVER, OTHER EXPENSES AND TOTAL OPERATING EXPENSES,
BASED ON THE FUND'S FISCAL 1996 AVERAGE NET ASSETS OF $28 MILLION AND THE
PORTFOLIO'S AVERAGE NET ASSETS OF $3.5 BILLION, WOULD HAVE BEEN 0.62% AND
0.75%, RESPECTIVELY.
THE FEE WAIVER MAY BE MODIFIED OR TERMINATED AT ANY TIME AT THE SOLE
DISCRETION OF THE FUND ADMINISTRATOR. FOR INFORMATION REGARDING CURRENT
OPERATING EXPENSES OF THE FUND, CALL (800)835-3879.
EXAMPLES
An investor would pay the following expenses on a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return, (2)
redemption at the end of each time period, and (3) continuation of any currently
applicable waivers of management fees. As noted above, the Fund does not charge
any redemption fees or deferred sales loads of any kind.
3
<PAGE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
Money Market Fund......................... $5 $16 $28 $63
The above expense table is designed to assist investors in understanding
the various direct and indirect costs and expenses that investors in the Fund
bear. The fees and expenses included in Other Expenses include the fees paid to
the Fund Administrator under the Administration and Shareholder Services
Agreement, the fees paid to Morgan under the Portfolio's Administrative Services
Agreement, the fees paid to Funds Distributor Inc. ("FDI") under the Portfolio's
Co-Administration Agreement, the fees paid to Pierpont Group, Inc. under the
Portfolio Fund Services Agreement, the fees paid to State Street Bank and Trust
Company as custodian and transfer agent, and other usual and customary expenses
of the Fund and the Portfolio. For a more detailed description of contractual
fee arrangements and of the fees and expenses included in Other Expenses, see
"Management of the Fund and the Portfolio" and "Administration and Shareholder
Servicing; Distributor; Transfer Agent."
SUMMARY
GENERAL DESCRIPTION OF THE TRUST AND THE FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company organized as a Massachusetts business trust, currently
composed of the following eleven separate series:
Managers Income Equity Fund Managers Short Government Fund
Managers Capital Appreciation Fund Managers Short and Intermediate Bond Fund
Managers Special Equity Fund Managers Intermediate Mortgage Fund
Managers International Equity Fund Managers Global Bond Fund
Managers Emerging Markets Equity Fund Managers Bond Fund
Managers Money Market Fund
This Prospectus relates only to the Money Market Fund. For more complete
information about the other series (the "Equity Funds" and the "Income Funds")
call (800) 835-3879 or (203) 857-5321. Read the prospectus carefully before you
invest.
Each of the Funds has distinct investment objectives and strategies. There
is, of course, no assurance that a Fund will achieve its investment objectives.
4
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
The minimum initial investment in the Fund is $2,000 ($500 for IRAs). For
information on eligible investors and how to purchase and redeem shares of the
Fund, see "Purchase and Redemption of Fund Shares."
FINANCIAL HIGHLIGHTS
The following table presents financial highlights for the Money Market
Fund, for the last twelve fiscal periods, through May 31, 1997. The information
has been derived from the financial statements of the Trust which have been
audited by independent public accountants Coopers & Lybrand L.L.P. for the years
ended December 31, 1993 and December 31, 1994, the period January 1, 1995 to
November 30, 1995, and the fiscal year ended November 30, 1996, 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 MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ELEVEN MONTHS
MAY 31, ENDED ENDED YEAR ENDED
1997 NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
---------------
(UNAUDITED) 1996 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income(d) 0.026 0.054 0.044 0.035 0.022
Net realized and unrealized
gain on investments -- -- -- -- --
------ ------ ------ ------ ------
Total from investment
operations 0.026 0.054 0.044 0.035 0.022
------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.026) (0.054) (0.044) (0.035) (0.022)
Net realized gain on
investments -- -- -- -- --
------ ------ ------ ------ ------
Total distributions to
shareholders (0.026) (0.054) (0.044) (0.035) (0.022)
------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
- --------------------------------------------------------------------------------
Total Return(c) 5.26%(b) 5.53% 4.51%(b) 3.61% 2.48%
- --------------------------------------------------------------------------------
Ratio of net expenses to
average net assets(d) 0.31%(b) 0.12% 1.13%(b) 0.73% 0.74%
Ratio of net investment income
to average net assets(d) 5.22%(b) 5.35% 4.85%(b) 3.84% 2.48%
Net assets at end of period
(000's omitted) $45,429 $36,091 $11,072 $17,269 $7,368
- --------------------------------------------------------------------------------
Expense Waiver(a)
- -----------------
Ratio of total expenses to
average net assets 0.71%(b) 0.75% 1.18%(b) 1.03% 0.99%
Ratio of net investment income
to average net assets 4.82%(b) 4.71% 4.80%(b) 3.54% 2.23%
================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1992 1991 1990 1989
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income(d) 0.030 0.054 0.081 0.090
Net realized and unrealized
gain on investments -- 0.003 -- --
------ ------ ------ ------
Total from investment
operations 0.030 0.057 0.081 0.090
------ ------ ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.030) (0.054) (0.081) (0.090)
Net realized gain on
investments -- (0.003) -- --
------ ------ ------ ------
Total distributions to
shareholders (0.030) (0.057) (0.081) (0.090)
------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD $1.000 $1.000 $1.000 $1.000
====== ====== ====== ======
- -------------------------------------------------------------------------
Total Return(c) 3.12% 5.35% 7.66% 8.73%
- -------------------------------------------------------------------------
Ratio of net expenses to
average net assets(d) 0.67% 0.57% 0.27% 0.16%
Ratio of net investment income
to average net assets(d) 3.05% 5.69% 8.09% 9.12%
Net assets at end of period
(000's omitted) $9,320 $4,868 $14,944 $83,743
- -------------------------------------------------------------------------
Expense Waiver(a)
- -----------------
Ratio of total expenses to
average net assets 0.98% 1.06% 0.32% N/A
Ratio of net investment income
to average net assets 2.74% 5.21% 8.04% N/A
=========================================================================
</TABLE>
<TABLE>
SEVEN MONTHS YEAR
ENDED ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, MAY 31
------------------------------------
1988 1987 1987
- -----------------------------------------------------------------
<S>
<C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000
------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income(d) 0.075 0.042 0.063
Net realized and unrealized
gain on investments 0.010 0.001 0.001
------ ------ ------
Total from investment
operations 0.085 0.043 0.064
------ ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.075) (0.042) (0.063)
Net realized gain on
investments (0.010) (0.001) (0.001)
------ ------ ------
Total distributions to
shareholders (0.085) (0.043) (0.064)
------ ------ ------
NET ASSET VALUE, END
OF PERIOD $1.000 $1.000 $1.000
====== ====== ======
- -----------------------------------------------------------------
Total Return(c) 7.25% 3.81% 5.83%
- -----------------------------------------------------------------
Ratio of net expenses to
average net assets(d) 0.16% 0.17%(b) 0.15%
Ratio of net investment income
to average net assets(d) 7.35% 6.99%(b) 6.19%
Net assets at end of period
(000's omitted) $86,567 $103,041 $105,594
- -----------------------------------------------------------------
Expense Waiver(a)
- -----------------
Ratio of total expenses to
average net assets N/A N/A N/A
Ratio of net investment income
to average net assets N/A N/A N/A
=================================================================
</TABLE>
[FN]
(a) Ratio information assuming no waiver of investment advisory and management
fees and/or administrative fees in effect for the periods presented, if
applicable.
(b) Annualized.
(c) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(d) Does not reflect investment advisory and management fees paid directly to
the Manager for periods prior to May 1990.
6 & 7
<PAGE>
SPECIAL INFORMATION CONCERNING
INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund is an open-end management investment company
which seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, a separate registered investment company
with the same investment objective as the Fund. The investment objective of the
Fund or Portfolio may be changed only with the approval of the respective
holders of the outstanding voting securities of the Fund and the Portfolio, as
the case may be. Shareholders of the Fund shall receive 30 days prior written
notice before any such change. Shareholders of the Fund have approved changes in
fundamental investment restrictions and investment policy, permitting the Fund
to invest in the Portfolio. The master-feeder investment fund structure has been
developed relatively recently, so shareholders should carefully consider this
investment approach.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
bear a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio may sell shares of their own using a
different pricing structure than the Fund. Such different pricing structures may
result in differences in returns experienced by investors in other funds that
invest in the Portfolio. Such differences in returns are not uncommon and are
present in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from the Fund Administrator at (800)
835-3879.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed
8
<PAGE>
to a cash distribution) from the Portfolio, which may or may not be readily
marketable. The distribution in kind may result in the Fund having a less
diversified portfolio of investments or adversely affect the Fund's liquidity,
and the Fund could incur brokerage, tax or other charges in converting the
securities to cash. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in potentially increased portfolio risk (however, these
possibilities also exist for traditionally structured funds which have large or
institutional investors who withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the Securities and Exchange
Commission, whenever the Fund is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
impact on the outcome of such matters.
For more information about the Portfolio's investment objective, policies
and restrictions, see "Investment Objective and Policies," "Additional
Investment Information and Risk Factors," and "Investment Restrictions." For
more information about the Portfolio's management and expenses, see "Management
of the Fund and the Portfolio."
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of each of the Fund and the Portfolio is described
below, together with the policies each employs in its efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the SAI under "Investment Objective and Policies."
There can be no assurance that the objective of the Fund or the Portfolio will
be achieved.
The Fund's investment objective is to maximize current income and maintain
a high level of liquidity. The Fund is designed for investors who seek to
preserve capital and earn current income from a portfolio of
9
<PAGE>
high quality money market instruments. The Fund attempts to achieve its
objective by investing all of its investable assets in The Prime Money Market
Portfolio, a diversified open-end management investment company having the same
investment objective as the Fund.
The Portfolio seeks to achieve its investment objective by maintaining a
dollar-weighted average portfolio maturity of not more than 90 days and by
investing in high quality U.S. dollar-denominated securities which have
effective maturities of 397 calendar days or less. The market value of
obligations in which the Portfolio invests is not guaranteed and may rise and
fall in response to changes in interest rates. The Portfolio's ability to
achieve maximum current income is affected by its high quality standards
(discussed below).
UNITED STATES GOVERNMENT OBLIGATIONS. The Portfolio may invest in
obligations issued or guaranteed by the U.S. Government and backed by the full
faith and credit of the United States. These securities include Treasury
securities, obligations of the Government National Mortgage Association, the
Farmers Home Administration and the Export Import Bank. The Portfolio may also
invest in obligations issued or guaranteed by U.S. Government agencies or
instrumentalities where the Portfolio must look principally to the issuing or
guaranteeing agency for ultimate repayment; some examples of agencies or
instrumentalities issuing these obligations are the Federal Farm Credit System,
the Federal Home Loan Banks and the Federal National Mortgage Association.
BANK OBLIGATIONS. The Portfolio may invest in high quality U.S.
dollar-denominated negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks which have more than $2 billion in total assets and are organized under
U.S. federal or state law, (ii) foreign branches of these banks or of foreign
banks of equivalent size (Euros) and (iii) U.S. branches of foreign banks of
equivalent size (Yankees). The Portfolio may also invest in obligations of
international banking institutions designated or supported by national
governments to promote economic reconstruction, development or trade between
nations (e.g., the European Investment Bank, the Inter-American Development
Bank, or the World Bank). These obligations may be supported by appropriated but
unpaid commitments of their member countries, and there is no assurance these
commitments will be undertaken or met in the future.
COMMERCIAL PAPER; BONDS. The Portfolio may invest in high quality
commercial paper and corporate bonds issued by U.S. corporations. The Portfolio
may also invest in bonds and commercial paper of foreign issuers if the
obligation is U.S. dollar-denominated and is not subject to foreign withholding
tax.
10
<PAGE>
ASSET-BACKED SECURITIES. The Portfolio may also invest in securities
generally referred to as asset-backed securities, which directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets, such as motor vehicle or
credit card receivables or other asset-backed securities collateralized by such
assets. Asset-backed securities provide periodic payments that generally consist
of both interest and principal payments. Consequently, the life of an
asset-backed security varies with the prepayment experience of the underlying
debt obligations.
QUALITY INFORMATION. The Portfolio will limit its investments to those
securities which, in accordance with guidelines adopted by the Portfolio's
Trustees, present minimal credit risk. In addition, the Portfolio will not
purchase any security (other than a U.S. Government security) unless (i) it is
rated with the highest rating assigned to short-term debt by at least two
nationally recognized statistical rating organizations such as Moody's Investors
Services, Inc. ("Moody's") or Standard & Poor's Ratings Group ("Standard &
Poor's"), (ii) it is rated by only one agency with the highest such rating, or
(iii) it is not rated and is determined to be of comparable quality.
Determinations of comparable quality shall be made in accordance with procedures
established by the Portfolio's Trustees. For a more detailed discussion of
applicable quality requirements, see "Investment Objective and Policies" in the
SAI. These standards must be satisfied at the time an investment is made. If the
quality of the investment later declines below the quality required for
purchase, the Portfolio shall dispose of the investment, subject in certain
circumstances to a finding by the Portfolio's Trustees that disposing of the
investment would not be in the Portfolio's best interest.
The Portfolio may also invest in securities on a when-issued or delayed
delivery basis and in certain privately placed securities. The Portfolio may
also enter into repurchase and reverse repurchase agreements and lend its
portfolio securities. For a discussion of these investments and for more
information on foreign investments, see "Additional Investment Information and
Risk Factors."
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and, for fixed income securities, no interest
accrues to the Portfolio until settlement. At the time of settlement, a
when-issued security may be valued at less than its purchase price. The
Portfolio maintains with the custo-
11
<PAGE>
dian a separate account with a segregated portfolio of securities in an amount
at least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is currently the policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities other than the obligations created
by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of the agreement usually ranges from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives as collateral securities with a market value at least equal to
the purchase price plus accrued interest, and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See "Illiquid Investments; Privately Placed and other
Unregistered Securities" below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment
restrictions, the Portfolio is permitted to lend its securities in an amount up
to 331/3% of the value of the Portfolio's net assets. The Portfolio may lend its
securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Portfolio at least equal at
all times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, 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 credit-
12
<PAGE>
worthiness of the borrowing financial institution, and the Portfolio will not
make any loans in excess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfolio
securities are similar to the risks to the Portfolio with respect to sellers in
repurchase agreement transactions. See "Repurchase Agreements" above. The
Portfolio will not lend its securities to any officer, Trustee, Director,
employee or other affiliate of the Fund or Portfolio, Morgan, the Portfolio
Co-Administrator or the Distributor (each as defined below under "Management of
the Fund and the Portfolio"), unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement. For
purposes of the Investment Company Act of 1940, as amended (the "1940 Act"), it
is considered a form of borrowing by the Portfolio and, therefore, is a form of
leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. See "Investment Restrictions" for investment limitations applicable
to reverse repurchase agreements and other borrowings. For more information, see
"Investment Objective and Policies" in the SAI. See "Investment Restrictions"
for investment limitations applicable to reverse repurchase agreements and other
borrowings.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain U.S.
dollar-denominated foreign securities. Investment in securities of foreign
issuers and in obligations of foreign branches of domestic banks involves
somewhat different investment risks from those affecting securities of U.S.
domestic issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. The Portfolio may only invest in
foreign securities that are not subject to foreign withholding tax.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States
13
<PAGE>
or abroad could result in appreciation or depreciation of portfolio securities
and could favorably or unfavorably affect the Portfolio's operations.
Furthermore, the economies of individual foreign nations may differ from the
U.S. economy, whether favorably or unfavorably, in areas such as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position; it may also be more difficult
to obtain and enforce a judgment against a foreign issuer. Any foreign
investments made by the Portfolio must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.
SYNTHETIC INSTRUMENTS. The Portfolio may invest in certain synthetic
instruments. Such instruments generally involve the deposit of asset-backed
securities in a trust arrangement and the issuance of certificates evidencing
interests in the trust. The certificates are generally sold in private
placements in reliance on Rule 144A. The Advisor will review the structure of
synthetic instruments to identify credit and liquidity risks and will monitor
those risks. See "Illiquid Investments; Privately Placed and Other Unregistered
Securities."
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES.
The Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 10% of the Portfolio's net assets would be in illiquid investments.
Subject to this fundamental policy limitation, the Portfolio may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the Securities Act of
1933 (the "1933 Act") and cannot be offered for public sale in the United States
without first being registered under the 1933 Act. An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio. The
price the Portfolio pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the Advisor
and approved by the Trustees of the Portfolio. The Trustees of the Portfolio
will monitor the Advisor's implementation of these guidelines on a periodic
basis.
14
<PAGE>
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted, are
deemed fundamental policies, i.e., they may be changed only by a "vote of the
holders of a majority of the outstanding voting securities" (as defined in the
1940 Act) of the Fund and the Portfolio, respectively. The Fund has the same
investment restrictions as the Portfolio, except that the Fund may invest all of
its investable assets in another open-end investment company with the same
investment objective and restrictions (such as the Portfolio). References below
to the Fund's investment restrictions also include the Portfolio's investment
restrictions.
As a diversified investment company, 75% of the assets of the Fund are
subject to the following fundamental limitations: (a) the Fund may not invest
more than 5% of its total assets in the securities of any one issuer, except
U.S. Government securities, and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. The Fund is subject to
additional non-fundamental requirements governing non-tax exempt money market
funds. These non-fundamental requirements generally prohibit the Fund from
investing more than 5% of its total assets in the securities of any single
issuer, except obligations of the U.S. Government and its agencies and
instrumentalities.
The Fund may not (i) acquire any illiquid securities if as a result more
than 10% of the market value of its net assets would be in investments which are
illiquid, (ii) enter into reverse repurchase agreements exceeding, together with
any permitted borrowings, one-third of the market value of its total assets,
less certain liabilities, (iii) borrow money, except from banks for
extraordinary or emergency purposes and then only in amounts up to 10% of the
value of the Fund's total assets, taken at cost at the time of borrowing, or
purchase securities while borrowings exceed 5% of its total assets; or mortgage,
pledge or hypothecate any assets except in connection with any such borrowings
in amounts up to 10% of the value of the Fund's net assets at the time of
borrowing; or (iv) invest more than 25% of its assets in any one industry,
except there is no percentage limitation with respect to investments in U.S.
Government securities, negotiable certificates of deposit, time deposits, and
bankers' acceptances of U.S. branches of U.S. banks.
For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see "Investment
Restrictions" in the SAI.
15
<PAGE>
MANAGEMENT OF THE FUND AND THE PORTFOLIO
TRUSTEES. Information concerning the Trustees of the Fund and the
Portfolio, including their names, positions, and principal occupations during
the past five years, is contained in the SAI.
The Portfolio has entered into a Portfolio Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees of the Portfolio in exercising
their overall supervisory responsibilities for the Portfolio's affairs. The fees
to be paid under the agreement approximate the reasonable cost of Pierpont
Group, Inc. in providing these services to the Portfolio and certain other
registered investment companies subject to similar agreements with Pierpont
Group, Inc. Pierpont Group, Inc. was organized in 1989 at the request of the
Trustees of The Pierpont Family of Funds for the purpose of providing these
services at cost to these funds. See "Trustees and Officers" in the SAI. The
principal offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New
York, New York 10017. See "Administration; Custodian and Transfer Agent; and
Distributor."
ADVISOR. The Fund has not retained the services of an investment advisor
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly-owned subsidiary of J.P.
Morgan & Co., Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through Morgan and other subsidiaries, offers a wide range of services
to governmental, institutional, corporate and individual customers and acts as
investment advisor to individual and institutional clients with combined assets
under management of over $234 billion. Morgan provides investment advice and
portfolio management services to the Portfolio. Subject to the supervision of
the Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See "Investment Advisor and Administrative
Services Agent" in the SAI.
Morgan uses a sophisticated, disciplined, collaborative process for
managing all asset classes. The following persons are primarily responsible for
the day-to-day management and implementation of Morgan's process for the
Portfolio (the inception date of each person's responsibility for the Portfolio
and his business experience for the past five years is
16
<PAGE>
indicated parenthetically): Robert R. Johnson, Vice President (since June, 1988,
employed by Morgan since prior to 1992) and Daniel B. Mulvey, Vice President
(since January, 1995, employed by Morgan since 1992).
As compensation for the services rendered and related expenses borne by
Morgan under the Investment Advisory Agreement with the Portfolio, the Portfolio
has agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.20% of the Portfolio's average daily net assets up to $1
billion, and 0.10% of average daily net assets in excess of $1 billion.
Under a separate agreement, Morgan also provides administrative and related
services to the Portfolio. See " Investment Advisor and Administrative Services
Agent" in the SAI.
ADMINISTRATION; CUSTODIAN AND TRANSFER AGENT; AND DISTRIBUTOR
PORTFOLIO CO-ADMINISTRATOR. Pursuant to a Co-Administration Agreement with
the Portfolio, FDI serves as the Co-Administrator for the Portfolio. FDI (i)
provides office space, equipment and clerical personnel for maintaining the
organization and books and records of the Portfolio; (ii) provides officers for
the Portfolio; (iii) files Portfolio regulatory documents and mails Portfolio
communications to Trustees and investors; and (iv) maintains related books and
records. For its services under the Co-Administration Agreement, the Portfolio
has agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to the Portfolio is based on the ratio of its net assets to the
aggregate net assets of the Portfolio and certain other registered investment
companies subject to similar agreements with FDI.
FUND ADMINISTRATOR. The Managers Funds, L.P. serves as the Fund's
administrator and shareholder servicing agent (the "Fund Administrator") and has
overall responsibility, subject to the review of the Trustees of the Trust, for
all aspects of managing the Fund's operations, including administration and
shareholder services to the Fund, its shareholders and certain institutions,
such as bank trust departments, dealers and registered investment advisers, that
advise or act as an intermediary with the Fund's shareholders ("Shareholder
Representatives"). At the date of this Prospectus, the Fund has agreed to pay a
fee to the Fund Administrator at the rate of 0.25% per annum of the Fund's
average daily net assets. As of the date of this prospectus, the Fund
Administrator is voluntarily waiving all of its fee.
17
<PAGE>
Administrative services include (i) preparation of Fund performance
information; (ii) responding to telephone and in-person inquiries from
shareholders and shareholder representatives regarding matters such as account
or transaction status, net asset value of Fund shares, Fund performance, Fund
services, plans and options, Fund investment policies and Fund distributions and
the taxation thereof; (iii) preparing, soliciting and gathering shareholder
proxies and otherwise communicating with shareholders in connection with
shareholder meetings; (iv) maintaining the Trust's registration with federal and
state securities regulators; (v) dealing with complaints and correspondence from
shareholders directed to or brought to the attention of the Fund Administrator;
(vi) supervising the operations of the Fund's Transfer Agent; and (vii) such
other administrative, shareholder and shareholder-related services as the
parties may from time to time agree to in writing.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company ("State
Street Bank") serves as the Fund's and the Portfolio's custodian and fund
accounting and transfer agent, and the Fund's dividend disbursing agent. State
Street Bank also keeps the books of account for the Fund and the Portfolio.
DISTRIBUTOR. The Managers Funds, L.P. serves as distributor of the
shares of the Fund. Its address is 40 Richards Avenue, Norwalk, Connecticut
06854.
PURCHASE AND REDEMPTION OF FUND SHARES
HOW TO PURCHASE FUND SHARES
Initial purchases of shares of the Fund may be made in a minimum amount of
$2,000 ($500 for IRAs). Arrangements can also be made to open accounts with a
$500 or $250 initial investment and an agreement to invest at least $50 or $100,
respectively, per month until the minimum is attained. Call (800)835-3879 for
more information on these arrangements. There is no minimum for additional
investments, except for telephone Automated Clearing House ("ACH") purchases.
Investors may purchase shares of the Fund through their financial planner
or other investment professional who is (or who is associated with) an
investment adviser registered with the Securities and Exchange Commission (a
"Registered Investment Adviser") or directly from the Fund as indicated below.
Shares may also be purchased by bank trust departments on behalf of their
clients, other institutional investors such as corporations, endowment funds and
charitable foundations, and tax-exempt employee welfare, pension and
profit-sharing plans.
18
<PAGE>
The following shows the various methods for purchasing the Fund's shares.
For more complete instructions, see the account application.
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------ ----------------------
Minimums: $2,000(or lower as No minimum
Regular accounts described above)
IRAs, IRA rollovers, $500 No minimum
SEP and SIMPLE IRAs
METHOD
------
Through your Contact your investment Send additional funds
investment professional advisor, bank or other to your investment
investment professional professional at the
address appearing on
your account statement
Direct by mail Send your account Send letter of instruction
application and check and check (payable to
(payable to The The Managers Funds) to
Managers Funds) to The Managers Funds
the address indicated on c/o Boston Financial
the application Data Service, Inc.
P.O. Box 8517
Boston, MA 02266-8517
Please include your
account # on your check
Direct Federal Funds Call (800) 358-7668 Call the Transfer Agent
or Bank Wire to notify the Transfer at (800) 358-7668 prior
Agent, and instruct your to wiring additional
bank to wire U.S. funds funds
to:
ABA #011000028
State Street Bank &
Trust Company
Boston, MA 02101
BFN--The Managers
Funds
AC 9905-001-5
FBO--Shareholder Name
By telephone Only for established Call the Transfer Agent
accounts with ACH priv- at (800) 252-0682
ileges. Call (800)-252- Minimum investment:
0682 with instructions $100
for the Transfer Agent
19
<PAGE>
The employees and their families of The Managers Funds, L.P. and selected
dealers and their authorized representatives who are engaged in the sale of Fund
shares, may purchase shares of the Fund without regard to a minimum initial
investment.
Certain states may require Registered Investment Advisers that purchase
Fund shares for customers in those states to register as broker-dealers.
Fund shares are offered and orders accepted on each business day (a day on
which the New York Stock Exchange ("NYSE") and Federal Reserve Bank are open for
trading). The Fund may limit or suspend the offering of shares of the Fund at
any time and may refuse, in whole or in part, any order for the purchase of
shares.
Purchase orders received by the Fund, c/o Boston Financial Data Services,
Inc. (the "Transfer Agent") at the address listed on the back cover of this
prospectus, prior to 4:00 p.m., New York Time, on any business day will receive
the offering price computed that day. See "Income, Dividends and Capital Gains
Distributions." The broker-dealer, omnibus processor or investment professional
is responsible for promptly transmitting orders to the Fund. The Fund cannot
accept orders transmitted to it at the address indicated on the cover page of
this prospectus, but will use its best efforts to promptly forward such orders
to the Transfer Agent for receipt no later than the next business day.
Federal Funds or Bank Wires used to pay for purchase orders of the Fund
must be in U.S. dollars and received in advance, except for certain processing
organizations which have entered into special arrangements with the Fund.
Purchases made by check are effected when the check is received, but are
accepted subject to collection at full face value in U.S. funds and must be
drawn in U.S. dollars on a U.S. bank. Third party checks which are payable to an
existing shareholder who is a natural person (as opposed to a corporation or
partnership) and endorsed over to the Fund or State Street Bank and Trust
Company will be accepted. To ensure that checks are collected by the Fund,
redemptions of shares purchased by check, or exchanges from such shares, are not
effected until 15 days after the date of purchase, unless arrangements are made
with the Administrator.
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
20
<PAGE>
Fund incurs. For current shareholders, the Fund can redeem shares from any
identically registered account in the Fund or any other series of the Trust as
reimbursement for any loss incurred. The Trust may prohibit or restrict all
future purchases in the Fund in the event of any nonpayment for shares.
In the interest of economy and convenience, share certificates will not be
issued. All share purchases are confirmed to the record holder and credited to
such holder's account on the Fund's books maintained by the Transfer Agent.
REDEEMING SHARES
Any redemption orders received by the Fund as indicated below before 4:00
p.m. New York time on any business day will receive the net asset value
determined at the close of trading on the NYSE on that day. Payments for wire
redemption orders received prior to 4:00 p.m. will be sent out that day. In
addition, purchases made with immediately available funds, which are received by
the Fund prior to 4:00 p.m., will receive the daily income dividend declared on
that day. The Trust cannot accept redemption orders transmitted to it at the
address indicated on the cover page of the prospectus, but will use its best
efforts to promptly forward such orders to the Transfer Agent for receipt by the
next business day. If you are trading through a broker-dealer or investment
adviser, such investment professional is responsible for promptly transmitting
orders. There is no redemption charge. The Fund reserves the right to redeem
shareholder accounts (after 60 days notice) when the value of the Fund shares in
the account falls below $500 due to redemptions. Whether the Fund will exercise
its right to redeem shareholder accounts will be determined by the Fund
Administrator on a case-by-case basis. No interest will accrue on amounts
represented by uncashed redemption (or distribution) checks.
METHOD INSTRUCTIONS
------ ------------
By mail--write to Send a letter of instruction which
The Managers Funds specifies the name of the Fund,
c/o Boston Financial Data dollar amount or number of shares
Services, Inc. to be sold, your name and account
P.O. Box 8517 number. This letter must be signed
Boston, MA 02266-8517 by all owners of the shares in the
exact manner in which they
appear on the account.
21
<PAGE>
METHOD INSTRUCTIONS
------ ------------
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 For shareholders who have elected
the checkwriting option with State
Street Bank and Trust Company,
see "Investor Services--
Checkwriting Privilege" below.
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 bank accounts
can be made monthly, quarterly or annually. The amount you specify will be
deducted from your bank account on the day you specify.
SYSTEMATIC WITHDRAWALS of $100 or more from the Fund can be made monthly by
shareholders.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other series of the Trust through the Automatic Investment
service above. Before investing in the Trust's Equity Funds or Income Funds,
shareholders must obtain a prospectus from the Trust describing those Funds.
INDIVIDUAL RETIREMENT ACCOUNTS, including SEP and SIMPLE IRAs, IRA
rollovers and 403(b) accounts, are available to shareholders at no additional
cost.
CHECKWRITING PRIVILEGE is available to shareholders of the Fund.
Participating shareholders must return a completed signature card and
22
<PAGE>
authorization form, and will be provided a supply of checks. Checks may be drawn
for amounts between $500 and $500,000. When such a check is presented to State
Street Bank for payment, a sufficient number of full and fractional shares will
be redeemed from the shareholder's account to cover the amount of the check.
The check redemption privilege for withdrawal enables a shareholder to
receive dividends declared on the shares to be redeemed (up to and including the
day of redemption) until such time as the check is processed. Because of this,
the check redemption privilege is not appropriate for a complete liquidation of
a shareholder's account. If the amount of a withdrawal check is greater than the
value of the shares held in the shareholder's account the check will be returned
unpaid, and the shareholder may be subject to additional charges.
The Fund and State Street Bank each reserve the right at any time to
suspend or limit the procedure permitting withdrawals by check.
EXCHANGE PRIVILEGE permits shareholders of the Fund to exchange their
shares for shares of any of the other series of the Trust at the relative net
asset value per share. Exchange transactions may be made by writing to the Fund
(see "Redeeming Shares"), by contacting your investment professional, via the
Telephone Exchange Privilege (unless you have declined this option) or on your
signed account application. Call Investors Services at (800) 252-0682 to utilize
the Telephone Exchange Privilege. Shareholders must receive a prospectus
describing the Equity Funds or Income Funds of the Trust before requesting an
exchange into one or more of those series. By requesting an exchange into one of
those series, shareholders are deemed to confirm receipt of the prospectus
describing the Trust's Equity Funds and/or Income Funds.
The exchange privilege is offered to shareholders for their convenience and
use consistent with their investment objectives. It is not offered as a
short-term market timing service. The Trust reserves the right to refuse
exchange orders from shareholders who have previously been advised that their
frequent use of the exchange privilege is, in the opinion of the Fund
Administrator, inconsistent with the orderly management of the Funds'
portfolios.
THE FUND AND ITS TRANSFER AGENT WILL EMPLOY REASONABLE PROCEDURES TO VERIFY
THE GENUINENESS OF TELEPHONIC REDEMPTION OR EXCHANGE REQUESTS. IF SUCH
PROCEDURES ARE NOT FOLLOWED, THE FUND OR ITS TRANSFER AGENT MAY BE LIABLE FOR
ANY LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS. THESE PROCEDURES
INVOLVE REQUIRING CERTAIN PERSONAL IDENTIFICATION INFORMATION.
23
<PAGE>
THE ABOVE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE FUND MAY BE
LEGALLY OFFERED, AND MAY BE TERMINATED OR MODIFIED BY THE FUND AT ANY TIME UPON
60 DAYS WRITTEN NOTICE TO SHAREHOLDERS. NEITHER THE FUND, THE DISTRIBUTOR, THE
FUND'S CUSTODIAN, THE TRANSFER AGENT, NOR THEIR RESPECTIVE OFFICERS AND
EMPLOYEES, WILL BE LIABLE FOR ANY LOSS, EXPENSE OR COST ARISING OUT OF A
TRANSACTION EFFECTED IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH IN
THIS PROSPECTUS EVEN IF SUCH TRANSACTION RESULTS FROM ANY FRAUDULENT OR
UNAUTHORIZED INSTRUCTIONS.
INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends and distributions of short-term capital gains or losses
will normally be declared daily on all settled shares (including purchases made
with immediately available funds prior to 3:00 p.m. on that day) and paid
monthly on the third business day prior to month end. Distributions of any long
term capital gains will normally be declared annually in December.
All dividends and distributions declared by the Fund will be reinvested in
additional shares of the Fund (unless the shareholder has elected to receive
dividends or distributions in cash) at net asset value. An election may be
changed by delivering written notice to the Fund at least ten business days
prior to the payment date.
In connection with the intention to maintain a constant $1.00 net asset
value per share, the Trustees of the Trust have approved the following
procedures in the event the Fund has a negative amount of net investment income
on any day. Such a negative amount could occur, for instance, upon default by an
issuer of a security held by The Money Market Portfolio. In such event, the Fund
would first offset the negative amount with respect to each shareholder account
from the dividends declared but unpaid during the month with respect to such
account. If and to the extent that such negative amount exceeds such declared
but unpaid dividends, the Trustees of the Trust would consider what other action
might be taken, including reducing the number of its outstanding shares by
treating each shareholder as having contributed to the capital of the Fund that
number of full and fractional shares in the account of such shareholder which
represents its proportion of the amount of such excess. Each shareholder will be
deemed to have agreed to such contribution in these circumstances by its
investment in the Fund.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting
from the value of the Fund's total assets (i.e., the value of its investment in
the Portfolio and other assets) the amount of its liabilities and
24
<PAGE>
dividing the remainder by the number of its outstanding shares, rounded to the
nearest cent. Expenses are accrued daily. The Portfolio values all portfolio
securities by the amortized cost method. This method attempts to maintain for
the Fund a constant net asset value per share of $1.00. No assurances can be
given that this goal can be attained. The Fund's net asset value is computed at
4:00 p.m., New York time on Monday through Friday, except that the net asset
value is not computed for the Fund on the holidays listed under "Net Asset
Value" in the SAI and may be computed at earlier times as set forth in the SAI.
PERFORMANCE INFORMATION
From time to time the Fund may advertise "yield" and/or "total return."
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE.
YIELD
The Fund may advertise "current yield" and "effective yield." "Current
yield" refers to the income generated by an investment in the Fund over a
seven-day period (which period will be stated in the advertisement). This income
is then "annualized," that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment.
TOTAL RETURN
The Fund may include total return figures in its advertisements. In
calculating total return, the net asset value per share at the beginning of the
period is subtracted from the net asset value per share at the end of the period
(after assuming and adjusting for the reinvestment of any income dividends and
capital gains distributions), and the result is divided by the net asset value
per share at the beginning of the period to ascertain the total return
percentage.
The Fund also may include comparative performance information in
advertising or marketing the Fund's shares. Such performance information may
include data from industry publications, business periodicals, rating services
and market indices. For more detailed information on performance calculations
and comparisons, see "Performance Data" in the SAI.
25
<PAGE>
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value, and currently offers eleven 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 eleven series without the requirement of a
vote of shareholders of the Trust.
Shares of each series are entitled to one vote per share. Shareholders have
the right to vote on all matters on which, by law or the provisions of the
Trust's Declaration of Trust or by-laws, they may be entitled to vote. On
matters relating to all series and affecting all series in the same manner,
shareholders of all series are entitled to vote. On any matters affecting only
one series, only the shareholders of that series are entitled to vote. On
matters relating to all the series but affecting the series differently,
separate votes by series are required.
The Trust and its series are not required, and do not intend, to hold
annual meetings of shareholders, under normal circumstances. The Trustees or the
shareholders may call special meetings of the shareholders for action by
shareholder vote, including the removal of any or all of the Trustees. The
Trustees will call a special meeting of shareholders of the Fund upon written
request of the holders of at least 10% of the Fund's shares.
Under Massachusetts law, the shareholders and trustees of a business trust
may, in certain circumstances, be personally liable for the trust's obligations
to third parties. However, the Declaration of Trust provides, in substance, that
no shareholder or Trustee shall be personally liable for the Trust's obligations
to third parties, and that every written contract made by the Trust shall
contain a provision to that effect. The Declaration of Trust also requires the
Fund to indemnify shareholders and Trustees against such liabilities and any
related claims and expenses. The Trust will not indemnify a Trustee when the
loss is due to willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the Trustee's office.
Two lawsuits seeking class action status have been filed against
Managers Intermediate Mortgage Fund, Managers Short Government Fund, The
Managers Funds, L.P. and the Trust, among other defendants. In both of these
cases, the plaintiffs seek unspecified damages based upon losses alleged in the
two funds named above. In the suit relating to Managers Short Government Fund,
after plaintiff amended the complaint, a second motion to dismiss was filed. In
that action, the parties have now entered into a preliminary agreement to settle
all claims by the purported class. However, the parties have not finalized
26
<PAGE>
their settlement nor have they obtained the required court approvals. For these
and other reasons, there can be no assurance that the settlement will be
consummated. In addition, a non-class action lawsuit based on similar
allegations has been filed by a customer against certain of the defendants named
in the class action lawsuits, as well as Managers Short and Intermediate Bond
Fund. Certain other customers, who are potentially members of the plaintiff
class in each of the two class action lawsuits referred to above, have asserted
that they may file similar lawsuits based on similar claims, but have not done
so. Management continues to believe that it has meritorious defenses and, if the
cases are not settled, Management intends to defend vigorously against these
actions.
TAX INFORMATION
The Fund has qualified and intends to continue to qualify as a regulated
investment company under the provisions of the Internal Revenue Code of 1986, as
amended, under which the Fund is regarded as a separate regulated investment
company. The Portfolio intends to qualify as an association treated as a
partnership for federal income tax purposes. As such, the Portfolio should not
be subject to tax. The Fund's status as a regulated investment company is
dependent on, among other things, the Portfolio's continued qualification as a
partnership for federal income tax purposes.
All dividends and distributions designated as capital gains are generally
taxable to shareholders whether received in cash or additional shares.
Although distributions are generally taxable to a shareholder in the
taxable year in which the distribution is made, dividends declared in October,
November or December of a taxable year with a record date in such a month and
actually received during the following January, will be taxed as though received
by the shareholder on December 31 of such year.
Generally, the Fund is required to back-up withhold 31% of distributions
paid to a shareholder who fails to provide a social security or taxpayer
identification number and certify that such number is correct and that such
shareholder is not subject to, or is otherwise exempt from, back-up withholding.
A shareholder should consult its own tax advisers for more information
regarding the Federal, foreign, state, and local tax treatment of such
shareholder with respect to its own tax situation. For more information
concerning taxes, see "Tax Information" in the SAI.
27
<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 Fund and Portfolio. Shareholders will also receive
annual tax statements indicating the tax status of distributions made during the
year. Confirmations of transactions will be sent to shareholders following
purchases, redemptions or exchanges by the shareholder, and quarterly statements
of account will be sent to all shareholders.
28
<PAGE>
THE MANAGERS FUNDS
WHERE LEADING MONEY MANAGERS CONVERGE
Fund Distributor
The Managers Funds, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
Custodian
State Street Bank and Trust
Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Legal Counsel
Shereff, Friedman, Hoffman &
Goodman, LLP
919 Third Avenue
New York, New York 10022
Transfer Agent
Boston Financial Data
Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800)252-0682
The Managers Funds
EQUITY FUNDS:
INCOME EQUITY FUND
Scudder Kemper Investments, Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management
Company, Inc.
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard, Fre`res Asset
Management Co.
EMERGING MARKETS
EQUITY FUND
INCOME FUNDS:
MONEY MARKET FUND
J.P. Morgan
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE
FUND
Jennison Associates Capital Corp.
BOND FUND
Loomis, Sayles & Company, Inc.
GLOBAL BOND FUND
Rogge Global Partners
THE MANAGERS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
dated December 29, 1997
40 Richards Avenue, Norwalk, Connecticut 06854
Investor Services: (800) 835-3879
This Statement of Additional Information relates to the Managers Income
Equity Fund,Capital Appreciation Fund, Special Equity Fund, International Equity
Fund, Emerging Markets 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 separately in Managers 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 December 29,
1997, 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>
<CAPTION>
TABLE OF CONTENTS
I. INVESTMENT RESTRICTIONS
II. PORTFOLIO TURNOVER
III. TRUSTEES AND OFFICERS
IV. MANAGEMENT OF THE FUNDS
V. FUND MANAGEMENT AGREEMENT
VI. ASSET MANAGER PROFILES
VII. ADMINISTRATIVE SERVICES; DISTRIBUTION
ARRANGEMENTS
VIII. PORTFOLIO SECURITIES TRANSACTIONS
IX. NET ASSET VALUE
X. TAX INFORMATION
XI. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANT
XII. CONTROL PERSONS AND PRINCIPAL
HOLDERS OF SECURITIES
XIII. OTHER INFORMATION
XIV. PERFORMANCE INFORMATION
XV. FINANCIAL STATEMENTS
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 money, 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 such borrowings 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). It will not mortgage, pledge
or in any other manner transfer any of its assets as security for any
indebtedness, 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.
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) 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
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.
17. Invest up to 10% of its total assets in shares of other investment
companies investing exclusively in securities in which it may otherwise
invest. Because of restrictions on direct investment made by U.S. entities
in certain countries, other investment companies may provide the most
practical or only way for the Emerging Markets Equity Fund to invest in
certain markets. Such investments may involve the payment of substantial
premiums above the net asset value of those investment companies' portfolio
securities and are subject to limitations under the Investment Company Act.
The Emerging markets Fund may also incur tax liability to the extent they
invest in the stock of a foreign issuer that is a "passive foreign investment
company" regardless of whether such "passive foreign investment company"
makes distributions to the Funds.
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 10% of its net assets in warrants or rights,
valued at the lower of cost or market, nor more than 5% 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.
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.
III. PORTFOLIO TURNOVER
Generally, securities are purchased for the Managers Income Equity Fund,
Capital Appreciation Fund, Special Equity Fund, International Equity Fund,
and Emerging Markets 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, 1996, the portfolio turnover rate
for Income Equity Fund was 33%, for Capital Appreciation Fund was 172%, for
Special Equity Fund 56%, and for International Equity Fund was 30%. For the
fiscal year ended December 31, 1995, the portfolio turnover rate for Income
Equity Fund was 36%, for Capital Appreciation Fund was 134%, for Special
Equity Fund was 65%, and for International Equity Fund was 73%.
For the fiscal year ended December 31, 1996, the portfolio turnover rate
for Short Government Fund was 169%, for Short and Intermediate Bond Fund was
96%, for Bond Fund was 72% and for Global Bond Fund was 202%. For the fiscal
year ended December 31, 1995, the annual portfolio turnover rate for Short
Government Fund was 238%, for Short and Intermediate Bond Fund was 131%, for
Bond Fund was 46% and for Global Bond was 214%. The higher than 100% turnover
rate for the Short and Intermediate Bond Fund was due to sales of portfolio
investments to meet shareholder 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 assets on a
long-term basis. The Intermediate Mortgage Fund's rates of portfolio
turnover for the years ended December 31, 1996 and December 31, 1995 were
232% and 506%, 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 brokerage fees and the
possibility of more highly taxed short-term capital gains, which may be
offset against capital loss carryovers, 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.
<CAPTION>
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
<S> <C>
ROBERT P. WATSON1 President and Trustee of The Managers Funds;
40 Richards Avenue Chairman and Chief Executive Officer,
Norwalk, CT 06854 Evaluation Associates Investment Management
Chief Executive Officer, Company (predecessor of The Managers Funds,
President, Trustee L.P.) (prior to June 1988 and from August
1989 to August 1990); Partner, The Managers
Date of birth: 1/21/34 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 Trust
West Hartford, CT 06107 Division, The Connecticut Bank and Trust
Trustee Company, N.A. (1956 to 1976); President,
American Bankers Association, Trust Division
Date of birth: 12/30/23 (1974 to 1975); President Connecticut Bankers
Association, Trust Division (1966 to 1968).
President, Dale, Elliott & Company
MADELINE H. McWHINNEY (management consultants) (1977 to present);
24 Blossom Cove Assistant Vice President and Financial
Red Bank, NJ 07701 Economist, Federal Reserve Bank of New York
Trustee (1943 to 1973); Trustee and Treasurer,
Institute of International Education (since
Date of birth: 3/11/22 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).
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
<S> <C>
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. (1991
to present); Vice President, Secretary and
Date of birth: 4/3/50 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),
10 Cortland Drive Associate Professor of Finance (1980-1985),
Amherst, MA 01002 Ph.D. Director (Acting) (1985 to 1986),
Trustee Chairman (Acting) Department of General
Business and Finance (1981-1982), and
Date of birth: 5/10/47 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 Funds,
40 Richards Avenue L.P. (September 1994 to present); Director of
Norwalk, CT 06854 Marketing, Hyperion Capital Management, Inc.
Vice President (June 1993 to June 1994); Senior Vice
President and Chief Investment Officer,
Date of Birth: 1/18/55 Greenwich Asset Management, Inc. (April 1989
to June 1993)
Director of Operations, The Managers Funds,
DONALD S. RUMERY L.P. (December 1994 to present)
40 Richards Avenue Vice President, Signature Financial Group
Norwalk, CT 06854 (March 1990 to December 1994)
Secretary, Treasurer(PrincipalFinancial andVice President,
The Putnam Companies (August
Accounting Officer) 1980 to March 1990).
Date of Birth: 5/29/58
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to Present) and
40 Richards Avenue Assistant Vice President (July 1986 to June
Norwalk, CT 06854 1992), The Managers Funds, L.P.; Accountant,
Assistant Treasurer Gintel Co. (June 1980 to June 1986).
Date of Birth: 3/31/56
PETER M. McCABE Portfolio Administrator, The Managers Funds,
40 Richards Avenue L.P. (August 1995 to Present); Portfolio
Norwalk, CT 06854 Administrator, Oppenheimer Capital, L.P.
Assistant Treasurer (July 1994 to August 1995); College Student
(September 1990 to June 1994).
Date of Birth: 9/8/72
</TABLE>
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, 1996:
<TABLE>
<CAPTION>
Total compensation
Aggregate from Registrant
Compensation and Fund Complex
From Trust Paid to Trustees
<S> <C> <C>
William W. Graulty $12,250 $12,250
Madeline H. McWhinney 13,000 13,000
Steven J. Paggioli 13,000 13,000
Thomas R. Schneeweis 13,000 13,000
</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. 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 over 20 years
of experience in evaluating investment advisers for individuals and
institutional investors.
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, or markups, in connection
therewith as permitted by Sections 17(a) and 17(e) of the 1940 Act, and the
terms of any exemptive order issued by the Securities and Exchange
Commission.
An Asset Manager may also serve as a discretionary or non-discretionary
investment adviser 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 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 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 record keeping.
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
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. The annual management fee rate paid by each Fund
to the manager for the Emerging Markets Equity Fund is not presented since it
had not commenced operations as of the date of this Prospectus.
<TABLE>
<CAPTION>
Weighted Average of the
Total Management Manager's Portion of the
Name of Fund Fee Total Management Fee
<S> <C> <C>
Income Equity Fund 0.75% 0.40%
Capital Appreciation 0.80% 0.40%
Fund
Special Equity Fund 0.90% 0.40%
International Equity 0.90% 0.40%
Fund
Emerging Markets 1.15% 0.40%
Equity Fund
Short Government 0.20% 0.00%
Fund*
Short and 0.50% 0.25%
Intermediate Bond
Fund
Intermediate 0.45% 0.25%
Mortgage Fund
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.
During the fiscal years ended December 31, 1994, 1995 and 1996, 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:
<PAGE>
<TABLE>
<CAPTION>
January 1, 1996-December 31, 1996 January 1, 1995-December 31,
1995
Approxi-mate FeeFee Paid to Asset Approxi-mate FeeFee Paid to Asset
Retained byManager by Retained byManager by
Manager Manager/1Fee Paid toManager Manager/1
Fee Paid to Manager <C> <C> Manager <C> <C>
Name of Fund/Asset <C> <C>
Manager
<S>
Income Equity Fund $349,821 $175,519 $299,824 $150,5
65
Scudder, Stevens & $86,220 $74,220
Clark, Inc.
Spare, Kaplan, $88,082 $75,039
Bischel &
Associates
Capital Appreciation $761,925 $380,963 $635,588 $318,7
Fund 16
Essex Investment
Management N/A N/A
Company, Inc./8
Husic Capital $60,917 N/A
Management/2
Special Equity Fund $1,572,132 $698,733 $977,869 $435,3
43
Liberty Investment $266,030 $187,691
Management
Pilgrim Baxter & $305,198 $190,981
Associates/6
Westport Asset $302,171 $163,854
Management, Inc.
International Equity $1,856,193 $824,774 $948,514 $422,5
Fund 12
Lazard Fr?res Asset $516,157 $215,232
Management Co/7
Scudder, Stevens & $515,262 $310,770
Clark, Inc.
Short Government $11,423 $0 $15,835 N/A
Fund
Jennison Associates $11,423 $15,835
Capital
Corp/3
Short and $116,037 $58,018 $128,254 $64,20
Intermediate Bond 9
Fund
Standish, Ayer & $58,019 34,464
Wood, Inc.
Intermediate $143,803 $79,890 $214,141 $118,9
Mortgage Fund 67
Jennison Associates $63,913 $95,174
Capital
Corp/4
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
January 1, 1994-December 31, 1994
Approxi-mate FeeFee Paid to Asset
Retained by ManagerManager by
Fee Paid to Manager <C> Manager/1
Name of Fund/Asset <C> <C>
Manager
<S>
Income Equity Fund $339,061$170,11
0
Scudder, Stevens & $83,842
Clark, Inc.
Spare, Kaplan, Bischel $85,108
&
Associates
Capital Appreciation $669,940$335,07
Fund 4
Essex Investment
Management N/A
Company, Inc./8
Husic Capital N/A
Management/2
Special Equity Fund $972,495$468,41
3
Liberty Investment $194,58
Management 8
Pilgrim Baxter & $33,634
Associates/6
Westport Asset $160,02
Management, Inc. 7
International Equity $728,272$323,63
Fund 9
Lazard Fr?res Asset N/A
Management Co/7
Scudder, Stevens & $404,63
Clark, Inc. 3
Short Government Fund $197,692$109,43
8
Jennison Associates $2,338
Capital
Corp/3
Short and Intermediate $433,531$217,37
Bond Fund 5
Standish, Ayer & Wood, $84,716
Inc.
Intermediate Mortgage $646,916$439,61
Fund 4
Jennison Associates $23,470
Capital
Corp/4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
January 1, 1994-December 31, 1994
Approxi-mate FeeFee Paid to Asset
Retained by ManagerManager by
<C> Manager/1
Fee Paid to Manager <C>
Name of Fund/Asset <C>
Manager
<S>
Bond Fund $237,886$142,66
4
Loomis, Sayles & $95,222
Company, Inc.
Global Bond Fund $52,093$27,100
Rogge Global $24,993
Partners/5
</TABLE>
1/Does not reflect payments made to asset managers whose relationship with a
Fund has been
terminated.
2/ Portfolio manager hired during 1996.
3/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
$29,861, $19,793 and $14,280 for
the
fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996, respectively.
4/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.
5/Fund commenced operation during 1994.
6/ Portfolio manager hired during 1994.
7/ Portfolio manager hired during 1995.
8/ Portfolio manager hired during 1997.
<TABLE>
<CAPTION>
January 1, 1996-December 31, 1996January 1, 1995-December 31, 1995
Approxi-mate FeeFee Paid to Asset Approxi-mate Fee
Retained by ManagerManager by Retained by ManagerFee Paid to Asset
<C> Manager/1 <C> Manager by Manager/1
Fee Paid to Manager <C> Fee <C>
Name of Fund/Asset <C> Paid to
Manager Manager
<S> <C>
Bond Fund $180,197$108,24 $162,59 $97,557
0 4
Loomis, Sayles & $71,957 $65,037
Company, Inc.
Global Bond Fund $126,043$62,024 $86,482 $43,466
Rogge Global $64,019 $43,016
Partners/5
</TABLE>
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.
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.
INCOME EQUITY FUND
CHARTWELL INVESTMENT PARTNERS, L.P.
Chartwell Investment Partners, L.P. is a limited partnership which is
controlled by Bobcat Partners, L.P. Bobcat Partners, L.P. is controlled by
James McNiff, James Croney, Jr. and Michael Kennedy.
SCUDDER KEMPER INVESTMENTS, INC.
Scudder Kemper Investments, Inc. is a privately-held Delaware
corporation which is owned by the Zurich Group. Daniel Pierce is the
Chairman of the Board and Edmond D. Villani is the President and Chief
Executive Officer of Scudder. Stephen R. Beckwith, Lynn S. Birdsong,
Nicholas Bratt, E. Michael Brown, Mark S. Casady, Linda E. Coughlin, Margaret
D. Hadzima, Jerard K. Hartman, Richard A. Holt, Dudley H. Ladd, Thomas H.
O'Brien, John T. Packard, Kathryn L. Quirk, Cornelia M. Small and Stephen A.
Wohler 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, Juris Padegs 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.
CAPITAL APPRECIATION FUND
ESSEX INVESTMENT MANAGEMENT COMPANY, INC.
Essex was founded in 1976, and is a Massachusetts corporation which is
controlled by Joseph C. McNay.
HUSIC CAPITAL MANAGEMENT
The firm is was formed in 1986 as a limited partnership which is 100%
owned by Frank J. Husic.
SPECIAL EQUITY FUND
LIBERTY INVESTMENT MANAGEMENT
Liberty Investment Management is a division of Goldman Sachs Asset
Management, which itself is a separate operating division of Goldman, Sachs &
Co. The general partners of Goldman, Sachs & Co. are The Goldman Sachs
Group, L.P. (a Delaware Limited Partnership) ("GSGLP") and The Goldman, Sachs
& Co. L.L.C. (a Delaware limited liability company) ("GSCLLC"). The Goldman
Sachs Corporation ("GSC") is the parent company of both GSGLP and GSCLLC.
GSGLP is also a parent of GSCLLC. GSC is the sole general partner of GSGLP.
PILGRIM BAXTER & ASSOCIATES
Pilgrim Baxter & Associates is owned by United Asset Management, a
public company.
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.
KERN CAPITAL MANAGEMENT, LLC
Kern Capital management, LLC is a Delaware limited liability company
which is controlled by Robert E. Kern, David G. Kern and Fremont Investment
Advisors, Inc., a subsidiary of Fremont Investments, Inc. and affiliated with
The Fremont Group.
INTERNATIONAL EQUITY FUND
SCUDDER KEMPER INVESTMENTS, INC.
(See INCOME EQUITY FUND)
LAZARD, FReRES ASSET MANAGEMENT CO.
Lazard, Freres Asset Management Co. is a New York limited liability
company founded in 1848. The managing directors are Eileen D. Alexanderson,
Thomas F. Dunn, Norman Eig, Herbert W. Gullquist, Larry A. Kohn, Robert P.
Morgenthau, John R. Reese, John R. Reinsberg, Michael S. Rome and Alexander
E. Zagoreos.
EMERGING MARKETS EQUITY FUND
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, and George W. Noyes, Director and
President, each owns more than 10% of the outstanding voting securities of
Standish. Caleb F. Aldrich, Managing Director and Vice President, Davis B.
Clayson, Managing Director and Vice President, Dolores S. Driscoll, Managing
Director 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. 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 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)
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 plc
Rogge Global Partners plc. is owned by United Asset Management, a public
company.
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).
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 through brokers 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, or markups, for doing so in
accordance with Sections 17(a) and 17(e) of the 1940 Act and the procedures
adopted by the Trustees in accordance with the rules thereunder, and the
terms of any exemptive order issued by the Securities and Exchange
Commission. 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, 1996, the aggregate brokerage
commissions paid by each of the Funds incurring any such commissions was
$44,936 for Income Equity Fund, $421,852 for Capital Appreciation Fund,
$278,627 for Special Equity Fund, and $555,519 for International Equity Fund.
For the fiscal year ended December 31, 1995, the aggregate brokerage
commissions paid by each of the Funds incurring any such commissions were
$69,964 for Income Equity Fund, $283,673 for Capital Appreciation Fund,
$119,418 for Special Equity Fund and $421,365 for International Equity Fund.
For the fiscal year ended December 31, 1994, the aggregate brokerage
commissions paid by each of the Funds incurring any such commissions were
$73,083 for Income Equity Fund,$276,975 for Capital Appreciation Fund,
$117,854 for Special Equity Fund and $109,595 for International Equity Fund.
During the fiscal year ended December 31, 1996, the Capital Appreciation
Fund paid brokerage commissions totaling $49,756 to Fahnestock &
Co.("Fahnestock"), an affiliated broker-dealer of Hudson Capital Advisers
which then served as an Asset Manager. Effective September 1996, Husic
Capital Management replaced Hudson Capital Advisers as an Asset Manager for
this Fund. During the fiscal year ended December 31, 1995, the Capital
Appreciation Fund paid brokerage commissions totaling $41,584 to Fahnestock.
During the fiscal year ended December 31, 1994, the Capital Appreciation Fund
paid brokerage commissions totaling $69,584 to Fahnestock. The brokerage
commissions paid to Fahnestock by the Capital Appreciation Fund represented
12% of the total brokerage commissions paid by that fund during the fiscal
year ended December 31, 1996; 15% during the fiscal year ended December 31,
1995; and 25% during the fiscal year ended December 31, 1994. Such
commissions were paid in connection with portfolio transactions the dollar
amount of which represented 8, 16% and 22%, 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, Martin Luther King 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 fair
value, as determined in good faith by the Asset Manager pursuant to
procedures established by the Trustees.
Fixed-income securities are generally 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, Emerging Markets 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-Forward 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 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 mid-term and long-term capital gains to such shareholders are taxable
as mid-term and long-term capital gains, irrespectively, 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. A loss may be disallowed 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.
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 Fund 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") regardless of the length of time the
contract was held. 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 paper 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.
Certain Funds may invest in obligations (such as zero coupon bonds)
which are issued with original issue discount ("OID"). Under the code, OID
is accrued as investment income over the life of the investment even in the
absence of cash payments. Accordingly, such 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
forward contracts generally will be treated as ordinary income or loss. Any
non-U.S. dollar denominated futures or options contract may be treated as
either ordinary income or capital gain of it meets the requirements of
Section 1256.
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 capital gain realized by the
Fund which, depending on its character, may be a long-term capital gain 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 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, Emerging Markets 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 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 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., P.O. Box 8517, Boston,
Massachusetts 02266-8517, 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 September 24, 1997, 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 Charles Schwab & Co. "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 September
24, 1997 holding 5% or more of the outstanding shares of any of the Funds.
Certain of these shareholders are omnibus processing organizations.
Income Equity Fund
Huntington
National Bank, Columbus, Ohio (12%)
Charles Schwab &
Co., Inc., San Francisco, California (19%)
Capital Appreciation Fund
Resource Bank, Minneapolis, Minnesota (25%)
Special Equity Fund
Huntington Trust Company, Columbus, Ohio (7%)
Resource Bank, Minneapolis, Minnesota (6%)
Charles Schwab & Co., Inc., San Francisco, California (37%)
International Equity Fund
Huntington Trust
Company, Columbus, Ohio (6%)
Resource Bank,
Minneapolis, Minnesota (9%)
Charles Schwab &
Co., Inc., San Francisco, California (26%)
Short Government Fund
Charles Schwab &
Co., Inc., San Francisco, California (6%)
Short and Intermediate Bond Fund
Huntington Trust Company, Columbus, Ohio (7%)
Intermediate Mortgage Fund
Roman Catholic
Diocese, Syracuse, New York (8%)
Bond Fund
Charles Schwab &
Co., Inc., San Francisco, California (12%)
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 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 and Emerging Markets 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, 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 and the Emerging Markets 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.
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 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 Considerations -- Since the assets of the Emerging
Markets Equity Fund will be principally invested in equity securities of
companies in emerging markets, substantially all of the income which is
derived from the investments will be in foreign currency. The Fund, however,
will compute and distribute, as of the date that the income is earned by the
Fund, its income at the foreign exchange rate that is in effect on that date.
If the value of the foreign currency in which the Fund receives its income
falls in relation to the U.S. dollar between the time that the Fund earns the
income and the time that it takes to convert it to U.S. Dollars, the Fund
may, however, be required to liquidate securities in order to make
distributions if the Fund has insufficient cash in U.S. dollars to make the
distributions. In turn, the liquidation of investments, if necessary, may
have an adverse impact on the Fund's performance.
The asset managers of the Emerging Markets Equity Fund will not
routinely attempt to hedge the Fund's foreign currency exposure. However,
the Fund may, in order to protect some or all of its portfolio from currency
risks, engage in hedging transactions. For a description of such hedging
strategies, see "Hedging Techniques" in the prospectus.
Forward Foreign Currency Exchange Transactions -- The value of the
assets of the International Equity Fund, Emerging Markets 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 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 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 and the Emerging Markets Equity 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 25% of the
value of its respective total assets committed to such contracts. The other
Funds, except for 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 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 -- 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 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 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.
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 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 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 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 -- 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 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 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 and the Emerging Markets 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 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) 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 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, 1996, 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
Ratings Bond Fund Intermediate
<S> <C> Bond Fund
<C>
Government and
AAA/Aaa 14% 50%
AA/Aa 3% 5%
A/A 6% 18%
BBB/Baa 61% 22%
BB/Ba 9% 5%
Not rated 7% -
</TABLE>
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 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 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 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, 1996. The
average annual total return quotations for the Emerging Markets Equity Fund
is not presented since it had not commenced operations as of the date of this
Prospectus.
<TABLE>
<CAPTION>
Annual-ized Since
Commence-ment of
Annual-ized 5Annual-ized 10Operations
Years Years <C> Commence-ment Date
NAME OF FUND 1 Year <C> <C> <C>
<S> <C>
Income Equity Fund 17.08% 14.45% 12.46% 14.57% 10/31/84
Capital Appreciation Fund 13.73% 14.04% 14.66% 15.48% 6/30/84
Special Equity Fund 24.75% 17.42% 17.60% 16.47% 6/30/84
International Equity Fund 12.77% 14.02% 10.62% 14.30% 12/31/85
Short Government Fund 3.89% 2.90% NA 5.21% 10/31/87
Short & Int. Bond Fund 4.15% 5.94% 6.97% 8.56% 6/30/84
Intermediate Mortgage Fund 3.33% 2.27% 6.36% 7.13% 5/31/86
Bond Fund 4.97% 8.94% 9.36% 11.37% 6/30/84
Global Bond Fund 4.39% NA NA 7.48% 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 Prospectuses, 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
previous 30-day (or one-month) period. Yield is computed by dividing the net
investment income per share earned during the 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, 1996,
the annualized yield of the Income Equity Fund and each of the Income Funds,
was as follows:
<TABLE>
<CAPTION>
30-Day
Annualized Yield
Fund at 12/31/96
<S> <C>
Income Equity Fund 2.67%
Short Government Fund 5.08%
Short and Intermediate
Bond Fund 5.24%
Intermediate Mortgage Fund 5.64%
Bond Fund 6.39%
Global Bond Fund 4.66%
</TABLE>
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., and IBC 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.
Morningstar, Inc., a widely used independent research firm, also ranks
mutual funds by overall performance, investment objectives and assets.
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 U.S. 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 Money Market Fund Index, prepared IBC Financial Data, Inc. in
"IBC'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 IBC 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 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 Report of Independent Accountants of Coopers & Lybrand L.L.P.,
independent public accountants, are herein incorporated by reference from The
Managers Funds' Annual Reports dated December 31, 1996. The unaudited
Financial Statements and the Notes thereto are herein incorporated by
reference from the Managers Funds' Semi-Annual Reports dated June 30, 1996.
<PAGE>
THE MANAGERS FUNDS
MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
Dated December 29, 1997
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" or the "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
ten series of the Trust is contained in the prospectuses for the Equity Funds
and Income Funds, and in a separate Statement of Additional Information for
those Funds, copies of which may be obtained without charge by contacting the
Trust at the address or telephone number listed above.
This Statement of Additional Information is not a prospectus; it
should be read in conjunction with the Money Market Fund Prospectus of the
Trust, dated December 29, 1997, copies of which may be obtained without
charge by contacting the Trust as noted above.
This Statement of Additional Information is authorized for
distribution to prospective investors only if preceded or accompanied by an
effective prospectus for the Money Market Fund.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
I. INVESTMENT OBJECTIVE AND POLICIES
II. INVESTMENT RESTRICTIONS
III. TRUSTEES AND OFFICERS
IV. MANAGEMENT OF THE FUND AND THE PORTFOLIO
V. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANTS
VI. EXPENSES
VII. CODE OF ETHICS
VIII. NET ASSET VALUE
IX. CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES
X. PERFORMANCE DATA
XI. ORGANIZATION OF THE PORTFOLIO
XII. PORTFOLIO TRANSACTIONS
XIII. TAX INFORMATION
XIV. FINANCIAL STATEMENTS
<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 master-
feeder investment fund structure. Prior to December 1, 1995, the Fund
operated as a free-standing mutual fund and not through the master-feeder
structure. Where indicated in this Statement of Additional Information,
historical information for the Fund includes information from the period
prior to commencement of operations in the master-feeder structure.
I. 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 Prime 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 397
calendar days or less. 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 to the extent consistent with its investment
objective and policies. 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. Securities which are backed by the
full faith and credit of the United States include obligations of the
Government National Mortgage Association, the Farmers Home Administration,
and the Export-Import Bank. In the case of securities not backed by the full
faith and credit of the United States, each Fund 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 each Fund may invest that are not backed by the full
faith and credit of the United States include, but are not limited to: (i)
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation, the Federal Home Loan Banks and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations;
(ii) securities issued by the Federal National Mortgage Association, which
are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and (iii) obligations of the Federal Farm
Credit System and the Student Loan Marketing Association, each of whose
obligations may be satisfied only by the individual credits of the issuing
agency.
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 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. It is possible that the issuer of a master demand obligation
could be a client of Morgan to whom Morgan, in its capacity as a commercial
bank, has made a loan.
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 the
same security at a mutually agreed upon date and price. The resale price
normally is in excess of the purchase price, reflecting an agreed upon
interest rate. This 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 also 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 will the Portfolio invest in repurchase
agreements for 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 of the repurchase agreement. The
Portfolio will always receive securities as collateral whose market value is,
and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Portfolio in the agreement plus accrued
interest, and the Portfolio will make payment for such securities only upon
the physical delivery or upon evidence of book entry transfer to the account
of the Custodian. The Portfolio will be fully collateralized within the
meaning of paragraph (a) (4) 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
disposal 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 for money market instruments, 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, if applicable,
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 and the Portfolio 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. The Fund and the Portfolio have applied
for exemptive relief from the Securities and Exchange Commission ("SEC") to
permit the Portfolio to invest in affiliated investment companies. If the
requested relief is granted, the Portfolio would then be permitted to invest
in affiliated funds, subject to certain conditions specified in the
applicable order.
Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase the same security at a mutually
agreed upon date and price. For purposes of the 1940 Act, a reverse
repurchase agreement is also considered as the borrowing of money by the
Portfolio, and, therefore, a form of leverage. The Portfolio will invest the
proceeds of the borrowings under reverse repurchase agreements. In addition,
the Portfolio will enter into a reverse repurchase agreement only when the
interest income to be earned from the investment of the proceeds is greater
than the interest expense of the transaction. The Portfolio will not invest
the proceeds of a reverse repurchase agreement for a period which exceeds the
duration of the reverse repurchase agreement. The Portfolio 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 Portfolio,
the Advisor or Funds Distributor, Inc. 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.
Synthetic Instruments. The Portfolio may invest in certain synthetic
instruments. Such instruments generally involve the deposit of asset-backed
securities in a trust arrangement and the issuance of certificates and/or
notes evidencing interests in the trust. The certificates are generally sold
in private placements in reliance on Rule 144A.
Foreign Investments. The Portfolio may invest in certain foreign
securities. All investments of the Portfolio must, however, be U.S. dollar
denominated, and any foreign commercial paper must not be subject to foreign
withholding tax at the time of purchase.
For a description of the risks associated with investing in foreign
securities, see "Foreign Investment Information" in the Prospectus.
Quality and Diversification Requirements
The Portfolio intends to meet the diversification requirements of the
1940 Act. To meet these requirements, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (1) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government, its agencies and
instrumentalities, and (2) the Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer. As for the other 25% of the
Portfolio's assets not subject to the limitation described above, there is no
limitation on investment of these assets under the 1940 Act, so that all of
such assets may be invested in the securities of any one issuer, subject to
the limitation of any applicable state securities laws, or as described
below. Investments not subject to the limitations described above could
involve an increased risk to the Portfolio should an issuer, or a state or
its related entities, 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.
II. 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
substantially identical, unless as otherwise specified. Accordingly,
references below to the Fund also include the Portfolio unless the context
requires otherwise.
The Fund may not:
1. Issue senior securities, except as may otherwise be permitted by
the following investment restrictions or 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 (see "Investment
Objective and Policies");
7. Purchase or sell puts, calls, straddles, spreads, or any
combination thereof, real estate, commodities, or commodity contracts or
interests in oil, gas, or mineral exploration or development programs.
However, the Fund may purchase bonds or commercial paper issued by companies
which invest in real estate or interests therein including real estate
investment trusts;
8. Purchase securities on margin, make short sales of securities, or
maintain a short position, provided that this restrictions shall not be
deemed to be applicable to the purchase or sale of when-issued securities or
of securities for delivery at a future date;
9. Acquire securities of other investment companies, except as
permitted by the 1940 Act;
10. Act as an underwriter of securities; or
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).
III. 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.
<CAPTION>
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
<S> <C>
ROBERT P. WATSON2 President and Trustee of The Managers Funds;
40 Richards Avenue Chairman and Chief Executive Officer,
Norwalk, CT 06854 Evaluation Associates Investment Management
Chief Executive Officer, Company (predecessor of The Managers Funds,
President, Trustee L.P.) (prior to June 1988 and from August
1989 to August 1990); Partner, The Managers
Date of birth: 1/21/34 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 Trust
West Hartford, CT 06107 Division, The Connecticut Bank and Trust
Trustee Company, N.A. (1956 to 1976); President,
American Bankers Association, Trust Division
Date of birth: 12/30/23 (1974 to 1975); President Connecticut Bankers
Association, Trust Division (1966 to 1968).
President, Dale, Elliott & Company
MADELINE H. McWHINNEY (management consultants) (1977 to present);
24 Blossom Cove Assistant Vice President and Financial
Red Bank, NJ 07701 Economist, Federal Reserve Bank of New York
Trustee (1943 to 1973); Trustee and Treasurer,
Institute of International Education (since
Date of birth: 3/11/22 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. (1991
to present); Vice President, Secretary and
Date of birth: 4/3/50 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).
Name, Address and Position with Principal Occupation During Past 5 Years
Trust <C>
<S>
THOMAS R. SCHNEEWEIS Professor of Finance (1985 to present),
University of Massachusetts School ofAssociate Professor of Finance (1980-1985),
Management Ph.D. Director (Acting) (1985 to 1986),
Amherst, MA 01003 Chairman (Acting) Department of General
Trustee Business and Finance (1981-1982), and
Assistant Professor of Finance (1977-1980),
Date of birth: 5/10/47 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 Funds,
40 Richards Avenue L.P. (September 1994 to present); Director of
Norwalk, CT 06854 Marketing, Hyperion Capital Management, Inc.
Vice President (June 1993 to June 1994); Senior Vice
President and Chief Investment Officer,
Date of birth: 1/18/55 Greenwich Asset Management, Inc. (April 1989
to June 1993).
Director of Operations, The Managers Funds,
DONALD S. RUMERY L.P. (December 1994 to present)
40 Richards Avenue Vice President, Signature Financial Group
Norwalk, CT 06854 (March 1990 to December 1994)
Secretary, Treasurer (Principal Financial andVice President, The Putnam
Companies (August
Accounting Officer) 1980 to March 1990).
Date of birth: 5/29/58
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to Present) and
40 Richards Avenue Assistant Vice President (July 1986 to June
Norwalk, CT 06854 1992), The Managers Funds, L.P.; Accountant,
Assistant Treasurer Gintel Co. (June 1980 to June 1986).
Date of birth: 3/31/56
PETER M. McCABE Portfolio Administrator, The Managers Funds,
40 Richards Avenue L.P. (August 1995 to present); Portfolio
Norwalk, CT 06854 Administrator, Oppenheimer Capital, L.P.
Assistant Treasurer (July 1994 to August 1995); College Student
(September 1990 to June 1994).
Date of birth: 9/8/72
</TABLE>
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, 1996:
<TABLE>
<CAPTION>
Aggregate Total Compensation
from
Compensation Registrant and
Fund
Name of Trustee from Fund Complex Paid to
Trustees
<S> <C> <C>
William W. Graulty $520 $12,250
Madeline H. McWhinney 550 13,000
Steven J. Paggioli 550 13,000
Thomas R. Schneeweis 550 13,000
</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, their principal
occupations during the past five years and dates of birth are set forth
below.
Frederick S. Addy - Trustee; Retired; Executive Vice President and Chief
Financial Officer since prior to April 1994, Amoco Corporation. His address
is 5300 Arbutus Cove, Austin, TX 78746. Birthdate January 1, 1932.
William G. Burns - Trustee; Retired; Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL
32779. Birthdate November 2, 1932.
Arthur C. Eschenlauer - Trustee; Retired: Former Senior Vice President,
Morgan Guaranty Trust Company of New York. 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 prior to 1992. His address is Pine
Tree Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL 33436.
Birthdate August 23, 1937.
Michael P. Mallardi - Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc., and President, Broadcast Group, since prior to April 1996.
His address is 10 Charnwood Drive, Suffern, NY 10910. Birthdate March 17,
1934.
(1) Mr. Healey is an "interested person" of the Portfolio as that term is
defined in the 1940 Act.
Each Trustee of the Portfolio is currently paid an annual fee of $65,000
for serving as Trustee of the Portfolio as well as 18 other investment
companies which are affiliated with the Advisor and is reimbursed for
expenses incurred in connection with service as a Trustee. The Trustees may
hold various other directorships unrelated to these funds. Trustee
compensation expenses accrued by the Portfolio for the calendar year ended
December 31, 1996 are set forth below.
<TABLE>
<CAPTION>
Aggregate Total
Trustee
Trustee Compensation
Accrued by
Compensation the Master
Portfolios*, The
Accrued by the JPM Pierpont
Funds and JPM
Name of Trustee Portfolio during 1996 Institutional
Funds during
1996***
<S> <C> <C>
Frederick S. Addy, Trustee$11,349 $65,000
William G. Burns, Trustee 11,349 65,000
Arthur C. Eschenlauer, Trustee11,349 65,000
Matthew Healey, Trustee, 11,349 65,000
Chairman and Chief Executive
Officer**
Michael P. Mallardi, Trustee11,349 65,000
</TABLE>
*Includes the Portfolio, the Federal Money Market Portfolio, the Tax Exempt
Money Market Portfolio, the Short Term Bond Portfolio, the U.S. Fixed Income
Portfolio, the Tax Exempt Bond Portfolio, the New York Total Return Bond
Portfolio, the U.S. Equity Portfolio, the U.S. Small Company Portfolio, the
International Equity Portfolio, the Emerging Markets Equity Portfolio, the
Diversified Portfolio, the Non-U.S. Fixed Income Portfolio, the Series
Portfolio and Series Portfolio II (collectively the "Master Portfolios").
**During 1996, 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 $21,500 in
insurance premiums for his benefit.
***No investment company within the Portfolio's fund complex has a pension or
retirement plan. Currently, there are 18 investment companies (15 investment
companies comprising the Master Portfolios, The JPM Pierpont Funds, The JPM
Institutional Funds and JPM Series Trust) in the Portfolio's fund complex.
The Trustees of the Portfolio, in addition to reviewing actions of the
Portfolio's various service providers, decide upon matters of general policy.
The Portfolio has entered into a Portfolio Fund Services Agreement with
Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities over the affairs of the Portfolio. Pierpont
Group, Inc. was organized in July 1989 to provide services for The Pierpont
Family of Funds, and the Trustees of the Portfolio are the equal and sole
shareholders of Pierpont Group, Inc. The Portfolio has agreed to pay
Pierpont Group, Inc. a fee in an amount approximating its reasonable costs in
performing these services to the Portfolio and certain other registered
investment companies subject to similar agreements with Pierpont Group, Inc.
These costs are periodically reviewed by the Trustees.
The aggregate fees paid to Pierpont Group, Inc. by the Portfolio during
the fiscal year ended November 30, 1994, November 30, 1995 and November 30,
1996 were $246,089, $261,045 and $157,428, respectively.
The Portfolio's executive officers (listed below), other than the Chief
Executive Officer, are provided and compensated by Funds Distributor, Inc.
("FDI"), a wholly-owned indirect subsidiary of Boston Institutional Group,
Inc. The Portfolio's officers conduct and supervise the business operations
of the Portfolio. The Portfolio has no employees.
Officers of the Portfolio
The officers of the Portfolio, their principal occupations during the
past five years and dates of birth are set forth below. The business address
of each of the officers unless otherwise noted is Funds Distributor, Inc., 60
State Street, Suite 1300, Boston, Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group, since
prior to 1992. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. His date of birth is August 23, 1937.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI,
Premier Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual")
and an officer of certain investment companies advised or administered by the
Dreyfus Corporation ("Dreyfus") or its affiliates. From December 1991 to
July 1994, she was President and Chief Compliance Officer of FDI. Her date
of birth is August 1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant
Vice President and Manager of Treasury Services and Administration of FDI and
an officer of certain investment companies advised or administered by Dreyfus
or its affiliates. Prior to April 1997, Mr. Conroy was Supervisor of
Treasury Services and Administration of FDI. From April 1993 to January
1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust
Company. Prior to March 1993, Mr. Conroy was employed as a fund accountant
at The Boston Company, Inc. His date of birth is March 31, 1969.
JACQUELINE HENNING; Assistant Secretary and Assistant Treasurer of the
Portfolios only. Managing Director, State Street Cayman Trust Company, Ltd.
since October 1994. Prior to October 1994, Mrs. Henning was head of mutual
funds at Morgan Grenfell in Cayman and for five years was Managing Director
of Bank of Nova Scotia Trust Company (Cayman) Limited from September 1988 to
September 1993. Address: P.O. Box 2508 GT, Elizabethan Square, 2nd Floor,
Shedden Road, George Town, Grand Cayman, Cayman Islands. Her date of birth
is March 24, 1942.
RICHARD W. INGRAM; President and Treasurer. Executive Vice President
and Director of Client Services and Treasury Administration of FDI, Senior
Vice President of Premier Mutual and an officer of RCM Capital Funds, Inc.,
RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and
certain investment companies advised or administered by Dreyfus or Harris
Trust and Savings Bank ("Harris") or their respective affiliates. Prior to
April 1997, Mr. Ingram was Senior Vice President and Director of Client
Service and Treasury Administration of FDI. From March 1994 to November
1995, Mr. Ingram was Vice President and Division Manager of First Data
Investor Services Group, Inc. From 1989 to 1994, Mr. Ingram was Vice
President, Assistant Treasurer and Tax Director - Mutual Funds of The Boston
Company, Inc. His date of birth is September 15, 1955.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant
Vice President of FDI and an officer of RCM Capital Funds, Inc. and RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and
Harris or their respective affiliates. From June 1994 to January 1996, Ms.
Jacoppo-Wood was a Manager, SEC Registration, Scudder, Stevens & Clark, Inc.
From 1988 to May 1994, Ms. Jacoppo-Wood was a senior paralegal at The Boston
Company Advisors, Inc. ("TBCA"). Her date of birth is December 29, 1966.
ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Vice
President and Senior Counsel of FDI and Premier Mutual and an officer of RCM
Capital Funds, Inc. RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or
administered by Dreyfus or Harris or their respective affiliates. Prior to
August 1996, Ms. Keeley was Assistant Vice President and Counsel of FDI and
Premier Mutual. Prior to September 1995, Ms. Keeley was enrolled at Fordham
University School of Law and received her JD in May 1995. Address: 200 Park
Avenue, New York, New York 10166. Her date of birth is September 14, 1969.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI and Premier Mutual and an
officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Harris or its affiliates.
From April 1994 to July 1996, Mr. Kelley was Assistant Counsel at Forum
Financial Group. From 1992 to 1994, Mr. Kelley was employed by Putnam
Investments in legal and compliance capacities. His date of birth is
December 24, 1964.
LENORE J. MCCABE; Assistant Secretary and Assistant Treasurer of the
Portfolios only. Assistant Vice President, State Street Bank and Trust
Company since November 1994. Assigned as Operations Manager, State Street
Cayman Trust Company, Ltd. since February 1995. Prior to November, 1994,
employed by Boston Financial Data Services, Inc. as Control Group Manager.
Address: P.O. Box 2508 GT, Elizabethan Square, 2nd Floor, Shedden Road,
George Town, Grand Cayman, Cayman Islands. Her date of birth is May 31,
1961.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President
and Manager of Treasury Services and Administration of FDI and Premier
Mutual, an officer of RCM Capital Funds, Inc. RCM Equity Funds, Inc.,
Waterhouse Investors Cash Management Fund, Inc. and certain investment
companies advised or administered by Dreyfus or Harris or their respective
affiliates. From 1989 to 1994, Ms. Nelson was an Assistant Vice President
and client manager for The Boston Company, Inc. Her date of birth is April
22, 1964.
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of FDI and Premier Mutual and an officer
of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or
administered by Dreyfus or Harris or their respective affiliates. From
February 1992 to April 1994, Mr. Pelletier served as Counsel for TBCA. His
date of birth is June 24, 1964.
MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior
Vice President and Director of Strategic Client Initiatives for FDI since
December 1996. From December 1989 through November 1996, Mr. Petrucelli was
employed with GE Investments where he held various financial, business
development and compliance positions. He also served as Treasurer of the GE
Funds and as Director of GE Investment Services. Address: 200 Park Avenue,
New York, New York, 10166. His date of birth is May 18, 1961.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Executive
Vice President, Treasurer and Chief Financial Officer, Chief Administrative
Officer and Director of FDI. Senior Vice President, Treasurer and Chief
Financial Officer, Chief Administrative Officer and Director of Premier
Mutual and an officer of Waterhouse Investors Cash Management Fund, Inc. and
certain investment companies advised or administered by Dreyfus or its
affiliates. Prior to 1997, Mr. Tower was Senior Vice President, Treasurer
and Chief Financial Officer, Chief Administrative Officer and Director of
FDI. From July 1988 to November 1993, Mr. Tower was Financial Manager of The
Boston Company, Inc. His date of birth is June 13, 1962.
IV. MANAGEMENT OF THE FUND AND THE PORTFOLIO
INVESTMENT ADVISOR AND ADMINISTRATIVE SERVICES AGENT
The investment advisor to the Portfolio is Morgan Guaranty Trust Company
of New York ("Morgan" or the "Advisor"), a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized
under the laws of the State of Delaware. The Advisor, 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. The Advisor 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, the Advisor offers a wide range of services, primarily to
governmental, institutional, corporate and individual customers in the United
States and throughout the world.
The investment advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Advisory Agreement. The Advisor is
free to and does render similar investment advisory services to others. The
Advisor 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 the Advisor serves as trustee.
The accounts which are managed or advised by the Advisor have varying
investment objectives and the Advisor 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 the Advisor who may also
be acting in similar capacities for the Portfolio. See "Portfolio
Transactions."
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 $234 billion.
J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as financial advisor to
national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
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 over 100 full-time
research analysts, among the largest research staffs in the money management
industry, 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 benchmark with the emphasis
on security selection as the method to achieve investment performance
superior to the benchmark. The benchmark for the Portfolio in which the Fund
invests is currently IBC Financial Data, Inc.'s Tier-One Money Fund Average.
J. P. Morgan Investment Management Inc., also 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 the Advisor on investment of the
commingled pension trust funds.
The Portfolio is managed by officers of the Advisor 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 the Advisor or with any of its affiliated persons, with the
exception of J. P. Morgan Investment Management Inc. and certain other
investment management affiliates of J.P. Morgan.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Advisory
Agreement, the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.20% of
the Portfolio's average daily net assets up to $1 billion and 0.10% of net
assets in excess of $1 billion.
The advisory fees paid by the Portfolio to the Advisor are as follows:
For the fiscal year ended November 30, 1994: $3,423,576. For the fiscal year
ended November 30, 1995: $3,913,479. For the fiscal year ended November 30,
1996: $4,503,793.
The Investment Advisory Agreement provides that it will continue in
effect for a period of two years after execution only if specifically
approved thereafter annually. The Investment Advisory Agreement will
terminate automatically if assigned and is terminable at any time without
penalty by a vote of a majority of the Portfolio's Trustees, or by a vote of
the holders of a majority of the Portfolio's outstanding voting securities,
on 60 days' written notice to the Advisor and by the Advisor on 90 days'
written notice to the Portfolio. See "Additional Investment Information and
Risk Factors."
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 the Advisor 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. The Advisor 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, it 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 the Advisor from continuing to
perform such services for the Portfolio.
If the Advisor were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio would recommend
to investors that they approve the Portfolio entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Morgan also provides other services to the Portfolio outside the scope
of the Advisory Agreement. The Portfolio has entered into an Administrative
Services Agreement (the "Services Agreement") with Morgan effective December
29, 1995, as amended effective August 1, 1996, pursuant to which Morgan is
responsible for certain administrative and related services provided to the
Portfolio. The Services Agreement may be terminated at any time, without
penalty, by the Portfolio's Trustees or Morgan, in each case on not more than
60 days' nor less than 30 days' written notice to the other party.
Under the amended Services Agreement, the Portfolio has agreed to pay
Morgan fees equal to the Portfolio's allocable share of an annual complex-
wide charge. This charge is calculated daily based on the aggregate net
assets of the Master Portfolios and JPM Series Trust in accordance with the
following annual schedule: 0.09% of the first $7 billion of their aggregate
average daily net assets and 0.04% of their average daily net assets in
excess of $7 billion, less the complex-wide fees payable to FDI. The portion
of this charge payable the Portfolio is determined by the proportionate share
that its net assets bear to the total net assets of The JPM Pierpont Funds,
The JPM Institutional Funds, the Master Portfolios, the other investors in
the Master Portfolios for which Morgan provides similar services and JPM
Series Trust.
Under Administrative Services Agreements in effect from December 29,
1995 through July 31, 1996, with Morgan, the Portfolio paid Morgan a fee
equal to its proportionate share of an annual complex-wide charge. This
charge was calculated daily based on the aggregate net assets of the Master
Portfolios in accordance with the following schedule: 0.06% of the first $7
billion of the Master Portfolios' aggregate average daily net assets, and
0.03% of the Master Portfolios' average daily net assets in excess of $7
billion.
Prior to December 29, 1995, the Portfolio had entered into a Financial
and Fund Accounting Services Agreement with Morgan, the provisions of which
included certain of the 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 are as follows:
For the fiscal year ended November 30, 1994: $385,012. For the fiscal year
ended November 30, 1995: $373,077. For the fiscal year ended November 30,
1996: $891,730.
PORTFOLIO CO-ADMINISTRATOR AND EXCLUSIVE PLACEMENT AGENT
FDI serves as the Portfolio's exclusive placement agent. Under a Co-
Administration Agreement dated August 1, 1996, FDI also serves as the
Portfolio's Co-Administrator. The Co-Administration Agreement may be renewed
or amended by the Portfolio's Trustees without a shareholder vote. The Co-
Administration Agreement is terminable at any time without penalty by a vote
of a majority of the Portfolio's Trustees on not more than 60 days' written
notice nor less than 30 days' written notice to the other party. The Co-
Administrator may subcontract for the performance of its obligations,
provided, however, that unless the Portfolio expressly agrees in writing, the
Co-Administrator shall be fully responsible for the acts and omissions of any
subcontractor as it would for its own acts or omissions. See "Investment
Advisor and Administrative Services Agent" above.
For its services under the Co-Administration Agreement, the Portfolio
has agreed to pay FDI fees equal to its allocable share of an annual complex-
wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to the Portfolio is based on the ratio of its net assets to the
aggregate net assets of The JPM Pierpont Funds, The JPM Institutional Funds,
the Master Portfolios, JPM Series Trust and JPM Series Trust II.
The administrative fees paid to Signature Broker-Dealer Services, Inc.
(which provided placement agent and administrative services to the Portfolio
prior to August 1, 1996) since the Portfolio's commencement of operations are
as follows: For the period July 12, 1993 (commencement of operations)
through November 30, 1993: $32,869. For the fiscal year ended November 30,
1994: $165,519. For the fiscal year ended November 30, 1995: $176,717. For
the Period December 1, 1995 through July 31, 1996: $272,989. The fees paid
to FDI for the period August 1, 1996 through November 30, 1996 were $33,012.
FUND ADMINISTRATOR
The Trust has separately retained the services of The Managers Funds,
L.P. as administrator (the "Fund Administrator"). The Fund has agreed to pay
the Fund Administrator and shareholder servicing agent for the Fund a fee of
0.25% of the Fund's average daily net assets for these services. The Fund
Administrator is currently waiving all of this fee through at least May 31,
1996. See "Management of the Fund and the Portfolio-Fund Administrator" in
the Prospectus and "Expenses" below.
DISTRIBUTOR
The Managers Funds, L.P. also serves as distributor (the "Distributor")
in connection with the offering of the Money Market Fund's shares on a no-
load basis. The Distributor bears certain expenses associated with the
distribution and sale of shares of the Fund. The Distributor acts as agent
in arranging for the sale of the Fund's shares without sales commission or
other compensation and bears all advertising and promotion expenses incurred
in the sale of shares.
The Distribution Agreement between the Trust, on behalf of the Fund, and
the Distributor may be terminated by either party under certain specified
circumstances and will automatically terminate on assignment. The
Distribution Agreement may be continued annually if specifically approved by
the Trust's Trustees or by a vote of the Fund's outstanding shares, including
a majority of the Trustees who are not "interested persons" of the Trust or
the Distributor, as such term is defined in the 1940 Act, cast in person at a
meeting called for the purpose of voting such approval.
V. CUSTODIAN, TRANSFER AGENT AND INDEPENDENT PUBLIC ACCOUNTANTS
State Street Bank and Trust Company ("State Street"), 1776 Heritage
Drive, Quincy, Massachusetts 02171, serves as the Trust's and the Portfolio's
custodian and fund accounting agent and the Trust's dividend disbursing
agent. Pursuant to the Custodian Contract with the Portfolio, the Custodian
is responsible for maintaining the books of account and records of portfolio
transactions and holding portfolio securities and cash.
Boston Financial Data Services, Inc. serves as the Transfer Agent for
the Fund. The independent accountants of the Fund are Coopers & Lybrand
L.L.P., One Post Office Square, Boston, Massachusetts 02109.
The independent accountants of the Portfolio are Price Waterhouse LLP,
1177 Avenue of the Americas, New York, New York 10036.
VI. EXPENSES
From time to time, the Fund Administrator may agree voluntarily to waive
all or a portion of the fee it would otherwise be entitled to receive from
the Fund. The Fund Administrator may decide to waive all or a portion of its
fees from the Fund for such reasons as attempting to make the Fund's
performance more competitive as compared to similar funds. The effect of the
fee waivers in effect at the date of this Statement of Additional Information
on the fees payable by the Fund is reflected in the Illustrative Expense
Information located in the front of the Fund's Prospectus. Existing
voluntary fee waivers by the Fund Administrator may be terminated or reduced
in amount at any time, and solely at the discretion of the Fund
Administrator. Shareholders will be notified of any change at the time that
it becomes effective.
In addition to the fees payable to Pierpont Group, Inc., Morgan and FDI
under the various agreements discussed above, the Portfolio is responsible
for usual and customary expenses associated with its operations. Such
expenses include organization expenses, legal fees, accounting expenses,
insurance costs, the compensation and expenses of the Portfolio's Trustees,
registration fees under federal and foreign securities laws, extraordinary
expenses, custodian fees and brokerage expenses. Under fee arrangements
prior to September 1, 1995, Morgan was responsible for reimbursements to the
Portfolio for the fee of the Portfolio's Administrator and the Portfolio's
usual and customary expenses described above (excluding organization and
extraordinary expenses, custodian fees and brokerage expenses).
VII. 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.
VIII. 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, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. In the event that trading in the money
markets is scheduled to end earlier than the close of the New York Stock
Exchange in observance of these holidays, the Fund and the Portfolio would
expect to close for purchases and redemptions an hour in advance of the end
of trading in the money markets. The Fund and the Portfolio may also close
for purchases and redemptions at such other times as may be determined by the
respective Boards of Trustees to the extent permitted by applicable law. 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 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) less the
Fund's liabilities.
IX. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 24, 1997, two shareholders, Benefits Resources, and
William and Rita Matherson, each held 6% of the outstanding shares of the
Fund.
X. 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, 1996, the current yield
and effective yield of the Money Market Fund were 5.24% and 5.38%,
respectively. These figures reflect expense reimbursements in effect during
the relevant time period. In the absence of such reimbursement, these
figures would have been 5.03% and 5.16%, 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, 1996, the Money Market Fund's
annualized one-, five- and ten-
year total returns were 5.47%, 3.93% and 5.48%, respectively.
Aggregate total returns, reflecting the cumulative percentage change
over a measuring period, may also be calculated.
GENERAL. The Fund's performance will vary from time to time depending
upon market conditions, the composition of the Portfolio, and its total
operating expenses. Consequently, any given performance quotation should not
be considered representative of the Fund's performance for any specified
period in the future. In addition, because performance will fluctuate, it
may not provide a basis for comparing an investment in the Fund with certain
bank deposits or other investments that pay a fixed yield or return for a
stated period of time.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical
Services, Inc., Micropal, Inc., Ibbotson Associates, IBC Financial Data, Inc.
and Morningstar Inc.
XI. 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.
XII. PORTFOLIO TRANSACTIONS
Morgan places orders for the Portfolio for all purchases and sales of
portfolio securities, enters into repurchase agreements and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Portfolio. See "Investment Objective and Policies."
Fixed income and debt securities and municipal bonds and notes 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
Portfolio'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, Morgan
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 Co-Administrator or Advisor or the Fund's
Administrator or Distributor or any other "affiliated person" as defined in
the 1940 Act, of the Administrators, Distributor or Advisor when such
entities are acting as principals, except to the extent permitted by law. In
addition, the Portfolio will not purchase securities during the existence of
any underwriting group relating thereto of which the Advisor or an affiliate
of the Advisor is a member, except to the extent permitted by law.
On those occasions when Morgan deems the purchase or sale of a security
to be in the best interests of the Portfolio as well as other customers
including other investment companies managed by Morgan or its affiliate,
Morgan, 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 Morgan 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.
XIII. 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. A loss may be
disallowed on the sale of shares of the Fund to the extent the shareholder
acquired other Fund shares within 30 days prior to the sale of the loss
shares or 30 days after such sale.
Dividends and other distributions by the Fund may also be subject to
state and/or local taxes. Shareholders should consult with their own tax
advisers concerning the foregoing state and local tax consequences of
investing in the Fund. Additionally, shareholders who are foreign persons
should consult with their own tax advisers concerning the foreign tax
consequences of investing in the Fund.
Under the federal income tax law, the Fund will be required to report to
the Internal Revenue Service all distributions of taxable income and capital
gains as well as gross proceeds from all redemptions of the shares except in
the case of certain exempt shareholders. Under the backup withholding
provisions of the Code, such distributions and redemption proceeds may be
subject to the withholding of federal income tax at the rate of 31% in the
case of non-exempt shareholders who fail to furnish the Fund with their
correct taxpayer identification numbers and with required certifications
regarding their status under the federal income tax law, or with respect to
those shareholders whom the Internal Revenue Service notifies the Fund of
certain of the non-compliance. If these withholding provisions are
applicable, any distributions to, and proceeds received by, shareholders,
whether taken in cash or reinvested in shares, will be reduced by the amounts
required to be withheld.
The Code imposes a four percent nondeductible excise tax on each RIC
with respect to the amount, if any, by which it does not meet distribution
requirements specified under such tax law. The Fund intends to comply with
such distribution requirements and thus does not expect to incur the four
percent nondeductible excise tax although it may not be possible for the Fund
to avoid this tax in all instances.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility
that distributions may be subject to a 30% U.S. withholding tax (or a reduced
rate of withholding provided by treaty).
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. For the
complete provisions, reference would be made to the pertinent Code sections
and the Treasury Regulations promulgated thereunder. The above discussion
covers only federal income tax considerations with respect to the Fund and
its shareholders. Foreign, state and local tax laws vary greatly.
Shareholders should consult their own tax advisers for more information
regarding the federal, foreign, state, and local tax treatment of the Fund's
distributions to shareholders and with respect to their own tax situation.
XIV. FINANCIAL STATEMENTS
The audited Financial Statements and the Notes thereto for the Fund, and
the Report of Independent Accountants 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, 1996. The
unaudited Financial Statements for the Fund are herein incorporated by
reference from the Managers Money Market Fund Semi-Annual Report dated May
31, 1997.
The Portfolio's audited Financial Statements and the Notes thereto at
November 30, 1996, the Portfolio's unaudited Financial Statements at May 31,
1997, and the report of Price Waterhouse LLP, independent accountants, are
herein incorporated by reference from the Portfolio's filing with the SEC
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S:
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA
has the highest ratings assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - 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.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB
is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal for debt
in this category than for debt in higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designations 1, 2, and 3 to indicate the relative degree of
safety.
A-1 - This designation
indicates that the degree of safety regarding timely payment is very
strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest rating
assigned by Standard & Poor's and has a very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a "plus" (+)
designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory
capacity to pay principal and interest.
<PAGE>MOODY'S:
CORPORATE AND MUNICIPAL BONDS
Aaa - Bonds which are
rated Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa - Bonds which are
rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced
by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on 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.
-- Well established access to a range of financial markets and
assured sources of alternate liquidity.
<PAGE>
SHORT-TERM TAX EXEMPT NOTES
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes
with this rating enjoy strong protection from established cash
flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of
protection not as large as MIG-1.
THE MANAGERS FUNDS POST-EFFECTIVE
AMENDMENT NO. 40 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:
Income Equity Fund
Capital Appreciation 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, 1996 (November 30,
1996, with respect to Managers Money Market Fund); and for six
months ended June 30, 1997 (unaudited) (six months ended May
31, 1997, with respect to Managers Money Market Fund
(unaudited))
Part B:
With reference to each of The Managers:
Income Equity Fund
Capital Appreciation 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
At December 31, 1996 (audited) and with respect to Managers
Money Market Fund, at November 30, 1996 (audited) and the
period ended June 30, 1997 (unaudited); and for six months
ended June 30, 1997 (unaudited) (six months ended May 31,
1997, with respect to Managers Money Market Fund (unaudited)):
Schedule of Investments
Statement of Assets and Liabilities
For the fiscal year ended December 31, 1996 (audited) and with
respect to Managers Money Market Fund, at November 30, 1996
(audited); and six months ended June 30, 1997 (unaudited) (six
months ended May 31, 1997, with respect to Managers Money
Market Fund (unaudited)):
Statement of Changes in Net Assets
For the fiscal years ended December 31, 1996 (audited) and
December 31, 1995 (audited), and with respect to Managers Money
Market Fund, for the fiscal year ended November 30, 1996 and
for the eleven months ended November 30, 1995 (audited); and
six months ended June 30, 1997 (unaudited) (six months ended
May 31, 1997, with respect to Managers Money Market Fund
(unaudited)):
Statement of Operations
Notes to Financial Statements
For the fiscal years (or portions thereof) from commencement of
operations to December 31, 1996 (audited) and with respect to
Managers Money Market Fund, for the fiscal year ended November
30, 1996 (audited); and six months ended June 30, 1997
(unaudited) (six months ended May 31, 1997, with respect to
Managers Money Market Fund (unaudited)):
Financial Highlights
With respect to The Prime Money Market Portfolio:
At November 30, 1996 (audited); and six months ended May 31,
1997, with respect to Managers Money Market Fund (unaudited):
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. 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.
Not Applicable
11.* Consent of Independent Accountants, Coopers & Lybrand
L.L.P.
12. Not Applicable.
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
Incorporated by reference to PEA 31.
(2)* Powers of Attorney for the Trustees and President and
Treasurer of The Prime
Money Market Portfolio:
Michael P. Mallardi
Frederick S. Addy
William G. Burns
Matthew Healey
Arthur C. Eschenlauer
Richard W. Ingram
- -------------
* 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 September 23, 1997, 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
Income Equity Fund 2,361
Capital Appreciation Fund 2,652
Special Equity Fund 10,855
International Equity Fund 6,548
Short Government Fund 719
Short and Intermediate Bond Fund 1,222
Intermediate Mortgage Fund 1,332
Bond Fund 1,951
Global Bond Fund 1,564
Money Market Fund 1,462
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 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.
(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 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
Chartwell Investment Partners, L.P. - 801-54124
Husic Capital Management -- 801-27298
Essex Investment Management Company - 801-12548
Jennison Associates Capital Corp. -- 801-5608
Kern Capital Management, LLC -801-54766
Lazard Fr?res Asset Management -- 801-6568
Liberty Investment Management -- 801-21343
Loomis, Sayles & Company, Inc. -- 801-17000
Pilgrim Baxter Associates -- 801-19165RC
Rogge Global Partners, Inc. -- 801-25482
Scudder, Stevens & Clark, Inc. -- 801-252
Standish, Ayer & Wood Inc. -- 801-584
Westport Asset Management, Inc. -- 801-21845
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)
(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 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.
(d) The Registrant will file a post-effective amendment, using financial
statements which may not be certified, within four to six months of the
effective date of this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant 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 14th day of October, 1997.
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 President October 14, 1997
Robert P. Watson (Principal Executive Officer)
/s/ Donald S. Rumery Principal Financial andOctober 14, 1997
Donald S. Rumery Accounting Officer
/s/ William W. GraultyTrustee October 14, 1997
William W. Graulty
/s/ Madeline H. McWhinneyTrustee October 14, 1997
Madeline H. McWhinney
/s/ Steven J. PaggioliTrustee October 14, 1997
Steven J. Paggioli
/s/ Thomas R. SchneeweisTrustee October 14,
Thomas R. Schneeweis 1997
SIGNATURES
The Prime Money Market Portfolio (the "Portfolio") has duly
caused this registration statement on Form N-1A ("Registration
Statement") of The Managers Funds (the "Trust") (File No. 2-84012) to be
signed on its behalf by the undersigned, thereto duly authorized, in the
City of George Town, Grand Cayman, on the 14th day of October, 1997.
THE PRIME MONEY MARKET PORTFOLIO
By:
/s/ Lenore J. McCabe
Lenore J. McCabe
Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in
the capacities indicated on October 14, 1997.
Richard W. Ingram*
- -------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of
the Portfolio
Matthew Healey*
- -------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive
Officer) of the Portfolio
Frederick S. Addy*
- -------------------------
Frederick 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/ Lenore J. McCabe
Lenore J. McCabe, as attorney-in-fact pursuant to a power of
attorney filed herewith.
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Managers Funds:
We consent to the inclusion in Post-Effective Amendment No. 40 to the
Registration Statement of The Managers Funds on Form N-1A (Securities
Act of 1933 File No. 2-84012) of our reports dated February 14, 1997
(except for Managers Money Market Fund which report is dated January 16,
1997) on our audits of the financial statements and the financial
highlights of: Managers Income Equity Fund, Managers Capital
Appreciation Fund, Managers Special Equity Fund, Managers International
Equity Fund, Managers Short Government Fund, Managers Short and
Intermediate Bond Fund, Managers Intermediate Mortgage Fund, Managers
Bond Fund, Managers Global Bond Fund and Managers Money Market Fund,
which reports are included in the Annual Reports to shareholders for the
year ended December 31, 1996, (except for Managers Money Market Fund
which is for the year ended November 30, 1996) and which reports are
also incorporated by reference in the Post-Effective Amendment to 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
October 15, 1997
Exhibit 18(2)
POWER OF ATTORNEY
The
undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C.
Conroy, Christopher J. Kelley, and Michael S. Petrucelli, Jacqueline
Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Pierpont Funds, The JPM Institutional Funds,
or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other
investor in any separate registered investment company (each such
separate registered investment company, a "Portfolio") in which the JPM
Pierpont Funds or JPM Institutional Funds invest, in either case with
the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended; and
(iii) any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust and Portfolio to
comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the corporate, securities or
Blue Sky laws of any state or other jurisdiction, and the undersigned
hereby ratifies and confirms as his own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and
may exercise, all of the powers hereby conferred.
IN WITNESS
WHEREOF, the undersigned has hereunto set his hand this 8th day of
October, 1997, in Hamilton, Bermuda.
/s/ Frederick S. Addy
Frederick S. Addy
POWER OF ATTORNEY
The
undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C.
Conroy, Christopher J. Kelley, and Michael S. Petrucelli, Jacqueline
Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Pierpont Funds, The JPM Institutional Funds,
or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other
investor in any separate registered investment company (each such
separate registered investment company, a "Portfolio") in which the JPM
Pierpont Funds or JPM Institutional Funds invest, in either case with
the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended; and
(iii) any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust and Portfolio to
comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the corporate, securities or
Blue Sky laws of any state or other jurisdiction, and the undersigned
hereby ratifies and confirms as his own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and
may exercise, all of the powers hereby conferred.
IN WITNESS
WHEREOF, the undersigned has hereunto set his hand this 8th day of
October, 1997, in Hamilton, Bermuda
/s/ William G. Burns
William G. Burns
POWER OF ATTORNEY
The
undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C.
Conroy, Christopher J. Kelley, and Michael S. Petrucelli, Jacqueline
Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Pierpont Funds, The JPM Institutional Funds,
or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other
investor in any separate registered investment company (each such
separate registered investment company, a "Portfolio") in which the JPM
Pierpont Funds or JPM Institutional Funds invest, in either case with
the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended; and
(iii) any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust and Portfolio to
comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the corporate, securities or
Blue Sky laws of any state or other jurisdiction, and the undersigned
hereby ratifies and confirms as his own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and
may exercise, all of the powers hereby conferred.
IN WITNESS
WHEREOF, the undersigned has hereunto set his hand this 8th day of
October, 1997, in Hamilton, Bermuda.
/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer
POWER OF ATTORNEY
The
undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C.
Conroy, Christopher J. Kelley, and Michael S. Petrucelli, Jacqueline
Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Pierpont Funds, The JPM Institutional Funds,
or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other
investor in any separate registered investment company (each such
separate registered investment company, a "Portfolio") in which the JPM
Pierpont Funds or JPM Institutional Funds invest, in either case with
the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended; and
(iii) any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust and Portfolio to
comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the corporate, securities or
Blue Sky laws of any state or other jurisdiction, and the undersigned
hereby ratifies and confirms as his own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and
may exercise, all of the powers hereby conferred.
IN WITNESS
WHEREOF, the undersigned has hereunto set his hand this 8th day of
October, 1997, in Hamilton, Bermuda.
/s/ Matthew Healey
Matthew Healey
POWER OF ATTORNEY
The
undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C.
Conroy, Christopher J. Kelley, and Michael S. Petrucelli, Jacqueline
Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Pierpont Funds, The JPM Institutional Funds,
or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other
investor in any separate registered investment company (each such
separate registered investment company, a "Portfolio") in which the JPM
Pierpont Funds or JPM Institutional Funds invest, in either case with
the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended; and
(iii) any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust and Portfolio to
comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the corporate, securities or
Blue Sky laws of any state or other jurisdiction, and the undersigned
hereby ratifies and confirms as his own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and
may exercise, all of the powers hereby conferred.
IN WITNESS
WHEREOF, the undersigned has hereunto set his hand this 8th day of
October, 1997, in Hamilton, Bermuda.
/s/ Michael P. Mallardi
Michael P. Mallardi
POWER OF ATTORNEY
The
undersigned hereby constitutes and appoints Matthew Healey, Richard W.
Ingram, Marie E. Connolly, Joseph F. Tower III, John E. Pelletier,
Elizabeth A. Keeley, Karen Jacoppo-Wood, Mary A. Nelson, Douglas C.
Conroy, Christopher J. Kelley, and Michael S. Petrucelli, Jacqueline
Henning and Lenore J. McCabe, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in
his name and on his behalf in any and all capacities (i) the
Registration Statements on Form N-1A, and any and all amendments
thereto, filed by The JPM Pierpont Funds, The JPM Institutional Funds,
or JPM Series Trust (each a "Trust"); (ii) the Registration
Statement(s), and any and all amendments thereto, filed by any other
investor in any separate registered investment company (each such
separate registered investment company, a "Portfolio") in which the JPM
Pierpont Funds or JPM Institutional Funds invest, in either case with
the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended; and
(iii) any and all instruments which such attorneys and agents, or any of
them, deem necessary or advisable to enable each Trust and Portfolio to
comply with such Acts, the rules, regulations and requirements of the
Securities and Exchange Commission, and the corporate, securities or
Blue Sky laws of any state or other jurisdiction, and the undersigned
hereby ratifies and confirms as his own act and deed any and all acts
that such attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof. Any one of such attorneys and agents have, and
may exercise, all of the powers hereby conferred.
IN WITNESS
WHEREOF, the undersigned has hereunto set his hand this 8th day of
October, 1997, in Hamilton, Bermuda.
/s/ Richard W. Ingram
Richard W. Ingram
The Managers Funds
40 Richards Avenue
Norwalk, CT 06854
(203)857-5321
October 15, 1997
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: The Managers Funds Post-Effective Amendment 40
to Registration Statement on Form N-1A
File Nos. 2-84012 and 811-3752
Commissioners:
We are hereby filing Post Effective Amendment No. 40 to The Managers
Funds' (the "Trust") Registration Statement on Form N-1A (the
"Amendment") under the Securities Act of 1933 (the "1933 Act") and the
Investment Company Act of 1940.
The Amendment is being filed pursuant to paragraph (a) of Rule 485 under
the 1933 Act to add a new Fund in the Trusts' series (the "Emerging
Markets Equity Fund") and to add a new sub-adviser to the Special Equity
Fund and the Income Equity Fund.
Should you have any questions on this filing, please feel free to call
the undersigned at (203)857-5321, or Judith L. Shandling, of Shereff,
Friedman, Hoffman and Goodman, LLP at (212)891-9459.
Sincerely,
/s/Donald S. Rumery
Donald S. Rumery
Secretary
cc: Judith L. Shandling, Esq.
_______________________________
1Trustee who is an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act).
2Trustee who is an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act).
