As filed with the Securities and Exchange Commission on November 19,1997
_ 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. 41 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 43 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:
Joel H. Goldberg, Esq.
Donald S. Rumery Shereef, Friedman, Hoffman
The Managers Funds, L.P. & 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. 41
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 Illustrative Expense
Information Information; Financial
Highlights
Item 4. General Description of Summary; Investment
Registrant 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 Management of the Funds (Equity
Fund 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 Not Applicable
of Fund Performance
Item 6. Capital Stock and Purchase and Redemption of
Fund
Other Securities Shares; Description of Shares,
Voting Rights and Liabilities;
Tax Information
Item 7. Purchase of Securities Purchase and Redemption of Fund
Being Offered 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 Other Information
History
Item 13. Investment Objectives Investment Restrictions;
and Policies Investment Objectives and
Policies; Portfolio Turnover;
Other Information
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Trustees and Officers; Control
Principal Holders of Persons and Principal Holders
Securities of Securities
Item 16. Investment Advisory Management of the Funds; Fund
and Other Services Management Agreement; Asset
Manager Profiles; Investment
Advisor
Item 17. Brokerage Allocation Portfolio Securities
and Other Practices Transactions
Item 18. Capital Stock and Other Control Persons and Principal
Securities Holders of Securities
Item 19. Purchase, Redemption and Net Asset Value
Pricing of Securities Being
Offered
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 Performance Information;
Data Performance Data
Item 23. Financial Statements Financial Statements
Part C - Other Information
Information required to be included in Part C of the registration
statement is set forth under the appropriate Item, so numbered, in Part
C to this Post-Effective Amendment.
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 (after
expense waiver)*** .................... 0.00% 0.79% 0.79%
- --------------------
*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 are estimated based on estimated average net assets for the
current fiscal year ending December 31, 1998 of $50,000,000. The Management
Fee reflects a voluntary fee waiver by the Manager which is in effect until
March 31, 1998. In the absence of such a waiver, the maximum total
Management Fee and Total Operating Expenses payable by the Emerging Markets
Equity Fund would be 1.15% and 1.94%, respectively.
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*............... 8 25 -- ---
- -------------
* Reflects a voluntary fee waiver by the Manager which is in effect until March
31, 1998. In the absence of such a waiver, the 1 Year and 3 Years expenses
would be $16 and $57, respectively.
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 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 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $30.49 $28.43 $24.90 $27.89 $27.38 $28.62 $24.06
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (c) 0.39 0.76 0.87 0.80 0.81 0.99 1.11
Net realized and unrealized gain (loss)
on investments 4.17 3.97 7.47 (0.50) 2.54 1.72 5.82
------ ------ ------ ------ ------ ------ ------
Total from investment operations 4.56 4.73 8.34 0.30 3.35 2.71 6.93
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From investment income (0.40) (0.76) (0.86) (0.83) (0.76) (0.98) (1.20)
From net realized gain on investments -- (1.91) (3.95) (2.46) (2.08) (2.97) (1.17)
------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (0.40) (2.67) (4.81) (3.29) (2.84) (3.95) (2.37)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $34.65 $30.49 $28.43 $24.90 $27.89 $27.38 $28.62
====== ====== ====== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Total Return (d) 15.06% 17.08% 34.36% 0.99% 12.40% 9.80% 29.33%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.35%(b)(e) 1.44%(b) 1.45% 1.33% 1.32% 1.20% 1.16%
Ratio of net investment income to average
net assets(c) 2.46%(e) 2.63% 2.85% 3.06% 2.75% 3.52% 4.00%
Portfolio turnover 21%(f) 33% 36% 46% 41% 41% 64%
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 $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 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $26.34 $27.14 $23.25 $25.17 $24.67 $23.46 $19.99
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(c) (0.02) 0.09 0.09 0.12 0.19 0.08 0.25
Net realized and unrealized gain (loss)
on investments 1.35 3.66 7.62 (0.49) 3.80 2.39 6.10
------ ------ ------ ------ ------ ------ ------
Total from investment operations 1.33 3.75 7.71 (0.37) 3.99 2.47 6.35
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.10) (0.08) (0.12) (0.19) (0.07) (0.27)
From net realized gain on investments -- (4.45) (3.74) (1.39) (3.30) (1.19) (2.61)
In excess of net realized gain
on investments -- -- -- (0.04) -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders -- (4.55) (3.82) (1.55) (3.49) (1.26) (2.88)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $27.67 $26.34 $27.14 $23.25 $25.17 $24.67 $23.46
====== ====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------------------
Total Return(d) 5.09% 13.73% 33.39% (1.50)% 16.38% 10.50% 31.97%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.26%(b)(e) 1.33%(b) 1.36% 1.29% 1.18% 1.05% 1.31%
Ratio of net investment income to average
net assets(c) (0.13)%(e) 0.34% 0.31% 0.53% 0.74% 0.33% 1.07%
Portfolio turnover 134%(f) 172% 134% 122% 131% 175% 259%
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 $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 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $50.95 $43.34 $36.79 $38.90 $36.14 $34.49 $24.46
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.02 (0.00) (0.07) (0.01) 0.02 0.05 0.22
Net realized and unrealized gain (loss)
on investments 5.04 10.68 12.28 (0.76) 6.12 5.35 11.78
------ ------ ------ ------ ------ ------ ------
Total from investment operations 5.06 10.68 12.21 (0.77) 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 -- (3.07) (5.66) (1.34) (3.37) (3.70) (1.74)
------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders -- (3.07) (5.66) (1.34) (3.38) (3.75) (1.97)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $56.01 $50.95 $43.34 $36.79 $38.90 $36.14 $34.49
====== ====== ====== ====== ====== ====== ======
- ----------------------------------------------------------------------------------------------------------------------------
Total Return(d) 9.93% 24.75% 33.94% (1.99)% 17.05% 15.64% 49.26%
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.35%(f)(e) 1.43% 1.44% 1.37% 1.26% 1.29% 1.30%
Ratio of net investment income (loss) to
average net assets(c) 0.12%(e) (0.10)% (0.16)% (0.06)% 0.07% 0.14% 0.73%
Portfolio turnover 24%(g) 56% 65% 66% 45% 54% 70%
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 $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 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $43.69 $39.97 $36.35 $35.92 $26.52 $25.66 $22.09
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(c) 0.37 0.32 0.31 0.16 0.22 0.23 0.36
Net realized and unrealized gain (loss)
on investments 5.22 4.76 5.59 0.56 9.88 0.85 3.64
------ ------ ------ ------ ------ ------ ------
Total from investment operations 5.59 5.08 5.90 0.72 10.10 1.08 4.00
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.33) (0.13) (0.08) (0.29) (0.22) (0.36)
In excess of net investment income -- -- -- -- (0.11) -- --
From net realized gain on investments -- (1.03) (2.15) -- (0.30) -- (0.07)
In excess of net realized gain
on investments -- -- -- (0.21) -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders -- (1.36) (2.28) (0.29) (0.70) (0.22) (0.43)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $49.28 $43.69 $39.97 $36.35 $35.92 $26.52 $25.66
====== ====== ====== ====== ====== ====== ======
- ----------------------------------------------------------------------------------------------------------------------------
Total Return(d) 12.79% 12.77% 16.24% 2.00% 38.20% 4.25% 18.14%
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.47%(f)(e) 1.53% 1.58% 1.49% 1.47% 1.45% 1.69%
Ratio of net investment income to
average net assets(c) 1.75%(e) 0.97% 0.80% 0.60% 0.78% 0.97% 1.50%
Portfolio turnover 20%(g) 30% 73% 22% 46% 51% 158%
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 $62,273 $23,129 $14,222
============================================================================================================================
</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 $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.,
New York 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. HOWEVER, THE TIME UNTIL WHICH ORDERS ARE
ACCEPTED MAY BE CHANGED IN CASE OF AN EMERGENCY OR IF THE NYSE CLOSES AT A TIME
OTHER THAN 4:00 P.M. New York time. 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.
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<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.
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<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. HOWEVER, THE TIME AT WHICH
TRANSACTIONS AND SHARES ARE PRICED MAY BE CHANGED IN CASE OF AN EMERGENCY OR IF
THE NYSE CLOSES AT A TIME OTHER THAN 4:00 P.M. New York time. 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.
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<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.
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<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
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<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.
<TABLE>
TOTAL ASSET
MANAGEMENT MANAGEMENT
NAME OF FUND FEE FEE
<S> <C> <C>
------------ ---------- ----------
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 ....................... 0.00%* 0.75%
- ----------------
</TABLE>
* Reflects a voluntary fee waiver by the Manager which is in effect until
March 31, 1998. Absent such waiver, the Total Management Fee would be 1.15%.
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.
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<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.
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<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
Montgomery Asset Management, LLC ("Montgomery")--The firm is a Delaware
limited liability company. As of September 30, 1997, the firm had approximately
$10 billion assets under management. The firm's address is 101 California
Street,San Francisco, California 94111.
The Senior portfolio managers and principals are Josephine Jimenez, CPA,
Bryan Sudweeks, Ph.D, CPA, Angeline Ee, and Frank Chiang.
State Street Global Advisors ("State Street")--The firm is a division
of State Street Bank and Trust Company. As of September, 1997, the firm
had approximately $375 billion assets under management. The firm's address is
Two International Place, Boston, Massachusetts 02110.
Murray Davey and Ken King are the portfolio managers of that portion of
the Emerging Markets Equity Fund managed by State Street.
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.
A lawsuit seeking class action status has been filed against Managers
Intermediate Mortgage Fund, the Manager and the Trust, among other
defendants in the United States District Court for the District of Connecticut
in September, 1994. The plaintiffs seek unspecified damages based upon losses
alleged in the fund named above. The parties have now entered into an agreement
to settle all claims by the purported class. However, the settlement is subject
to court approval and certain other conditions, such as the minimum percentage
of class members agreeing to participate in the settlement. For these and
other reasons, there can be no assurance that the settlement will be
consummated. In addition, a
32
<PAGE>
non-class action lawsuit based on similar allegations has been filed by a
customer against certain of the defendants named in the class action lawsuit,
as well as Managers Short Government Fund and Managers Short and Intermediate
Bond Fund. The parties have now entered into an agreement to settle all claims
by this customer and the settlement is conditional on, among other things, the
settlement of the class action lawsuit. Certain other customers, who are
potentially members of the plaintiff class in
the class action lawsuit referred to above, have asserted that they may
file similar lawsuit 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 November 18, 1997, Resource Bank and Trust owned more than
24% 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 and the Managers International 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.
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<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
Montgomery Asset Management, LLC
State Street Global Advisors
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, YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------ ------------------------------------------
(UNAUDITED) 1996 1995(D) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.40 $17.76 $16.96 $19.35 $19.86 $20.35 $19.86 $19.96
------- ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.51 1.02 0.98 0.86 1.28 1.26 1.58 1.42
Net realized and unrealized gain (loss) on
investments (0.11) (0.37) 0.63 (2.01) (0.53) (0.49) 0.49 (0.03)
------- ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.40 0.65 1.61 (1.15) 0.75 0.77 2.07 1.39
------- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.51) (1.01) (0.50) (1.17) (1.26) (1.26) (1.58) (1.49)
In excess of net investment income -- -- (0.31) (0.07) -- -- -- --
------- ------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (0.51) (1.01) (0.81) (1.24) (1.26) (1.26) (1.58) (1.49)
------- ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $17.29 $17.40 $17.76 $16.96 $19.35 $19.86 $20.35 $19.86
------- ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return(b) (e) 2.34% 3.89% 9.71% (6.18)% 3.81% 3.90% 10.82% 7.07%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.13%(c) 1.17% 1.25% 0.97% 0.87% 0.76% 0.58% 1.01%
Ratio of net investment income to
average net assets(a) 5.81%(c) 5.85% 5.62% 7.06% 8.71% 6.24% 6.08% 6.78%
Portfolio turnover 34%(b) 169% 238% 140% 189% 168% 84% 183%
Net assets at end of period(000's omitted) $5,070 $6,113 $5,836 $10,263 $87,874 $142,874 $144,042 $27,683
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver(f) 1.58%(c) 1.62% 1.65% 1.03% 0.96% 0.83% 0.59% 2.84%
Ratio of net investment income to
average net assets, absent waiver(f) 5.36%(c) 5.40% 5.22% 7.00% 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, YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------ -----------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.45 $19.67 $18.06 $21.23 $20.89 $20.33 $19.43 $19.69
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.54 1.03 1.28 1.45 1.38 1.69 1.50 1.57
Net realized and unrealized gain
(loss) on investments (0.08) (0.24) 1.45 (3.17) 0.34 0.57 0.88 (0.19)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.46 0.79 2.73 (1.72) 1.72 2.26 2.38 1.38
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.50) (1.01) (1.09) (1.37) (1.38) (1.70) (1.48) (1.64)
In excess of net investment income -- -- (0.03) (0.08) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (0.50) (1.01) (1.12) (1.45) (1.38) (1.70) (1.48) (1.64)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $19.41 $19.45 $19.67 $18.06 $21.23 $20.89 $20.33 $19.43
------ ------ ------ ------ ------ ------ ------ ------
- --------------------------------------------------------------------------------------------------------------------------------
Total Return(b) (e) 2.35% 4.15% 15.57% (8.37)% 8.49% 11.55% 12.78% 7.22%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.45%(c) 1.45% 1.50% 1.05% 0.94% 0.86% 0.96% 0.56%
Ratio of net investment income to
average net assets(a) 5.60%(c) 5.43% 6.52% 7.11% 6.58% 8.33% 7.41% 8.05%
Portfolio turnover 51%(b) 96% 131% 57% 126% 117% 536% 477%
Net assets at end of period(000's omitted) $16,540 $22,380 $25,241 $30,956 $112,228 $72,031 $52,168 $115,223
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver(f) N/A N/A N/A N/A N/A N/A 1.00% 0.58%
Ratio of net investment income to
average net assets, absent waiver(f) N/A N/A N/A N/A 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, YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------ --------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.17 $15.54 $14.20 $20.65 $21.13 $21.77 $20.31 $20.19
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.44 0.87 0.93 1.52 1.94 2.58 2.03 1.80
Net realized and unrealized gain
(loss) on investments 0.02 (0.38) 1.45 (6.56) 0.44 (0.40) 1.48 0.17
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.46 0.49 2.38 (5.04) 2.38 2.18 3.51 1.97
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.42) (0.86) (1.03) (1.41) (2.28) (2.40) (2.05) (1.85)
In excess of net investment income -- -- (0.01) -- -- -- -- --
From net realized gain on investments -- -- -- -- (0.51) (0.42) -- --
In excess of net realized gain on investments -- -- -- -- (0.07) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (0.42) (0.86) (1.04) (1.41) (2.86) (2.82) (2.05) (1.85)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.21 $15.17 $15.54 $14.20 $20.65 $21.13 $21.77 $20.31
------ ------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return(b) (d) 3.09% 3.33% 17.27% (25.00)% 11.45% 10.50% 18.18% 10.19%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.24%(c) 1.19% 1.17% 0.85% 0.75% 0.79% 0.69% 0.55%
Ratio of net investment income to
average net assets(a) 5.76%(c) 5.78% 6.33% 8.37% 8.90% 11.30% 9.91% 9.06%
Portfolio turnover 223%(b) 232% 506% 240% 253% 278% 172% 161%
Net assets at end of period(000's omitted) $22,097 $24,846 $40,022 $55,986 $271,861 $115,885 $165,358 $119,118
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver (e) N/A N/A N/A 0.92% 0.82% 0.84% N/A N/A
Ratio of net investment income to
average net assets, absent waiver(e) N/A N/A N/A 8.30% 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, YEAR ENDED DECEMBER 31,
JUNE 30, 1997 ------------------------ -------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.83 $23.13 $18.92 $22.18 $21.88 $22.60 $20.95 $21.34
------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.71 1.35 1.44 1.59 1.49 1.48 1.70 1.88
Net realized and unrealized gain
(loss) on investments 0.17 (0.29) 4.23 (3.16) 0.98 0.23 2.12 (0.33)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.88 1.06 5.67 (1.57) 2.47 1.71 3.82 1.55
------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.72) (1.36) (1.46) (1.55) (1.50) (1.48) (1.72) (1.94)
Net realized gain on investments -- -- -- (0.14) (0.67) (0.95) (0.45) --
------ ------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (0.72) (1.36) (1.46) (1.69) (2.17) (2.43) (2.17) (1.94)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $22.99 $22.83 $23.13 $18.92 $22.18 $21.88 $22.60 $20.95
====== ====== ====== ====== ====== ====== ====== ======
- -------------------------------------------------------------------------------------------------------------------------------
Total Return(b) (d) 3.96% 4.97% 30.91% (7.25)% 11.56% 7.88% 19.04% 7.53%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(a) 1.31%(c) 1.36% 1.34% 1.20% 1.15% 0.93% 1.02% 0.84%
Ratio of net investment income to
average net assets(a) 6.33%(c) 6.13% 6.84% 7.28% 6.65% 6.61% 7.82% 8.98%
Portfolio turnover 8%(b) 72% 46% 84% 373% 292% 182% 64%
Net assets at end of period (000's omitted) $34,604 $31,819 $26,376 $30,760 $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 PERIOD
FOR THE MARCH 25, 1994
SIX MONTHS YEAR ENDED (COMMENCEMENT
ENDED DECEMBER 31, OF OPERATIONS) TO
JUNE 30, 1997 ---------------- DECEMBER 31,
(UNAUDITED) 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.40 $21.74 $19.10 $20.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.49 1.21 0.95 0.48
Net realized and unrealized
gain (loss) on investments (0.84) (0.27) 2.66 (0.77)
------ ------ ------ ------
Total from investment operations (0.35) 0.94 3.61 (0.29)
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.87) (0.93) (0.50)
In excess of net investment income -- -- (0.04) (0.11)
From net realized gain on investments -- (0.41) -- --
------ ------ ------ ------
Total distributions to shareholders -- (1.28) (0.97) (0.61)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $21.05 $21.40 $21.74 $19.10
====== ====== ====== ======
- --------------------------------------------------------------------------------------
Total Return(a)(d) (1.64)% 4.39% 19.08% (1.52)%
- --------------------------------------------------------------------------------------
Ratio of net expenses to average
net assets 1.70%(b) 1.57% 1.55% 1.73%(b)
Ratio of net investment income to
average net assets 5.00%(b) 4.98% 5.07% 4.19%(b)
Portfolio turnover 131%(c) 202% 214% 266%(c)
Net assets at end of period
(000's omitted) $16,931 $16,852 $18,823 $9,520
- --------------------------------------------------------------------------------------
Ratio of total expenses to average
net assets, absent waiver(e) N/A 1.60% 1.69% 2.03%(b)
Ratio of net investment income to
average net assets, absent waiver(e) N/A 4.95% 4.93% 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.
16
<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.
18
<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.
19
<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
20
<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
21
<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.
22
<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,
23
<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
24
<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."
25
<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.
26
<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.
27
<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.
New York time, on any Business Day will receive the offering price
computed that day. HOWEVER, THE TIME UNTIL WHICH ORDERS ARE ACCEPTED MAY BE
CHANGED IN CASE OF AN EMERGENCY OR IF THE NYSE CLOSES AT A TIME OTHER THAN
4:00 P.M. New York time. 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.
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<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. HOWEVER,
THE TIME AT WHICH TRANSACTIONS AND SHARES ARE PRICED MAY BE CHANGED IN CASE OF
AN EMERGENCY OR IF THE NYSE CLOSES AT A TIME OTHER THAN 4:00 P.M. EASTERN
STANDARDTIME. 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.
A lawsuit seeking class action status has been filed against Managers
Intermediate Mortgage Fund, the Manager and the Trust, among other
defendants in the United States District Court for the District of Connecticut
in September, 1994. The plaintiffs seek unspecified damages based upon losses
alleged in the fund named above. The parties have now entered into an agreement
to settle all claims by the purported class. However, the settlement is subject
38
<PAGE>
to court approval and certain other conditions, such as the minimum percentage
of class members agreeing to participate in the settlement. 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 lawsuit, as
well as Managers Short Government Fund and Managers Short and Intermediate
Bond Fund. The parties have now entered into an agreement to settle all
claims by this customer and the settlement is conditional on, among other
things, the settlement of the class action lawsuit. Certain other customers,
who are potentially members of the plaintiff class in the class action lawsuit
referred to above, have asserted that they may file similar lawsuits based on
similar claims, but have not done so. Manangement 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
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
Montgomery Asset Management, LLC
State Street Global Advisors
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, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income(d) 0.026 0.054 0.044 0.035 0.022 0.030 0.054 0.081 0.090
Net realized and unrealized
gain on investments -- -- -- -- -- -- 0.003 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.026 0.054 0.044 0.035 0.022 0.030 0.057 0.081 0.090
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.026) (0.054) (0.044) (0.035) (0.022) (0.030) (0.054) (0.081) (0.090)
Net realized gain on
investments -- -- -- -- -- -- (0.003) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions to
shareholders (0.026) (0.054) (0.044) (0.035) (0.022) (0.030) (0.057) (0.081) (0.090)
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END
OF PERIOD $1.000 $1.000 $1.000 $1.000 $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% 3.12% 5.35% 7.66% 8.73%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to
average net assets(d) 0.31%(b) 0.12% 1.13%(b) 0.73% 0.74% 0.67% 0.57% 0.27% 0.16%
Ratio of net investment income
to average net assets(d) 5.22%(b) 5.35% 4.85%(b) 3.84% 2.48% 3.05% 5.69% 8.09% 9.12%
Net assets at end of period
(000's omitted) $45,429 $36,091 $11,072 $17,269 $7,368 $9,320 $4,868 $14,944 $83,743
- ------------------------------------------------------------------------------------------------------------------------------------
Expense Waiver(a)
- -----------------
Ratio of total expenses to
average net assets 0.71%(b) 0.75% 1.18%(b) 1.03% 0.99% 0.98% 1.06% 0.32% N/A
Ratio of net investment income
to average net assets 4.82%(b) 4.71% 4.80%(b) 3.54% 2.23% 2.74% 5.21% 8.04% N/A
====================================================================================================================================
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
=================================================================
<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.
</FN>
</TABLE>
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 33 1/3% 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." HOWEVER, THE TIME UNTIL WHICH ORDERS ARE ACCEPTED MAY BE CHANGED
IN CASE OF AN EMERGENCY OR IF THE NYSE CLOSES AT A TIME OTHER THAN 4:00 P.M.
New York time. 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. HOWEVER, THE TIME AT WHICH TRANSACTIONS AND SHARES ARE PRICED MAY BE
CHANGED IN CASE OF AN EMERGENCY OR IF THE NYSE CLOSES AT A TIME OTHER THAN
4:00 P.M. New York time. 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.
A lawsuit seeking class action status has been filed against
Managers Intermediate Mortgage Fund, The Managers Funds, L.P. and the Trust,
among other defendants in the United States District Court for the District of
Connecticut in September, 1994. The plaintiffs seek unspecified damages based
upon losses alleged in the fund named above. The parties have now entered into
an agreement to settle all claims by the purported class. However, the
settlement is subject to court approval and certain other conditions, such as
the minimum percentage of class members agreeing to participate in the
settlement.
26
<PAGE>
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 lawsuit, as well as Managers Short
Government Fund and Managers Short and Intermediate Bond Fund. The parties
have now entered into an agreement to settle all claims by this customer and
the settlement is conditional on, among other things, the settlement of the
class action lawsuit. Certain other customers, who are potentially members
of the plaintiff class in the class action lawsuit 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, Freres Asset
Management Co.
EMERGING MARKETS
EQUITY FUND
Montgomery Asset Management, LLC
State Street Global Advisors
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
SAI
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.
TABLE OF CONTENTS
I. INVESTMENT RESTRICTIONS 1
II. PORTFOLIO TURNOVER 4
III. TRUSTEES AND OFFICERS 5
IV. MANAGEMENT OF THE FUNDS 9
V. FUND MANAGEMENT AGREEMENT 10
VI. ASSET MANAGER PROFILES 15
VII. ADMINISTRATIVE SERVICES; DISTRIBUTION
ARRANGEMENTS 18
VIII. PORTFOLIO SECURITIES TRANSACTIONS 19
IX. NET ASSET VALUE 21
X. TAX INFORMATION 23
XI. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANT 27
XII. CONTROL PERSONS AND PRINCIPAL
HOLDERS OF SECURITIES 28
XIII. OTHER INFORMATION 29
XIV. PERFORMANCE INFORMATION 48
XV. FINANCIAL STATEMENTS 52
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.
II. 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.
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
ROBERT P. WATSON1 President and Trustee of The
40 Richards Avenue Managers Funds; Chairman and
Norwalk, CT 06854 Chief Executive Officer,
Chief Executive Officer, Evaluation Associates Investment
President, Trustee Management Company (predecessor
of The Managers Funds, L.P.)
Date of birth: 1/21/34 (prior to June 1988 and from
August 1989 to August 1990);
Partner, The Managers Funds,
L.P. (since August 1990);
Executive Vice President,
Evaluation Associates, Inc.
(June 1988 to August 1989).
WILLIAM W. GRAULTY Practicing Attorney (1977 to
65 LaSalle Road present); Executive Vice
West Hartford, CT 06107 President and Head of Trust
Trustee Division, The Connecticut Bank
and Trust Company, N.A. (1956 to
Date of birth: 12/30/23 1976); President, American
Bankers Association, Trust
Division (1974 to 1975);
President Connecticut Bankers
Association, Trust Division (1966
to 1968).
MADELINE H. McWHINNEY President, Dale, Elliott &
24 Blossom Cove Company (management consultants)
Red Bank, NJ 07701 (1977 to present); Assistant Vice
Trustee President and Financial
Economist, Federal Reserve Bank
Date of birth: 3/11/22 of New York (1943 to 1973);
Trustee and Treasurer, Institute
of International Education (since
1975); Assistant Director,
Operations, Whitney Museum of
American Art (1983 to 1986);
Member, Advisory Committee on
Professional Ethics, New Jersey
Supreme Court (March 1983 to
present).
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
STEVEN J. PAGGIOLI Executive Vice President and
479 West 22nd Street Director, Wadsworth & Associates,
New York, NY 10011 Inc. (1986 to present); Vice
Trustee President, Secretary and
Director, First Fund
Date of birth: 4/3/50 Distributors, Inc. (1991 to
present); Vice President,
Secretary and Director;
Investment Company Administration
Corporation (1990 to present);
President and Director,
Southampton Investment Management
Company, Inc. (1991 to present);
Trustee of Professionally Managed
Portfolios (1991 to present).
THOMAS R. SCHNEEWEIS Professor of Finance (1985 to
10 Cortland Drive present), Associate Professor of
Amherst, MA 01002 Finance (1980-1985), Ph.D.
Trustee Director (Acting) (1985 to 1986),
Chairman (Acting) Department of
Date of birth: 5/10/47 General Business and Finance
(1981-1982), and Assistant
Professor of Finance (1977-1980),
University of Massachusetts;
Teaching Assistant, University of
Iowa Principal Occupation (1973-
1977); Financial Consultant,
Ehlers and Associates (1970-
1973).
PETER M. LEBOVITZ Director of Marketing, The
40 Richards Avenue Managers Funds, L.P. (September
Norwalk, CT 06854 1994 to present); Director of
Vice President Marketing, Hyperion Capital
Management, Inc. (June 1993 to
Date of Birth: 1/18/55 June 1994); Senior Vice President
and Chief Investment Officer,
Greenwich Asset Management, Inc.
(April 1989 to June 1993)
DONALD S. RUMERY Director of Operations, The
40 Richards Avenue Managers Funds, L.P. (December
Norwalk, CT 06854 1994 to present)
Secretary, Treasurer (Principal Vice President, Signature
Financial and Accounting Officer) Financial Group (March 1990 to
December 1994)
Date of Birth:5/29/58 Vice President, The Putnam
Companies (August 1980 to March
1990).
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to
40 Richards Avenue Present) and Assistant Vice
Norwalk, CT 06854 President (July 1986 to June
Assistant Treasurer 1992), The Managers Funds, L.P.;
Accountant, Gintel Co. (June 1980
Date of Birth: 3/31/56 to June 1986).
PETER M. McCABE Portfolio Administrator, The
40 Richards Avenue Managers Funds, L.P. (August 1995
Norwalk, CT 06854 to Present); Portfolio
Assistant Treasurer Administrator, Oppenheimer
Capital, L.P. (July 1994 to
Date of Birth: 9/8/72 August 1995); College Student
(September 1990 to June 1994).
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:
Total compensation
Aggregate from Registrant
Compensation and Fund Complex
From Trust Paid to Trustees
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
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.
Weighted Average
of the Manager's
portion of the
Total Management Total Management
Name of Fund Fee Fee
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 0.00% 0.00%
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%
*Reflects voluntary fee waiver by the Manager which is in effect
until March 31, 1998. Absent this fee waiver, the maximum
Total Management Fee payable by the Emerging Markets Equity
Fund would be 1.15% and the Weighted Average of the Manager's
portion of the Total Management Fee would be 0.40%.
** 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:
<TABLE>
<CAPTION>
January 1, 1996-December 31, January 1, 1995-December January 1, 1994-
1996 31, 1995 December 31, 1994
Fee Paid Fee Paid
Approxi- Fee Paid Approxi- to Asset Approxi- to Asset
mate Fee to Asset mate Fee Manager mate Fee Manager
Fee Paid Retained Manager Fee Paid Retained by Fee Paid Retained by
Name of Fund/Asset to by by to by Manager/ to by Manager/
Manager Manager Manager Manager/1 Manager Manager 1 Manager Manager 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Equity Fund $349,821 $175,519 $299,824 $150,565 $339,061 $170,110
Scudder, Stevens & $86,220 $74,220 $83,842
Clark, Inc.
Spare, Kaplan, Bischel $88,082 $75,039 $85,108
&
Associates
Capital Appreciation $761,925 $380,963 $635,588 $318,716 $669,940 $335,074
Fund
Essex Investment
Management N/A N/A N/A
Company, Inc./8
Husic Capital $60,917 N/A N/A
Management/2
Special Equity Fund $1,572,13 $698,733 $977,869 $435,343 $972,495 $468,413
2
Liberty Investment $266,030 $187,691 $194,588
Management
Pilgrim Baxter & $305,198 $190,981 $33,634
Associates/6
Westport Asset $302,171 $163,854 $160,027
Management, Inc.
International Equity $1,856,19 $824,774 $948,514 $422,512 $728,272 $323,639
Fund 3
Lazard Freres Asset $516,157 $215,232 N/A
Management Co/7
Scudder, Stevens & $515,262 $310,770 $404,633
Clark, Inc.
Short Government Fund $11,423 $0 $15,835 N/A $197,692 $109,438
Jennison Associates $11,423 $15,835 $2,338
Capital
Corp/3
Short and Intermediate $116,037 $58,018 $128,254 $64,209 $433,531 $217,375
Bond Fund
Standish, Ayer & Wood, $58,019 $34,464 $84,716
Inc.
Intermediate Mortgage $143,803 $79,890 $214,141 $118,967 $646,916 $439,614
Fund
Jennison Associates $63,913 $95,174 $23,470
Capital
Corp/4
January 1, 1996-December January 1, 1995-December 31, January 1, 1994-December 31,
31, 1996 1995 1994
Fee Paid Fee Paid
Approxi- Fee Paid Approxi- to Asset Approxi- to Asset
mate Fee to Asset mate Fee Manager mate Fee Manager
Fee Paid Retained Manager Fee Paid Retained by Fee Paid Retained by
Name of Fund/Asset to by by to by Manager/ to by Manager/
Manager Manager Manager Manager/1 Manager Manager 1 Manager Manager 1
Bond Fund $180,197 $108,240 $162,594 $97,557 $237,886 $142,664
Loomis, Sayles & $71,957 $65,037 $95,222
Company, Inc.
Global Bond Fund $126,043 $62,024 $86,482 $43,466 $52,093 $27,100
Rogge Global $64,019 $43,016 $24,993
Partners/5
<FN>
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.
</FN>
</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
MONTGOMERY ASSET MANAGEMENT, LLC
Montgomery Asset Management, LLC is a Delaware limited liability
company. The Senior portfolio managers and principals are Josephine
Jimenez, CPA, Bryan Sudweeks, Ph. D, CPA, Angeline Ee, and Frank
Chiang.
STATE STREET GLOBAL ADVISORS
State Street Global Advisors is a division of State Street Bank
and Trust Company. Nicholas A. Lopardo is the Chief Executive
Officer and Timothy B. Harbert is the President of State Street
Global Advisers.
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)
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; (iii) 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; (iv) 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; and (v) solely
with respect to tax years beginning on or before August 5, 1997,
derived less than 30% of its gross income from the sale of stocks,
securities and certain financial instruments held for less than three
months. In any year in which a RIC distributes 90% of its Investment
Company Taxable Income and 90% of its net tax-exempt interest income,
it will not be subject to corporate income tax on amounts distributed
to its shareholders.
If for any taxable year a Fund does not qualify as a RIC, all of
its taxable income (including its net capital gain) will be subject
to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable
as ordinary dividends to the extent of such Fund's current and
accumulated earnings and profits. Such distributions generally will
be eligible for the dividends-received deduction in the case of
corporate shareholders.
If for any taxable year a Fund complies with certain
requirements, then some or all of the dividends (excluding capital
gain distributions) payable out of income of the Fund that are
attributable to dividends received from domestic corporations may
qualify for the 70% dividends-received deduction available to
corporations.
Ordinary income distributions and distributions of net realized
short-term capital gains to shareholders who are liable for federal
income taxes will be taxed as ordinary dividend income to such
shareholders. Distributions of net long-term capital gains to such
shareholders are taxable as either 28% rate gain or 20% rate gain,
depending upon the Fund's holding period in the asset disposed of and
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, as well as gain
on the sale or exchange of shares of a 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 if
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 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 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.
Newly-enacted Code Section 1259 will require the recognition of
gain (but not loss) if a Fund makes a "constructive sale" of an
appreciated financial position (e.g. stock). A Fund generally will
be considered to make a constructive sale of an appreciated financial
position if it sells the same or substantially identical property
short, enters into a futures or forward contract to deliver the same
or substantially identical property, or enters into certain other
similar transactions.
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 may 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 dividends from U.S. Government sources.
Shareholders should consult their own tax advisers for additional or
more current 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 November 18, 1997, Charles Schwab & Co. "controlled"
(within the meaning of the 1940 Act i.e., owned in excess of 25% of
the shares of) 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
November 18, 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 Trust Company, Columbus, Ohio (7%)
Huntington National Bank, Columbus, Ohio (12%)
Charles Schwab & Co., Inc., San Francisco, California (20%)
Capital Appreciation Fund
Resource Bank, Minneapolis, Minnesota (24%)
Special Equity Fund
Huntington Trust Company, Columbus, Ohio (7%)
Resource Bank, Minneapolis, Minnesota (5%)
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 (27%)
Short Government Fund
Charles Schwab & Co., Inc., San Francisco, California (7%)
Short and Intermediate Bond Fund
Huntington Trust Company, Columbus, Ohio (6%)
Intermediate Mortgage Fund
Roman Catholic Diocese, Syracuse, New York (9%)
Bond Fund
Charles Schwab & Co., Inc., San Francisco, California (13%)
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:
Percentage of Total Investments of:
Short and
Intermediate
Ratings Bond Fund Bond Fund
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% -
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.
Annual -
ized
Since
Annual- Annual- Commence-
ized ized ment of
5 10 Opera- Commence-
NAME OF FUND 1 Year Years Years tions ment Date
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
* 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:
30-Day
Annualized Yield
Fund at 12/31/96
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%
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.
_______________________________
1Trustee who is an "interested person" of the Trust (as defined in Section
2(a)(19) of the 1940 Act).
1
Money Market SAI
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.
TABLE OF CONTENTS
I. INVESTMENT OBJECTIVE AND POLICIES 1
II. INVESTMENT RESTRICTIONS 7
III. TRUSTEES AND OFFICERS 8
IV. MANAGEMENT OF THE FUND AND THE PORTFOLIO 15
V. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANTS 19
VI. EXPENSES 20
VII. CODE OF ETHICS 20
VIII. NET ASSET VALUE 21
IX. CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES 21
X. PERFORMANCE DATA 22
XI. ORGANIZATION OF THE PORTFOLIO 23
XII. PORTFOLIO TRANSACTIONS 23
XIII. TAX INFORMATION 24
XIV. FINANCIAL STATEMENTS 26
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.
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
ROBERT P. WATSON1 President and Trustee of The
40 Richards Avenue Managers Funds; Chairman and
Norwalk, CT 06854 Chief Executive Officer,
Chief Executive Officer, Evaluation Associates Investment
President, Trustee Management Company (predecessor
of The Managers Funds, L.P.)
Date of birth: 1/21/34 (prior to June 1988 and from
August 1989 to August 1990);
Partner, The Managers Funds, L.P.
(since August 1990); Executive
Vice President, Evaluation
Associates, Inc. (June 1988 to
August 1989).
WILLIAM W. GRAULTY Practicing Attorney (1977 to
65 LaSalle Road present); Executive Vice
West Hartford, CT 06107 President and Head of Trust
Trustee Division, The Connecticut Bank
and Trust Company, N.A. (1956 to
Date of birth: 12/30/23 1976); President, American
Bankers Association, Trust
Division (1974 to 1975);
President Connecticut Bankers
Association, Trust Division (1966
to 1968).
MADELINE H. McWHINNEY President, Dale, Elliott &
24 Blossom Cove Company (management consultants)
Red Bank, NJ 07701 (1977 to present); Assistant Vice
Trustee President and Financial
Economist, Federal Reserve Bank
Date of birth: 3/11/22 of New York (1943 to 1973);
Trustee and Treasurer, Institute
of International Education (since
1975); Assistant Director,
Operations, Whitney Museum of
American Art (1983 to 1986);
Member, Advisory Committee on
Professional Ethics, New Jersey
Supreme Court (March 1983 to
present).
STEVEN J. PAGGIOLI Executive Vice President and
479 West 22nd Street Director, Wadsworth & Associates,
New York, NY 10011 Inc. (1986 to present); Vice
Trustee President, Secretary and
Director, First Fund
Date of birth: 4/3/50 Distributors, Inc. (1991 to
present); Vice President,
Secretary and Director;
Investment Company Administration
Corporation (1990 to present);
President and Director,
Southampton Investment Management
Company, Inc. (1991 to present);
Trustee of Professionally Managed
Portfolios (1991 to present).
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
THOMAS R. SCHNEEWEIS Professor of Finance (1985 to
University of Massachusetts present), Associate Professor of
School of Management Finance (1980-1985), Ph.D.
Amherst, MA 01003 Director (Acting) (1985 to 1986),
Trustee Chairman (Acting) Department of
General Business and Finance
Date of birth: 5/10/47 (1981-1982), and Assistant
Professor of Finance (1977-1980),
University of Massachusetts;
Teaching Assistant, University of
Iowa Principal Occupation (1973-
1977); Financial Consultant,
Ehlers and Associates (1970-
1973).
PETER M. LEBOVITZ Director of Marketing, The
40 Richards Avenue Managers Funds, L.P. (September
Norwalk, CT 06854 1994 to present); Director of
Vice President Marketing, Hyperion Capital
Management, Inc. (June 1993 to
Date of birth: 1/18/55 June 1994); Senior Vice President
and Chief Investment Officer,
Greenwich Asset Management, Inc.
(April 1989 to June 1993).
DONALD S. RUMERY Director of Operations, The
40 Richards Avenue Managers Funds, L.P. (December
Norwalk, CT 06854 1994 to present)
Secretary, Treasurer (Principal Vice President, Signature
Financial and Accounting Officer) Financial Group (March 1990 to
December 1994)
Date of birth: 5/29/58 Vice President, The Putnam
Companies (August 1980 to March
1990).
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to
40 Richards Avenue Present) and Assistant Vice
Norwalk, CT 06854 President (July 1986 to June
Assistant Treasurer 1992), The Managers Funds, L.P.;
Accountant, Gintel Co. (June 1980
Date of birth: 3/31/56 to June 1986).
PETER M. McCABE Portfolio Administrator, The
40 Richards Avenue Managers Funds, L.P. (August 1995
Norwalk, CT 06854 to present); Portfolio
Assistant Treasurer Administrator, Oppenheimer
Capital, L.P. (July 1994 to
Date of birth: 9/8/72 August 1995); College Student
(September 1990 to June 1994).
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:
Total Compensation
from
Registrant and
Aggregate Fund
Compensation Complex Paid to
Name of Trustee from Fund Trustees
William W. Graulty $520 $12,250
Madeline H. McWhinney 550 13,000
Steven J. Paggioli 550 13,000
Thomas R. Schneeweis 550 13,000
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.
Aggregate Total Trustee
Trustee Compensation
Compensation Accrued by the
Accrued Master
by the Portfolios*, The
Portfolio JPM Pierpont Funds
during and JPM Institutional
Name of Trustee 1996 Funds during 1996.
Frederick S. Addy, Trustee $11,349 $65,000
William G. Burns, Trustee 11,349 65,000
Arthur C. Eschenlauer, Trustee 11,349 65,000
Matthew Healey, Trustee, 11,349 65,000
Chairman and Chief Executive
Officer**
Michael P. Mallardi, Trustee 11,349 65,000
*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 November 18, 1997, two shareholders, Benefits
Resources, and William and Rita Matherson, each held 5% 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)
distribute at least 90% of its dividend, interest and certain
other taxable income ("Investment Company Taxable Income") each
year; (iii) 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; (iv) 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; and (v) solely
with respect to tax years beginning on or before August 5, 1997,
derived less than 30% of its gross income from the sale or
stocks, securities and certain financial instruments held for
less than three months. 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 either 28% rate
gain or 20% rate gain, depending upon the Fund's holding period
in the asset disposed of 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. It is not anticipated that the Fund will derive long-
term capital gains.
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
additional or more current 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.
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.
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.
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.
_______________________________
1Trustee who is an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act).
THE MANAGERS FUNDS POST-EFFECTIVE
AMENDMENT NO. 41 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 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, 1997 (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
(audited) and for the eleven months ended
November 30, 1995 (audited); and the 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, 1996, 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
Refiled electronically herein. Initially filed as an
exhibit to PEA 20 to Registrant's Registration Statement on Form N-1A
on September 28, 1990.
* 1. (B) Amendment to Declaration of Trust dated May 12,
1993.
Refiled electronically herein. Initially filed as an
exhibit to PEA 32 to Registrant's Registration Statement on Form N-1A
on November 5, 1993.
* 1. (C) Amendment to Declaration of Trust dated June 30,
1993.
Refiled electronically herein. Initially filed as an
exhibit to PEA 32 to Registrant's Registration Statement on Form N-1A
on November 5, 1993.
* 2. By-Laws of the Trust.
Refiled electronically herein. Initially filed as an
exhibit to PEA 20 to Registrant's Registration Statement on Form N-1A
on September 28, 1990.
3. Not Applicable.
* 4. Instruments Defining Rights of Shareholders.
Refiled electronically herein. Initially filed as an
exhibit to PEA 34 to Registrant's Registration Statement on Form N-1A
on March 7, 1995.
* 5. (A) Fund Management Agreement dated August 17, 1990
between EAIMC Partners, L.P. (now "The Managers
Funds, L.P.") and the Trust.
Refiled electronically herein. Initially filed as an
exhibit to PEA 32 to Registrant's Registration Statement on Form N-1A
on November 5, 1993.
* 5. (B) Asset Management Agreements between The Managers
Funds, L.P. and each of the Asset Managers
identified in the Registration Statement.
Refiled electronically herein. Initially filed as an
exhibit to PEA 32 to Registrant's Registration Statement on Form N-1A
on November 5, 1993.
* 6. Form of the Distribution Agreement between The
Managers Funds and The Managers Funds, L.P.
Refiled electronically herein. Initially filed as an
exhibit to PEA 28 to Registrant's Registration Statement on Form N-1A
on November 9, 1992.
7. Not Applicable.
* 8. Form of the Custodian Agreement with State Street
Bank and Trust Company.
Refiled electronically herein. Initially filed as an
exhibit to PEA 28 to Registrant's Registration Statement on Form N-1A
on November 9, 1992.
* 9. (A) Transfer Agency Agreement between The Managers
Funds and State Street Bank and Trust Company.
Refiled electronically herein. Initially filed as an
exhibit to PEA 33 to Registrant's Registration Statement on Form N-1A
on April 28, 1994.
* 9. (B) Form of Administration and Shareholder Servicing
Agreement between the Trust and The Managers Funds,
L.P.
Refiled electronically herein. Initially filed as an
exhibit to PEA 28 to Registrant's Registration Statement on Form N-1A
on November 9, 1992.
* 9. (C) Form of License Agreement Relation to the Use of
Name between The Managers Funds and The Managers
Funds, L.P.
Refiled electronically herein. Initially filed as an
exhibit to PEA 28 to Registrant's Registration Statement on Form N-1A
on November 9, 1992.
* 10. Opinion and Consent of Shereef, Friedman, Hoffman
& Goodman, L.L.P.
Refiled electronically herein. Initially files as an
exhibit to PEA 20 to Registrant's Registration Statement
on Form N-1A on September 28, 1990.
* 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.
Refiled electronically herein. Initially filed as an
exhibit to PEA 19 to Registrant's Registration Statement on Form N-1A
on April 13, 1990.
17. Financial Data Schedules
* 18. (1) Powers of Attorney for:
William H. Graulty
Madeline H. McWhinney
Steven J. Paggioli
Thomas R. Schneeweis
Robert P. Watson
Donald S. Rumery
Refiled electronically herein. Initially filed as an
exhibit to PEA 31 to Registrant's Registration Statement on Form N-1A
on April 23, 1993.
* 18. (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 November 1, 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 2,448
Capital Appreciation Fund 2,709
Special Equity Fund 11,729
International Equity Fund 6,777
Short Government Fund 730
Short and Intermediate Bond Fund 1,256
Intermediate Mortgage Fund 1,336
Bond Fund 2,051
Global Bond Fund 1,614
Money Market Fund 1,413
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 Freres Asset Management 801-6568
Liberty Investment Management 801-21343
Loomis, Sayles & Company, Inc. 801-17000
Montgomery Asset Management, LLC 801-54803
Pilgrim Baxter Associates 801-19165RC
Rogge Global Partners, Inc. 801-25482
Scudder, Stevens & Clark, Inc. 801-252
Standish, Ayer & Wood, Inc. 801-584
State Street Global Advisers*
Westport Asset Management, Inc. 801-21854
- --------
* As a bank, exempt from filing ADV.
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 and 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 19th day of November,
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
Robert P. Watson
Trustee and President
Principal Executive
Officer
November 19, 1997
/s/ Donald S. Rumery
Donald S. Rumery
Principal Financial
and Accounting Officer
November 19, 1997
/s/ William W. Graulty
William W. Graulty
Trustee
November 19, 1997
/s/ Madeline H. McWhinney
Madeline H. McWhinney
Trustee
November 19, 1997
/s/ Steven J. Paggioli
Steven J. Paggioli
Trustee
November 19, 1997
/s/ Thomas R. Schneeweis
Thomas R. Schneeweis
Trustee
November 19, 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 19th day of November, 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 November 19,
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. 41
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
November 19, 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
EXHIBIT 1(A)
THE MANAGEMENT OF MANAGERS GROUP OF FUNDS
DECLARATION OF TRUST
DATED NOVEMBER 23, 1987
TABLE OF CONTENTS
Page
ARTICLE I -- Name and Definitions 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II -- Trustees 4
Section 2.1 General Powers 4
Section 2.2 Investments 4
Section 2.3 Legal Title 6
Section 2.4 Issuance and Repurchase of Securities 7
Section 2.5 Delegation; Committees 7
Section 2.6 Collection and Payment 7
Section 2.7 Expenses 7
Section 2.8 Manner of Acting; By-Laws 7
Section 2.9 Miscellaneous Powers 8
Section 2.10 Principal Transactions 9
Section 2.11 Number of Trustees 9
Section 2.12 Election and Term 9
Section 2.13 Resignation and Removal 9
Section 2.14 Vacancies 10
Section 2.15 Delegation of Power to Other Trustees 20
ARTICLE III -- Contracts 11
Section 3.1 Underwriting Contract 11
Section 3.2 Advisory or Management Contract 11
Section 3.3 Affiliations of Trustees or Officers,Etc 12
Section 3.4 Compliance with 1940 Act 12
ARTICLE IV -- Limitations of Liability of Shareholders,
Trustees and Others 13
Section 4.1 No Personal Liability of Shareholders,
Trustees, Etc 13
Section 4.2 Non-Liability of Trustees, Etc 13
Section 4.3 Mandatory Indemnification 14
Section 4.4 No Bond Required of Trustees : 16
Section 4.5 No Duty of Investigation; Notice in
Trust Instruments, Etc 16
Section 4.6 Reliance on Experts, Etc 16
Page
ARTICLE V -- Shares of Beneficial Interest 17
Section 5.1 Beneficial Interest 17
Section 5.2 Rights of Shareholders 17
Section 5.3 Trust Only 17
Section 5.4 Issuance of Shares 18
Section 5.5 Register of Shares 15
Section 5.6 Transfer of Shares 19
Section 5.7 Notices 19
Section 5.8 Treasury Shares 19
Section 5.9 Voting Powers 19
Section 5.10 Meetings of Shareholders 20
Section 5.11 Series Designation 21
ARTICLE VI -- Redemption and Repurchase of Shares 23
Section 6.1 Redemption of Shares 23
Section 6.2 Price 23
Section 6.3 Payment 23
Section 6.4 Effect of Suspension of Determination
of Net Asset Value 23
Section 6.5 Repurchase by Agreement 24
Section 6.6 Redemption of Shareholder's Interest 24
Section 6.7 Redemption of Shares in Order to
Qualify as Regulated Investment
Company; Disclosure of Holding 24
Section 6.8 Reductions in Number of Outstanding
Shares Pursuant to Net Asset
Value Formula 25
Section 6.9 Suspension of Right of Redemption 25
ARTICLE VII -- Determination of Net Asset Value and
Distributions 26
Section 7.1 Net Asset Value 26
Section 7.2 Distributions to Shareholders 27
Section 7.3 P,6wer to Modify Foregoing Procedures .27
ARTICLE VIII -- Duration, Termination of Trust; Amendment;
Mergers, Etc. 29
Section 8.1 Duration 29
Section 8.2 Termination of Trust 29
Section 8.3 Amendment Procedure 30
Section 8.4 Merger, Consolidation and Sale of
Assets 31
Section 8.5 Incorporation 31
Page
ARTICLE IX Reports to Shareholders 33
ARTICLE X Miscellaneous 34
Section 10.1 Filing 34
Section 10.2 Governing Law 34
Section 10.3 Counterparts 34
Section 10.4 Reliance by Third Parties 34
Section 10.5 Provisions in Conflict with Law or
Regulations 35
DECLARATION OF TRUST
OF THE MANAGEMENT OF MANAGERS GROUP OF FUNDS
Dated November 23, 1987
DECLARATION OF TRUST made November 23, 1987 by Robert P.
Watson, William W. Graulty,Madeline H. McWhinney and Thomas R.
Schneeweis (together with all other persons from time to time
duly elected, qualified and serving as Trustees in accordance
with the provisions of Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to establish a trust under the
laws of Massachusetts for the investment and reinvestment of
funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in
the trust assets be divided into transferable shares of
beneficial interest, as hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money,
securities and other assets contributed to the Trust established
hereunder, or any Series thereof, shall be held, managed and
disposed of in trust for the pro rata benefit of the holders from
time to time of the shares of beneficial interest of any such
Series in this Trust which shares shall be issued hereunder and
subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the Trust created
hereby is the "The Management of Managers Group of Funds," and
the Trustees shall conduct the business of the Trust under that
name or any other name as they may from time to time adopt
pursuant to Section 8.3(a) hereof.
Section 1.2. Definitions. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8
hereof, as from time to time amended.
-2-
(b) The terms "Commission" and "Interested Person" have the-
meanings given them in the 1940 Act. Except as otherwise defined
by the Trustees in conjunction with the establishment of any
Series of Shares, the term "vote of a majority of the Shares
outstanding and entitled to vote" shall have the same meaning as
the term "vote of majority of the outstanding voting securities"
given it in the 1940 Act.
(c) "Custodian" means any Person other than the Trust who
has custody of any Trust Property as required by 17(f) of the
1940 Act, but does not include a system for the central handling
of securities described in said 17(f).
(d) "Declaration" means this Declaration of Trust as
amended from time to time. Reference in this Declaration of
Trust to "Declaration, " "hereof , " "herein, " and
"hereunder" shall be deemed to refer to this Declaration
rather than exclusively to the article or section in which such
words appear.
(e) "Distributor" means the party, other than the Trust, to
the contract described in Section 3.1 hereof.
(f) "His" shall include the feminine and neuter, as
well as the masculine, genders.
(g) "Investment Adviser" means the party or parties,
other than the Trust, to the contract or contracts described in
Section 3.2 hereof.
(h) "Municipal Bonds" means obligations issued by or on
behalf of states, territories and of the United States and the
District of Columbia and their political subdivisions, agencies
and instrumentalities, the interest from which is exempt from
federal income tax.
(i) "Net Asset Value" means the net asset value of each
Series of the Trust determined in the manner provided in Section
7.1 hereof.
(j) The "1940 Act" means the Investment Company Act of
1940, as amended from time to time, and the rules, regulations,
interpretations and orders promulgated, rendered or granted from
time to time thereunder.
(k) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
(l) "Series" means any series of Shares of the Trust
established in accordance with the provisions of Section 5.11
hereof.
(m) "Shareholder" means a record owner of Outstanding
Shares.
(n) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time, or, if more than one Series
is authorized by the Trustees pursuant to Section 5.11 hereof,
the equal proportionate transferable units into which each Series
shall be divided from time to time, and includes fractions of
Shares as well as whole Shares. "Outstanding Shares" means those
Shares shown from time to time on the books of the Trust or of
its Transfer Agent as then issued and outstanding, but shall not
include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the
Trust.
(o) "Transfer Agent" means any Person other than the Trust
who maintains the Shareholder records of the Trust, such as the
list of Shareholders, the number of Shares credited to each
account, and the like.
(p) The "Trust" means The Management of Managers Group of
Funds, as established by this Declaration. Reference to the
Trust, when applicable to one or more Series, shall refer to any
such Series.
(q) The "Trust Property" means any and all property, real
or personal, tangible or intangible, which is owned or held by or
for the account of the Trust or the Trustees in their capacity as
Trustees.
(r) The "Trustees" means the persons who have signed this
Declaration, so long as they shall continue in office in
accordance with the terms hereof, and all other persons who may
from time to time be duly elected, qualified and serving as
Trustees in accordance with the provisions of Article II hereof,
and reference herein to a Trustee or the Trustees shall refer to
such person or persons in his capacity or their capacities as
trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have
exclusive and absolute control over the Trust Property and over
the business of the Trust and of any Series to the same extent as
if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation
as may be permitted by this Declaration. The Trustees shall have
power to conduct the business of the Trust and any Series and
carry on the operations of Trust and all Series in any and all of
the Trust's branches and maintain offices both within and without
the Commonwealth of Massachusetts, in any and all states of the
United States of America, in the District of Columbia, and in any
and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States
of America and of foreign nations, and to do all such other
things and execute all such instruments as they deem necessary,
proper or desirable in order to promote the interests of the
Trust or any Series although such things are not herein
specifically mentioned. Any determination as to what is in the
interests of the Trust or of any Series made by the Trustees in
good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the
Trustees may be exercised without order of or resort to any
court.
Section 2.2. Investments. The Trustees shall have the
power:
(a) To operate as, and carry on the business of, an
investment company, and exercise all the powers necessary and
appropriate to the conduct of such operations.
(b) To invest in, hold for investment, or reinvest cash and
other property in securities, including common and preferred
stocks and, to the extent permitted by the 1940 Act, shares of
other investment companies; indices of instruments in which it
may invest; futures contracts and forward contracts with respect
to instruments in which it may invest and options on such futures
contracts; warrants; bonds, debentures, bills, time notes and all
other evidences of indebtedness; negotiable or nonnegotiable
instruments; government securities, including
securities of any state, municipality or other political
subdivision thereof, or any governmental or-quasi-governmental
agency or instrumentality; and money market instruments including
bank certificates of deposit, finance paper, commercial paper,
bankers acceptances and all kinds of repurchase agreements, of
any corporation, company, trust, association, firm or other
business organization, however established, and of any country,
state, municipality or other political subdivision, or any
governmental or quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or options
to purchase or sell, to sell or otherwise dispose of, to lend,
and to pledge any such securities and repurchase agreements.
(d) To purchase put and call options written by others and
to write put and covered call options covering the types of
securities in which the Trust or any Series thereof may invest
and to enter into contracts for the future delivery of fixed
income securities.
(e) To exercise all rights, powers and privileges of
ownership or interest in all securities and repurchase agreements
included in the Trust Property, including the right to vote
thereon and otherwise act with respect thereto, and to do all
acts for the preservation, protection, improvement and
enhancement in value of all such securities and repurchase
agreements.
(f) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop and dispose of (by sale or
otherwise) any property, real or personal, including cash, and
any interest therein.
(g) To borrow money, and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by
mortgaging, pledging or otherwise subjecting as security the
Trust Property; to endorse, guarantee, or undertake the
performance of any obligation or engagement of any other Person;
and to lend Trust Property.
(h) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in
which is included in the Trust Property or in the affairs of
which the Trustees have any direct or indirect interest; to do
all acts and things designed to protect, preserve, improve or
enhance the value of such obligation or interest; to guarantee o@-
become surety on any or all of the contracts, stocks, bonds,
notes, debentures and other obligations of any such corporation,
company, trust, association or firm.
-6-
(i) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do
everything necessary, suitable or proper for the accomplishment
of any purpose or the attainment of any object or the furtherance
of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing
incidental br appurtenant to or growing out of or connected with
the aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall
not be held to limit or restrict in any manner the general powers
of the Trustees.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall
the Trustees be limited by any law limiting the investments which
may be made by fiduciaries but shall have full authority and
power to make any and all investments which they, in their sole
discretion, shall deem proper to accomplish the purposes of this
Trust. However, each of the powers hereinbefore mentioned shall
be subject to any investment policies or restrictions contained
in any effective registration statement filed with the Securities
and Exchange Commission on behalf of the Trust.
Section 2.3. Legal Title. Legal title to all the Trust
Property shall be vested in the Trustees as joint tenants except
that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the
Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of
the Trustees in the Trust Property shall vest automatically in
each Person who may hereafter become a Trustee. The Trust
Property shall be held by the Trustee separate and apart from any
assets now or hereafter held in any capacity other than as
Trustee hereunder. Upon the termination of the term of office,
resignation, removal or death of a Trustee, he shall
automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such cessation and vesting of title shall be
effective whether or not conveyancing documents have been
executed and delivered.
7 -
Section 2.4. Issuance and Repurchase of Securities.
The rustees shall have the power to issue, sell, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue, dispose
of transfer, and otherwise deal in Shares, and, subject to the
provisions set forth in Articles VI and VII and Section 5.11
hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of
the Trust or the appropriate Series, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by
the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 2.5. Delegation; Committees. The Trustees
shall have power to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing
of such things and the execution of such instruments, either in
the name of the Trust or in the names of the Trustees, or
otherwise, as the Trustees may deem expedient, to the same extent
as such delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. The Trustees
shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to
prosecute, defend, compromise or abandon any claims relating to
the Trust Property; to foreclose any security interest securing
any obligations, by virtue of which any property is owed to the
Trust; and to enter into releases, agreements and other
instruments.
Section 2.7. Expenses. The Trustees shall have the
power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the
purposes of this Declaration, and to pay reasonable compensation
from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees
and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise
provided herein or in the By-laws or as otherwise required by the
1940 Act, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a
quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can
hear each other, or by written consents of the entire number of
Trustees then in office. The Trustees may adopt By-laws not
inconsistent with this Declaration to provide for the conduct of
the business of the Trust, and may amend or repeal such By-laws
to the extent such power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8,
and in addition to such provisions or any other provision of this
Declaration or of the By-laws with respect to the appointment and
powers of committees, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees
then in office, which committee may be empowered to act for and
bind the Trustees and the Trust, as if the acts of such committee
were the acts of all the Trustees then in office, with respect to
the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be
pending or threatened to be brought before any court,
administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. The Trustees shall have
the power to: (a) employ or contract with such Persons as the
Trustees may deem desirable for the transaction of the business
of the Trust including, but not limited to one or more Transfer
Agents, Distributors, Custodians or Investment Advisers; (b)
enter into joint ventures, partnerships and any other
combinations or associations; (c) remove Trustees or fill
vacancies in or add to their number, elect and remove such
officers and appoint and terminate such agents or employees as
they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or
all of the power and authority of the Trustees as the Trustees
may determine; (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; (e) establish pension, profit-sharing,
share purchase, and other retirement, incentive and benefit plans
for any Trustees, officers, employees or agents of the Trust; (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; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the
fiscal year of the Trust and the method by which its accounts
shall be kept; (i) establish separate and distinct Series of
Shares with separately defined investment objectives, policies
and restrictions, and distinct investment purposes, in accordance
with the provisions of Section 5.11 hereof; (j) allocate assets,
liabilities and expenses of the Trust to a particular Series or
to apportion the same between or among two or more Series,
provided that any liabilities or expenses attributable to a
particular Series shall be payable solely out of the assets
belonging to that Series as provided in Section 5.11 hereof; and
(k) adopt a seal for the Trust, but the absence of such seal
shall not impair the validity of any instrument executed on
behalf of the Trust.
Section 2.10. Principal Transactions. Except in
transactions not permitted by the 1940 Act, the Trustees may, on
behalf of the Trust, buy any securities from, or sell any
securities to, or lend any assets of the Trust to, any Trustee or
officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor or Transfer
Agent or with any Interested Person of any such Person; and the
Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel,
registrar, Transfer Agent, dividend disbursing agent or Custodian
upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees
shall initially be four (4), and thereafter shall be such number
as shall be fixed from time to time by a written instrument
signed by a majority of the Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1) nor
more than seven (7).
Section 2.12. Election and Term. Except for the
Trustees named herein or appointed to fill vacancies pursuant to
Section 2.14 hereof, the Trustees shall be elected by the
Shareholders owning of record a plurality of all of the Shares of
the Trust voting at a meeting of Shareholders. Except in event
of the resignation or removal pursuant to Section 2.13 hereof,
each Trustee shall hold office during the lifetime of the Trust,
and until its termination as provided in Section 8.2 hereof, or,
if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until his successor is elected
and qualified.
Section 2.13. Resignation and Removal. Any Trustee may resign
his trust (without need for prior or subsequent accounting) by an
instrument in writing signed by him and
delivered to the other Trustees, and such resignation shall be
effective upon such delivery, or at a later date according to
the terms of the instrument. Any of the Trustees may be removed
(provided the aggregate number of Trustees after such removal
shall not be less than three) with cause, by the action of two-
thirds of the remaining Trustees. Upon the resignation or
removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the incapacity or death
of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence.
Section 2.14. Vacancies. The term of office of a
Trustee shall terminate and a vacancy shall occur in the event of
the death, resignation, removal, bankruptcy, adjudicated
incompetence or other incapacity to perform the duties of the
office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to
the terms of the Declaration. In the case of an existing
vacancy, including a vacancy existing by reason of an increase in
the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees shall fill such
vacancy by the appointment of such other person as they in their
discretion shall see fit, made by a written instrument signed by
a majority of the Trustees then in office. Any such appointment
shall not become effective, however, until the person named in
the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the
terms of the Declaration. An appointment of a Trustee may be
made in anticipation of a vacancy to occur at a later date by
reason of retirement, resignation or increase in the number of
Trustees, provided that such appointment shall not become
effective prior to such retirement, resignation or increase in
the number of Trustees. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in
this Section 2.14 or in Section 5.10, the Trustees in office,
regardless of their number, shall have all the powers granted to
the Trustees, and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the
existence of such vacancy signed by a majority of the Trustees in
offite shall be conclusive evidence of the existence of such
vacancy.
Section 2.15. Delegation of Power to Other Trustees.
Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six (6) months at any one time to any other
Trustee or Trustees; provided that in no case shall less than two
(2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise
expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Underwriting Contract. The Trustees may
in their discretion from time to time enter into an exclusive or
non-exclusive underwriting contract or contracts providing for
the sale of the Shares to net the Trust not less than the amount
provided for in Section 7.1 hereof, whereby the Trustees may
either agree to sell the Shares to the other party to the
contract or appoint such other party their sales agent for the
Shares, and in either case on such terms and conditions as may be
prescribed in the By-laws, if any, and such further terms and
conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article III or of the By-
laws, and such contract may also provide for the redemption,
repurchase or sale of the Shares by such other party as agent of
the Trustees.
Section 3.2. Advisory or Management Contract. Subject
to approval by the affirmative vote of a majority of the Shares
outstanding and entitled to vote thereon, the Trustees may in
their discretion from time to time enter into one or more
investment advisory or management contracts with respect to the
Trust or any Series thereof whereby the other party to any such
contract shall undertake to furnish to the Trust or any Series
thereof such administrative, management, investment advisory,
statistical and research facilities and services, and such other
facilities and services, if any, all upon such terms and
conditions as the Trustees may in their discretion determine,
including the grant of authority to such other party to determine
what securities shall be purchased or sold by the Trust or Series
and what portion of the assets thereof shall be uninvested, which
authority shall include the power to effect on behalf of the
Trustees purchases, sales or exchanges of portfolio securities
and other investment instruments of the Trust or such Series
selected by such Investment Adviser without further consultation
with the Trustees or may authorize any officer, agent or Trustee
to effect such purchases, sales or exchanges pursuant to
instructions or recommendations of the Investment Adviser (and
all without further action by the Trustees). Any such purchases,
sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may, subject to applicable requirements of the
1940 Act, including those relating to Shareholder approval,
authorize the Investment Adviser to employ one or more
subadvisers from time to time to perform such of the acts and
services of the Investment Adviser, and upon such terms and
12-
conditions as may be agreed upon between the Investment Adviser
and any such-sub-adviser.
Section 3.3. Affiliations of Truatees or Officers, Etc.
The fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other
organization, or of or for any parent or affiliate of any
organization, with which a contract of the character
described in Sections 3.1 or 3.2 above, or for services as
Custodian, Transfer Agent or disbursing agent or for related
services may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or
other organization with which a contract of the character
described in Sections 3.1 or 3.2 above or for services as
Custodian, Transfer Agent or disbursing agent or for related
services may have been or may hereafter be made also has any
one or more of such contracts with one or more other
partnerships, corporations, trusts, associations or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability
to this Trust or its Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered
into pursuant to Section 3.1 or 3.2 shall be consistent with or
subject to the requirements of Section 15 of the 1940 Act
(including any amendment thereof or other applicable Act of
Congress hereafter enacted) with respect to its continuance in
effect, its termination and the method of authorization and
approval of such contract or renewal thereof; and no amendment to
any contract entered into pursuant to Section 3.2 shall be
effective unless assented to by a vote of a majority of the
Shares outstanding and entitled to vote thereon.
-13 -
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 or other disposition
not 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 be 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.
Sectioon 4.4. No Bond Required of Trustees. No Trustee shall
be obligated to give any bond or other security for the
performance of any of his duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, Transfer Agent or other
@er on dealing with the Trustees or any officer, employee or
agent of the Trust shall be bound to make any inquiry concerning
the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent, or, be liable for
the application of money or property paid, loaned, or delivered
to or on the order of the Trustees or of said officer, employee
or agent. Every obligation, contract, instrument, certificate,
Share, other security of the Trust or any Series or undertaking,
and every other act or thing whatsoever executed in connection
with the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity
as Trustees under this Declaration or in their capacity as
officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other
security of the Trust or any Series or undertaking made or issued
by the Trustees may recite that the same is executed or made by
them not individually, but as Trustees under this Declaration,
and that the obligations of the Trust under any such instrument
are not binding upon any of the Trustees or Shareholders
individually, but bind only the trust estate, and may contain any
further recital which they or he may deem appropriate, but the
omission of such recital shall not operate to bind the Trustees
individually. The Trustees shall at all times maintain insurance
for the protection of the Trust Property, its Shareholders,
Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability,
and such other insurance as the Trustees in their sole judgment
shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee and
officer, employee or agent of the Trust shall, in the performance
of his duties, be fully and completely justified and protected
with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records
of the Trust or any Series, upon an opinion of counsel, or upon
reports made to the Trust or any Series by any of its officers or
employees or by the Investment Adviser, Distributor, Transfer
Agent, selected dealers, accountants, appraisers or other experts
or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such
counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1- Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into transferable shares
of beneficial interest, all of one class, except as provided for
division into Series in Section 5.11 hereof, without par value.
The number of shares of beneficial interest authorized hereunder
is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares
or a split of Shares, shall be fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of
the Trust Property of every description and the right to conduct
any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein
other than the proportionate undivided beneficial interest
conferred by their Shares, and they shall have no right to call
for any partition or division of any property, profits, rights or
interests of the Trust, nor can they be called upon to share or
assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. All persons
acquiring Shares shall acquire the same subject to the provisions
of this Declaration and the By-laws established hereunder as in
effect from time to time, and by virtue of having become a
Shareholder, shall be held to have expressly assented and agreed
to the terms hereof and to have become a party hereto. The
Shares shall be personal property giving only the rights in this
Declaration specifically set forth. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine and
designate with respect to any Series of Shares established
pursuant to Section 5.11 hereof. The death.of a Shareholder
during the continuance of the Trust shall not operate to
terminate the same nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or
elsewhere ag@inst the Trust or Trustees, but shall entitle the
representative only to the rights of said decedent under this
Trust.
Section 5.3. Trust 0nly It is the intention of the Trustees
to create only the relationship of Trustee and beneficiary
between the Trustees and each Shareholder from time to time.
Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust, shall have any power to bind any Shareholder
personally or, except as specifically provided herein, to call
upon any Shareholder for the payment of any sum
of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of
subscription for any Shares or otherwise. It is not the
intention of the Trustees to create a general partnership,
limited partnership, joint stock association, corporation,
bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners
or members of a joint stock association. All persons extending
credit to, contracting with or having any claim against the Trust
or the Trustees, or a particular Series, shall look only to the
assets of the Trust or the appropriate Series for payment under
such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally
liable therefor.
Section 5.4. Issuance of Shares. The Trustees in their
discretion may, from time to time without vote of the
Shareholders, issue Shares, in addition to the then issued and
outstanding Shares and Shares held in the treasury, to such party
or parties and for such amount and type of consi - deration,
including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject
to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine
the Shares into a greater or lesser number without thereby
changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall
be redeemed as, whole Shares and/or 1/1,000ths of a Share or
integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at
the principal office of the Trust or an office of the Transfer
Agent which shall contain the names and addresses of the
Shareholders of each Series, if any, and the number of Shares
held by them respectively and a record of all transfers thereof.
Such register shall be conclusive as to who are the holders of
the Shares of each Series and who shall be entitled to receive
dividends or distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to
receive payment of any dividend or distribution, nor to have
notice given to him as herein or in the By-laws provided, until
he has given his address to the Transfer Agent or such other
officer or agent of the Trustees as shall keep the said register
for entry thereon. It is not contemplated that certificates will
be issued for the Shares; however, the Trustees, in their
discretion, may authorize the issuance of share certificates and
promulgate appropriate rules and regulations as to their use.
Section 5.6. Transfer of Shares. Shares shall be
transferable on the records of the Trust only by the record
holder thereof or by his agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of a
duly executed instrument of transfer, together with such evidence
of the genuineness of each such execution and authorization and
of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the
Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or
registrar nor any officer, employee or agent of the Trust shall
be affected by any notice of the proposed transfer.
Any Person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or
otherwise by operation of law, shall be recorded on the register
of Shares as the holder of such Shares upon production of proper
evidence thereof to the Trustees or the Transfer Agent, but until
such record is made, the Shareholder of record shall be deemed to
be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any
officer or agent of the Trust shall be affected by any notice of
such death, bankruptcy or incompetence, or other operation of
law.
Section 5.7. Notices. Any and all notices to which any
Shareholder may be entitled, and any and all communications,
shall be deemed duly served or given if mailed, postage-prepaid,
addressed to any Shareholder of record at his last known address
as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury
shall, until reissued pursuant to Section 5.4, not confer any
voting rights on the Trustees, nor shall such Shares be entitled
to any dividends or other distributions declared with respect to
such Shares.
Section 5.9. Voting Powers. The Shareholders shall have
power to vote only (i) for the election of Trustees as provided
in Section 2.12 hereof; (ii) with respect to any investment
advisory or management contract entered into pursuant to Section
3.2 hereof; (iii) with respect to termination of the Trust as
provided in Section 8.2 hereof; (iv) with respect to any
amendment of this Declaration to the extent and as provided
in Section 8.3 hereof; (v) with respect to any merger,
consolidation or sale of assets as provided in Section 8.4
hereof; (vi) with respect to incorporation of the Trust to the
extent and as provided in Section 8.5 hereof; (vii) to the same
extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders
provided, however, that a Shareholder of a particular Series
shall not be entitled to bring any derivative or class action on
behalf of any other Series of the Trust; and (viii) with respect
to such additional matters relating to the Trust as may be
required by this Declaration, the By-laws or because of any
registration of the Trust as an investment company under the 1940
Act with the Commission (or any successor agency) or as the
Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any other matter on which it
is entitled to vote and each fractional Share shall be entitled
to a proportionate fractional vote, except that, if any Series
are established, all shares shall be voted by individual Series
as required by Rule 18f-2 promulgated under the 1940 Act, except
(i) when required by the 1940 Act, Shares shall be voted in the
aggregate and not by individual Series; and (ii) when the
Trustees have determined that the matter affects only the
interests of one or more Series, then only the Shareholders of
such Series shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and
may take any action required by law, this Declaration or the By-
Laws to be taken by Shareholders. The By-laws may include
further provisions for Shareholders' votes and meetings and
related matters.
Section 5.10. Meetings of Shareholders. Special meetings of
the Shareholders of any Series or of all of the Series may be
called by the Trustees and shall be called by the Trustees for
the purpose of voting upon the question of the removal of any
Trustee or Trustees when requested in writing to do so by the
Shareholders of not less than 10% of the outstanding Shares. At
any time when less than a majority of the Trustees holding office
have been elected by the Shareholders, the then remaining
Trustees shall forthwith call a special meeting of Shareholders
to be held as promptly as possible and in any event within 60
days for the purpose of electing Trustees to fill any existing
vacancies. All such meetings shall be held either at the
principal office of the Trust, or at such other place as may be
designated by the Trustees. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940
Act seek the opportunity of furnishing materials to the other
Shareholders with a view to obtaining signatures on such a
request for a meeting, the Trustees shall comply with the
provisions of said Section 16(c) with respect to providing such
Shareholders access to the list of Shareholders or the mailing of
such materials to Shareholders.
Section 5.11. Series Designation. The Trustees, in their sole
discretion and without Shareholder approval, may authorize the
division of Shares into two or more Series, and the different
Series shall be established and designated, and the variations in
the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees; provided,
that all Shares shall be identical except that there may be
variations so fixed and determined between different Series as to
investment objective, purchase price, right of redemption,
special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Series
shall have separate voting rights. Each Share of a Series will
represent an equal proportionate interest in the Series with each
other Share of the same Series, none having priority or
preference over another within the same Series. All references
to Shares in this Declaration shall be deemed to be Shares of any
or all Series as the context may require.
If the Trustees shall divide the Shares of the Trust into two
or more Series, the following provisions shall be applicable:
(a) The number of authorized Shares and the number of
Shares of each Series that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series into one or
more Series that may be established and designated from time to
time. The Trustees may hold as treasury shares (of the same or
some other Series), reissue for such consideration and on such
terms as they may determine, or cancel any Shares of any Series
reacquired by the Trust at their discretion from time to time.
(b) All consideration received by the Trust for the issue
or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all
income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only
to the rights of creditors and except as may otherwise be
required by applicable tax laws, shall be so recorded upon the
books of account of the Trust and shall be held by the Trustees
in trust for the benefit of the holders of Shares of that Series.
In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series, the Trustees
shall allocate them among any one or more of the Series
established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for
all purposes.
(c) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that
Series, and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or
more of the Series established and designated from time to time
in such manner and on such basis as the Trustees, in their sole
discretion, deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of
all Series for all purposes. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to
determine which items are capital, and each such determination
and allocation shall be conclusive and binding upon the
Shareholders. Any creditor of any Series may look only to the
assets of that Series to satisfy such creditor's debt.
The establishment and designation of any Series of Shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation of the relative rights and preferences of such
Series, or as otherwise provided in such instrument. At any time
that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may, by an
instrument executed by a majority of their number, abolish that
Series and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of
an amendment to this Declaration.
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ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust
shall be redeemable at the redemption price determined in the
manner set out in this Declaration. Redeemed or repurchased
Shares may be resold by the Trust.
The Trust or a particular Series shall redeem the Shares of
the Trust or of such Series at the price determined as
hereinafter set forth, upon the appropriately verified written
application of the record holder thereof (or upon such other form
of request as the Trustees may determine) at such office or
agency of the Trust or of that Series as may be designated from
time to time for that purpose by the Trustees. The Trustees may
from time to time specify additional conditions, not inconsistent
with the 1940 Act, regarding the redemption of Shares of any
Series in the Trust's then effective prospectus under the
Securities Act of 1933.
Section 6.2. Price. Shares of the Trust or of a particular
Series shall be redeemed at their net asset value determined as
set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence
of such resolution, the redemption price of Shares deposited
shall be the net asset value of such Shares next determined as
set forth in Section 7.1 hereof after receipt of such
application.
Section 6.3. Payment. Payment for such Shares shall be made
in cash or in property to the Shareholder of record at such time
and in the manner, not inconsistent with the 1940 Act or other
applicable laws, as may be specified from time to time in the
Trust's then effective prospectus under the Securities Act of
1933, subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net
Asset Value. If, pursuant to Section 6.9 hereof, the Trustees
shall declare a suspension of the determination of net asset
value with regard to the Trust or any Series, the rights of
Shareholders of the Trust or such Series (including those who
shall have applied for redemption pursuant to Section 6.1 hereof
but who shall not yet have received payment) to have Shares
redeemed and paid for by the Trust or the Series shall be
suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by
appropriate written notice of revocation at the office or agency
where application was made, revoke any application for redemption
not honored and withdraw any certificates on deposit.
The.redemption price of Shares for which redemption applications
have not been revoked shall be the net asset value of such Shares
next determined, as set forth in Section 7.1, after the
termination of such suspension, and payment shall be made
within'seven (7) days after the date upon which the application
was made plus the period after such application during which the
determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may
repurchase Shares directly, or through the Distributor or another
agent designated for the purpose, by agreement with the owner
thereof at a price not exceeding the net asset value per Share of
the Trust or the particular Series determined as of the time when
the purchase or contract of purchase is made, or the net asset
value as of any time which may be later determined pursuant to
Section 7.1 hereof, provided payment is not made for the Shares
prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trust
shall have the right at any time without prior notice to the
Shareholder to redeem Shares of any Shareholder for their then
current net asset value per Share if at such time the Shareholder
owns Shares having an aggregate net asset value of less than
$1,000 subject to such terms and conditions as the Trustees may
approve, and subject to the Trust's giving general notice to all
Shareholders of its intention to avail itself of such right,
either by publication in the Trust's then current prospectus, if
any, or by such other means as the Trustees may determine.
Section 6.7. Redemption of Shares in Order to Qualify as
Regulated Investment Company; Disclosure of Holdings. If the
Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares or other securities
of the Trust has or may become concentrated in any Person to an
extent which would disqualify the Trust as a regulated investment
company under the Internal Revenue Code of 1986, as amended, (the
"Code"), then the Trustees shall have the power, by lot or other
means deemed equitable by them, (i) to call for redemption by any
such Person a number, or principal amount, of Shares or other
securities of the Trust sufficient to maintain or bring the
direct or indirect ownership of Shares or other securities of the
Trust into conformity with the requirements for such
qualification, and (ii) to refuse to transfer or issue Shares or
other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in
-25-
question would result in such disqualification. The redemption
shall be effected at the redemption price and in the manner
provided in Section 6.1.
The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other
securities of the Trust as the Trustees deem necessary to comply
with the provisions of the Code, or to comply with the
requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares
Pursuant to Net Asset Value Formula. The Trust may also reduce
the number of Outstanding Shares pursuant to the provisions of
Section 7.3.
Section 6.9. Suspension of Right of Redemption. The Trustees
may declare a suspension of the right of redemption or postpone
the date of payment or redemption for the whole or any part of
any period (i) during which the New York Stock Exchange is closed
other than customary weekend and holiday closings, (ii) during
which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by
the Trust of securities owned by it is not reasonably practicable
or it is not reasonably practicable for the Trust fairly to
determine the value of its net assets, or (iv) during any other
period when the Commission may for the protection of security
holders of the Trust or any Series thereof by order permit
suspension of the right of redemption or postponement of the date
of payment or redemption; provided that applicable rules and
regulations of the Commission shall govern as to whether the
conditions prescribed in (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trustees shall
specify, but not later than the close of business on the business
day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment on redemption
until the Trust shall declare the suspension at an end, except
that the suspension shall terminate in any event on the first day
on which said stock exchange shall have reopened or the period
specified in (ii) or (iii) shall have expired (as to which, in
the absence of an official ruling by the Commission, the
determination of the Trustees shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may
either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of
the suspension.
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ARTICLE VII
DETERMINAT10N OF NET ASSET VALUE
AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of the
Trust or a particular Series shall be determined by appraisal of
the securities owned by the Trust or such Series, such appraisal
to be on the basis of the amortized cost of such securities,, or
by such other method as shall be deemed to reflect the fair value
thereof, determined in good faith by or under the direction of
the Trustees. From the total value of said assets, there shall
be deducted all indebtedness; interest; taxes payable or accrued,
including estimated taxes on unrealized book profits; expenses
and management charges accrued to the appraisal date; net income
determined and declared as a distribution and all other items in
the nature of liabilities which shall be deemed appropriate. The
resulting amount which shall represent the total net assets of
the Trust or the particular Series shall be divided by the number
of Shares of the Trust or of such Series outstanding at the time,
and the quotient so obtained shall be deemed to be the net asset
value of the Shares of the Trust or of such Series as
appropriate. The net asset value shall be determined separately
for each Series, if the Trustees divide the Shares into two or
more Series, and shall be determined at least once on each
business day, as of the close of trading on the New York Stock
Exchange, or as of such other time or times as the Trustees shall
determine. The power and duty to make the daily calculations may
be delegated by the Trustees to the Investment Adviser, the
Custodian, the Transfer Agent or such other Person as the
Trustees by resolution may determine. The Trustees may suspend
the daily determination of net asset value to the extent
permitted by the 1940 Act.
For the purpose of allowing the net asset value per Share of
the Trust or of any Series to remain constant, if the Trustees
determine that it is desirable to do so, the Trustees shall be
entitled to declare, pay and credit as dividends daily the net
income (which may include or give effect to realized and
unrealized gains and losses, as determined in accordance with the
Trust's accounting and portfolio valuation policies) of the Trust
or of any Series. If the amount so determined for any day is
negative, the Trustees shall be entitled, without the payment of
monetary compensation but in consideration of the interest of the
Trust or the Series and the Shareholders in maintaining a
constant net asset value per Share, to redeem pro rata from all
Shareholders of the Trust or the Series at the time of such
redemption (in proportion to their respective holdings of
Shares) such number of outstanding Shares of the Trust or the
Series, or fractions thereof, as shall be required to permit the
net asset value per Share to remain constant. The Trustees may
delegate the powers and duties specified in this Section 7.1.
Section 7.2. Distributions to Shareholders. The Trustees
shall from time to time distribute ratably among the Shareholders
of the Trust or of each Series, if any, such proportion of the
net profits, surplus (including paid in surplus), capital or
assets held by the Trustees as they may deem proper. Such
distributions may be made in cash or property (including without
limitation any type of obligations of the Trust or any assets
thereof), and the Trustees may distribute ratably among the
Shareholders of the Trust or of any Series additional Shares
issuable hereunder in such manner, at such times and on such
terms as the Trustees may deem proper. Such distributions may be
among the Shareholders of record of the Trust or Series at the
time of declaring a distribution, or among the Shareholders of
record of the Trust or Series at such other date or time or dates
or times as the Trustees shall determine. The Trustees may in
their discretion determine that, solely for the purposes of such
distributions, Outstanding Shares shall exclude Shares for which
orders have been placed subsequent to a specified time on the
date the distribution is declared or on the next preceding day if
the distribution is declared as of a day on which Boston banks
are not open for business, all as described in the then effective
prospectus under the Securities Act of 1933. The Trustees may
always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the Trust or the
particular Series or to meet obligations of the Trust or the
particular Series, or as they may deem desirable to use in the
conduct of the affairs of the Trust or Series or to retain for
future requirements or extensions of the business. The Trustees
may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend,payout plans or related plans as the
Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for
federal income tax purposes may vary from the computation thereof
on the books, the above provisions shall be interpreted to give
the Trustees the power in their discretion to distribute for any
fiscal year as ordinary dividends and as capital gains
distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 7.3. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article
VII, the Trustees may prescribe, in their absolute discretion,
such other bases and times for determining the per Share net
asset value of the Trust's or a Series' Shares or net income, or
the declaration and payment of dividends and distributions as
they may deem necessary or desirable. Without limiting the
generality of the foregoing, the Trustees may establish several
Series of Shares in accordance with Section 5.11, and declare
dividends thereon in such manner other than above stated as they
shall determine.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue
without limitation of time but subject to the provisions of this
Article VIII.
Section 8.2. Termination of Trust. (a) The Trust may
be terminated by the affirmative vote of the holders of not less
than two-thirds of the Shares of each Series of the Trust
outstanding and entitled to vote at any meeting of Shareholders,
or by an instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not
less than two-thirds of such Shares. Upon the termination of the
Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs
of the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust
shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets,
sell, convey, assign, exchange, transfer or otherwise dispose
of all or any part of the remaining Trust Property to one or
more Persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities,
and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially, all
the Trust Property shall require Shareholder approval in
accordance with Section 8.4 hereof.
(iii) After paying or adequately providing for the
payment of all liabilities of the Trust (including the
liabilities of all Series), and upon receipt of such
releases, indemnities and refunding agreements as they deem
necessary for their protection, the Trustees may distribute
the remaining Trust Property, in cash or in kind or partly
each, ratably among the holders of the Shares of the Trust
then outstanding.
(b) After termination of the Trust and distribution to the
Shareholders as herein provided, a majority of the Trustees shall
execute and lodge among the records of the Trust an instrument in
writing setting forth the fact of such termination, and the
Trustees shall thereupon be discharged from all further
liabilities and duties hereunder as regards the Trust, and the
rights and interests of, all Shareholders of the Trust shall
thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may
be amended by a vote of the holders of a majority of the Shares
outstanding and entitled to vote, or by any instrument in
writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of a majority of the Shares
outstanding and entitled to vote. However, an amendment which
will affect the Shareholders of one or more Series shall be
authorized by a vote of a majority of the Shares outstanding and
entitled to vote of each such Series affected, and no vote of
Shareholders of a Series not affected shall be required. The
Trustees may also amend this Declaration, without the vote or
consent of Shareholders, to change the name of the Trust or if
they deem it necessary to conform this Declaration to the
requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of
the Code (including those provisions of the Code relating to the
retention of the exemption from federal income tax with respect
to dividends paid by the Trust out of interest income received
on municipal bonds), but the Trustees shall not be liable for
failing so to do.
(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.
(c) A certificate signed by a majority of the Trustees
setting forth an amendment and reciting that it was duly adopted
by the Shareholders or by the Trustees as aforesaid, or a copy
of the Declaration, as amended, and executed by a majority of
the Trustees, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time
as a Registration Statement under the Securities Act of 1933, as
amended, covering the first public offering of securities of the
Trust shall have become effective, this Declaration may be
terminated or amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority
of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets. The
Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property,
including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of
Shareholders called for the purpose by the affirmative vote of
the holders of two-thirds of the Shares outstanding and entitled
to vote, or by an instrument or instruments in writing without a
meeting, consented to by the holders of two-thirds of the Shares
or by such other vote as may be established by the Trustees with
respect to any Series; provided, however, that, if such merger,
consolidation, sale, lease or exchange is recommended by the
Trustees, the vote or written consent of the holders of a
majority of the Shares outstanding and entitled to vote, or such
other vote or written consent as may be established by the
Trustees with respect to any Series, shall be sufficient
authorization, and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been
accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts.
Section 8.5. Incorporation. With the approval of the holders
of a majority 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, the Trustees may cause to be
organized, or may assist in organizing, a corporation or
corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to takeover
all of the Trust Property or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to
sell, convey and transfer the Trust Property to any such
corporation, trust, association or organization in exchange for
the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership,
trust, association or organization in which the Trust holds or is
about to acquire shares or any other interest. The Trustees may
also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted
by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of
Shareholders for,the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations
orother organizations, and selling, conveying or transferring a
portion of the Trust Property to such organizations or entities.
33 -
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the
Shareholders a written financial report, which may be included in
the Trust's prospectus, of the transactions of the Trust,
specifying the transactions attributable to each Series,
including financial statements which shall at least annually be
certified by independent public accountants.
-34-
ARTICLE X
MISCELLANEOUS
Section 10.1. This Declaration and any amendment hereto
shall be filed in the office of the Secretary of the
Commonwealth of Massachusetts, and in such other places as
may be required under the laws of Massachusetts, and may also
be filed or recorded in such other places as the Trustees
deem appropriate. Each amendment so filed shall be
accompanied by a certificate signed and acknowledged by a
Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, integrating into a single
instrument all of the provisions of the Declaration which are
then in effect and operative, may be executed from time to
time by a majority of the Trustees, and shall, upon filing
with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original
Declaratipn and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by
the Trustees with reference to the laws of the Commonwealth of
Massachusetts, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and
construed according to the laws of said Commonwealth.
Section 10.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts,
together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the
Trust appears to be a Trustee hereunder, certifying to: (a) the
number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c)
the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration, (e)
the form of any By-laws adopted by or the identity of any
officers elected by the Trustees or (f) the existence of any fact
or facts which in any manner relate to the affairs of the Trust,
shall be conclusive evidence as to the matters so certified in
favor of any Person dealing with the Trustees and their
successors.
Section 10.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of
such provisions are in conflict with the 1940 Act, the regulated
investment company provisions of the Code or with other
applicable laws and regulations, the conflicting provisions shall
be deemed never to have constituted a part of this Declaration;
provided, however, that such determination shall not affect any
of the remaining provisions of this Declaration or render invalid
or improper any action taken or omitted prior to such
determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this
instrument this 23rd day of November, 1987.
/s/Robert P. Watson
Robert P. Watson
/s/William W. Graulty
Willilam W. Graulty
/s/Madeline H. McWhinney
Madeline H. McWhinney
/s/Thomas R. Schneeweis
Thomas R. Schneeweis
-36-
Then personally appeared the above-named Robert P. Watson,
William W. Graulty, Madeline H. McWhinney and Thomas R.
Schneeweis, each of whom executed and acknowledged the foregoing
instrument to be their free act and deed.
/s/Brian
Commissioner of the Superior Court
EXHIBIT 1(B)
THE MANAGERS FUNDS
Certificate of Amendment
The undersigned, being the Secretary of The Managers
Funds (hereinafter referred to as the "Trust"), a trust with
transferable shares of the type commonly called a Massachusetts
business trust, DOES HEREBY CERTIFY that, pursuant to the
authority conferred upon the Trustees of the Trust by Sections
2.8 and 8.3 of the Agreement and Declaration of Trust, dated
November 23, 1987, as amended, and by, the affirmative vote of
all of the Trustees at a meeting held on May 10, 1993, the names
of the series established by the Certificate of Designation dated
January 23, 1989 are hereby changed as follows:
Previous Name New Name
Management of Managers Core Managers Core Equity Fund
Equity Fund
Management of Managers Capital Managers Capital Appreciation
Appreciation Fund Fund
Management of Managers Special Managers Special Equity Fund
Equity Fund
Management of Managers Income Managers Income Equity Fund
Equity Fund
Management of Managers Managers International Equity
International Equity Fund Fund
Management of Managers Terminated as of May 14, 1990
Precious Metals Fund pursuant to Trustee action
(see attached)
Management of Managers Fixed Managers Bond Fund
Income Securities Fund
Management of Managers Managers Intermediate Mortgage
Intermediate Mortgage Fund
Securities Fund
Management of Managers Short Managers Short and
and Intermediate Fixed Income Intermediate Bond Fund
Securities Fund
Management of Managers Short Managers Short Government Fund
Term Fixed Income Securities
Fund
Previous Name New Name
Management of Managers Money Managers Money Market Fund
Market Fund
Management of Managers Managers Municipal Bond Fund
Municipal Bond Fund
Management of Managers Short Managers Short Municipal Fund
Term Municipal Bond Fund
Management of Managers Short Terminated as of May 14, 1990
and Intermediate Government pursuant to Trustee action
Securities Fund (see attached)
IN WITNESS WHEREOF, the undersigned has set her hand
this 12th day of May, 1993.
/s/Kathleen Wood
Kathleen Wood, Secretary
THE MANAGERS FUNDS
Secretary's Certificate
I, Kathleen Wood, Secretary of The Managers Funds, a
Massachusetts business trust (the "Trust"), hereby certify that
the following resolutions were duly adopted by unanimous vote of
the Trustees of the Trust at a regular meeting of the Trustees
held on May 14, 1990; that the passage of said resolutions was in
all respects legal; and that said resolutions are in full force
and effect.
WHEREAS, the Trustees previously have established and
designated as separate series of the Trust the Management of
Managers U.S. Government Securities Fund and the Management
of Managers Precious Metals Fund; and
WHEREAS, no shares of either of the above-named Series
have been issued or are presently outstanding,
NOW THEREFORE, BE IT
RESOLVED, that, pursuant to the Trust's Declaration of
Trust, the Trustees hereby abolish the Series of the Trust
previously established and designated by the Trustees as the
Management of Managers U.S. Government Securities Fund and
the Management of Managers Precious Metals Fund.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day
of May, 1993.
/s/Kathleen Wood
Kathleen Wood, Secretary
ACKNOWLEDGMENT
STATE OF Connecticut)
) ss.
COUNTY OF Fairfield ) May 12th, 1993
Then personally appeared the above named Kathleen Wood
and acknowledged the foregoing instrument to be her free act and
deed.
Before me,
/s/Sally W. Marcus
Notary Public
EXHIBIT 1(C)
THE MANAGERS FUNDS
Certificate of Amendment
The undersigned, being the Secretary of The Managers
Funds (hereinafter referred to as the "Trust"), a trust with
transferable shares of the type commonly called a Massachusetts
business trust, DOES HEREBY CERTIFY that, pursuant to the
authority conferred upon the Trustees of the Trust by Sections
2.8 and 8.3 of the Agreement and Declaration of Trust, dated
November 23, 1987, as amended, and by the affirmative vote of all
of the Trustees at a meeting held on May 10, 1993, the names of
the series established by the Certificate of Designation dated
May 12, 1993 are hereby changed as follows:
Previous Name New Name
Managers Core Equity Fund Managers Balanced Fund
IN WITNESS WHEREOF, the undersigned has set her hand
this 30th day of June, 1993.
/s/Kathleen Wood
Kathleen Wood, Secretary
ACKNOWLEDGMENT
STATE OF Connecticut)
) ss.
COUNTY OF Fairfield ) June 30, 1993
Then personally appeared the above named Kathleen Wood
and acknowledged the foregoing instrument to be her free act and
deed.
Before me,
/s/Sally W. Marcus
Notary Public
EXHIBIT 2
BY-LAWS
OF
THE MANAGEMENT OF MANAGERS GROUP OF FUNDS
DATED NOVEMBER 23, 1987
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS
ARTICLE II - OFFICES 1
Section 1. Principal Office 1
Section 2. Other Offices 1
ARTICLE III - SHAREHOLDERS 1
Section 1. Meetings 1
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings and
Other Purposes 2
Section 4. Proxies 2
Section 5. Inspection of Records 3
Section 6. Action without Meeting 3
ARTICLE IV - TRUSTEES 3
Section 1. Meetings of the Trustees 3
Section 2. Quorum and Manner of Acting 4
ARTICLE V - COMMITTEES 4
Section 1. Executive and Other Committees 4
Section 2. Meetings, Quorum and Manner of
Acting 4
ARTICLE VI OFFICERS 5
Section 1. General Provisions 5
Section 2. Term of Office and Qualifications 5
Section 3. Removal 5
Section 4. Powers and Duties of the President 5
Section 5. Powers and Duties of Vice Presidents 6
Section 6. Powers and Duties of the Treasurer 6
Section 7. Powers and Duties of the Secretary 6
Section 5. Powers and Duties of Assistant
Treasurers 7
-2-
Section 9. Powers and Duties of Assistant
Secretaries 7
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 7
ARTICLE VII - FISCAL YEAR 7
ARTICLE VIII - SEAL 7
ARTICLE IX - WAIVERS OF NOTICE 8
ARTICLE X - CUSTODY OF SECURITIES 8
Section 1. Employment of a Custodian 8
Section 2. Action Upon Termination of
Custodian Agreement 8
Section 3. Provisions of Custodian Contract a
Section 4. Central Certificate System 9
Section 5. Acceptance of Receipts in Lieu of
Certificate 9
ARTICLE XI AMENDMENTS 10
ARTICLE X MISCELLANEOUS 10
BY- LAWS
OF
THE MANAGEMENT OF MANGERS GROUP OF FUNDS
ARTICLE I
DEFINITIONS
The terms "Commission," "Custodian," "Declaration,"
"Distributor," "Investment Adviser," "Municipal Bonds,"
"1940 Act," "Series," "Shareholder," "Transfer Agent,"
"Trust," "Trust Property," "Trustees," and "vote of a majority of
the Shares outstanding and entitled to vote," have the respective
meanings given them in the Declaration of Trust of The Management
of Managers Group of Funds (the "Trust") dated November 23, 1967,
as amended from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the
Trustees, the principal office of the Trust in the Commonwealth
of Massachusetts shall be in the City of Boston, County of
Suffolk. With respect to votes by any Series, the holders of a
majority of outstanding Shares of such Series present in person
or by proxy shall constitute a quorum at any meeting of the
Shareholders of such Series.
Section 2. Other Offices. The Trust may have offices
in such other places without as well as within the Commonwealth
as the Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meeting; Quorum. Meetings of the Shareholders
shall be held as provided in the Declaration at such place within
or without the Commonwealth of Massachusetts as the Trustees
shall designate. The holders of a majority of outstanding Shares
present in person or by proxy shall constitute a quorum at any
meeting of the Shareholders. With respect to votes by any
Series, the holders of a majority of
-2 -
outstanding Shares of such Series present in person or by proxy
shall constitute a quorum at any meeting of the Shareholders of
such Series.
Section 2. Notice of Meetings. Notice of all meetings
of the Shareholders, stating the time, place and purposes of the
meeting, shall be given by the Trustees by mail to each
Shareholder at his address as recorded on the register of the
Trust mailed at least (10) days, but not more than sixty (60)
days, before the meeting. only the business stated in the notice
of the meeting shall be considered at such meeting. Any
adjourned meeting may be held as adjourned without further
notice. No notice need be given to any Shareholder who shall
have failed to inform the Trust of his current address or if a
written waiver of notice, executed before or after the meeting by
the Shareholder or his attorney thereunto authorized, is filed
with the records of the meeting.
Section 3. Record Date for Meetings and Other
Purposes. For the purpose of determining the Shareholders who
are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer
books for the Trust or for any Series for such period, not
exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date
not more than sixty (60) days prior to the date of any meeting of
Shareholders or distribution or other action as a record date for
the determinations of the persons to be treated as Shareholders
of record for such purposes, except for dividend payments which
shall be governed by the Declaration.
Section 4. Proxies. At any meeting of Shareholders,
any holder of Shares of any Series entitled to vote thereat may
vote by proxy, provided that no proxy shall be voted at any
meeting unless it shall have been placed on file with the
Secretary, or with.such other officer or agent of the Trust as
the Secretary may direct, for verification prior to the time at
which such vote shall be taken. Proxies may be solicited in the
name of one or more Trustees or one or more of the officers of
the Trust. Only Shareholders of record shall be entitled to
vote. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled by the Declaration to vote, and
each fractional Share shall be entitled to a proportionate
fractional vote. When any Share is held jointly by several
persons, any one of them may vote at any meeting in person or by
proxy in respect of such Share, but if more than one of them
shall be present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such
Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest
on the challenger. If the holder of any such Share is a minor or
a person of unsound mind, and subject to guardianship or the
legal control of any other person as regards the charge or
management of such Share, he may vote by his guardian or such
other person appointed or having such control, and such vote may
be given in person or by proxy.
Section 5. Inspection of Records. The records of the Trust
shall be open to inspection by Shareholders to the same extent as
is permitted shareholders of a Massachusetts business
corporation.
Section 6. Action without Meeting. Any action which
may be taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by law, the
Declaration or these By-laws for approval of such matter) consent
to the action in writing and the written consents are filed with
the records of the meetings of Shareholders. Such consents shall
be treated for all purposes as a vote taken at a meeting of
Shareholders called for such purpose.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in
their discretion provide for regular or stated meetings of the
Trustees. Notice of regular or stated meetings need not be
given. Meetings of the Trustees other than regular or stated
meetings shall be held whenever called by the President, or by
any one of the Trustees, at the time being in office. Notice of
the time and place of each meeting other than regular or stated
meetings shall be given by the Secretary or an Assistant
Secretary or by the officer or Trustee calling the meeting and
shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each
Trustee at his business address, or personally delivered to him
at least one day before the meeting. Such notice may, however,
be waived by any Trustee. Notice of a meeting need not be given
to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of
notice to him. A notice or waiver of notice need not specify the
purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment
by means of which all persons participating in the meeting are
connected, which meeting shall be deemed to have been held at a
place designated by the Trustees at the meeting. Participation
in a telephone conference meeting shall constitute presence in
person at such meeting. Any action required or permitted to be
taken at any Meeting of the Trustees may be taken by the Trustees
without a meeting if all the Trustees consent to the action in
writing and the written consents are filed with the records of
the Trustees' meetings. Such consents shall be treated as a vote
for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the
Trustees shall be present in person at any regular or special
meeting of the Trustees in order to constitute a quorum for the
transaction of business at such meeting and (except as otherwise
required by law, the Declaration or these By-laws) the act of a
majority of the Trustees present at any such meeting, at which a
quorum is present, shall be the act of the Trustees. In the
absence of a quorum, a majority of the Trustees present may
adjourn the meeting from time to time until a quorum shall be
present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by
vote of a majority of all the Trustees may elect from their own
number an Executive Committee to consist of not less than two (2)
to hold office at the pleasure of the Trustees, which shall have
the power to conduct the current and ordinary business of the
Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities
to be delivered upon redemption of Shares of any Series of the
Trust, and such other powers of the Trustees as the Trustees may,
from time to time, delegate to them except those powers which by
law, the Declaration or these By-laws they are prohibited from
delegating. The Trustees may also elect from their own number
other Committees from time to time, the number composing such
Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and
the term of membership on such Committees to be determined by the
Trustees. The Trustees may designate a chairman of any such
Committee. In the absence of such designation the Committee may
elect its own chairman.
Section 2. Meetings, Quorum and Manner of Acting. The
Trustees may (1) provide for regular or stated meetings of any
Committee, (2) specify the manner of calling and notice required
for special meetings of any Committee, (3) specify the number of
members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified
powers delegated to such Committee, (4) authorize the making of
decisions to exercise specified powers by written assent of the
requisite number of members of a Committee without a meeting, and
(5) authorize the members of a Committee to meet by means of a
telephone conference circuit or similar communications equipment
by means of which all persons participating in the meeting are
connected.
The Executive Committee and any other Committee created as
above provided or as provided in the Declaration shall keep
regular minutes of its meetings and records of decisions taken
without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust
shall be a President, a Treasurer and a Secretary, who shall be
elected by the Trustees. The Trustees may elect or appoint such
other officers or agents as the business of the Trust may
require, including one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The
Trustees may delegate to any officer or committee the power to
appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except
as otherwise provided by law, the Declaration or these By-laws,
the President, the Treasurer and the Secretary shall each hold
office until his successor shall have been duly elected and
qualified, and all other officers shall hold office at the
pleasure of the Trustees. The Secretary and Treasurer may be the
same person. A Vice President and the Treasurer or a Vice
President and the Secretary may be the same person, but the
offices of Vice President, Secretary and Treasurer shall not be
held by the same person. The President shall hold no other
office. Except as above provided, any two offices may be held by
the same person. Any officer may be, but none need be, a Trustee
or Shareholder.
Section 3. Removal. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer without cause, by
a vote of a majority of the Trustees then in office. Any officer
or agent appointed by an officer or committee may be removed with
or without cause by such appointing officer or committee.
Section 4. Powers and Duties of the President. The President
may call meetings of the Trustees and of any Committee thereof
when he deems it necessary and shall preside at all meetings of
the Shareholders. Subject to the control of the Trustees and to
the control of any Committees of the Trustees, within their
respective spheres, as provided by the Trustees, the President
shall at all times exercise a general supervision and direction
over the affairs of the Trust. The President shall have the
power to employ attorneys and counsel for the Trust and to employ
such subordinate officers, agents, clerks and employees as he may
find necessary to transact the business of the Trust. The
President shall also have the power to grant, issue, execute or
sign such powers of attorney, proxies or other documents as may
be deemed advisable or necessary in furtherance of the interests
of the Trust. The President shall have such other powers and
duties, as from time to time may be conferred upon or assigned to
him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In
the absence or disability of the President, the Vice President
or, if there be more than one Vice President, any Vice President
designated by the Trustees, shall perform all the duties and may
exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such
other duties as may be assigned to him from time to time by the
Trustees and the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer
shall be the principal financial and accounting officer of the
Trust. The Treasurer shall deliver all funds of the Trust which
may come into his hands to such Custodian as the Trustees may
employ pursuant to Article X of these By-laws. The Treasurer
shall render a statement of condition of the finances of the
Trust to the Trustees as often as they shall require the same and
he shall in general perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be
assigned to him by the Trustees. The Treasurer shall give a bond
for the faithful discharge of his duties, if required to do so by
the Trustees, in such sum and with such surety or sureties as the
Trustees shall require.
Section 7. Powers and Duties of the Secretary. The Secretary
shall keep the minutes of all meetings of the Trustees and of the
Shareholders in proper books provided for that purpose. The
Secretary shall have custody of the seal of the Trust, if any,
and shall have charge of the Share transfer books, lists and
records unless the same are in the charge of the Transfer Agent.
The Secretary shall attend to the giving and serving of all
ncitices by the Trust in accordance with the provisions of these
By-laws and as required by law; and as subject to these By-laws,
the Secretary shall in general perform all duties incident to the
office of Secretary and such other duties as from time to time
may be assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the
absence or disability of the Treasurer, any Assistant Treasurer
designated by the Trustees shall perform all the duties, and may
exercise any of the powers, of the Treasurer. Each Assistant
Treasurer shall perform such other duties as from time to time
may be assigned to him by the Trustees. Each Assistant Treasurer
shall give a bond for the faithful discharge of his duties, if
required to do so by the Trustees, in such sum and with such
surety or sureties as the Trustees shall require.
Section 9. Powers and Duties of Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary
designated by the Trustees shall perform all the duties, and may
exercise any of the powers, of the Secretary. Each Assistant
Secretary shall perform such other duties as from time to time
may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and Members
of the AdvisoryB Board. Subject to any applicable provisions of
the Declaration, the compensation of the officers and Trustees
and members of the Advisory Board, if any, shall be fixed from
time to time by the Trustees or, in the case of officers, by any
committee or officer upon whom such power may be conferred by the
Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he is
also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
January in each year and shall end on the thirty-first day of
December in each year, provided, however, that the Trustees may
from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and
shall have such inscription thereon as the Trustees may from time
to time prescribe. However, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf
of the Trust.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law,
the Declaration or these By-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto. A notice shall be deemed to have been
telegraphed, cabled or wirelessed for the purposes of these
Bylaws when it has been delivered to a representative of any
telegraph, cable or wireless company with instructions that it be
telegraphed, cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place
and at all times maintain in the custody of a Custodian
(including any sub-custodian for the Custodian) all funds,
securities and similar investments included in the Trust
Property. The Custodian (and any sub-custodian) shall be a bank
or trust company, having not less than $2,000,000 aggregate
capital, surplus and undivided profits and shall be appointed
from time to time by the Trustees, who shall fix its
remuneration.
Section 2. Action Upon Termination of Custodian Agreement.
Upon termination of a custodian agreement or inability of the
Custodian to continue to serve, the Trustees shall promptly
appoint a successor Custodian, but in the event that no successor
Custodian can be found which has the required qualifications and
is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine
whether the Trust shall function without a Custodian or shall be
liquidated. If so directed by vote of the holders of a majority
of the outstanding voting securities of the Trust, the Custodian
shall deliver and pay over all Trust Property held by it as
specified in such vote.
Section 3. Provisions of Custodian Contract. The following
provisions shall apply to the employment of a Custodian and to
any contract entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all
securities included in the Trust Property or to which the
Trust may become entitled, and shall order the same to be
delivered by the Custodian only in completion of a sale,
exchange, transfer, pledge, loan of portfolio securities to
another person, or other disposition thereof, all as
Trustees may generally or from time to time require or
approve or to asuccessor Custodian; and the Trustees shall
cause all funds included in the Trust Property or to which it
may become entitled to be paid to the Custodian, and shall
order same disbursed only for investment against delivery of
the securities acquired, or the return of cash held as
collateral for loans of portfolio securities, or in payment
of expenses, including management compensation, and
liabilities of the Trust, including distributions to
Shareholders, or to a successor Custodian. Not withstanding
anything to the contrary in these By-laws, upon receipt of
proper instructions, which may be standing instructions, the
Custodian may deliver funds in the following cases. In
connection with repurchase agreements, the Custodian shall
transmit, prior to receipt on behalf of the Trust of any
securities or other property, funds from the Trust's (or a
specific Series') custodian account to a special custodian
approved by the Trustees of the Trust, which funds shall be
used to pay for securities to be purchased by the Trust
sub'ect to the Trust's obligation to sell and the seller's
obligation to repurchase such securities. In such case, the
securities shall be held in the custody of the special
custodian. In connection with the Trust's purchase or sale
of financial future contracts, the Custodian shall transmit,
prior to receipt on behalf of the Trust of any securities or
other property, funds from the Trust's custodian account in
order to furnish to and maintain funds with brokers as margin
to guarantee the performance of the Trust's future
obligations in accordance with the applicable requirements of
commodities exchanges and brokers.
Section 4. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees
may direct the Custodian to deposit all or any part of the
securities owned by the Trust in a system for the central
handling of securities established by a national securities
exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such
other person as may be permitted by the Commission, or otherwise
in accordance with the 1940 Act, pursuant to which system all
securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the
Trustees or their duly authorized agent.
Section 5. Acceptance of Receipts in Lieu of
Certificates. Subject to such rules, regulations and orders
as the Commission may adopt, the Trustees may direct the
Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the
Federal Reserve System in accordance with regulations promulgated
by the Board of Governors of the Federal Reserve System and the
local Federal Reserve Banks in lieu of receipt of certificates
representing such securities.
ARTICLE XI
AMENDMENTS
These By-laws, or any of them, may be altered, amended or
repealed, or new By-laws may be adopted by (a) vote of a majority
of the Shares outstanding and entitled to vote or (b) by the
Trustees, provided, however, that no By-law may be amended,
adopted or repealed by the Trustees if such amendment, adoption
or repeal requires, pursuant to law, the Declaration or these By-
laws, a vote of the Shareholders of the Trust or of any Series
thereof.
ARTICLE XII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustee
of the Trust and no partner, officer, director or shareholder of
the Investment Adviser of the Trust (as that term is defined in
the 1940 Act) or of the underwriter of the Trust, and no
Investment Adviser or underwriter of the Trust, shall take long
or short positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent the
underwriter from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and
cancellation of orders) to purchase for the purpose of
filling orders for such Shares received by the underwriter,
and provided that orders to purchase from the Trust are
entered with the Trust or the Custodian promptly upon receipt
by the underwriter of purchase orders for such Shares, unless
the underwriter is otherwise instructed by its customer.
(2) The foregoing provisions shall not prevent the
underwriter from purchasing Shares of the Trust as agent for
the account of the Trust.
(3) The foregoing provisions shall not prevent the
purchase from the Trust or from the underwriter of Shares
issued by the Trust, by any officer, or Trustee of the Trust
or by any partner, officer, director or shareholder of the
Investment Adviser of the Trust or of the underwriter of the
Trust at the price available to the public generally at the
moment of such purchase, or as described in the then
currently effective Prospectus of the Trust.
(4) The foregoing shall not prevent the Investment
Adviser or any affiliate thereof of the Trust from purchasing
Shares prior to the effectiveness of the first registration
statement relating to the Shares under the. Securities Act
of 1933.
(B) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust, or to any partner, officer,
director or shareholder of, or person financially interested in,
the Investment Adviser of the Trust, or the underwriter of the
Trust, or to the Investment Adviser of the Trust or to the
underwriter of the Trust.
(C) The Trust shall not impose any restrictions upon the
transfer of the Shares of the Trust except as provided in the
Declaration, but this requirement shall not prevent the charging
of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of
the Trust, or any partner, officer or director of the Investment
Adviser or underwriter of the Trust to deal for or on behalf of
the Trust with himself as principal or agent, or with any
partnership, association or corporation in which he has a
financial interest; provided that the foregoing provisions shall
not prevent (a) officers and Trustees of the Trust or partners,
officers or directors of the Investment Adviser or underwriter of
the Trust from buying, holding or selling shares in the Trust, or
from being partners, officers or directors or otherwise
financially interested in the Investment Adviser or underwriter
of the Trust; (b) purchases or sales of securities or other
property by the Trust from or to an affiliated person or to the
Investment Adviser or underwriter of the Trust if such
transaction is exempt from the applicable provisions of the 1940
Act; (c) purchases of investments for the portfolio of the Trust
or sales of investments owned by the Trust through a securities
dealer who is, or one or more of whose partners, shareholders,
officers or directors is, an officer or Trustee of the Trust, or
a partner, officer or director of the Investment Adviser or
underwriter of the Trust, if such transactions are handled in the
capacity of broker only and commissions charged do not exceed
customary brokerage charges for such services; (d) employment of
legal counsel, registrar, Transfer Agent, dividend disbursing
agent or Custodian who is, or has a partner, shareholder,
officer, or director who is, an officer or Trustee of the Trust,
or a partner, officer or director of the Investment Adviser or
underwriter of the Trust, if only customary fees are charged for
services to the Trust; (e) sharing statistical research, legal
and management expenses and office hire and expenses with any
other investment company or other company in which an officer or
Trustee of the Trust, or a partner, officer or director of the
Investment Adviser or underwriter of the Trust, is an officer or
director or otherwise financially interested.
END OF BY-LAWS
EXHIBIT 4
INSTRUMENTS DEFINING RIGHTS OF SHAREHOLDERS
Provisions of Registrant's Declaration of
Trust Relating to Rights of Shareholders
ARTICLE II - Trustees
Section 2.4 - Issuance and Repurchase of Securities
Section 2.8 - Manner of Acting; By-Laws
ARTICLE III - Contracts
Section 3.2 - Advisory or Management Contract
Section 3.3 - Affiliations of Trustees or Officers, etc.
Section 3.4 - Compliance with 1940 Act
ARTICLE IV - Limitations of Liability of Shareholders, Trustees
and Others
ARTICLE V - Shares of Beneficial Interest
ARTICLE VI - Redemption and Repurchase of Shares
ARTICLE VII - Determination of Net Asset Value and Distributions
Section 7.2 - Distributions to Shareholders
ARTICLE VIII - Duration; Termination of Trust; Amendment;
Mergers, etc.
Section 8.2 - Termination of Trust
Section 8.3 - Amendment Procedure
Section 8.4 - Merger, Consolidation and Sale of Assets
Section 8.5 - Incorporation
* * * *
Provisions of Registrant's By-Laws
Relating to Rights of Shareholders
ARTICLE III - Shareholders
ARTICLE XI - Amendments
EXHIBIT 5(A)
FUND MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made as of this 17th day
of August, 1990, between The Management of Managers Group of
Funds, a business trust organized under the laws of the
Commonwealth of Massachusetts ("Company") and EAIMC Partners,
L.P., a partnership organized under the laws of the State of
Delaware ("Manager"). This Agreement shall not become effective
as to any Series unless the shareholders of such Series approve
this Agreement.
WHEREAS, the Company operates as an investment company
registered under the Investment Company Act of 1940, as amended
(the "Investment Company Act") for the purpose of investing and
reinvesting the assets of its various series (each a "Series",
each of which is listed in Appendix A hereto) in securities
pursuant to investment objectives and policies as set forth more
fully in its Declaration of Trust, its By-Laws and its
Registration Statement under the Investment Company Act and the
Securities Act of 1933, as amended, all as amended and
supplemented from time to time; and the Company desires to avail
itself of the services, information, advice, assistance and
facilities of a fund manager and to have a fund manager provide
or perform for it various administrative management,
statistical, research, portfolio manager selection and other
services; and
WHEREAS, the Company and Evaluation Associates
Investment Management Company ("EAIMC") have previously entered
into a Fund Management Agreement dated May 1, 1990 (the "Prior
Agreement") pursuant to which EAIMC has provided investment
management services to the Company; and
WHEREAS, the Manager has, on the date hereof, acquired
the assets of EAIMC and has succeeded to the investment
management business of EAIMC and such acquisition constitutes an
assignment of the Prior Agreement which causes the termination
of the Prior Agreement; and
WHEREAS, the Manager is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended,
and has entered into a Consulting Agreement with Evaluation
Associates, Inc. ("EAI"); and
WHEREAS, the Manager desires to provide services to the
Company in consideration of and on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, Company and Manager agree as follows:
1. Employment of the Manager. The Company hereby
employs the Manager to manage the investment and reinvestment of
the assets of the Company's various Series in the manner set
forth in Section 2 (B) of this Agreement and to administer its
business and administrative operations, subject to the direction
of the Trustees and the officers of the company, for the period
in the manner, and on the terms hereinafter set forth. The
Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations
herein set forth. The Manager shall for all purposes herein be
deemed to be an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise)
have no authority to act for or represent the Company in any way
or otherwise be deemed an agent of the Company.
2. Obligation of and Services to be Provided by the
Manager. The Manager undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. Corporate Management and Administrative Services.
(a) The Manager shall furnish to the Company adequate
(i)office space, which may be space within the offices of the
Manager or in such other place as may be agreed upon from time to
time, (ii) office furnishings, facilities and equipment as may be
reasonably required for managing and administering the operations
and conducting the business of the Company, including complying
with the securities, tax and other reporting requirements of the
United States and the various states in,which the Company does
business, conducting correspondence and other communications with
the shareholders of the Company, and maintaining or supervising
the maintenance ot all internal bookkeeping, accounting and
auditing services and records in connection with the company to
investment and business activities. Company agrees that its
shareholder recordkeeping services, the computing of net asset
value and the preparation of certain of its records required by
Section 31 of the Investment Company Act and the Rules
promulgated thereunder are to be performed by Company's transfer
agent, custodian or portfolio managers, and that with respect to
these services Manager's obligations under this Section 2(A) are
supervisory in nature only.
-2-
(b) The Manager shall employ or provide and compensate
the executive, administrative, secretarial and clerical personnel
necessary to supervise the provision'of the services set forth in
subparagraph 2 (A) (a) above, and shall bear the expense of
providing such services, except as may otherwise be provided in
Section 4 of this Agreement. The Manager shall also compensate
all officers and employees of the Company who are officers or
employees of the Manager.
B. Investment Management Services.
(a) The Manager shall have overall
supervisory responsibility for the
general management and investment of the
assets and securities portfolio of each
of the company's various Series subject
to and in accordance with the investment
objectives, policies and restrictions of
each such Series, and any directions
which the Company's Trustees may issue to
the Manager from time to time.
(b) The Manager shall provide overall
investment programs and strategies for
the Company, and more particularly for
each Series, shall revise such programs
as necessary and shall monitor and report
periodically to the Trustees concerning
the implementation of the programs.
(c) The Company intends to appoint one or
more persons or companies ("Portfolio
Managers"), and each Portfolio Manager
shall have full investment discretion and
shall make all determinations with
respect to the investment of the portion
of the particular Series' assets assigned
to that Portfolio Manager and the
purchase and sale of portfolio securities
with those assets, and take such steps as
may be necessary to implement such
appointments. The Manager shall not be
responsible or liable for the investment
merits of any decision by a Portfolio
Manager to purchase, hold or sell a
security for the portfolio of the Series
for which it acts as Portfolio Manager.
-3-
(d) The Manager shall evaluate Portfolio Managers
and shall advise the Trustees of the Company of the
Portfolio Managers which the Manager believes are best
suited to invest the assets of each Series; shall
monitor and evaluate the investment performance of each
Portfolio Manager employed by each Series; shall
allocate the portion of each Series' assets to be
managed by each Portfolio Manager; shail recommend
changes of or additional Portfolio Managers vhen
appropriate; shall coordinate the investment activities
of the Portfolio Managers; and shall compensate the
Portfolio Managers.
(e) The Manager shall render regular reports to the Company,
at regular meetings of the Trustees, of, among other
things, the decisions which it has made vith respect to
the allocation of assets among Portfolio Managers.
C. Provision of Information Necessary for Preparation of
Securities Registration Statements, Amendments and Other
Materials.
The Manager will make available and provide financial,
accounting and statistical information required by the
Company in the preparation of registration statements,
reports and other documents required by federal and state
securities laws, and such information as the Company may
reasonably request for use in the preparation of
registration statements, reports and other documents
required by federal and state securities laws and such
information as the Company may reasonably request for use in
the preparation of such documents or of other materials
necessary or helpful for the underwriting and distribution
of the Company's shares.
D. Other Obligations and Services.
The Manager shall make available its officers and employees
to the Trustees and officers of
-4-
the Company for consultation and discussion
regarding the
administration and management of the Company
and its
investment activities.
3. Execution and Allocation of Portfolio Brokerage
Commissions. Portfolio Managers, subject to and in
accordance with any directions the Company's Trustees may issue
from time to time, shall place, in the name of the Series of the
Company for which they act as Portfolio Manager, orders for the
execution of that Series' portfolio transactions. When placing
such orders, the primary objective of the Manager and Portfolio
Managers shall be to obtain the best net price and execution for
the series, but this requirement shall not be deemed to obligate
the Manager or a Portfolio Manager to place any order solely on
the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The
Company recognizes that there are likely to be many cases in
which different brokers are equally able to provide such best
price and execution and that, in the selection among such brokers
with respect to particular trades, it is desirable to choose
those brokers who furnish brokerage and research services, (as
defined in Section 28 (e) (3) of the Securities Exchange Act of
1934) or statistical quotations and other inflation to the
Company, the Manager and/or the Portfolio Managers in accordance
with the standards set forth below. Moreover, to the extent that
it continues to be lawful to do so and so long as the trustees
determine as a matter of general policy that the Company will
benefit, directly or indirectly, by doing so, the Manager or a
Portfolio Manager may place orders with a broker who charges a
commission for that transaction which is in excess of the amount
of commission that another broker would have charged for
affecting that transaction, provided that the excess commission
is reasonable in relation to the value of brokerage and research
services provided by that broker. Accordingly, the Company and
the Manager agree that the Manager and the Portfolio Managers may
select brokers for the execution of the Company's portfolio
transactions from among:
A. Those brokers and dealers who provide brokerage
and research services, or statistical quotations
and other information to the Company, specifically
including the quotations necessary to determine
the value of the Company's Series not assets in
such amount of total brokerage as may reasonably
be required in light of such services;
B. Those brokers and dealers who supply brokerage and
research services to the Manager or the Portfolio
Managers which relate directly to portfolio
securities, actual or potential, of the Series, or
which place the Manager or Portfolio Managers in a
better position to make decisions in connection
with the management of the Series assets and
portfolio, whether or not such data may also be
useful to the Manager and its affiliates, or the
Portfolio Managers and their affiliates, in
managing other portfolios, including other Series,
or advising other clients, in such amount of total
brokerage as may reasonably be required.
The Manager shall render regular reports to tho Company
of the total brokerage business placed and the manner in which
the allocation has been accomplished.
The Manager agrees and each Portfolio Manager will be
required to agree that no investment decision will be made or
influenced by a desire to provide brokerage for allocation in
accordance with the foregoing, and that the right to make such
allocation of brokerage shall not interfere with the Manager's or
Portfolio Managers' primary duty to obtain the best net price and
execution for the Company.
4. Expenses of the Company. It is understood that the
Company will pay all its expenses other than those
expressly assumed by the Manager herein, which
expenses payable by the company shall include:
A. Expenses of all audits by independent public
accountants;
B. Expenses of transfer agent, registrars
dividend disbursing agent and shareholder
recordkeeping services;
C. Expenses of custodial services including
recordkeeping services provided by the
Custodian;
D. Expenses of obtaining quotations for
calculating the value of the Company's net
assets;
E. Salaries and other compensation of any of its
executive officers and employees, if any, who
are not officers, directors, stockholders or
employees of the Manager;
F. Taxes levied against the Company;
G. Brokerage fees and commissions in connection
with the purchase and sale of portfolio
securities for the Company;
H. Costs, including the interest expense, of
borrowing money;
I. Costs and/or fees incident to Trustee and
shareholder meetings of the Company, the
preparation and mailing of prospectuses and
reports of the Company to its shareholders, the
filing of reports with regulatory bodies, the
maintenance of the Company's corporate
existence, and the registration of shares with
federal and state securities authorities;
J. Legal fees, including the legal fees related to
the registration and continued qualification of
the Company's Shares for sale;
K. Costs of printing stock certificates
representing shares of the Company's various
Series;
L. Trustees' fees and expenses of Trustees who are
not directors, officers, employees or
stockholders of the Manager or any of its
affiliates; and
M. Its pro rata portion of the fidelity bond
required by Section 17(g) of the Investment
Company Act, or other insurance premiums.
The Manager understands that each Series will be liable or
the expenses attributable to such Series.
5. Activities and Affiliates of the Manager.
A. The services of the Manager to the Company
hereunder are not to be deemed exclusive, and
the Manager and any of its affiliates shall be
free to render similar services to others. The
Manager shall use the same skill and care in the
management of the Company's assets as it uses in
the administration of other accounts to which it
provides asset
-7-
management, consulting and portfolio manager
selection services, but shall not be obligated
to give the Company more favorable or ,
preferential treatment vis-a-vis its other
clients.
B. Subject to and in accordance with the
Declaration of Trust and By-Laws of the
Company and to Section 10(a) of the Investment
Company Act, it is understood that Trustees,
officers, agents and shareholders of the
Company are or may be interested in the
Manager or its affiliates as directors,
officers, agents or stockholders of the
Manager or its affiliates; that directors,
officers, agents and stockholders of the
Manager or its affiliates are or may be
interested in the Company as trustees,
officers, agents, shareholders or otherwise;
that the Manager or its affiliates may be
interested in the Company as shareholders or
otherwise; and that the effect of any such
interests shall be governed by said
Declaration of Trust, By-Laws and the
Investment Company Act.
6. Compensation of the Manager. In consideration of
all of the services provided and obligations assumed by the
Manager pursuant to this Agreement, each Series shall pay the
Manager a management fee calculated as a specified percentage of
the average daily net asset value of that Series. Such fee,
which shall be accrued daily and paid monthly, shall be
calculated at the annual percentage rate set forth for the
particular series in Appendix B to this Agreement. Each Series
all be solely responsible for the payment of its management fee,
and no Series shall be responsible for the payment of a
management fee calculated for or attributable to any other
Series.
7. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard
of obligations or duties hereunder on the part
of the Manager, the Manager shall not be
subject to liability to the Company or any
Series or to any shareholder of the Company for
any act or omission in the course of, or
connected with, rendering services hereunder
or for any losses that may be sustained in
the purchase, holding or sale of any security.
B. No provision of this Agreement shall be
construed to protect any Trustee or officer of
the Company, or the Manager, from liability in
violation of Sections 17(h) and (i) of the
Investment Company Act.
8. Renewal and Termination.
A. This Agreement shall become effective on the date
written above and shall continue in effect until August
17, 1992. This Agreement may be continued annually
thereafter for successive one year periods (a) by a vote
of a majority of the outstanding shares of beneficial
interest of each Series of the Company or (b) by a vote
of a majority of the Trustees of the Company, and in
either case by a majority of the Trustees who are not
parties to the Agreement or interested persons of any
parties to the Agreement (other than as Trustees of the
Company) cast in person at a meeting called for the purpose
of voting on the Agreement. The aforesaid provision that
this Agreement may be continued "annually" shall be
construed in a manner consistent with the Investment
Company Act and the Rules and Regulations promulgated
thereunder. If continuance of this Agreement is
approved by less than all of the Series, it shall be
deemed terminated as to those Series not giving their
approval, and Appendix A and Appendix B hereto shall be
appropriately amended to reflect that fact.
B. This Agreement
(a) may at any time be terminated without the payment
of any penalty by (1) vote of the Trustees of the
Company; (ii) by vote of a majority of the outstanding
voting securities of the Company; or (iii) as to any
Series by vote of the outstanding voting securities of
such Series, on sixty (60) days written notice to the
Manager;
(b) shall immediately terminate in the
event of its
assignment; and
(c) may be terminated by the Manager on
sixty
(60) days written notice to the Company.
C. As used in this Section 8, the terms "assignment,"
"interested person" and "vote of a majority of the
outstanding voting securities" shall, have the meanings set
forth in the Investment Company Act.
D. Any notice under this Agreement shall be given in
writing addressed and delivered or mailed postpaid, to the
other party to this Agreement at its principal place of
business.
9. Severability. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be
affected thereby.
10. Governing Law. To the extent that state law has
not been preempted by the provisions of any law of the United
States heretofore or hereafter enacted, as the same may be
amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of
Connecticut.
11. Amendments. This Agreement, including the
Appendix hereto, may be amended by an instrument in writing
signed by the parties subject to Investment Company obtaining
such approvals as may be required by the Investment Company Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed, as of the day and year first written
above.
THE MANAGEMENT OF MANAGERS
GROUP OF FUNDS
ATTEST
/S/John E. Rosati By: /s/Kathleen Wood
Name: Name:
Title: Secretary
ATTEST EAIMC PARTNERS, L.P.
_________________ By: /s/Robert P. Watson
Name: Name:
Title: Partner
-10-
APPENDIX A
Series Covered by Fund Management Agreement
Capital Appreciation Fund
Special Equity Fund
Income Equity Fund
Balanced Fund
International Equity Fund
Global Opportunity Fund
Bond Fund
Intermediate Mortgage Fund
Short and Intermediate Bond Fund
Short Government Fund
Global Bond Fund
Municipal Bond Fund
Short Municipal Fund
Money Market Fund
APPENDIX B
Annual rate of management fees, expressed as a
percentage of the average net asset value of the series:
Annual Percentage
Name of Series Rate of Management Fee
Capital Appreciation Fund 0.80%
Income Equity Fund 0.75%
Special Equity Fund 0.90%
Balanced Fund 0.60%
International Equity Fund 0.90%
Global Opportunity Fund 0.90%
Short Government Fund 0.45%
Short and Intermediate Bond Fund 0.50%
Intermediate Mortgage Fund 0.45%
Bond Fund 0.625%
Global Bond Fund 0.70%
Short Municipal Fund 0.50%
Muncipal Bond Fund 0.625%
Money Market Fund 0.35%
EXHIBIT 5(B)
FORM OF
PORTFOLIO MANAGEMENT AGREEMENT
Attention: [NAME]
<Manager>
RE: Asset Management Agreement
To whom it may concern:
The Managers <Fund>, (the "Portfolio") is a series of a
New York business trust (the "Trust") that is registered as an
investment company under the Investment Company Act of 1940
(the "Act"), and subject to the rules and regulations
promulgated thereunder.
The Managers Funds L.P. (the "Manager") acts as manager and
administrator of the Portfolio pursuant to the terms of it
Management Agreement with the Trust. The Manager is responsible
fur the day-to-day management and administration or the
portfolio and the coordination of investment of the Portfolio's
assets in portfolio securities. However, pursuant to the terms
of the Management Agreement, specific portfolio purchases and
sales for the Portfolio's investment portfolio or a portion
thereof, are to be made by advisory organizations recommended by
the Manager and approved by the Trustees of the Trust and by the
shareholders of the Portfolio.
1. Appointment as an Asset Manager. The Manager, being
duly authorized, hereby appoints and employs <manager> ("Asset
Manager") as a discretionary asset manager, on the terms and
conditions set forth herein, of those assets of the Portfolio
which the Manager determines to assign to the Asset Manager
(those assets being, referred to as the "Portfolio Account").
The Manager may, from time to time, with the consent of the
Asset Manager, make additions to the Portfolio Account and may,
from time to time, make withdrawals from the Portfolio Account.
2. Acceptance of Appointment; Standard of Performance.
The Asset Manager accepts the appointment as a discretionary
asset manager and agrees to use its best professional judgement
to make timely investment decisions for the Portfolio with
respect to the investments of the Portfolio Account in
accordance with the provisions of this Agreement.
3. Asset Management Services of Asset Manager. The Asset
Manager is hereby employed and authorized to select Portfolio
securities for investment by the Portfolio, to purchase and sell
securities of the Portfolio AccounL and upon making any purchase
or sale decision, to place orders for the execution of such
portfolio transactions in accordance with paragraphs 5 and 6
hereof and Schedule A (as amended from time to time). In
Providing portfolio management services to the Portfolio Account,
the Asset Manager shall be subject to such investment
restrictions as are set forth in the Act and the Rules and
Regulations promulgated thereunder, the supervision and control
of the Trustees, such specific instructions as the Trustees may
adopt and communicate to the Asset Manager, the investment
objectives, policies and restrictions of the Portfolio furnished
pursuant to paragraph 4, and instructions from the Manager. The
Asset Manager shall maintain on behalf of the Portfolio the
records listed in Schedule B hereto (as amended from time to
time). At the Manager's reasonable request Asset Manager will
consult with the Portfolio or with the Manager with respect to
any decisions made by it with respect to the investments of the
Portfolio Account.
4. Investment Objectives, Policies and Restrictions. The
Manager shall provide the Asset Manager with a statement of the
investment objectives and policies of the Portfolio and any
specific investment restrictions applicable thereto as
established by the Portfolio. The Portfolio retains the right,
on written notice to the Asset Manager from the Portfolio or the
Manager, to modify any such objectives, policies or restrictions
in any manner at any time provided any such amendment is
consistent with the Declaration of Trust and By-Laws of the Trust
and with the Act and the Rules and Regulations promulgated
thereunder.
5. Transaction Procedures. All transactions will be
consummated by payment to or delivery by the Portfolio's
custodian (presently State Street Bank & Trust Company) (the
"Custodian"), or such depositories or agents as may be designated
by the Custodian, as custodian for the Portfolio, of all cash
and/or securities due to or from the Portfolio Account and the
Asset Manager shall not have possession or custody thereof or any
responsibility or liability with respect thereto. The Asset
Manager shall advise the Custodian and confirm in writing to the
Portfolio all investment orders for the Portfolio Account placed
by it with brokers and dealers at the time and in the manner as
set forth in Schedule A hereto (as amended from time to time).
The Portfolio shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any
transaction initiated by the Asset Manager. The Portfolio shall
be responsible for all custodial arrangements and the payment of
all custodial charges and fees, and, upon giving proper
instructions to the Custodian, the Asset Manager shall have no
responsibility or liability with respect to custodial
arrangements or the acts, omissions or other conduct of the
Custodian.
6. Allocation. The Asset Manager shall have
authority
and discretion to select brokcrs and dealers to execute Portfolio
transactions initiated by the Asset Manager, and for the
selection of the markets on or in which the transaction will be
executed.
A. In doing so, the Asset Manager's primary
responsibility shall be to obtain the best net price and
execution for the Portfolio. However, this responsibility
shall not be deemed to obligate the Asset Manager to solicit
competitive bids for each transaction, and the Asset Manager
shall have no obligation to seek the lowest available
commission cost to the Portfolio, so long as the Asset Manager
determines that the broker or dealer is able to obtain the best
net price and execution for the particular transaction and that
the commission cost is reasonable in relation to the total
quality and reliability of the brokerage and research services
made available by the broker to the the Asset Manager viewed in
terms of either that particular transaction or of the the Asset
Manager's overall responsibilities with respect to its clients,
including the Portfolio, as to which the Asset Manager
exercises investment discretion, notwithstanding that the
Portfolio may not be the direct or exclusive beneficiary of any
such services or that another broker may be willing to charge
the Portfolio a lower commission on the particular transaction.
B. The Manager shall have the right to request that
specified transactions giving rise to brokerage commissions, in
an amount to be agreed upon by the Manager and the Asset
Manager, shall be executed by brokers and dealers that provide
brokerage or research services to the Portfolio or the Manager,
or as to which an on-going relationship will be of value to the
Portfolio in the management of its assets, which services and
relationship may, but need not, be of direct benefit to the
Portfolio Account, so long as (i) the Manager determines that
the broker or dealer is able to obtain the best net price and
execution on, a particular transaction and (ii) the Manager
determines that the commission cost is reasonable in relation to
the total quality and reliability of the brokerage and research
services made available to the Portfolio or to the Manager for
the benefit of its clients for which it exercises investment
discretion, notwithstanding that the Portfolio Account may not
be the direct or exclusive beneficiary of any such service or
that another broker may be willing to charge the Portfolio a
lower commission on the particular transaction.
C. The Asset Manager agrees that it will not execute any
portfolio transactions with a broker or dealer which is an
"affiliated person" (as defined in the Act) of the Trust or of
the Manager or of any asset manager for the Trust without the
prior written approval of the Portfolio. The Manager agrees that
it will provide the Asset Manager with a list of brokers and
dealers which are "affiliated persons" of the Trust, the Manaoer
or the Trust's asset managers.
D. As used in this paragraph 6, "brokerage and research
services' shall have the meaning set forth in Section 28(c)(3) of
the Securities Exchange Act of 1934 and such interpretations as
shall be published by the Securities and Exchange Commission from
time to time.
7. Proxies. The Portfolio will vote all proxies
solicited
by or with respect to the issuers of securities in which assets
of the Portfolio Account may be invested from time to time. At
the request of the Portfolio, the Asset Manager shall vote all
proxies on Securities held in the Portfolio Account on behalf of
the Portfolio.
8. Reports to the Asset Manager. The Manager shall
provide the Asset Manager with such periodic reports concerning
the status of the Portfolio Account as the Asset Manager may
reasonably request.
9. Fees for Servicing. The compensation of the Asset
Manager for its services under this Agreement shall be calculated
and paid by the Manager in accordance with the attached Schedule
C. Pursuant to the provisions of the Management Agreement between
the Portfolio and the Manager, the Manager is solely responsible
for the payment of fees to the Asset Manager, and the Asset
Manager agrees to seek payment of its fees solely from the
Manager.
10. Other Investment Activities of the Asset Manager. The
Manager acknowledges that the Asset Manager or one or more of its
affiliates may have investment responsibilities or render
investment advice to or perform other investment advisory
services for other individuals or entities ("Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the
Manager agrees that the Asset Manager or its affiliates may give
advice or exercise investment responsibility and take such other
action with respect to other Afflhated Accounts which may differ
from the advice given or the timing or nature of action taken
with respect to the Portfolio Account, provided that the Asset
Manager acts in good faith and provided further that it is the
Asset Manager's policy to allocate, within its reasonable
discretion, investment opportunities to the Portfolio Account
over a period of time on a fair and equitable basis relative to
the Affiliated Accounts, taking into account the investment
objectives and policies of the Portfolio and any specific
investment restrictions applicable thereto. The Manager
acknowledges that one or more of the Affiliated Accounts may at
any time hold, acquire, increase, decrease, dispose or otherwise
deal with positions in investments in which the Portfolio Account
may have an interest from time to time, whether in transactions
which involve the Porifollo Account or otherwise. The Asset
Manager shall have no obligation to acquire for the Portfolio
Account a position in any investment which any Affiliated Account
may acquire, and the Portfol'o shall have no fast refusal, co-
investment or other rights in respect of any such investment,
either for the Portfolio Account or otherwise.
11. Certificate of Authority. The Portfolio, the Manager
and the Asset Manager shall furnish to each other from time to
time certified copies of the resolutions of their Trustees or
Board of Directors or executive committees, as the case may be,
evidencing the authority of officers and employees who are
authorized to act on behalf of the Portfolio, a Portfolio
Account, the Manager and/or the Asset Manager.
12. Limitation of Liability. The Asset Manager shall not
be liable for any action taken, omitted or suffered to be taken
by it in its reasonable judgment, in good faith and believed by
it to be authorized or with the discretion or rights or powers
conferred upon it by this Agreement, or in accordance with (or in
the absence of) specific directions or instructions from the
Portfolio, provided, however, that such acts or omissions shall
not have resulted from the Asset Manager's willful misfeasance,
bad faith or gross negligence, a violation of the standard of
care established by paragraph 2 hereof and applicable to the
Asset Manager in its actions under this Agreement or breach of
its duty or of its obligations hereunder.
13. Confidentiality. Subject to the duty of the Asset
Manager, the Manager and the Portfolio to comply with applicable
law, including any demand of any regulatory or taxing authority
having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Account
and the actions of the Asset Manager and the Portfolio in
respect thereof.
14. Assignment. No assignment, as that term is defined in
Section 2(a)(4) of the Act, of this Agreement shall be made by
the Asset Manager, and this Agreement shall terminate
automatically in the event of such assigmment. The Asset Manager
shall notify the Portfolio in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of
the Act, as will enable the Portfolio to consider whether an
assignment as defined in Section 2(a)(4) of the Act will occur,
and to take the steps necessary to enter into a new contract
with the Asset Manager.
15. Representations, Warranties and Agreements of the
Trust. The Trust represents, warrants, and agrees that:
A. The Asset Manager has been duly appointed by the
Trustees and shareholders of the Portfolio to provide
investment advice to the Portfolio Account as
contemplated hereby.
B. The Trust will deliver to the Asset Manager a true
and complete copy of its then current prospectus as amended or
supplemented from time to time and such other documents or
instruments governing the investment of the Portfolio Account
and such other information as is necessary for the Asset
Manager to carry out its obligations under this Agreement.
C. The Trust is currently in compliance and shall at all
times comply with the requirements imposed upon the
Portfolio by applicable law and regulation.
16. Representations, Warranties, and Agreements of the
Asset Manager. The Asset Manager represents, warrants, and
agrees that:
A. The Asset Manager is registered as an "Investment
Adviser" under the Investment Advisers Act of 1940 ("Advisers
Act"); or is a "bank" as defined in Section 202(a)(2) of the
Advisers Act.
B. The Asset Manager will maintain, keep current and
preserve on behalf of the Portfolio, in the manner required or
permitted by the Act, the records identified in Schedule B (as
amended from time to time). The Asset Manager agrees that such
records (other than those required by No. 4 of Schedule B) are
the property of the Portfolio, and will be surrendered to the
Portfolio promptly upon request.
C. The Asset Manager will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the Act,
will provide the Portfolio with a copy of the code of ethics and
evidence of its adoption, will report to the Portfolio all
violations of the code of ethics relating to the Portfolio and
will make such other reports to the Portfolio as are required by
the Portfolio as are required by Rule 17j-1 under the Act.
17. Amendment. This Agreement may be amended at any
time, but only by written agreement between the Asset Manager
and the Manager, which amendment, other than amendments to
Schedules A and B, is subject to the approval of the Trustees
and the shareholders of the Portfolio in the manner required by
the Act. Schedules A and B are operational schedules that are
attached to this Agreement for reference only and are not a
part of this Agreement.
18. Effective Date: Term. This Agreement shall become
effective on ________________, 1993 and shall continue in effect
for a term of two years from that date. Thereafter, the
Agreement shall continue in effect only so long as its
continuance has been specifically approved at least annually by
the Trustees, or the shareholders of the Portfolio in the manner
required by the Act. The aforesaid requirement that continuance
of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Act and the
Rules and Regulations thereunder.
19. Terinination. This Agreement may be terminated by
either party hereto, without the payment of any penalty,
immediately upon written notice to the other in the event of a
breach of any provision hereof by the party so notified, or
otherwise upon sixty (60) days written notice to the other. This
agreement may be terminated by the Trustees or by vote of a
majority of the outstanding shares of the Portfolio, on sixty
(60) days written notice to the the Asset Manager. Any such
termination shall not affect the status, obligations, or
liabilities of any party hereto to the other.
20. Severability, If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule, or
otherwise, the remainder of this Agreement shall not be affected
thereby but shall continue in full force and effect.
21. Applicable Law. The provisions of this Agreement shall
be construed in a manner consistent with the requirements of the
Act and the Rules and Regulations thereunder. To the extent that
state law is not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be
amended from time to time, this Agreement shall be administered,
construed, and enforced according to the laws of the State of
Connecticut.
THE MANAGERS FUNDS, L. P.
BY: EAIMC HOLDINGS CORP.
General Partner
BY:_________________________
Its: _______________________
DATE:_______________________
ACCEPTED:
BY: __________________________
Its:__________________________
DATE:_________________________
Acknowledged:
The Managers Funds
BY: ________________________
Its: _______________________
DATE:_______________________
SCHEDULES: A. Operational Procedures.
B. Record Keeping Requirements.
C. Fee Schedule.
SCHEDULE A
The Asset Manager must abide by certain rules and
procedures in order to minimize operational problems. The Asset
Manager must maintain various records and files (as required by
regulatory agencies) at its office (see Schedule B). In
addition, it will be necessary for a flow of information to be
supplied to State Street Bank and Trust Company ("State Street").
the Custodian for the Portfolio.
The Asset Manager must furnish State Street with
daily information as to executed trades no later than the morning
following the day of the trade. The necessary information can be
transmitted via facsimile machine to State Street (the direct
line to the machine is (617) 348-0376, 348-0374, or 348-0377).
Upon receipt of brokers conflrmations, the Asset Manager or State
Street must noffy the other party if any differences exist. The
reporting of trades by the Asset Manager to State Street shall
include the following information:
1 - Purchase or sale;
2 - Security name;
3 - Cusip #;
4 - Number of shares;
5 - Commission rate per share or if a net
trade;
6 - Executing broker;
7 - Trade date;
8 - Settlement date, if other than normal;
and
9 - If Security is not eligible for DTC
When opening accounts with brokers for
the Portfolio, the
account must be a cash account. No margin accounts in the name
of the Portfolio are to be maintained. The broker should be
advised to use State Street IDC's ID system number (no. 20997) to
facilitate the receipt of information by State Street. In
addition, the Asset Manager should arrange to have duplicate
confirmations sent as follows:
The Managers Funds <<fund>> Portfolio
c/o The Managers Funds L.P.
200 Connecticut Avenue Suite 680
Norwalk, CT 06854-1907
State Street Bank & Trust Company
Custody and Shareholder Services Department
P.O. Box 1713
Boston, MA 02105
<<GN#>>
Delivery Instructions are as follows:
All DTC eligible securities
Depository Trust Company (DTC)
#997 Custodian Services
All Commerciad Paper and ineligible DTC securities New York
Office:
State Street Bank & Trust Company
TP Concourse Level
61 Broadway
New York, NY 10006
"vs payment" (Federal Funds on commercial paper only)
Account: The Managers Funds <<fund>> Portfolio
All Government issues delivered through book entry:
Delivery @ough area Federal Reserve Bank to:
State Street Boston
<<GN#>>
"vs payment" Federal Funds
Wire Instructions
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02010
Credit Info: ABA#: 0110000028
BNF#: <<GN#>>
AC: Demand Account #
The Asset Manager must submit to State Street a trade
authorization form signed by two authorized individuals by trade
date plus one. The list of authorized persons with specimen
signatures must be kept curtent at State Street.
The Asset Manager shall make available for State Street
appropriate names of individuals at executing brokers with whom
State Street may discuss and resolve problems that may occur.
State Street will supply the Asset Manager daily with a cash
availability report. This will normally be done by facsimilie so
that the Asset Manager may know the amount available for
investment purposes.
SCHEDULE B
Records to be Maintained by the Asset Manager
1. A record of each brokerage order, and all other
portfolio purchases and sales, given by the Asset Manager
on behalf of the Portfolio for, or in connection with, the
purchase or sale of securities, whether executed or
unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modifications or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of execution; and
F . The name of the person who placed the order on
behalf of the Portfolio.
2.* A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing
specifically the basis or bases upon which the allocation
of orders for the purchase and sale of portfolio
securities to brokers or dealers was effected, and the
division of brokerage commissions or other compensation on
such purchase and sale orders.
Such record:
A. Shall include the consideration given to:
(i) the sale of shares of the Portfolio
(ii) the supplying of services or benefits by
brokers or dealers to:
(a)Tbe Portfolio
(b)The Manager (The Managers Funds, L.P.)
(c)The Asset Manager and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the
technical qualifications of the brokers and dealers
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at
such allocation of purchase and sale orders and such
division of brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. A record in the form of an appropriate memorandum identifying
the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an
authorization is made by a committee or group, a record shall
be kept of the names of its members who participate in the
authorization.
There shall be retained as part of this record: any
memorandum, recommendation or instruction supporting or
authorizing the purchase or sale of portfolio securities and
such other information as is appropriate to support the
authorization.**
4 . Such accounts, books and other documents as are required
to be maintained by registered investment advisors by rule
adopted under Section 204 of the Investment Advisors Act of
1940, to the extent such records are necessary or appropriate
to record the Asset Manager's transactions with the Portfolio.
* Maintained as property of the Portfolio pursuant to 1940
Act Rule 3la-3(a).
** Such information might include: the current Form 10-K,
annual and quarterly reports, press releases, reports by
analysts and from brokerage firms (including their
recommendation; i.e., buy, sell, hold) or any internal
reports or asset manager reviews.
Schedule of Portfolio Management Agreements
The Managers Funds, L.P. has entered into portfolio
management agreements with the portfolio managers for each Fund.
Each such agreement is substantially identical in all material
respects to the form filed herewith. A list of the portfolio
management agreements, and the material details in which they
differ from the form, follows:
Portfolio
Management
Name of Fund/Portfolio Manager Fee
Capital Appreciation Fund
Dietche & Field Advisers, Inc. 0.40%
Hudson Capital Advisors 0.40%
Special Equity Fund
Eagle Asset Management 0.50%
Provident Investment Counsel, Inc. 0.50%
Westport Asset Management, Inc. 0.50%
Income Equity Fund
Scudder, Stevens & Clark, Inc. 0.35%
Spare, Tengler, Kaplan & Bischel 0.40%
Balanced Fund
Munder Capital Management, Inc. 0.40% on first
$20 million;
0.30% thereafter
International Equity Fund
Scudder, Stevens & Clark, Inc. 0.50%
Global Opportunity Fund
Resource Capital Advisers, Inc. 0.40%
Short Government Fund
Piper Capital Management, Inc. 0.20% on first
$50 million;
0.10% thereafter
Portfolio
Management
Name of Fund/Portfolio Manager Fee
Short and Intermediate Bond Fund
Standish, Ayer & Wood 0.25%
TCW Funds Management, Inc. 0.25%
Intermediate Mortgage Fund
Piper Capital Management, Inc. 0.20% on first
$50 million;
0.10% thereafter
Bond Fund
Loomis, Sayles & Company, Inc. 0.25%
Municipal Bond Fund
Massachusetts Financial Services Company 0.25%
Short Municipal Fund
T. Rowe Price Associates, Inc. 0.25%
Global Bond Fund
Rogge Global Partners 0.35% on first
$50 million;
0.10% thereafter
Money Market Fund
Discount Corporation of New York Advisers 0.10%
EXHIBIT 6
FORM OF
DISTRIBUTION AGREEMENT
THE MANAGERS FUNDS
AGREEMENT made this____ day of ____,1992 by and between
THE MANAGERS FUNDS, a Massachusetts business trust (the "Trust"),
and THE MANAGERS FUNDS, L.P. (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company and it is in the interest of the
Trust to offer shares of the twelve separate series of the Trust,
and such other series as may be created from time to time (each a
"Fund," and collectively, the "Funds") for sale as described in
the Prospectus and Statement of Additional Information of the
Trust; and
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Act of 1934, and is a member of the
National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the Trust and the Distributor wish to enter
into an agreement with each other with respect to the offering of
the Trust's shares in order to promote the growth of the Trust
and facilitate distribution of its shares;
NOW, THEREFORE,it is hereby mutually agreed as follows
1. The Trust hereby appoints Distributor as an
underwriter of the shares of beneficial interest of the Trust
(the "Shares"), as an independent contractor upon the terms and
conditions hereinafter set forth. Except as the Trust may from
time to time agree, Distributor will act as agent for the Trust
and not as principal. The Distributor shall be a representative
of the Trust to act an underwriter and distributor of Shares of
the Trust sold to certain high net worth individuals, persons or
entities resident outside the United States, and institutions
other than banks, (collectively "Purchasers"), as agreed to by
Interactive Financial Solutions, Inc.(the "Principal
Underwriter").
2. Distributor will use its best efforts to find
Purchasers for the Shares, to promote the distribution of the
Shares, and may obtain orders from brokers, dealers, or other
persons for sales of Shares to them for the account of
Purchasers. The Distributor may enter into agreements, in form
and substance satisfactory to the Trust, with dealers and other
persons selected by the Distributor ("Selected Dealers"),
providing for the sale to such Selected Dealers and resale by
them to Purchasers of Shares at the applicable public offering
price. No dealer, broker, or other person shall have any
authority to act as agent for the Trust; such dealer, broker, or
other person shall act only as dealers for their own accounts or
as agents for their customers. Nothing herein contained shall
prevent the Distributor from serving as principal underwriter
with other investment companies so long as those investment
companies either (a) invest all of their assets in shares of the
same registered investment company "core" as does the Trust
(i.e., are the other "feeders" in the same "core" as the Trust);
or (b) do not have the same investment objectives as any series
of the Trust and the performance of the Distributor's obligations
hereunder is not impaired thereby.
3. Sales of Shares by the Distributor shall be made at the
applicable public offering price determined in the manner set
forth in the current Prospectus and/or Statement of Additional
Information of the Trust, as amended or supplemented, at the time
of the Trust's acceptance of the order for Shares of a Fund. It
is understood and agreed that the applicable public offering
price of Shares is currently net asset value. All orders shall
be subject to acceptance by the Trust, and the Trust reserves the
right in its sole discretion to reject any order received. The
Trust shall not be liable to the Distributor or any other person
for failure to accept any order.
4. On all sales of Shares, the Trust shall receive
the current net asset value. If sales charges are described in
the then-current Prospectus and Statement of Additional
Information of the Trust, as amended or supplemented, the
Distributor shall be entitled to receive such sales charges. The
Distributor may reallow all or a part of any such sales charges
to such brokers, dealers, or other persons as Distributor may
determine. In the event that a sales charge is in effect and
Shares of a Fund are redeemed or repurchased by the Trust or the
Distributor as agent for the Trust, within seven business days
after confirmation by the Distributor of the original purchase
order, the Distributor shall pay to the Trust, for the account of
that Fund, the Disuibutor's portion of the sales load paid on
such Shares. In such case, the Distributor shall require the
dealer or other person that sold the Shares so redeemed or
repurchased to refund to the Distributor the full discount
allowed to the dealer or other person on the sale and, upon the
receipt of such discount, the Distributor shall pay the same to
the Trust, for the account of the appropriate Fund.
5. The Trust agrees to supply to the Distributor,
either directly or indirectly, promptly after the time or times
at which net asset value is determined, on each day on which the
New York Stock Exchange is open for business and on such other
days as the Trustees of the Trust may from time to time determine
(each such day being hereinafter called a "business day"),
statement of the net asset value of each Fund of the Trust having
been determined in the manner set forth in the then-current
Prospectus and Statement of Additional Information of the Trust,
as amended or supplemented. Each determination of net asset
value shall take effect as of the time or times on each business
day as set forth in the then-current Prospectus of the Trust, as
amended or supplemented, and shall prevail until the time as of
which the next determination is made. The Distributor may reject
any order for Shares. The Trust, or any agent of the Trust
designated in writing by the trust shall be promptly advised of
all purchase orders for Shares received by the Distributor. Any
order may be rejected by the Trust (or its agent). The Trust (or
its agent) will confirm orders upon their receipt and will make
appropriate book entries. The Distributor agrees to cause
payment to be delivered promptly to the Trust (or its agent).
6. (a) All sales literature and advertisements used
by the Distributor in connection with sales of Shares shall be
subject to approval by the Trust. The Trust authorizes the
Distributor, in connection with the sale or arranging for the
sale of Shares, to provide only such information and to make only
such statements or representations as are contained in the Truses
then-current Prospectus and Statement of Additional Information,
as amended or supplemented, or in such financial and other
statements which are furnished to the Disuibutor pursuant to the
next paragraph or as may properly be included in sales literature
or advertisements in accordance with the provisions of the
Securities Act of 1933 (the "1933 Act"), the 1940 Act and
applicable rules of the NASD. The Trust shall not be responsible
in any way for any information provided or statements or
representations made by the Distributor or its representatives or
agents other than the information, statements and representations
described in the preceding sentence.
(b) The Trust shall keep the Distributor fully
informed with regard to its affairs, shall furnish the
Distributor with a copy of all financial statements of the Trust
and a signed copy of each report prepared for the Trust by its
independent auditors, and shall cooperate
fully in the efforts of the Distributor to sell the Shares and in
the performance by the Distributor of all its duties under this
Agreement. Copies of the then-current Prospectus and Statement
of Additional Information and all amendments or supplements
thereto will be supplied by the Trust to the Distributor in
reasonable quantities upon request. The costs of printing
Prospectuses and Statements of Additional Information for
prospective investors shall be borne by the Principal
Underwriter.
7. Distributor agrees to comply with the Rules of Fair
Practice of the NASD.
8. (a) Any of the outstanding shares may be tendered
for redemption at any time, and the Trust agrees to redeem shares
so tendered in accordance with its Declaration of Trust as
ammended from time to time, and in accordance with the applicable
provisions of the Prospectus. The price to be paid to redeem or
repurchase shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the
Trust hereunder shall be made in the manner set forth in
Paragraph (b) below.
(b) The Trust shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to
the instructions of the Distributor on or before the [seventh]
day subsequent to its having received the notice of redemption in
proper form.
(c) Redemption of shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Trust fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
9. The Trust has delivered to the Distributor a copy
of the Trust's Declaration of Trust as currently in effect and
agrees to deliver to the Distributor any ammendments thereto
promptly upon the filing thereof with the Office of the Secretary
of State of The Commonwealth of Massachusetts.
10. The Trust represents and warrants that its
Registration Statement, post-effective amendments, Prospectus and
Statement of Additional Information (excluding statements
relating to the Distributor and the services it provides that are
based upon information furnished by the Distributor expressly for
inclusion therein) shall not contain any untrue statement of
material fact or omit to state any material fact required to be
stated therein or necessary to make the staterments therein not
misleading, and that all statements or information furnished to
the Distributor, pursuant to Section 6(b) hereof, shall be true
and correct in all material respects.
11. The Trust agrees to indemnify and hold harmless
the Distributor, its officers, and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
1933 Act, against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in
connection therewith) which the Distributor, its officers, or any
such controlling person may incur under the 1933 Act, under any
other statute, at common law or otherwise, arising out of or
based upon
(a) any untrue statement or alleged untrue statement
of a material fact contained in the Trust's registration
statement, Prospectus or Statement of Additional Information
(including amendments and supplements thereto), or
(b) any omission or alleged omission to state a
material fact required to be stated in the Trust's Registration
Statement, Prospectus, or Statement of Additional Information
necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages,
liabilities, or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information
furnished to the Trust by the Distributor for use in the Trust's
Registration Statement, Prospectus or Statement of Additional
Information (including amendments and supplements thereto), such
indemnification is not applicable. In no case shall the Trust
indemnify the Distributor, its officers or its controlling person
as to any amounts inncurred for any liability arising out of or
based upon any actions for which the Distributor, its officers,
or any controlling person would otherwise be subject to liability
by reason of willful misfeasance, bad faith, or gross negligence
in the performance of its duties or by reason of the reckless
disregard of its obligations and duties under this Agreement.
12. The Distributor agrees to indemnify and hold
harmless the Trust, its officers and Trustees and each person, if
any, who controls the Trust within the meaning of Section 15 of
the 1933 Act against any losses, claims, damages, liabilities,
and expenses (including the cost of any legal fees incurred in
connection therewith) which the Trust, its officers, Trustees or
any such controlling person may incur under the 1933 Act, under
any other statute, at common law or otherwise arising out of the
acquisition of any Shares by any person which may be based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Trust's Registration Statement, Prospectus
or Statement of Additional Information (including amendments and
supplements thereto), or any omission or alleged omission to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, if such statement
or omission was made in reliance upon information furnished, or
confirmed in writing, to the Trust by the Distributor for use
therein.
13. The Distributor shall bear the expense of
preparing, printing and distributing advertising and sales
literature for Purchasers, and of distributing Prospectuses and
Statements of Additional Information in connection with the sale
or offering of Shares to Purchasers. The Trust shall bear the
expense of registering Shares under the 1933 Act and the Trust
under the 1940 Act, qualifying shares for sale under the so-
called "blue sky" laws of any state, the preparation and printing
of Prospectuses, Statements of Additional Information and reports
required to be filed with the SEC and other authorities, the
preparation, printing and mailing of Prospectuses and Statements
of Additional Information to shareholders of the Trust, and the
direct expenses of the issue of Shares.
14. (a) This Agreement shall become effective on the date
hereof and shall remain in full force and effect until _____,
1993, and may be continued from year to year thereafter;
provided, that such continuance shall be specifically approved no
less frequently than annually by the Trustees of the Trust or by
a majority of the outstanding voting securities of the Trust, and
in either case, also by a majority of the Trustees who are not
interested persons of the Trust or the Distributor
("Disinterested Trustees"). If such continuance is not approved,
the Agreement shall terminate upon the date specified by the
Trustees in written notice to the Distributor, which shall be no
more an 60 days after the date upon which such notice of non-
renewal is delivered personally or mailed registered mail,
postage prepaid, to the Distributor. This Agreement may be
amended with the approval of the Trustees or a majority of the
outstanding voting securities of the Trust, provided that in
either case, such amendment shall also be approved by a majority
of the Disinterested Trustees.
(b) If the Trustees determine in good faith that
there is reasonable cause to believe that the Distributor is
violating applicable federal or state law in connection with the
distribution of shares of the Trust and, after written notice to
Distributor of such violation which Distributor fails to cure to
the satisfaction of the Trustees within 10 days of receipt of
such notice, the Trustees determine that the continuation in
effect of this Agreement will result in further such violations,
to the detriment of the Trust or its shareholders, then this
Agreement may be terminated by the Trust without payment of any
penalty. Such termination may be effected by written notice
delivered personally or mailed registered mail, postage prepaid,
to the Distributor.
(c) This Agreement shall automatically terminate
if it is assigned by the Distributor.
(d) Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act
and to interpretations thereof, if any, by the United States
courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC validly issued
pursuant to the 1940 Act. Specifically, the terms "interested
persons," "assignment" and "vote of a majority of the outstanding
voting securities," as used in this Agreement, shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, when the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is modified,
interpreted or relaxed by a rule, regulation or order of the SEC,
whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order. The Trust and the Distributor may from time
to time agree on such provisions interpreting or clarifying the
provisions of this Agreement as, in their joint opinion, are
consistent with the general tenor of this Agreement and with the
specific provisions of this Paragraph 14(d). Any such
interpretations or clarifications shall be in writing signed by
the parties and annexed hereto, but no such interpretation or
clarification shall be effective in contravention of any
applicable federal or state law regulations, and no such
interpretation or clarification shall be deemed to be an
amendment of this Agreement.
(e) This Agreement is made in the State of
Connecticut and except insofar as the 1940 Act or other federal
laws and regulations may be controlling, this Agreement shall be
governed by, and construed and enforced in accordance with, the
internal laws of the State of Connecticut
(f) This Agreement is made by the Trust pursuant
to authority granted by the Trustees and the obligations created
hereby are not binding on any of the Trustees or shareholders of
the Trust, individually, but bind only assets belonging to the
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their respective officers thereunto
duly authorized at Norwalk, Connecticut, on the day and year
first written above.
THE MANAGERS FUNDS
By: ______________
Title: ____________
THE MANAGERS FUNDS, L.P.
By: ______________
Title: ___________
EXHIBIT 8
CUSTODIAN CONTRACT
Between
THE MANAGERS FUNDS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
page
1. Employment of Custodian and Property to be Held By
it 2
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian in the United States.. 3
2.1 Holding Securities 3
2.2 Delivery of Securities 3
2.3 Registration of Securities 9
2.4 Bank Accounts 9
2.5 Availability of Federal Funds 10
2.6 Collection of Income 11
2.7 Payment of Fund Monies 11
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased 15
2.9 Appointment of Agents 15
2.10 Deposit of Fund Assets in Securities System 15
2.10A Fund Assets Held in the Custodian's Direct
Paper System 18
2.11 Segregated Account 20
2.12 Ownership Certificates for Tax Purposes 22
2.13 Proxies 22
2.14 Communications Relating to Portfolio
Securities
22
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States 23
3.1 Appointment of Foreign Sub-Custodians 23
3.2 Assets to be Held 24
3.3 Foreign Securities Depositories 24
3.4 Segregation of Securities 24
3.5 Agreements with Foreign Banking Institutions 25
3.6 Access of Independent Accountants of the Fund 26
3.7 Reports by Custodian 26
3.8 Transactions in Foreign Custody Account 26
3.9 Liability of Foreign Sub-Custodians 27
3.10 Liability of Custodian 28
3.11 Reimbursement for Advances 29
3.12 Monitoring Responsibilities 29
3.13 Branches of U.S. Banks 30
3.14 Tax Law 31
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund 31
5. Proper Instructions 32
6. Actions Permitted Without Express Authority 33
7. Evidence of Authority 34
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net
Income 34
9. Records 35
10. Opinion of Fund's Independent Accountants 36
11. Reports to Fund by Independent Public Accountants 36
12. Compensation of Custodian 36
13. Responsibility of Custodian 37
14. Effective Period, Termination and Amendment 39
15. Successor Custodian 40
16. Interpretive and Additional Provisions 42
17. Additional Funds 42
18. Massachusetts Law to Apply 43
19. Prior Contracts 43
CONTRACT
This Contract between The Managers Funds, a business
trust organized and existing under the Commonwealth of
Massachusetts, having its principal place of business at 200
Connecticut Avenue, Norwalk, Connecticut 06854 hereinafter
called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110,
hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each such series representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in
twelve series, the Managers Capital Appreciation Funu, Managers
Income Equity Fund, Managers Special Equity Fund, Managers
International Equity Fund, Managers Balanced Fund, Managers
Short Government Income Fund, Managers Short and Intermediate
Bond Fund, Managers Intermediate Mortgage Fund, Managers Bond
Fund, Managers Short Term Municipal Fund, Managers Municipal
Bond Fund, and Managers Money Market Fund (such series together
with all other series subsequently established by the Fund and
made subject to this Contract in accordance with paragraph 17,
being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree
as follows:
1. Employment of Custodian and Proert-y to be Held by It
The Fund hereby employs the Custodian as the custodian of
the assets of the Portfolios of the Fund, including securities
which the Fund, on behalf of the applicable Portfolio desires to
be held in places within the United States ("domestic
securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions
of the Declaration of Trust. The Fund on behalf of the
Portfolio(s) agrees to deliver to the Custodian all securities
and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect
to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or
treasury shares of beneficial interest of the Fund representing
interests in the Portfolios, ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and
not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning
of Article 5), the Custodian shall on behalf of the applicable
Portfolio(s) frqm time to time employ one or more sub-custodians,
located in the United States but only in accordance with an
applicable vote by the Board of Trustees of the Fund on behalf of
the applicable Portfolio(s), and provided that the Custodian
shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian
so employed than any such sub-custodian has to the Custodian.
The Custodian may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the foreign
banking institutions and foreign securities depositories
designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. Duties of the Custodian with Respect to Property of th@ Fund
Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Portfolio
all non-cash property, to be held by it in the United
States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts
as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian
pursuant to Sectlon 2.10A.
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by
the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of
the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof,
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into
the name of the Portfolio or into the name of any
nominee or nominees of the Custodian or into the name
or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name
of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face
amount or number of units; Provided that, in any such case,
the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, but onlv against receipt of adequate
collateral as agreed upon from time to time by the
Clistodian and the Fund on behalf of the Portfolio, which
may be in the form of cash or obligations issued by the
United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
-6-
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio requiring
a pledge of assets by the Fund on behalf of the Portfolio,
but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization
-7-
or organizations, regarding account deposits in connection
with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time to
time in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified
copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery
of such securities shall be made.
-8-
2.3 Registration of Securities. Domestic securities
held by the Custodian (other than bearer securities) shall
be registered in the name of the Portfolio or in the name
of any nominee of the Fund on behalf of the Portfolio or
of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has
authorized in writing the appointment of a nominee to be
used in common with other registered investment companies
having the same investment adviser as the Portfolio, or in
the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-
custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under
the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to
notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency
of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of each Portfolio of the Fund, subject only to
draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio,
other than cash maintained by the Portfolio in a bank
account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by
the Custodian for a Portfolio may be deposited by it to
its credit as Custodian in the Banking Department of.the
Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable;
Provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or
trust company and the funds to be deposited with each such
bank or trust company shall on behalf of each applicable
Portfolio be approved by the of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by
the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement
between the Fund on behalf of each applicable Portfolio
and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio
as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in
payment for Shares of such Portfolio which are deposited
into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of
Section 2.3, the Custodian shall collect on a timely
basis all income and other payments with respect to
registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments
with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held
by the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall
collect interest when due on securities held hereunder.
Income due each Portfolio on securities loaned pursuant
to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other
than td provide the Fund with such information or data as
may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which
the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out
monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to
such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States
or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of
the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in
accordance with the conditions set forth in Section
2.10 hereof; (c) in the case of a purchase involving
the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the
case of repurchase agreements entered into between
the Fund on behalf of the Portfolio and the
-12-
Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to
repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the
Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not
-13-
limited to the following payments for the account of the
Portfolio: interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect
of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of
the Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom
such payment is to be made.
-14-
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as specifically stated
otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in
advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the
Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had
been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under The Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article 2 as the Custodian
may from time to time direct; Provided, however, that the
appointment of any agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain securities owned by
a Portfolio in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules
and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio in
a Securities System provided that such securities are
represented in an account ("Account") of the
Custodian in the Securities System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for
the account of the Portfolio upon (i) receipt of
advice from the Securities System that such securities
have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of
the Portfolio. The Custodian shall transfer
securities sold
for the account of the Portfolio upon (i) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio.
Copies of all advices from the Securities System of
transfers of securities for'the account of the Portfolio
shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at
its request. Upon request, the Custodian shall furnish the
Fund on behalf of the confirmation of each transfer to from
the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting
each day's transactions in the Securities System for the
account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
-17-
5) The Custodian shall have received
from the Fund on behalf of the Portfolio the
initial or annual certificate, as the case may
be, required by Article 14 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Fund for the benefit of thePortfolio
for any loss or damage to the Portfolio
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its
agents or of any of its or their employees or
from failure of the Custodian or any such
agent to enforce effectively such rights as it
may havagainst the Securities System; at the
election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian
with respect to any claim against the
Securities System or any other person which
the Custodian may have as a consequence of any
such loss or damage if and to the extent that
the Portfolio has not been made whole for any
such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System
The Custodian may deposit and/or maintain securities
owned by a Portfolio in the Direct Paper System of the
Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented
in an account ("Account") of the Custodian in the Direct
Paper System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
3) The records of the Custodian with respect to securities of
the Portfolio which are maintained in the Direct Papei
System shall identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio. The
Custodian shall transfer securities sold for the account of
the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
-19-
5) The Custodian shall furnish the
Fund on behalf of the Portfolio confirmation
of each transfer to or from the account of
the Portfolio, in the form of a written
advice or notice, of Direct Paper on the next
business day following such transfer and
shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets
reflecting each day's transaction in the
Securities System for the account of the
Portfolio;
6) The Custodian shall provide the Fund on
behalf of the Portfolio with any report on
its system of internal accounting control as
the Fund may reasonably request from time to
time.
2.11 Segregated Account. The Custodian shall upon receipt of
Proper Instructions from the Fund on behalf of each
applicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of
segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or
commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other certificates
and affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the
domestic securities held hereunder, cause to be promptly
executed by the registered holder of such securities, if
the securities are registered otherwise than in the name
of the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to
the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities
Subject to the provisions of Section 2.3, the Custodian
shall transmit promptly to the Fund for each Portfolio
all written information (including, without limitation,
pendency of calls and maturities of domestic securities
and expirations of rights in connection therewith and
notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or
exchange offers, the Custodian shall transmit promptly to
the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer,
exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to
employ as sub-custodians for the Portfolio's securities
and other assets maintained outside the United States the
foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions",
as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories
to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to
cease the employment of any one or more such sub-
custodians for maintaining custody of the Portfoliols
assets.
3.2 Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of
the foreign sub-custodians to: (a) "foreign securities",
as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund
may determine to be reasonably necessary to effect the
Portfolio's foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may otherwise
be agreed upon in writing by the Custodian and the Fund,
assets of the Portfolios shall be maintained in foreign
securities depositories only through arrangements
implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Where
possible, such arrangements shall include entry into
agreements containing the provisions set forth in Section
3.5 hereof.
3.4 Segregation of Securities. The Custodian shall identify
on its books as belonging to each applicable Portfolio of
the Fund, the foreign securities of such Portfolios held
by each foreign sub-custodian. Each agreement pursuant
to which the Custodian employs a foreign banking
institution shall require that such institution establish
a custody account for the Custodian on behalf of the Fund
for each applicable Portfolio of the Fund and physically
segregate in each account, securities and other assets of
the Portfolios, and, in the event that such institution
deposits the securities of one or more of the Portfolios
in a foreign securities depository, that it shall identify
on its books as belonging to the Custodian, as agent for
each applicable Portfolio, the securities so deposited.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall be
substantially in the form set forth in Exhibit 1 hereto
and shall provide that: (a) the assets of each Portfolio
will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or
administration; (b) beneficial ownership for the assets
of each Portfolio will be freely transferable without the
payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the
extent permitted under applicable law the independent
public accountants for the Fund, will be given access to
the books and records of the foreign banking institution
relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the
foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of the
Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-
custodian insofar as such books and records relate to the
performance of such foreign banking institution under its
agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon,
statements in respect of the securities and other assets
of the Portfolio(s) held by foreign sub-custodians,
including but not limited to an identification of
entities having possession of the Portfolio(s) securities
and other assets and advices or notifications of any
transfers of securities to or from each custodial account
maintained by a foreign banking institution for the
Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio,
the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this
Section 3.8, the provision of Sections 2.2 and 2.7 of this
Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by
foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to
the contrary, settlement and payment for securities
received for the account of each applicable Portfolio and
delivery of securities maintained for the account of each
applicable Portfolio may be effected in accordance with
the customary established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to
the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian mav be maintained in the name of such
entity's nominee to the same extent as set forth in
Section 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder
of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign banking
institution as a foreign sub-custodian shall require the
institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold
harmless, the Custodian and the Fund from and against any
loss, damage, cost, expense, liability or claim arising
out of or in connection with the institution's
performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a
foreign banking institution as a consequence of any such
loss, damage, cost, expense, liability or claim if and to
the extent that the Fund has not been made whole for any
such loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect
to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the
custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as
contemplated by paragraph 1.3 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility
to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk
(including, but not limited to, exchange control
restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy
or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose
for the benefit of a Portfolio including the purchase or
sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct,
any property at any time held for the account of the
applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and
to disptse of such Portfolios assets to the extent
necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June,
information concerning the foreign sub-custddians
employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund
in connection with the initial approval of this Contract.
In addition, the Custodian will promptly inform the Fund
in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign sub-
custodian or any material loss of the assets of the Fund
or in the case of any foreign sub-custodian not the
subject of an exemptive order from the Securities and
Exchange Commission is notified by such foreign sub-
custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declinbd
below $200 million (in each case computed in accordance
with generally accepted U.S. accounting principles).
3.13 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the
provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a
banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940
meeting, the qualification set forth in Section 26(a) of
said Act. The appointment of any such branch as a sub-
custodian shall be governed by paragraph 1 of this
Contract.
(b) Cash held for each Portfolio of the Fund in the
United Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's
London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or
both.
3.14 Tax Law
The Custodian shall have no responsibility or liability
for any obligations now or hereafter imposed on the Fund
or the Custodian as custodian of the Fund by the tax law
of the United States of America or any state or political
subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those
mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other
governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts
to assist the Fund with respect to any claim for exemption
or refund under the tax law of jurisdictions for which the
Fund has provided such information.
4. Payment for Sales or Repurchases or Redemptions Shares
of the Fund
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent of the Fund and
deposit into the account of the appropriate Portfolio
such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund.
The Custodian will provide timely notification
to the Fund on behalf of each such Portfolio and the
Transfer Agent of any receipt by it of payments for Shares
of such Portfolio.
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and any
applicable votes of the Board of Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of a
Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer' Agent to wire funds to or
through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase
of Shares, of the Fund, the Custodian shall honor checks drawn
on the Custodian by a holder of Shares, wnich checks have
been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract
means a writing signed or initialled by one or more person or
persons as the Board of Trustees shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested.
oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by
the Board of Trustees of the Fund accompanied by a detailed
description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly
between electromechanical or electronic devices provided that the
Board of Trustees and the Custodian are satisfied that such
procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-
party agreement which requires a segregated asset account in
accordance with Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, Provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and 4) in
general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees of the
Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority
any person to act in accordance with such vote or (b) of
determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such
vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income The
Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board of Trustees of
the Fund to keep the books of account of each Portfolio and/or
compute the net asset value per share of the outstanding shares
of each Portfolio or, if directed in writing to do so by the Fund
on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income
of the Portfolio as described in the Fund's currently effective
prospectus related to such Portfolio and shall advise the Fund
and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to
do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily
income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective
prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create
and maintain all records relating to its activities and
obligations under this Contract in sucn manner as will meet the
obligations of the Fund under the Investment Company Act of 1940,
with particular attention to Section 31 thereof and Rules 3la-1
and 3la-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours
of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation
of securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund on behalf of each applicable Portfolio may from time to time
request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form N-
lA, and Form N-SAR or other annual reports to the Securities and
Exchange Commission and with respect to any other requirements of
such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each
of the Portfolios at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so
state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund on behalf of each
applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of
a foreign banking institution appointed pursuant to the
provisions of Article 3 to the same extent as set forth in
Article 1 hereof with respect to sub-custodians located in the
United States (except as specifically provided in Article 3.10)
and, regardless of whether assets are maintained in the custody
of a foreign banking institution, a foreign securities depository
or a branch of a U.S. bank as contemplated by paragraph 3.11
hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from, or caused by,
the direction of or authorization by the Fund to maintain custody
or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, or acts of
war or terrorism.
If the Fund on behalf of a Portfolio requires the
Custodian to take any action with respect to securities, which
action involves the payment of money or which action may, in the
opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, the
Fund on behalf of the Portfolio, as a prerequisite to requiring
the Custodian to take such action, shall provide indemnity to the
custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) for the
benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event
that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at
any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the
extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or
mailing; Provided, however that the Custodian shall not with
respect to a Portfolio act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by
such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees
has reviewed the use by such Portfolio of such Securities System,
as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not
with respect to a Portfolio act under Section 2.10A hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Trustees has approved
the initial use of the Direct Paper System by such Portfolio and
the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the
use by such Portfolio of the Direct Paper System; Provided
further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust, and
further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of
each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses
and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of
the Portfolios shall be appointed by the Board of Trustees of the
Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each
such Portfolio held in a Securities System. If no such successor
custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian
and transfer such securities, funds and other properties in
accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Trustees shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its'own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by
the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such
successor custodian all of the securities of each such Portfolio
held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and
other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full
force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund on behalf of each of the Portfolios, may
from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
17. Additional Funds
In the event that the Fund establishes one or more series
of Shares in addition to Managers Capital Appreciation Fund,
Managers Income Equity Fund, Managers Special Equity Fund,
Managers International Equity Fund, Managers Balanced Fund,
Managers Short Government Income Fund, Managers Short and
Intermediate Bond Fund, Managers Intermediate Mortgage Fund,
Managers Bond Fund, Managers Short Term Municipal Fund, Managers
Municipal Bond Fund,Tand Managers Money Market Fund with respect
to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the
custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a
Portfolio hereunder.
18. Massachusetts Law to Avplv
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund on behalf of each of
the Portfolios and the Custodian relating to th4 custody of the
Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the day of , 1992.
ATTEST THE MANAGERS FUNDS
By
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/John Curran By /s/ Robert P. watson
Assistant Secretary Senior Vice President
-44-
Schedule A
The following foreign banking institutions and foreign
securities depositories have been approved by the Board of
Trustees of The Managers Funds for use as sub-custodians for the
Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Fund's Authorized Officer
Date:
-45-
EXHIBIT 9(A)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE MANAGERS FUNDS
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank 2
Article 2 Fees and Expenses 6
Article 3 Representations and Warranties of the Bank 7
Article 4 Representations and Warranties of the Fund 7
Article 5 Data Access and Proprietary Information 8
Article 6 Indemnification 11
Article 7 Standard of Care 13
Article 8 Covenants of the Fund and the Bank 13
Article 9 Termination of Agreement 15
Article 10 Additional Funds 15
Article 11 Assignment 15
Article 12 Amendment 16
Article 13 Massachusetts Law to Apply 16
Article 14 Force Majeure 16
Article 15 Consequential Damages 17
Article 16 Merger of Agreement 17
Article 17 Limitations of Liability of the Trustees
and the Shareholders 17
Article 18 Counterparts 17
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of 1994,
by and between THE MANAGERS FUNDS, a Massachusetts business
trust, having its principal office and place of business at 200
Connecticut Avenue, Norwalk, Connecticut (the "Fund"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Fund currently offers shares in fourteen
series, Managers Capital Appreciation Fund, Managers Income
Equity Fund, Managers Special Equity Fund, Managers Balanced
Fund, Managers International Equity Fund, Managers Global
Opportunity Fund, Managers Short Government Fund, Managers Short
and Intermediate Bond Fund, Managers Intermediate Mortgage Fund,
Managers Bond Fund, Managers Global Bond Fund, Managers Short
Municipal Fund, Managers Municipal Bond Fund, and Managers Money
Market Fund (each such series, together with all other series
subsequently established by the Fund and made subject to this
Agreement in accordance with Article 10, being herein referred to
as a "Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to
appoint the Bank as its transfer agent, dividend disbursing
agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires-
to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth
in this Agreement, the Fund, on behalf of the Portfolios, hereby
employs and appoints the Bank to act as, and the Bank agrees to
act as its transfer agent for the authorized and issued shares of
beneficial interest of the Fund representing interests in each of
the respective Portfolios ("Shares"), dividend disbursing agent,
custodian of certain retirement plans and agent in connection
with any accumulation, open-account or similar plans provided to
the shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus")
of the Fund on behalf of the applicable Portfolio, including
without limitation any periodic investment plan or periodic
withdrawal program.
1.02 The Bank agrees that it will perform the
following services:
(a) In accordance with procedures established from
time to time by agreement between the Fund on behalf of each of
the Portfolios, as applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase
of Shares, and promptly deliver payment and
appropriate documentation thereof to the
Custodian of the Fund authorized pursuant to the
Declaration of Trust of the Fund (the
"Custodian");
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and hold such Shares in
the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests
and redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i),
(ii) and (iii) above, the Bank shall execute
transactions directly with broker-dealers authorized by
the Fund who shall thereby be deemed to be acting on
behalf of the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
(vi) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(viii) Issue replacement certificates for those
certificates alleged to have been lost, stolen or
destroyed upon receipt by the Bank of indemnification
satisfactory to the Bank and protecting the Bank and the
Fund, and the Bank at its option, may issue replacement
certificates in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(ix) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(x)Record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of the total
number of Shares which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of Shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares or
to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in
contravention of the services set forth in the above paragraph
(a), the Bank shall: (i) perform the customary services of a
transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, mailing Shareholder reports and prospectuses to
current Shareholders, withholding taxes on U.S. resident and non-
resident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with
respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Fund to monitor
the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the
Bank in writing those transactions and assets to be treated as
exempt from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system prior
to activation and thereafter monitor the daily activity for each
State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by
the Fund and the reporting of such transactions to the Fund as
provided above.
(d) Procedures as to who shall provide certain of
these services in Article 1 may be established from time to time
by agreement between the Fund on behalf of each Portfolio and the
Bank per the attached service responsibility schedule. The Bank
may at times perform only a portion of these services and the
Fund or its agent may perform these services on the Fund's
behalf.
(e) The Bank shall provide additional services on
behalf of the Fund (i.e., escheatment services) which may be
agreed upon in writing between the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this
Agreement, the Fund agrees on behalf of each of the Portfolios to
pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached hereto.
Such fees and out-of-pocket expenses and advances identified
under Section 2.02 below may be changed from time to time subject
to mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section
2.01 above, the Fund agrees on behalf of each of the Portfolios
to reimburse the Bank for out-of-pocket expenses, including but
not limited to confirmation production, postage, forms,
telephone, microfilm, microfiche, tabulating proxies, records
storage or advances incurred by the Bank for the items set out in
the fee schedule attached hereto. In addition, any other
expenses incurred by the Bank at the written request or with the
written consent of the Fund, will be reimbursed by the Fund on
behalf of the applicable Portfolio.
2.03 The Fund agrees on behalf of each of the
Portfolios to pay all fees and reimbursable expenses within five
days following the mailing of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing
date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that: 3.01 It is a
trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business
in the Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by
its Charter and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to
the necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and
existing and in good standing under the laws of the Commonwealth
of Massachusetts.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this
Agreement.
4.03 All corporate proceedings required by said Declaration
of Trust and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
4.04 It is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended. 4.05 A registration statement under the Securities Act
of 1933, as amended on behalf of each of the Portfolios is
currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to
be made, with respect to all Shares of the Fund being offered for
sale.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that the data bases,
computer programs, screen format, report formats, interactive
design techniques, and documentation manuals furnished to the
Fund by the Bank as part of the Fund's ability to access certain
Fund-related data ("Customer Data") maintained by the Bank on
data bases under the control and ownership of the Bank or other
third party ("Data Access Services") constitute copyrighted,
trade secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Bank or
other third party. In no event shall Proprietary Information be
deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it
shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its
employees and agents:
(a) to access Customer Data solely from
locations as may be designated in writing by the
Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way
the Proprietary Information;
(c) to refrain from obtaining unauthorized access to
any portion of the Proprietary Information, and
if such access is inadvertently obtained, to
inform in a timely manner of such fact and
dispose of such information in accordance with
the Bank's instructions;
(d) to refrain from causing or allowing third-party
data required hereunder from being retransmitted
to any other computer facility or other location,
except with the prior written consent of the
Bank;
(e) that the Fund shall have access only to those
authorized transactions agreed upon by the
parties;
(f) to honor all reasonable written requests made by
the Bank to protect at the Bank's expense the
rights of the Bank in Proprietary Information at
common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its
employees of their obligations pursuant to this Article 5. The
obligations of this Article shall survive any earlier termination
of this Agreement.
5.02 If the Fund notifies the Bank that any of
theData Access Services do not operate in material compliance
with the most recently issued user documentation for such
services, the Bank shall endeavor in a timely manner to correct
such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to
make no claim against the Bank arising out of the contents of
such third-party data, including, but not limited to, the
accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS
AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY
DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund
include the ability to originate electronic instructions to the
Bank in order to (i) effect the transfer or movement of cash or
Shares or (ii) transmit Shareholder information or other
information (such transactions constituting a "COEFI"), then in
such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further
inquiry as long as such instruction is undertaken in conformity
with security procedures established by the Bank from time to
time.
Article 6 Indemnification
6.01 The Bank shall not be responsible for, and
the Fund shall on behalf of the applicable Portfolio indemnify
and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) The reliance on or use by the Bank or its agents
or subcontractors of information, records, documents or services
which (i) are received by the Bank or its agents or
subcontractors, and (ii) have been prepared, maintained or
performed by the Fund or any other person or firm on behalf of
the Fund including but not limited to any previous transfer agent
or registrar.
(b) The reliance on, or the carrying out by the Bank
or its agents or subcontractors of any instructions or requests
of persons authorized to give instructions or requests for the
Fund on behalf of the applicable Portfolio.which persons shall be
those listed on Schedule 6.01 to the Agreement, which Schedule
may be amended by the Fund from time to time upon written notice
to the Bank.
(c) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or
the securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
6.02 The Bank shall be responsible to the Fund for
any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable
to any action or failure or omission to act by the Bank as a
result of the Bank's lack of good faith, negligence or willful
misconduct.
6.03 At any time the Bank may apply to any officer
of the Fund for instructions, and may consult with the Fund's
legal counsel with respect to any matter arising in connection
with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of
the applicable Portfolio for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such
counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Fund, reasonably believed to be
genuine and to have been signed by the proper person or persons,
or upon any instruction, information, data, records or documents
provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means
authorized by the Fund, and shall not be held to have notice of
any change of authority of any person, until receipt of written
notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former transfer
agent or former registrar, or of a co-transfer agent or co-
registrar.
6.04 In order that the indemnification provisions
contained in this Article 6 shall apply, upon the assertion of a
claim for which the Fund may be required to indemnify the Bank,
the Bank shall promptly notify the Fund of such assertion, and
shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to
defend against said claim in its own name or in the name of the
Bank. The Bank shall in no case confess any claim or make any
compromise in any case in which the Fund may be required to
indemnify the Bank except with the Fund's prior written consent.
Article 7 Standard of Care
7.01 The Bank shall at all times act in good faith
and agrees to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this
Agreement, but assumes no responsibility and shall not be liable
for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its
employees.
Article 8 Covenants of the Fund and the Bank
8.01 The Fund shall on behalf of each of the
Portfolios promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees
of the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of
the Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and
maintain facilities and procedures reasonably acceptable to the
Fund for safekeeping of stock certificates, check forms and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
8.03 The Bank shall keep records relating to the
services to be performed hereunder, in the form and manner as it
may deem advisable. To the extent required by Section 31 of the
Investment Company Act of 1940, as amended, and the Rules
thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such
Section and Rules, and will be surrendered promptly to the Fund
on and in accordance with its request.
8.04 The Bank and the Fund agree that all books,
records, information and data pertaining to the business of the
other party which are exchanged or received pursuant to the
negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
8.05 In case of any requests or demands for the
inspection of the Shareholder records of the Fund, the Bank will
endeavor to notify the Fund and to secure instructions from an
authorized officer of the Fund as to such inspection. The Bank
reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may
be held liable for the failure to exhibit the Shareholder
records to such person.
Article 9 Termination of Agreement
9.01 This Agreement may be terminated by
either party upon sixty (60) days written notice to the other.
9.02 Should the Fund exercise its right to
terminate, all reasonable out-of-pocket expenses associated with
the movement of records and material will be borne by the Fund on
behalf of the applicable Portfolio(s). Additionally, the Bank
reserves the right to charge for any other reasonable expenses
associated with such termination agreed to by the Fund in
writing.
Article 10 Additional Funds
10.01 In the event that the Fund establishes one or
more series of Shares in addition to Managers Capital
Appreciation Fund, Managers Income Equity Fund, Managers Special
Equity Fund, Managers Balanced Fund, Managers International
Equity Fund, Managers Global Opportunity Fund, Managers Short
Government Fund, Managers Short and Intermediate Bond Fund,
Managers Intermediate Mortgage Fund, Managers Bond Fund, Managers
Global Bond Fund, Managers Short Municipal Fund, Managers
Municipal Bond Fund, and Managers Money Market Fund with respect
to which it desires to have the Bank render services as transfer
agent under the terms hereof, it shall so notify.the Bank in
writing, and if the Bank agrees in writing to provide such
services, such series of Shares shall become a Portfolio
hereunder.
Article 11 Assignment
11.01 Except as provided in Section 11.03 below,
neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent ofthe
other party.
11.02 This Agreement shall inure to the benefit of
and be binding upon the parties and their respective permitted
successors and assigns.
11.03 The Bank may, without further consent on the
part of the Fund, subcontract for the performance hereof with (i)
Boston Financial Data Services, Inc., a Massachusetts corporation
("BFDS") which is duly registered as a transfer agent pursuant to
Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(1) or
(iii) a BFDS affiliate; provided, however, that the Bank shall be
as fully responsible to the Fund for the acts and omissions of
any subcontractor as it is for its own acts and omissions.
Article 12 Amendment
12.01 This Agreement may be amended or modified by
a written agreement executed by both parties and authorized or
approved by a resolution of the Trustees of the Fund.
Article 13 Massachusetts Law to Apply
13.01 This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with the
laws of the Commonwealth of Massachusetts.
Article 14 Force Majeure
14.01 In the event either party is unable to
perform its obligations under the terms of this Agreement because
of acts of God, strikes, equipment or transmission failure or
damage reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform
or otherwise from such causes.
Article 15 Consequential Damages
15.01 Neither party to this Agreement shall be
liable to the other party for consequential damages under any
provision of this Agreement or for any consequential damages
arising out of any act or failure to act hereunder.
Article 16 Merger of Agreement
16.01 This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement with respect to the subject matter hereof whether oral
or written.
Article 17 Limitations of Liability of the Trustees and
Shareholders
17.01 A copy of the Declaration of Trust of the
@rust is on file with the Secretary of the Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of this instrument are
not binding upon any of the Trustees or Shareholders individually
but are binding only upon the assets and property of the Fund.
Article 18 Counterparts
18.01 This Agreement may be executed by the parties
hereto on any number of counterparts, and all of said
counterparts taken together shall be deemed to constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf by and through
their duly authorized officers, as of the day and year first
above written.
THE MANAGERS FUNDS
BY: /s/John E. Rosati
ATTEST:
/s/Kathleen Wood
STATE STREET BANK AND TRUST COMPANY
BY:/s/Ronald W. Lynch
Executive Vice President
ATTEST:
/s/M. Connoly
Assistant Secretary
State Street
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
THE MANAGERS FUND
Annual Fees
Assets:
$0 - $1,000,000,000 4 Basis Points
$1,000,000,000 - $2,000,000,000 3.5 Basis Points
$Over 2,000,000,000 2.5 Basis Points
Fees are billable on a monthly basis at the rate of 1/12 of the annual
fee.
Out-of-Pocket Expenses Billed as incurred
Out-of-Pocket expenses include but are not limited to:
confirmation statements, postage, forms, audio response, lease
phone line, records retention, transcripts, microfilm,
microfiche, and expenses incurred at the specific direction of
the fund.
The first 3 months of operations the Fee charged will be 3.5 Basis
Points.
THE MANAGERS FUND STATE STREET BANK AND TRUST CO.
By: /s/John Roasti By:
Title: Vice President Title: Vice President
Date: 2/16/94_ Date: 2/11/94
EXHIBIT 9(B)
ADMINISTRATION AND SHAREHOLDER SERVICING AGREEMENT
AGREEMENT, made as of this ___ day of ____,1992 by and
between The Managers Funds, a Massachusetts business trust (the
"Trust") composed of twelve separate series (each a "Fund" and
together the "Funds") and The Managers Funds, L.P., a Delaware
limited partnership (the "Management Company").
WI T N E S S E T H:
WHEREAS, the Trust proposes to engage in business as an open-
end management investment company and is registered as such under
the Investment Company Act of 1940 (the "Act"); and
WHEREAS, the Trust requires administration, shareholder and
shareholder-related services and the Management Company has
developed the capability to provide, and is currently providing,
certain of the services required by the Trust; and
WHEREAS, the Trust desires to engage the Management
Company to continue to provide such services to the Trust and its
shareholders and to provide certain other services which are now
or may hereafter be required by the Trust on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
promises hereinafter set forth, the Trust and the Management
Compant agree as follows:
1. Administration, Shareholder and Shareholder-Related
Services to be Provided. The Management Company shall provide
such of the following services as are required by the Trust, its
shareholders or shareholder representatives such as bank trust
departments and registered investment advisers ("Shareholder
Representatives"):
(a) Direct administrative and shareholder services,
consisting of:
(i) processing and/or coordinating Fund share
purchase and redemption requests
transmitted or delivered to the office of
the Management Company;
(ii) coordinating and implementing bank-to-bank
wire transfers in connection with Fund
share purchases and redemptions;
(iii) executing orders under any offer of
exchange offered by the Trust involving
concurrent purchases and redemptions of
shares of oneor more Funds and shares of
another Fund or of other investment
companies;
(iv) responding to telephonic and in-person
inquiries from shareholders or Shareholder
Representatives requesting information
regarding matters such as shareholder account
or transaction status, net asset value of
Fund shares, Fund performance, Fund services,
plans and options, Fund investment policies,
Fund portfolio holdings and Fund
distributions and taxation thereof;
(v) dealing with complaints and correspondence
from shareholders or Shareholder
Representatives directed to or brought to the
attention of the Management Company;
(vi) performing sub-accounting for shareholders of
record who hold their shares for the benefit
of other beneficial owners, including
establishing and maintaining accounts and
records (such as back-up withholding and tax
identification number certifications) for
such beneficial owners, and providing
periodic statements of account to such
beneficial owners, including combined
statements showing such beneficial
owners holdings in all Funds combined
(b) Soliciting and gathering shareholder proxies and
otherwise communicating with shareholders and Shareholder
Representatives in connection with meetings of the shareholders.
(c) Preparing materials for and coordinating Board of
Trustees meetings.
(d) Such other administrative, shareholder and
shareholder-related services, whether similar to or different
from those described in Subparagraphs (a), (b) and (c) of this
Paragraph 1, as the parties may from time to time agree in
writing.
2. Blue Sky Services to be Provided. The Management
Company shall maintain under this Agreement the registration or
qualification of the Trust and its shares under the various
appropriate state Blue Sky or securities laws and regulations;
provided, that the Trust shall pay any fees of counsel to the
Trust in connection with such registration or qualification and
all related filing fees and registration or qualification fees.
3. Other Services to be Provided. The Management
Company shall provide such other services required by the Trust
as the parties may from time to time agree in writing are
appropriate to be provided under this Agreement. In the event
that the Management Company provides any services to the Trust,
or pays or assumes any Trust expense, which the Management
Company is not obligated to provide, pay or assume under this
Agreement, the Management Company shall not be obligated hereby
to provide the same or any similar service to the Trust or to pay
or assume the same or any similar Trust expense in the future;
provided, that nothing herein contained shall be deemed to
relieve the Management Company of any obligation to the Trust or
any Fund under any separate agreement or arrangement between the
parties.
4. Administration and Shareholder Servicing Fees. As
compensation for all services provided and expenses paid or
assumed by the Management Company under this Agreement, the Trust
shall pay the Management Company a monthly fee at an annual rate
of 0.25% of the average daily net assets of the Trust, or at such
lower rate as may be established by a vote of the Trustees. The
fees for each month shall be payable on the first business day of
the next succeeding calendar month.
5. Manner of Providing Services. The Management
Company may provide services under this Agreement through its own
personnel or by purchasing such services from a third party. If
a third party is retained to provide services, any fees payable
to such third party shall be paid by the Management Company.
6. Retention of Sub-Agents. The Management Company
may, in its discretion, retain the services of one or more sub-
agents to provide some or all of the services contemplated by
this Agreement. Such sub-agents shall be compensated by the
Management Company out of the fees it receives under this
Agreement, or out of its other resources. Sub-Agents may also
serve as Shareholder Representatives, provided that any agreement
pursuant to which a Shareholder Representative serves as a Sub-
Agent shall be substantially in the form attached hereto as
Exhibit A or in another form approved by the Trustees of the
Trust.
7. Trust Ownership of Records. All records required
to be maintained and preserved by the Trust pursuant to the
provisions or rules or regulations of the Securities and Exchange
Commission under Section 31(a) of the Act and maintained and
preserved by the Management Company on behalf of the Trust,
including any such records maintained by the Management Company
in connection with the performance of its obligations hereunder,
are the property of the Trust and shall be surrendered by the
Management Company promptly on request by the Trust; provided,
that the Management Company may at its own expense, make and
retain copies of any such records.
8. Management Company Ownership of Software and
Related Materials. All computer programs, written procedures and
similar items developed or acquired and used by the Management
Company in performing its obligations under this Agreement shall
be the property of the Management Company, and the Trust will not
acquire any ownership interest therein or property rights with
respect thereto.
9. Confidentiality. The Management Company agrees,
on its own behalf and on behalf of its employees, agents and
contractors, to keep confidential any and all records maintained
and other information obtained hereunder which relates to the
Trust or to any of the Trust's former, current or prospective
shareholders, except that the Management Company may deliver
records or divulge information when requested to do so by duly
constituted authorities after prior notification to and approval
in writing by the Trust (which approval will not be unreasonably
withheld and may not be withheld by the Trust where the
Management Company advises the Trust that it may be exposed to
civil or criminal contempt proceedings or other penalties for
failure to comply with such request) or whenever requested in
writing to do so by the Trust.
10. Services to Other Clients. Nothing herein
contained shall limit the freedom of the Management Company or
any affiliated person of the Management Company to render
services of the types contemplated hereby to other persons, firms
or corporations, including but not limited to other investment
companies, or to engage in other business activities.
11. Management Company Actions in Reliance on Trust
Instructions, Legal Opinions, Etc.; Trust Compliance with Law
(a) The Management Company may at any time apply to an
officer of the Trust for instructions, and may consult with legal
counsel for the Trust or with the Management Company's own legal
counsel, in respect of any matter arising in connection with this
Agreement; and the Management Company shall not be liable for any
action taken or omitted to be taken in good faith and with due
care in accordance with such instructions or with the advice or
opinion of such legal counsel. The Management Company shall be
protected in acting upon any such instructions, advice or opinion
and upon any other paper or document delivered by the Trust or
such legal counsel which the Management Company believes to be
genuine and to have been signed by the proper person or persons,
and the Management Company shall not be held to have notice of
any change of status or authority of any officer or
representative of the Trust, until receipt of written notice
thereof from the Trust.
(b) Except as otherwise provided in this Agreement or
in any separate agreement between the parties and except for the
accuracy of information furnished to the Trust by the Management
Company, the Trust assumes full responsibility for the
preparation, contents, filing and distribution of its Prospectus
and Statement of Additional Information, and full responsibility
for other documents or actions required for compliance with all
applicable requirements of the Act, the Securities Exchange Act
of 1934, the Securities Act of 1933, and any other applicable
laws, rules and regulations of governmental authorities having
jurisdiction over the Trust.
12. Liability of Management Company. The Management
Company shall not be liable to the Trust for any action taken or
omitted to be taken by the Management Company or its employees,
agents or contractors in carrying out the provisions of this
Agreement if such action was taken or omitted in good faith and
without negligence or misconduct on the part of the Management
Company, or its employees, agents or contractors.
13. Indemnification by Trust. The Trust shall
indemnify the Management Company and hold it harmless from and
against any and all losses, damages and expenses, including
reasonable attorneys' fees and expenses, incurred by the
Management Company which result from: (i) any claim, action, suit
or proceeding in connection with the Management Company's entry
into or performance of this Agreement; or (ii) any action taken
or omission to act committed by the Management Company in the
performance of its obligations hereunder; or (iii) any action of
the Management Company taken upon instructions believed in
good faith by it to have been executed by a duly authorized
officer or representative of the Trust, provided, that
Management Company shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or
misconduct on the part of the Management Company, or its
employees, agents or contractors. Before confessing any claim
against it which may be subject to indemnification by the Trust
hereunder, the Management Company shall give the Trust
reasonable opportunity to defend against such claim in its own
name or in the name of the Management Company.
14. Indemnification by Management Company. The
Management Company shall indemnify the Trust and hold it harmless
from and against any and all losses, damages and expenses,
including reasonable attorneys' fees and expenses, incurred by
the Trust which result from: (i) the Management Company's failure
to comply with the terms of this Agreement; or (ii) the
Management Company's lack of good faith in performing its
obligations hereunder, or (iii) the negligence or misconduct of
the Management Company, or its employees, agents or contractors
in connection herewith. The Trust shall not be entitled to such
indemnification in respect of actions or omissions constituting
negligence or misconduct on the part of the Trust or its
employees, agents or contractors other than the Management
Company, unless such negligence or misconduct results from or is
accompanied by negligence or misconduct on the part of the
Management Company, any affiliated person of the Management
Company, or any affiliated person of an affiliated person of the
Management Company. Before confessing any claim against it which
may be subject to indemnification hereunder, the Trust shall give
the Management Company reasonable opportunity to defend against
such claim in its own name or in the name of the Trust.
15. Effect of Agreement. Nothing herein contained
shall be deemed to require the Trust to take any action contrary
to its Declaration of Trust or its By-Laws or any applicable law,
regulation or order to which it is subject or by which it is
bound, or to relieve or deprive the Trustees of the Trust of
their responsibility for and control of the conduct of the
business and affairs of the Trust.
16. Term of Agreement. The term of this Agreement
shall begin on the date first above written, and shall continue
in effect for a one-year term unless sooner terminated as
hereinafter provided. Thereafter, this Agreement shall continue
in effect with respect to the Trust from year to year, subject to
the termination provisions and all other terms and conditions
hereof; provided such continuance with respect to the Trust is
approved at least annually by the Trustees, including the vote or
written consent of a majority of the Trustees who are not
interested persons of the Management Company or the Trust; and
provided further, that the Management Company shall not have
notified the Trust in writing at least one hundred and twenty
(120) days prior to the anniversary of the Agreement in any year
that it does not desire such continuation. The Management
Company shall furnish to the Trust, promptly upon its request,
such information (including the Management Company's costs of
delivering the services provided to the Trust hereunder) as may
reasonably be necessary to enable the Trust's Trustees to
evaluate the terms of this Agreement or any extension, renewal or
amendment hereof. The Management Company shall permit the Trust
and its accountants, counsel or other representatives to review
its books and records relating to the services provided hereunder
at reasonable intervals during normal business hours upon
reasonable notice requesting such review.
17. Amindment and Assignment of Agreement. This
Agreement may be amended only by a written instrument signed by
the parties hereto. This Agreement may not be assigned by the
Management Company, and the Management Company may not assign or
transfer any interest hereunder, voluntarily, by operation of law
or otherwise, without the prior written consent of the Trust's
Trustees. Any amendment hereof and any consent by the Trust to
any assignment hereof or assignment or transfer of any interest
hereunder by the Management Company shall not be effective unless
and until authorized by the Trust's Trustees, including the vote
or written consent of a majority of the Trustees who are not
interested persons of the Management Company or the Trust.
18. Termination of Agreement. This Agreement may be
terminated at any month-end, without the payment of any penalty,
by the Management Company upon at least one hundred and twenty
(120) days prior written notice to the Trust, or by the Trust
upon at least thirty (30) days prior written notice to the
Management Company; provided, that in the case of termination by
the Trust, such action shall have been authorized by the Trust's
Trustees, including the vote or written consent of a majority of
the Trustees who are not interested persons of the Management
Company or the Trust. This Agreement shall automatically and
immediately terminate in the event of its assignment by the
Management Company, or the Management Company's assignment or
transfer of any interest hereunder, without the prior written
consent of the Trust as provided in Paragraph 17 hereof.
19. Interpretation and Definition of Terms. Any
question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to
such term or provision of the Act and to interpretation thereof,
if any, by the United States courts or, in the absence of any
controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission validly issued
pursuant to the Act. Specifically, the terms "interested
persons," "assignment" and "affiliated person," as used in this
Agreement, shall have the meanings assigned to them by Section
2(a) of the Act. In addition, when the effect of a requirement
of the Act reflected in any provision of this Agreement is
modified, interpreted or relaxed by a rule, regulation or order
of the Securities and Exchange Commission, whether of special or
of general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order. The
Trust and the Management Company may from time to time agree on
such provisions interpreting or clarifying the provisions of
this Agreement as, in their joint opinion, are consistent with
the general tenor of this Agreement and with the specific
provisions of this Paragraph 19. Any such interpretations or
clarifications shall be in writing signed by the parties and
annexed hereto, but no such interpretation or clarification
shall be effective if in contravention of any applicable federal
or state law or regulations, and no such interpretation or
clarification shall be deemed to be an amendment of this
Agreement.
20. Captions. The captions in this Agreement are
included for convenience of reference only and in no way define
or delineate any of the provisions hereof or otherwise affect
their construction or effect.
21. Execution in Counterparts. This Agreement may be
executed simultaneously in counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
22. Choice of Law. Except insofar as the Act or other
federal laws and regulations may be controlling, this Agreement
shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of New York.
23. Limitation of Liability. The parties expressly
agree that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall
bind only the Trust estate, as provided in the Trust's
Declaration of Trust. Any authorization by the Trustees or
shareholders of the Trust, acting as such, to execute or deliver
this Agreement or both, shall not be deemed to have been made by
any of them individually or to impose any liability on any of
them personally, but shall bind only the Trust Estate as provided
in the Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto
duly authorized as of the day and year first above written.
THE MANAGERS FUNDS
By: _______________
_______________
Title
Attest:
___________________
Secretary
THE MANAGERS FUNDS, L.P.
By: EAIMC Holdings Corp.
By: _____________________
_____________________
Title
Attest:
_____________________
Secretary
EXHIBIT A
FORM OF SERVICE AGREEMENT
with respect to shares of
The Managers Funds
The Managers Funds, L.P.
200 Connecticut Avenue
Norwalk, CT 06854
Gentlemen:
We understand that you are party, with The Managers
Funds (the "Trust"), to an Administration and Shareholder
Servicing Agreement (the "Servicing Agreement") made as of the
_____ day of ______, 199___. The Trust is registered as an
investment company under the Investment Company Act of 1940, as
amended (the "Act"). The Servicing Agreement provides that you,
or a third party retained and paid by you, shall provide certain
specified services to the Trust, its shareholders or its
shareholder representatives such as bank trust departments and
registered investment advisers. You wish to retain us to provide
certain of such services under the Servicing Agreement, upon the
terms and conditions set forth herein.
The terms and conditions of this Agreement are as
follows:
1. We shall provide such of the following shareholder
and administration services ("Servicing") for each of our clients
who own of record or beneficially, shares of the Trust (a
"Client"), as you may require: answering Client inquiries
regarding the Trust; assisting Clients in changing dividend
options, account designations and addresses; performing
subaccounting for Clients who do not own their shares of record,
including establishing and maintaining accounts and records (such
as back-up withholding and tax identification number
certifications), and providing such Clients with periodic
statements of account showing holdings in all Funds combined;
arranging for bank wires; and obtaining such other information
and performing such services as you or the Client reasonably may
request, to the extent we are permitted by applicable statute,
rule or regulation and by the terms of the Servicing Agreement,
as the same may be amended from time to time.
2. We shall provide such office space and equipment
telephone facilities and personnel (which may be all or any part
of the space, equipment and facilities currently used in our
business, or all or any personnel employed by us) as is necessary
or beneficial to assist us in servicing Clients' accounts.
3. Neither we nor any of our employees or agents are
authorized to make any representation concerning the Trust except
those contained in the Trust's then current Prospectus and
Statement of Additional Information. In performing services
under this Agreement, we shall act as independent contractors and
we shall have no authority to act as agent for the Trust or for
you.
4. In consideration of the services and facilities
described herein, we shall be entitled to receive fees as set
forth in Exhibit A attached hereto. We understand that the
payment of fees has been authorized pursuant to the Servicing
Agreement and that such fees will be paid by you only so long as
this Agreement and the Servicing Agreement are in effect.
5. We shall be liable for our own acts and omissions
caused by our willful misfeasance, bad faith, or negligence in
the performance of our duties, or by our reckless disregard of
our obligations under this Agreement, and nothing herein shall
protect us against any such liability to you, the Trust or its
shareholders.
6. This Agreement shall commence upon acceptance by
you, as evidenced by your signature below, and shall continue in
effect until the earlier to occur of termination of the Servicing
Agreement and the expiration of a period of sixty (60) days
following written notice of termination by either party to the
other.
7. All communications to you shall be sent to you at
your offices, 200 Connecticut Avenue, Norwalk, CT 06854,
Attention: John Rosati, and shall be duly given if mailed first
class mail and postage prepaid. Any notice shall be duly given
mailed first class mail and postage prepaid, telecopied with a
copy to follow first class, or telegraphed to us at the address
shown in this Agreement.
8. We hereby represent and warrant to you that the
execution, delivery and performance of our obligations under this
Agreement have been duly authorized, and that this Agreement is
valid, binding and enforceable against us in accordance with its
terms.
9. This Agreement shall be subject to all applicable
provisions of law, including, without being limited to, the
applicable provisions of the Act, the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended; and
to the extent that any provisions herein contained conflict with
any such applicable provisions of law, the latter shall control.
10. This Agreement shall be construed in accordance
with the laws of the State of New York without reference to
principles of conflict of laws, except to the extent that any
applicable provisions of federal law shall be controlling, or
shall be deemed to govern the construction, validity and effect
of this contract.
Very truly yours,
_________________________
Service Organization Name
(Please Print for Type)
________________________
Address
_____________________
City State Zip Code
Date ___________________By __________________________________
Authorized Signature
NOTE: Please return both signed copies of this Agreement
to The Managers Funds, L.P. Upon acceptance, one
countersigned copy will be returned for your files.
Accepted:
THE MANAGERS FUNDS, L.P.
By: EAIMC Holdings Corp.
Date ____________________ By _______________________________
EXHIBIT A
Fees Payable
Servicing fees shall be payable to (Name of Servicing
Organization), on a monthly basis, at the rate of * of 1.0%
of the Trust's average weekly net assets attributable to the
Clients of (Name of Servicing Organization) for whom Servicing is
provided.
_________________
* Not to exceed
EXHIBIT 9(C)
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the ___ day of November 1992 by and
between The Managers Funds, L.P. ("TMFLP"), a Delaware limited
partnership and The Managers Funds, a Massachusetts business
trust (the "Fund").
W I T N E S S E T H :
WHEREAS, TMFLP is a limited partnership organized under the
laws of the State of Delaware under the name EAIMC Partners,
L.P., which changed its name to "The Managers Funds, L.P." in
April, 1991;
WHEREAS, the Fund was organized as an unincorporated business
trust under the name "The Management of Managers Group of Funds"
under the laws of the Commonwealth of Massachusetts pursuant to a
Declaration of Trust dated November 23, 1987, a copy of which,
together with all amendments thereto, is on file in the office of
the Secretary of the Commonwealth of Massachusetts, and changed
its name to "The Managers Funds" in April, 1991; and
WHEREAS, the Fund has requested TMFLP to consent to the use
of the words "The Managers Funds" in the Fund's name.
NOW, THEREFORE, in consideration of the premises and of the
covenants hereinafter contained, TMFLP and the Fund hereby agrees
as follows:
1. TMFLP hereby grants the Fund a non-exclusive license to
use the words "The Managers Funds" in the Fund's name.
2. The non-exclusive license hereinabove referred to has
been given and is given by TMFLP on the condition that it may at
any time, in its sole and absolute discretion, withdraw the
nonexclusive license to the use of the words "The Managers Funds"
in the name of the Fund; and, as soon as practicable after
receipt by the Fund of written notice of the withdrawal of such
nonexclusive license, and in no event later than ninety days
thereafter, the Fund will change its name so that such name will
not thereafter include the words "The Managers Funds" or any
variation thereof.
3. TMFLP reserves and shall have the right to grant to any
other company, including, without limitation, any other
investment company, the right to use the words "The Managers
Funds" or variations thereof in its name and no consent or
permission of the Fund shall be necessary; but, if required by an
applicable law of any state, the Fund will forthwith grant all
requisite consents.
4. The Fund will not grant to any other company the right
to use a name similar to that of the Fund or TMFLP without the
written consent of TMFLP.
5. Regardless of whether the Fund should hereafter change
its name and eliminate the words "The Managers Funds" or any
variation thereof from such name, the Fund hereby grants to TMFLP
the right to cause the incorporation of corporations or the
organization of voluntary associations which may have names
similar to that of the Fund or to that to which the Fund may
change its name and to own all or any portion of the shares of
such other corporations or associations and to enter into
contractual relationships with such other corporations or
associations, subject to any requisite approval of a majority of
the Fund's shareholders and the Securities and Exchange
Commission and subject to the payment of a reasonable amount to
be determined at the time of use, and the Fund agrees to give and
execute any such formal consents or agreements as may be
necessary in connection therewith.
6. This Agreement may be amended at any time a writing
signed by the parties hereto. This Agreement constitutes the
entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements, arrangements
and understandings, whether written or oral, with respect
thereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MANAGERS FUNDS, L.P.
By: EAIMC Holding Corp.
General Partner
By: ______________________
President
THE MANAGERS FUNDS
By: ______________________
President
2
EXHIBIT 10
SHEREEF, FRIEDMAN, HOFFMAN & GOODMAN
919 THIRD AVENUE NEW YORK, NY 10022-9998
(212) 758-9500
CABLE: SHERFRIED TELEX: 237328
TELECOPIER: (212) 758-9526
September 27, 1990
The Management of Managers Group of Funds
200 Connecticut Avenue
Norwalk, Connecticut 06854
Dear Sirs:
The Management of Managers Groups of Funds, a
Massachusetts business trust (the "Trust") proposes to issue
and sell and indefinite number of shares of beneficial
interest of the Trust, without par value (the "Shares"), in
the manner and on the terms set forth in the Trust's
Registration Statement on Form N-1A, as amended (the
"Registration Statement") filed with the Securities and
Exchange Commission (File Nos. 2-84012 and 811-3752).
The Trust currently consists of twelve separate series.
We were appointed counsel to the Trust by the Trustees on
May 14, 1990. Prior to that time, we had been retained,
since October 1989, by Evaluation Associates Investment
Management Company ("EAIMC"), investment adviser to the
Trust, in connection with matters relating to the
preparation and filing of Post-Effective Amendments Nos. 17,
18 and 19 to the Registration Statement. In these
capacities, we have examined copies, either certified or
otherwise provided our satisfaction to be genuine, of the
Trust's Declaration of Trust and By-Laws, as currently in
effect, a certificate of existence dated September 25, 1990,
issued by the Secretary of State of the Commonwealth of
Massachusetts and other documents relating to the Trust's
organization and operation. We have also reviewed the
Registration Statement and the documents filed as exhibits
thereto.
Based upon the foregoing and subject to the limitations
set forth herein, it is our opinion that:
1. The Trust has been duly organized and is legally
existing under the laws of the Commonwealth of
Massachusetts.
2. The Trust is authorized to issue an unlimited
number of Shares.
3. Upon the issuance of the Shares for a consideration
not less than the net asset value thereof as required by the
Investment Company Act of 1940, such Shares will be legally
issued and outstanding and fully paid and non-assessable.
However, we note that, as set forth in the Prospectus
forming a part of the Registration Statement, shareholders
of the Trust might, under certain circumstances, be liable
for the Trust's obligations to third parties.
We hereby consent to the filing op this opinion with
the Securities and Exchange Commission as part of the
Registration Statement, and to the reference to our firm as
counsel in the Prospectus and Statement of Additional
Information filed as part thereof. We also consent to the
filing of this opinion when required as part of the Trust's
application to qualify its shares for sale under the
securities laws of various states. In giving this consent
we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities
Act of 1933.
We are members of the Bar of the State of New York and
do not hold ourselves out as being conversant with the laws
of any jurisdiction other than those of the United States of
America and the State of New York. We note that we are not
licensed to practice law in the Commonwealth of
Massachusetts, and to the extent that any opinion expressed
herein involves the law of Massachusetts, such opinion
should be understood to be based solely upon our review of
the certificate of existence referred to above, the
published statutes of that Commonwealth and, where
applicable, published cases, rules or regulations of
regulatory bodies of that Commonwealth.
Very truly yours,
/s/Shereef, Friedman, Hoffman & Goodman
Shereef, Friedman, Hoffman & Goodman
EXHIBIT 16
THE MANAGEMENT OF MANAGERS GROUP OF FUNDS
Equity and Income Funds
Sample Calculation of Average Annual Total Return
for the Period Ended 12/31/89
From Commencement
of Operations
Description of Calculation 1 year 5 years 5/31/84
Initial Investment $1,000 $1,000 $1,000
Dividend by Initial
Net Asset Value 20.10 21.38 20.00
Equals Shares Purchased 49.80 46.8 50.00
Plus Shares Acquired Through
Reinvestment of Dividends and
Distributions 6.00 57.3 65.00
Equal Shares Held at 12/31/89 55.80 104.7 115.00
multiplied by NAV at 12/31/89 21.84 21.84 21.84
Equals Ending redeemable
Value (ERV) at 12/31/89 1218.70 2273.54 2511.60
Divided by $1,000 equals P 1.2187 2.2735 2.5116
Subtract 1 .2187 1.2735 1.5116
Expressed as a Percentage
equals Aggregate Total
Return for the Period 21.90 127.35 151.16
ERV Divided by P 1.2187 2.2735 2.5116
Raise to the power of
1/# of years 1 1/5 1/5.58
Equals 1.2187 1.1755 1.1793
Subtract 1 .2187 .1785 .1793
Expressed as a Percentage
equals Average Annual
Total Return for the period 21. 9% 17.9% 17.9%
THE MANAGEMENT OF MANAGERS GROUP OF FUNDS
Equity and Income Funds
Sample Yield Calculation for the 30-day
period ended December 31, 1989.
Capital Appreciation Fund
2 * ([a-b)+ 1]6 - 1)
c*d
= 2 * ([(160,763.25 - 20,466.65) + 1]6 - 1
2,424,846,048 * 21.84
= 2 * ([140,256.60 ) + 1]6 -1)
52,958,637.69
= 2 * (1.0026484186 - 1)
= .031992184
= 3.20%
MANAGEMENT OF MANAGERS MONEY MARKET FUND
Sample Yield Calculations for the 7-day
period ended December 31, 1989
12/25 .000233343
12/26 .000230361
12/27 .000236749
12/29 .0002414443
12/29 .000238424
12/30 .000238424
12/31 .000238424
.001657168 * 365/7 = 8.64%
Effective Yield Calculation
[(.001657168 + 1) 365/7) - 1 = 9.02%
EXHIBIT 18(1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that THE MANAGERS
FUNDS, a Massachusetts business trust (the "Trust"), and each of
its undersigned officers and trustees, hereby nominates,
constitutes and appoints Robert P. Watson, John E. Rosati and
Kathleen Wood (with full power to each of them to act alone)
its/his/her true and lawful attorney-in-fact and agent, for
it/him/her and on its/his/her behalf and in its/his/her name,
place and stead in any and all capacities, to make, execute and
sign any and all amendments to the Trust's Registration Statement
on Form N-lA under the Securities Act of 1933 and the Investment
Company Act of 1940, and to file with the Securities and Exchange
Commission, and any other regulatory authority having
jurisdiction over the offer and sale of shares of beneficial
interest, no par value, of the Trust, any such amendment, and any
and all supplements thereto or to any prospectus or statement of
additional information forming a part thereof, and any and all
exhibits granting unto said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises as fully to all intents and purposes as the Trust and
the undersigned officers and trustees itself/themselves might or
could do.
IN WITNESS WHEREOF, THE MANAGERS FUNDS has caused this
power of attorney to be executed in its name by its President,
and attested by its Secretary, and the undersigned officers and
trustees have hereunto set their hands and seals this 26th day of
October, 1992.
THE MANAGERS FUNDS
By: /s/Robert P. Watson
Robert P. Watson, President
ATTEST:
/s/Kathleen Wood
Kathleen Wood, Secretary
/s/Robert P. Watson Trustee, Chief Executive Officer
Robert P. Watson (Principal Executive Officer) and
President
/s/John E. Rosati Treasurer (Principal Financial and
John E. Rosati Accounting Officer) and Assistant
Secretary
/s/Kathleen Wood Secretary and Assistant Treasurer
Kathleen Wood
/s/William W. Graulty Trustee
William W. Graulty
/s/Madeline H. McWhinney Trustee
Madeline H. McWhinney
/s/Thomas R. Schneeweis Trustee
Thomas R. Schneeweis
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
trustee of THE MANAGERS FUNDS, a Massachusetts business trust
(the "Trust"), hereby nominates, constitutes and appoints Robert
P. Watson, John E. Rosati and Kathleen Wood (with full power to
each of them to act alone) his true and lawful attorney-in-fact
and agent, for him and on his behalf and in his name, place and
stead in any and all capacities, to make, execute and sign any
and all amendments to the Trust's Registration Statement on Form
N-lA under the Securities Act of 1933 and the Investment Company
Act of 1940, and to file with the Securities and Exchange
Commission, and any other regulatory authority having
jurisdiction over the offer and sale of shares of beneficial
interest, no par value, of the Trust, any such amendment, and any
and all supplements thereto or to any prospectus or statement of
additional information forming a part thereof, and any and all
exhibits granting unto said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises as fully to all intents and purposes as the undersigned
trustee himself might or could do.
IN WITNESS WHEREOF, the undersigned trustee has
hereunto set his hand this 4th day of November, 1992.
/s/Steven J. Paggioli
Steven J. Paggioli
Trustee
The Managers Funds
40 Richards Avenue
Norwalk, CT 06854
(203)857-5321
November 19, 1997
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: The Managers Funds Post-Effective Amendment 41
to Registration Statement on Form N-1A
File Nos. 2-84012; 811-3752
Commissioners:
We are hereby filing Post Effective Amendment No. 41 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.
We have previously filed Post-Effective Amendment No. 40 on
October 16, 1997 ("PEA 40") to add the Managers Emerging
Markets Equity Fund as a new Series. However, at the time
of that filing, we had not finalized the new Series' sub-
advisory arrangements. Accordingly, we are filing this
Amendment pursuant to paragraph (a) of Rule 485 under the
1933 Act to add the information about the sub-advisers and
expenses that were left blank in PEA 40. We are also
submitting a request for acceleration of this filing to
December 29, 1997 (the automatic effective date that would
have applied to PEA 40).
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.
