As filed with the Securities and Exchange Commission on April 29, 1998
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. 43 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 45 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 Shereff, 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)
X on May 1, 1998 pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on April 1, 1998 pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
THE MANAGERS FUNDS
POST-EFFECTIVE AMENDMENT NO. 43
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.
<PAGE>
THE MANAGERS FUNDS
INCOME EQUITY FUND
CAPITAL APPRECIATION FUND
SPECIAL EQUITY FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
- ------------------------
PROSPECTUS
DATED May 1, 1998
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
Illustrative Expense Information ....................................... 2
Summary ................................................................ 3
Financial Highlights ................................................... 4
Investment Objectives, Policies and Restrictions ....................... 11
Certain Investment Techniques and Associated Risks ..................... 14
GENERAL INFORMATION ON THE FUNDS
Purchase and Redemption of Fund Shares ............................ A1
Description of Shares, Voting Rights and Liabilities .............. A6
Tax Information ................................................... A7
Shareholder Reports ............................................... A8
Additional Information ............................................ A8
Management of the Funds ................................................ 18
Portfolio Turnover ..................................................... 23
Portfolio Transactions and Brokerage ................................... 23
Performance Information ................................................ 24
</TABLE>
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
DATED MAY 1, 1998
EQUITY FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with 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 May 1, 1998, 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.
The Securities and Exchange Commission maintains a website (http://www.sec.gov)
that contains the SAI, material incorporated by reference and other information
regarding the Trust.
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>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning
annual operating expenses of the Equity Funds.
<TABLE>
Caption>
SHAREHOLDER TRANSACTION EXPENSES
(applicable to each Fund)
<S> <C>
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Charges on Redemptions None
Redemption Fees None
Exchange Fees None
</TABLE>
EQUITY FUNDS' ANNUAL OPERATING EXPENSES: (based on average daily net
assets during fiscal 1997)
<TABLE>
<CAPTION>
INCOME EQUITY CAPITAL SPECIAL EQUITY INTERNATIONAL EMERGING MARKETS
FUND APPRECIATION FUND FUND EQUITY FUND EQUITY FUND2
-------------- ----------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Management Fees 0.75% 0.80% 0.90% 0.90% 1.15%
Rule 12b-1 Fees None None None None None
Other Expenses1 0.61% 0.47% 0.49% 0.57% 0.77%
--------- ------- -------- ------- ------
Total Operating
Expenses1 1.36% 1.27% 1.39% 1.47% 1.92%
</TABLE>
- ------------------------
[FN]
(1)Other Expenses reflect the expenses actually incurred by each Fund during
the year ended December 31, 1997, restated to reflect a new transfer agent
arrangements in effect. The expenses shown do not reflect current asset levels
for the Funds or the Fund family, and are not indicative of current expense
ratios. See "Management of the Funds--Administration and Shareholder Servicing;
Distributor; Transfer Agent." A portion of the brokerage commissions that each
of the Funds pays is used to reduce Fund expenses. These reductions are not
reflected in the expense information presented above. The reductions had a
de minimis impact on the expenses of Managers International Equity Fund;
However, in the case of Managers Income Equity, Managers Capital Appreciation
and Managers Special Equity Funds, after giving effect to such expense
reductions, Other Expenses would have been 0.65%, 0.54% and 0.50%,
respectively, and Total Operating Expenses would have been 1.40%, 1.34%
and 1.40%, respectively.
(2)Other Expenses are estimated based on estimated average net assets for the
current fiscal year ending December 31, 1998 of $30,000,000. To the extent
that actual average net assets are greater than or less than the estimate of
$30,000,000, actual Other Expenses and Total Operating Expenses will be less
than or greater than, respectively, the estimated amounts shown.
</FN>
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, and (2) redemption at the end of each time period. 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.
2
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Income Equity Fund ......................... $14 $43 $74 $164
Capital Appreciation Fund .................. 13 40 70 153
Special Equity Fund ........................ 14 44 76 167
International Equity Fund .................. 15 46 80 176
Emerging Markets Equity Fund ............... 20 60 -- ---
- -------------
</TABLE>
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.
This Prospectus relates to the Equity Funds. For more complete information
about any of the other Funds in the Trust 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 Fund may be exposed to a
higher degree of
3
<PAGE>
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
for the last ten years through December 31, 1997, or since the commencement of
operations, if applicable. The information for each Equity Fund except Managers
Emerging Markets Equity Fund 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, 1997, and by other accountants for the years prior to 1993,
and should be read in conjunction with such financial statements. The
financial highlights for Managers Emerging Markets Equity Fund for the period
February 9, 1998 (commencement of operations) to march 31, 1998 is unaudited.
See "Financial Statements" in the SAI.
4
<PAGE>
[This page is left intentionally blank]
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each year)
- --------------------------------------------------------------------------------
MANAGERS INCOME EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $30.49 $28.43 $24.90 $27.89 $27.38 $28.62
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (d) 0.67 0.76 0.87 0.80 0.81 0.99
Net realized and unrealized gain (loss)
on investments 7.27 3.97 7.47 (0.50) 2.54 1.72
------ ------ ------ ------ ------ ------
Total from investment operations 7.94 4.73 8.34 0.30 3.35 2.71
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.69) (0.76) (0.86) (0.83) (0.76) (0.98)
From net realized gain on investments (6.68) (1.91) (3.95) (2.46) (2.08) (2.97)
------ ------ ------ ------ ------ ------
Total distributions to shareholders (7.37) (2.67) (4.81) (3.29) (2.84) (3.95)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $31.06 $30.49 $28.43 $24.90 $27.89 $27.38
====== ====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------
Total Return 27.19% 17.08% 34.36% 0.99% 12.40% 9.80%
- ------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.32%(c) 1.44%(c) 1.45% 1.33% 1.32% 1.20%
Ratio of net investment income to average
net assets(d) 1.97% 2.63% 2.85% 3.06% 2.75% 3.52%
Portfolio turnover 96% 33% 36% 46% 41% 41%
Average commission rate(a) $0.06 $0.06 -- -- -- --
Net assets at end of year (000's omitted) $64,946 $53,063 $37,807 $48,875 $40,965 $49,648
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1991 1990 1989 1988
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $24.06 $30.23 $28.17 $23.59
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net net investment income (d) 1.11 1.48 1.68 1.45
Net realized and unrealized gain (loss)
on investments 5.82 (5.30) 4.77 4.84
------ ------ ------ ------
Total from investment operations 6.93 (3.82) 6.45 6.29
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From investment income (1.20) (1.45) (1.66) (1.43)
From net realized gain on investments (1.17) (0.90) (2.73) (0.28)
------ ------ ------ ------
Total distributions to shareholders (2.37) (2.35) (4.39) (1.71)
------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $28.62 $24.06 $30.23 $28.17
====== ====== ====== ======
- -------------------------------------------------------------------------------------------
Total Return 29.33% (13.04)% 22.24% 26.10%
- -------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.16% 0.80% 0.15% 0.17%
Ratio of net investment income to average
net assets(d) 4.00% 5.40% 5.34% 5.47%
Portfolio turnover 64% 57% 23% 26%
Average commission rate(a) -- -- -- --
Net assets at end of year (000's omitted) $70,077 $80,297 $116,103 $108,149
===========================================================================================
</TABLE>
MANAGERS CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1997(b) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $26.34 $27.14 $23.25 $25.17 $24.67 $23.46
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(d) (0.13) 0.09 0.09 0.12 0.19 0.08
Net realized and unrealized gain (loss)
on investments 3.15 3.66 7.62 (0.49) 3.80 2.39
------ ------ ------ ------ ------ ------
Total from investment operations 3.02 3.75 7.71 (0.37) 3.99 2.47
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.10) (0.08) (0.12) (0.19) (0.07)
From net realized gain on investments (5.12) (4.45) (3.74) (1.39) (3.30) (1.19)
In excess of net realized gain
on investments -- -- -- (0.04) -- --
------ ------ ------ ------ ------ ------
Total distributions to shareholders (5.12) (4.55) (3.82) (1.55) (3.49) (1.26)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $24.24 $26.34 $27.14 $23.25 $25.17 $24.67
====== ====== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------
Total Return 12.74% 13.73% 33.39% (1.50)% 16.38% 10.50%
- --------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.26%(c) 1.33%(c) 1.36% 1.29% 1.18% 1.05%
Ratio of net investment income (loss) to average
net assets(d) (0.45)% 0.34% 0.31% 0.53% 0.74% 0.33%
Portfolio turnover 235% 172% 134% 122% 131% 175%
Average commission rate(a) $0.06 $0.06 -- -- -- --
Net assets at end of year (000's omitted) $73,860 $101,282 $83,353 $86,042 $69,358 $56,196
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1991 1990 1989 1988
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $19.99 $21.84 $20.10 $17.38
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(d) 0.25 0.60 0.91 0.75
Net realized and unrealized gain (loss)
on investments 6.10 (0.98) 3.47 2.72
------ ------ ------ ------
Total from investment operations 6.35 (0.38) 4.38 3.47
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.27) (0.61) (0.91) (0.75)
From net realized gain on investments (2.61) (0.86) (1.73) --
In excess of net realized gain
on investments -- -- -- --
------ ------ ------ ------
Total distributions to shareholders (2.88) (1.47) (2.64) (0.75)
------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $23.46 $19.99 $21.84 $20.10
====== ====== ====== ======
- --------------------------------------------------------------------------------------------
Total Return 31.97% (1.98)% 21.05% 19.23%
- --------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.31% 1.09% 0.38% 0.33%
Ratio of net investment income (loss) to average
net assets(d) 1.07% 2.80% 4.04% 3.90%
Portfolio turnover 259% 124% 120% 95%
Average commission rate(a) -- -- -- --
Net assets at end of year (000's omitted) $53,246 $45,801 $52,724 $60,540
============================================================================================
</TABLE>
[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 average shares outstanding during the year.
(c) 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 years ended December 31, 1997 and 1996, would
have been 1.35% and 1.44%, respectively, for Managers Income Equity
Fund and 1.32% and 1.38%, respectively, for Managers Capital Appreciation
Fund. Such payments were primarily used to reduce the custodian expense.
(d) Does not reflect investment advisory and management fees paid by
shareholders directly to the Manager prior to May 1990.
</FN>
6-7
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each year)
- --------------------------------------------------------------------------------
MANAGERS SPECIAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995(b) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $50.95 $43.34 $36.79 $38.90 $36.14 $34.49
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(d) 0.08 (0.00) (0.07) (0.01) 0.02 0.05
Net realized and unrealized gain (loss)
on investments 12.29 10.68 12.28 (0.76) 6.12 5.35
------ ------ ------ ------ ------ ------
Total from investment operations 12.37 10.68 12.21 (0.77) 6.14 5.40
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.07) -- -- -- (0.01) (0.05)
From net realized gain on investments (2.07) (3.07) (5.66) (1.34) (3.37) (3.70)
------ ------ ------ ------ ------ ------
Total distributions to shareholders (2.14) (3.07) (5.66) (1.34) (3.38) (3.75)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $61.18 $50.95 $43.34 $36.79 $38.90 $36.14
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------
Total Return 24.45% 24.75% 33.94% (1.99)% 17.05% 15.64%
- ---------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.35%(c) 1.43% 1.44% 1.37% 1.26% 1.29%
Ratio of net investment income (loss) to
average net assets(d) 0.17% (0.10)% (0.16)% (0.06)% 0.07% 0.14%
Portfolio turnover 49% 56% 65% 66% 45% 54%
Average commission rate(a) $0.05 $0.05 -- -- -- --
Net assets at end of year (000's omitted) $719,707 $271,433 $118,362 $111,584 $99,032 $53,641
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $24.46 $32.45 $27.04 $22.97
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(d) 0.22 0.33 0.54 0.51
Net realized and unrealized gain (loss)
on investments 11.78 (5.44) 8.57 5.43
------ ------ ------ ------
Total from investment operations 12.00 (5.11) 9.11 5.94
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.23) (0.36) (0.64) (0.40)
From net realized gain on investments (1.74) (2.52) (3.06) (1.47)
------ ------ ------ ------
Total distributions to shareholders (1.97) (2.88) (3.70) (1.87)
------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $34.49 $24.46 $32.45 $27.04
====== ====== ====== ======
- ---------------------------------------------------------------------------------------------
Total Return 49.26% (16.05)% 32.76% 25.26%
- ---------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.30% 1.19% 0.40% 0.60%
Ratio of net investment income (loss) to
average net assets(d) 0.73% 1.22% 1.65% 1.20%
Portfolio turnover 70% 67% 48% 62%
Average commission rate(a) -- -- -- --
Net assets at end of year (000's omitted) $40,616 $24,429 $37,316 $28,824
=============================================================================================
</TABLE>
MANAGERS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995(b) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $43.69 $39.97 $36.35 $35.92 $26.52 $25.66
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(d) 0.42 0.32 0.31 0.16 0.22 0.23
Net realized and unrealized gain (loss)
on investments 4.27 4.76 5.59 0.56 9.88 0.85
------ ------ ------ ------ ------ ------
Total from investment operations 4.69 5.08 5.90 0.72 10.10 1.08
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (loss) (0.65) (0.33) (0.13) (0.08) (0.29) (0.22)
In excess of net investment income -- -- -- -- (0.11) --
From net realized gain on investments (2.15) (1.03) (2.15) -- (0.30) --
In excess of net realized gain
on investments -- -- -- -- (0.21) --
------ ------ ------ ------ ------ ------
Total distributions to shareholders (2.80) (1.36) (2.28) (0.29) (0.70) (0.22)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $45.58 $43.69 $39.97 $36.35 $35.92 $26.52
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------------------------
Total Return 10.83% 12.77% 16.24% 2.00% 38.20% 4.25%
- ---------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.45%(c) 1.53% 1.58% 1.49% 1.47% 1.45%
Ratio of net investment income to
average net assets(d) 0.75% 0.97% 0.80% 0.60% 0.78% 0.97%
Portfolio turnover 37% 30% 73% 22% 46% 51%
Average commission rate(a) $0.03 $0.03 -- -- -- --
Net assets at end of year (000's omitted) $386,624 $269,568 $140,488 $86,924 $62,273 $23,129
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $22.09 $26.12 $23.80 $21.74
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(d) 0.36 0.34 (0.15) 0.02
Net realized and unrealized gain (loss)
on investments 3.64 (2.85) 3.76 2.12
------ ------ ------ ------
Total from investment operations 4.00 (2.51) 3.61 2.14
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (loss) (0.36) (0.13) -- (0.08)
In excess of net investment income -- -- -- --
From net realized gain on investments (0.07) (1.39) (1.29) --
In excess of net realized gain
on investments -- -- -- --
------ ------ ------ ------
Total distributions to shareholders (0.43) (1.52) (1.29) (0.08)
------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $25.66 $22.09 $26.12 $23.80
====== ====== ====== ======
- ----------------------------------------------------------------------------------------------
Total Return 18.14% (9.68)% 15.10% 8.89%
- ----------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(d) 1.69% 2.33% 2.77% 1.68%
Ratio of net investment income to
average net assets(d) 1.50% 1.12% (0.73)% 0.12%
Portfolio turnover 158% 78% 117% 88%
Average commission rate(a) -- -- -- --
Net assets at end of year (000's omitted) $14,222 $9,871 $8,974 $7,337
==============================================================================================
</TABLE>
[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 average shares outstanding during the year.
(c) 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 year ended December 31, 1997, would have been 1.36% and
1.45%, respectively, for Managers Special Equity and Managers International
Equity. Such payments were primarily used to reduce the custodian expense.
(d) Does not reflect investment advisory and management fees paid by
shareholders directly to the Manager prior to May 1990.
</FN>
8&9
<PAGE>
FINANCIAL HIGHLIGHTS
(For a shre of beneficial interest outstanding throughout the period)
- -------------------------------------------------------------------------------
MANAGERS EMERGING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FEBRUARY 9, 1998
(COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 1998 (unaudited)
- -----------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01
Net realized and unrealized gain (loss)
on investments 0.40
-----
Total from investment operations 10.41
------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ---
------
From net realized gain on investments ---
------
Total distributions to shareholders ---
------
NET ASSET VALUE, END OF PERIOD $10.41
-------
- --------------------------------------------------------------
Total Return 4.10%(c)(d)
- --------------------------------------------------------------
Ratio of net expenses to average net assets 1.83%(b)
Ratio of net investment income to
average net assets 1.47%(b)
Portfolio turnover 7%(c)
Net assets at end of period(000's omitted) $3,568
- ---------------------------------------------------------------------
Expense Waiver (a)
- ------------------
Ratio of total expenses to average net assets 2.98%(b)
Ratio of net investment income to average net
assets 0.27%(b)
=============================================================
</TABLE>
[FN]
(a) Ratio information assuming no waiver of investment advisory and management
fees in effect for the period.
(b) Annualized.
(c) Not annualized.
(d) The total return would have been lower had certain expenses not been
reduced during the period.
</FN>
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 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 Depository Receipts, securities such as rights and warrants which
permit the holder to purchase equity securities, and securities which enable the
Fund to own a group of equities, for example Standard & Poor's Depository
Receipts (SPDRs).
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 engage in securities lending, and may invest the
collateral for such loans in unaffiliated money market funds. 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 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.
11
<PAGE>
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 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."
12
<PAGE>
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 and can tolerate the increased risk
associated with investing in these 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 -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
market 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 market 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.
A company in an emerging market country 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 country; (iii) derives 50% or
more of its total revenue from either goods produced, sales made or
services performed in an emerging markets country; or (iv) has at least 50%
of its assets located in an emerging markets country.
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
13
<PAGE>
to time engage in foreign currency exchange transactions if, based on
fundamental research, technical factors, and their experience and judgment,
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 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
14
<PAGE>
GENERAL INFORMATION ON THE FUNDS
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 or
an applicable state securities commission (a "Registered Investment Adviser")
or directly from the Trust as indicated below. Shares may also be purchased
by bank trust departments on behalf of their clients, other institutional
investors such as corporations, endowment funds and charitable foundations, and
tax-exempt employee welfare, pension and profit-sharing plans.
The following shows the various methods for purchasing the Trust's shares.
For more complete instructions, see the account application.
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------ ----------------------
<S> <C> <C>
Minimums:
Regular accounts $2,000 (or lower, as No minimum
described above)
Education IRA Minimum/Maximum $500 N/A
IRAs, IRA rollovers,
SEP, ROTH and SIMPLE IRAs $500 No minimum
<CAPTION>
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
A1
<PAGE>
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 Fund, at (800) 358-7668 prior
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
Fund & Account #
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
- --------------------------------------------------------------------------
<FN>
*For shareholders that invest directly with the Fund only. For Adviser and
Bank Trust accounts, please call (800) 358-7668 for further instructions.
</FN>
</TABLE>
The employees and their families of The Managers Funds, L.P. and selected
dealers and their authorized representatives who are engaged in the sale of Fund
shares, may purchase shares of the Fund without regard to a minimum initial
investment.
Certain states may require Registered Investment Advisers that purchase
Fund shares for customers in those states to register as broker-dealers. From
time to time the Trust's distributor may supply materials to 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.
A2
<PAGE>
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,
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. 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.
Federal Funds or Bank Wires used to pay for purchase orders must be in U.S.
dollars and received in advance, 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
A3
<PAGE>
canceled and you will be responsible for any loss the Trust incurs. For
current shareholders, each Fund can redeem shares from any identically
registered account in such Fund or any other Fund in the Trust as reimbursement
for any loss incurred. The Trust may prohibit or restrict all future purchases
in the Trust in the event of any nonpayment for shares.
In the interest of economy and convenience, share certificates will not be
issued. All share purchases are confirmed to the record holder and credited to
such holder's account on the Trust's books maintained by the Transfer Agent.
SHARE PRICE AND VALUATION OF SHARES. The net asset value of shares of each
Fund is computed each Business Day, at the close of trading on the NYSE, and is
the net worth of the Fund (assets minus liabilities) divided by the number of
shares outstanding. Fund securities listed on an exchange are valued on the
basis of the last quoted sale price on the exchange where such securities
principally are traded on the valuation date, prior to the close of trading on
the NYSE, or, lacking any sales, on the basis of the last quoted bid price on
such principal exchange prior to the close of trading on the NYSE.
Over-the-counter securities for which market quotations are readily available
are valued on the basis of the last sale price or, lacking any sales, at the
last quoted bid price on that date prior to the close of trading on the NYSE.
Securities and other instruments for which market quotations are not readily
available are valued at fair value, as determined in good faith and pursuant to
procedures established by the Trustees. For further information, see "Net Asset
Value" in the SAI.
REDEEMING SHARES
Any redemption orders received by the Trust as indicated below before 4:00
p.m. New York Time on any Business Day will receive the net asset value
determined at the close of trading on the NYSE on that day. Redemption orders
received after 4:00 p.m. will be redeemed at the net asset value determined at
the close of trading on the next Business Day. 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.
A4
<PAGE>
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
------ ------------
<S> <C>
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. For redemptions over $25,000,
signature(s) must be guaranteed.
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
</TABLE>
- ----------------------------------------------------------------
[FN]
*Telephone redemptions are available only for redemptions under $25,000.
</FN>
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. Withdrawals can be made via check on the 25th day of each month,
or the next Business Day in the event the 25th is a weekend or holiday, unless
a date other than the 25th is specified on the application for ACH accounts.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other Funds on the 15th Business Day of each month, or can be
done through the Automatic Investment service above. Before investing in the
Trust's Funds, shareholders must obtain a prospectus from the Trust
describing those Funds.
A5
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS, including SEP, ROTH 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.
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 such Fund(s) 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 such
Fund(s).
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.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value. The Trustees have the authority to create new series of
shares in addition to the existing series of the Trust without the requirement
of a vote of shareholders of the Trust.
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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.
YEAR 2000. Like other mutual funds, financial and business organizations
and individuals around the world, the Trust could be adversely affected if
computer systems used by the manager, sub-advisers and other service providers
do not properly process and calculate date-related information from January 1,
2000 and after. The Managers Funds is taking steps that it believes are
reasonably designed to address this "Year 2000" problem with respect to the
computer systems that are used and to obtain satisfactory assurances that
comparable steps are being taken by each of the Trust's major service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Trust. Companies or
governmental entities in which the Funds invest could be affected by the "Year
2000" problem, but at this time, the Funds cannot predict the degree of impact
on the Funds.
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,
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<PAGE>
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.
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.
ADDITIONAL INFORMATION
Any shareholder inquiries may be directed to the Trust at the address or
telephone number listed on the cover page of this Prospectus. This Prospectus,
including the SAI which has been incorporated by reference herein, does not
contain all the information set forth in the Registration Statement filed with
the Securities and Exchange Commission under the Securities Act of 1933. Copies
of the Registration Statement may be obtained at a reasonable charge from the
Securities and Exchange Commission or may be examined, without charge, at the
website maintained by the Securities and Exchange Commission
(http://www.sec.gov).
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<PAGE>
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
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
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<PAGE>
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
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
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<PAGE>
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.
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.
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<PAGE>
FUTURES CONTRACTS. A Fund may buy and sell futures contracts as a hedge to
protect the value of the Fund's portfolio against changes in prices of the
financial instruments in which it may invest. There are several risks in using
futures contracts. One risk is that futures prices could correlate imperfectly
with the behavior of cash market prices of the
instrument being hedged so that even a correct forecast of general price trends
may not result in a successful transaction. Another risk is that the Fund's
portfolio manager may be incorrect in its expectation of future prices. There is
also a risk that a secondary market in the instruments that the Fund holds may
not exist or may not be adequately liquid to permit the Fund to close out
positions when it desires to do so. When buying or selling futures contracts the
Fund will be required to segregate cash and/or liquid 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.
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
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<PAGE>
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.
The following table sets forth the annual management fee rates currently
paid by each Equity Fund, and 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>
<CAPTION>
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 ....................... 1.15% 0.75%
- ----------------
</TABLE>
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. As of December 31, 1997, Scudder is owned by the Zurich Group
and is the core of Zurich's global investment management services. As of
December 31, 1997, assets under management totaled $218 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.
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<PAGE>
Chartwell Investment Partners, L.P. ("Chartwell")--The firm was founded
in 1997, and is a limited partnership which is 75% controlled by the employees
of the firm. Chartwell is 25% controlled by Maverick Partners, L.P. which is
controlled by John McNiff and Michael Kennedy. As of December 1997, assets
under management totaled approximately $1.3 billion. 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.
CAPITAL APPRECIATION FUND
Essex Investment Management Company, LLC ("Essex")--The firm was formed in
1976 and is owned jointly by employees of the firm and an institutional partner,
Affiliated Managers Group, Inc. As of December 31, 1997, assets
under management totaled $4.3 billion. Its address is 125 High Street, Boston,
MA 02110.
Joseph C. McNay serves as the portfolio manager 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.
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, 1997, assets under management totaled approximately $3.6 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 Managing Partner 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 Management. As of December 31,
1997, assets under management totaled $8 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 Vice President of Liberty, a
position he has held since 1988.
Pilgrim Baxter & Associates, Ltd. ("PBA")--The firm was formed in 1982
and is owned by United Asset Management, a public company. As of December
31, 1997, assets under management for PBA and its subsidiaries totaled over
$16 billion. Its address is 825 Duportail Road, Wayne, PA 19087.
John S. Force, CFA, is the lead portfolio manager and Gary L. Pilgrim,
CFA, is the co-portfolio manager of the portion of the Special Equity Fund
managed by PBA. Mr. Force is responsible for managing small capitalization and
technology
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<PAGE>
portfolios. Mr. Pilgrim is the Chief Investment Officer and one of the founders
of the firm.
Westport Asset Management, Inc. ("Westport")--The firm was formed in July
1983 and is owned by Andrew J. Knuth and Ronald H.
Oliver. As of December 31, 1997, assets under management totaled $1.6 billion.
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 by Robert
E. Kern, Jr. and David G. Kern, and is a Delaware limited liability company. As
of December 31, 1997, assets under management totaled approximately $269
million. The firm's address is 114 West 47th Street, Suite 1926, New York,
NY 10036.
Robert E. Kern, Jr. 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 lead 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 Asset Management ("Lazard")--The firm is a New York
limited liability company founded in 1848. As of December 31, 1997, the firm had
$60 billion under management. Its address is 30 Rockefeller Plaza, New York, NY
10112.
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.
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The portfolio managers are Josephine Jimenez, CFA, Bryan Sudweeks, Ph.D,
CFA, Frank Chiang, Jose de Gusmao Fiuza, Stuart Quint, and Jesus Isidoro Duarte.
State Street Global Advisors, United Kingdom, Limited ("State Street Global")
- --The firm is a subsidiary of State Street Corporation. As of September, 1997,
the firm had approximately $7.1 billion assets under management. The firm's
address is Almack House, 28 King Street, London, SW1Y6QW, England.
Murray Davey and Ken King are the portfolio managers of that portion of
the Emerging Markets Equity Fund managed by State Street Global.
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 a
rate not to exceed 0.25% per annum of each Equity Fund's average daily net
assets.
Administrative services include (i) preparation of Fund performance
information; (ii) responding to telephone and in-person inquiries from
shareholders and Shareholder Representatives regarding matters such as account
or transaction status, net asset value of Fund shares, Fund performance, Fund
services, plans and options, Fund investment policies and portfolio holdings and
Fund distributions and the taxation thereof; (iii) preparing, soliciting and
gathering shareholder proxies and otherwise communicating with shareholders
in connection with shareholder meetings; (iv) maintaining the Trust's
registration with Federal and state securities regulators; (v) dealing
with complaints and correspondence from shareholders directed to or brought
to the attention of the Administrator; (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. Boston Financial Data Services, Inc. serves as the
Trust's Transfer Agent.
INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends will normally be paid at the frequency noted in the
following table. Income dividends will normally be declared on the fourth
Business Day prior to the end of the dividend period, payable on the
following Business Day, to shareholders of record on the day prior to the
declaration date. Distributions of most capital gains will normally be paid
annually in December.
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<PAGE>
<TABLE>
<CAPTION>
FREQUENCY FUND
--------- ----
<S> <C>
Monthly Income Equity Fund
Annually Capital Appreciation Fund,
Special Equity Fund,
International Equity Fund,
Emerging Markets Equity Fund
</TABLE>
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.
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."
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
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<PAGE>
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 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.
24
<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, LLC
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management
EMERGING MARKETS
EQUITY FUND
Montgomery Asset Management, LLC
State Street Global Advisors, United
Kingdom, Limited
INCOME FUNDS:
- ------------
MONEY MARKET FUND
J.P. Morgan
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
SHORT AND INTERMEDIATE
BOND FUND
BOND FUND
GLOBAL BOND FUND
- ------------------------
PROSPECTUS
dated May 1, 1998
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
------
<S> <C>
Illustrative Expense Information ........................................ 2
Summary ................................................................. 3
Financial Highlights .................................................... 4
Investment Objectives, Policies and Restrictions ........................ 9
GENERAL INFORMATION ON THE FUNDS
Purchase and Redemption of Fund Shares ................................. A1
Description of Shares, Voting Rights and Liabilities ................... A6
Tax Information ........................................................ A7
Shareholder Reports .................................................... A8
Additional Information.................................................. A8
Certain Investment Techniques and Associated Risks ...................... 13
Management of the Funds ................................................. 19
Portfolio Transactions and Brokerage ..................................... 23
Performance Information .................................................. 23
Portfolio Turnover ....................................................... 23
</TABLE>
The Managers Funds
THE MANAGERS FUNDS
PROSPECTUS
DATED MAY 1, 1998
INCOME FUNDS
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with 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 "Income Funds"):
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 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 May 1, 1998, 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.
The Securities and Exchange Commission maintains a website (http://www.sec.gov)
that contains the SAI, material incorporated by reference and other information
regarding the Trust.
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>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning
annual operating expenses of the Income Funds.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
(applicable to each Fund)
- ----------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Charges on Redemptions None
Redemption Fees None
Exchange Fees None
</TABLE>
INCOME FUNDS' ANNUAL OPERATING EXPENSES: (based on average
daily net assets during fiscal 1997)
<TABLE>
<CAPTION>
SHORT AND
INTERMEDIATE
BOND BOND GLOBAL
FUND FUND BOND FUND
------------ ------- ----------
<S> <C> <C> <C>
Management Fees(1) 0.50% 0.625% 0.70%
Rule 12b-1 Fees None None None
Other Expenses(2) 1.00% 0.71% 1.07%
-------- ----- ------
Total Operating
Expenses(2) 1.50% 1.33% 1.77%
- --------------------
</TABLE>
(1)The Management Fee reflect the fees payable by each Fund under the current
investment advisory agreements.
(2)Other Expenses reflect the expenses actually incurred by each Fund during
the year ended December 31, 1997, restated to reflect new transfer agency
arrangements currently in effect. 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. See "Management of
the Funds--Administration and Shareholder Servicing; Distributor; Transfer
Agent."
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.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Short and Intermediate Bond Fund ...... 15 47 82 179
Bond Fund ............................. 14 42 73 160
Global Bond Fund ...................... 18 56 96 208
</TABLE>
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.
This Prospectus relates to the Income Funds. For more complete information
about any of the other Funds in the Trust 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 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 cur-
3
<PAGE>
rency 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 ten years, or since inception, if applicable, through December 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 through December 31, 1997,
and by other accountants prior to 1993, and should be read in conjunction with
such financial statements. See "Financial Statements" in the SAI.
4
<PAGE>
[This page is intentionally left blank]
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a shares of beneficial interest outstanding throughout each year)
<TABLE>
<CAPTION>
MANAGERS SHORT AND INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $19.45 $19.67 $18.06 $21.23 $20.89 $20.33 $19.43
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.08 1.03 1.28 1.45 1.38 1.69 1.50
Net realized and unrealized gain
(loss) on investments 0.03 (0.24) 1.45 (3.17) 0.34 0.57 0.88
------ ------ ------ ------ ------ ------ ------
Total from investment operations 1.11 0.79 2.73 (1.72) 1.72 2.26 2.38
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.05) (1.01) (1.09) (1.37) (1.38) (1.70) (1.48)
In excess of net investment income -- -- (0.03) (0.08) -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (1.05) (1.01) (1.12) (1.45) (1.38) (1.70) (1.48)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $19.51 $19.45 $19.67 $18.06 $21.23 $20.89 $20.33
------ ------ ------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------
Total Return(b) 5.87% 4.15% 15.57% (8.37)% 8.49% 11.55% 12.78%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.40% 1.45% 1.50% 1.05% 0.94% 0.86% 0.96%
Ratio of net investment income to
average net assets(a) 5.54% 5.43% 6.52% 7.11% 6.58% 8.33% 7.41%
Portfolio turnover 91% 96% 131% 57% 126% 117% 536%
Net assets at end of year (000's omitted) $15,082 $22,380 $25,241 $30,956 $112,228 $72,031 $52,168
- ------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver(c) N/A N/A N/A N/A N/A N/A 1.00%
Ratio of net investment income to
average net assets, absent waiver(c) N/A N/A N/A N/A N/A N/A 7.37%
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1990 1989 1988
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $19.69 $19.32 $19.82
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.57 1.70 1.70
Net realized and unrealized gain
(loss) on investments (0.19) 0.37 (0.48)
------ ------ ------
Total from investment operations 1.38 2.07 1.22
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.64) (1.70) (1.71)
In excess of net investment income -- -- (0.01)
------ ------ ------
Total distributions to shareholders (1.64) (1.70) (1.72)
------ ------ ------
NET ASSET VALUE, END OF YEAR $19.43 $19.69 $19.32
------ ------ ------
- -----------------------------------------------------------------------------
Total Return(b) 7.22% 10.61% 5.79%
- -----------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 0.56% 0.12% 0.10%
Ratio of net investment income to
average net assets(a) 8.05% 8.81% 8.61%
Portfolio turnover 477% 202% 348%
Net assets at end of year (000's omitted) $155,223 $152,106 $192,706
- ----------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver(c) N/A N/A N/A
Ratio of net investment income to
average net assets, absent waiver(c) N/A N/A N/A
===============================================================================
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each year)
- --------------------------------------------------------------------------------
MANAGERS BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $22.83 $23.13 $18.92 $22.18 $21.88 $22.60 $20.95
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.39 1.35 1.44 1.59 1.49 1.48 1.70
Net realized and unrealized gain
(loss) on investments 0.90 (0.29) 4.23 (3.16) 0.98 0.23 2.12
------ ------ ------ ------ ------ ------ ------
Total from investment operations 2.29 1.06 5.67 (1.57) 2.47 1.71 3.82
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1.40) (1.36) (1.46) (1.55) (1.50) (1.48) (1.72)
Net realized gain on investments -- -- -- (0.14) (0.67) (0.95) (0.45)
------ ------ ------ ------ ------ ------ ------
Total distributions to shareholders (1.40) (1.36) (1.46) (1.69) (2.17) (2.43) (2.17)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $23.72 $22.83 $23.13 $18.92 $22.18 $21.88 $22.60
====== ====== ====== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------
Total Return 10.42% 4.97% 30.91% (7.25)% 11.56% 7.88% 19.04%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets(a) 1.27% 1.36% 1.34% 1.20% 1.15% 0.93% 1.02%
Ratio of net investment income to
average net assets(a) 6.14% 6.13% 6.84% 7.28% 6.65% 6.61% 7.82%
Portfolio turnover 35% 72% 46% 84% 373% 292% 182%
Net assets at end of year (000's omitted) $41,298 $31,819 $26,376 $30,760 $44,038 $39,117 $36,659
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1990 1989 1988
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $21.34 $20.54 $20.60
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.88 1.93 1.80
Net realized and unrealized gain
(loss) on investments (0.33) 0.79 (0.05)
------ ------ ------
Total from investment operations 1.55 2.72 1.75
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1.94) (1.92) (1.81)
Net realized gain on investments -- -- --
------ ------ ------
Total distributions to shareholders (1.94) (1.92) (1.81)
------ ------ ------
NET ASSET VALUE, END OF YEAR $20.95 $21.34 $20.54
====== ====== ======
- -----------------------------------------------------------------------------
Total Return 7.53% 13.10% 8.03%
- -----------------------------------------------------------------------------
Ratio of expenses to average net assets(a) 0.84% 0.26% 0.44%
Ratio of net investment income to
average net assets(a) 8.98% 9.37% 8.63%
Portfolio turnover 64% 94% 90%
Net assets at end of year (000's omitted) $31,648 $46,028 $31,241
=============================================================================
</TABLE>
[FN]
(a) Does not reflect investment advisory and management fees paid
by shareholders directly to the Manager for periods prior to May 1990.
(b) Total return would have been lower had certain expenses not been reduced
during the year.
(c) Ratio information assuming no fee waivers or reimbursements had been in
effect during the year.
</FN>
6 & 7
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 25, 1994
YEAR ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
-------------------- DECEMBER 31,
1997(f) 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 0.97 1.21 0.95 0.48
Net realized and unrealized
gain (loss) on investments (0.93) (0.27) 2.66 (0.77)
------ ------ ------ ------
Total from investment operations 0.04 0.94 3.61 (0.29)
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.17) (0.87) (0.93) (0.50)
In excess of net investment income -- -- (0.04) (0.11)
From net realized gain on investments (0.34) (0.41) -- --
------ ------ ------ ------
Total distributions to shareholders (0.51) (1.28) (0.97) (0.61)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $20.93 $21.40 $21.74 $19.10
====== ====== ====== ======
- --------------------------------------------------------------------------------------
Total Return(a)(d) 0.16% 4.39% 19.08% (1.52)%
- --------------------------------------------------------------------------------------
Ratio of net expenses to average
net assets 1.63%(b) 1.57% 1.55% 1.73%(b)
Ratio of net investment income to
average net assets 4.75%(b) 4.98% 5.07% 4.19%(b)
Portfolio turnover 197%(c) 202% 214% 266%(c)
Net assets at end of period
(000's omitted) $17,465 $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)
======================================================================================
</TABLE>
[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.
(f) Calculated using the average shares outstanding during the year.
</FN>
- --------------------------------------------------------------------------------
8
<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 and Intermediate Bond Fund and Bond Fund may
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 Funds 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 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.
9
<PAGE>
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" and
"Investment Restrictions"in the SAI. The Funds may also engage in securities
lending, and may invest the collateral for such loans in unaffiliated money
market funds. The following discussions of the individual Income Funds'
objectives and policies is modified by the above.
MANAGERS SHORT AND INTERMEDIATE BOND FUND
The Fund's investment objective is to seek high current income by investing
in fixed-income securities having an average dollar-weighted portfolio maturity
between one and five years.
The Fund invests in obligations of the U.S. government, its agencies and
instrumentalities and corporate bonds, debentures, non-convertible fixed-income
preferred stocks, eurodollar certificates of deposit and eurodollar bonds. The
Fund may invest a substantial portion of its assets in mortgage-related
securities (including CMOs, IOs and POs) that are issued or guaranteed by the
United States government, its agencies or instrumentalities. In addition, the
Fund may invest in privately issued mortgage-related securities (including CMOs,
IOs and POs) and asset-backed securities. For a discussion of mortgage-related
and asset-backed securities and related risks, see "Certain Securities and
Investment Techniques and Associated Risks--Special Risks Associated with
Asset-Backed and Mortgage-Related Securities." Ordinarily, at least 65% of the
Fund's total assets will be invested in bonds.
The Fund may invest up to 10% of its assets in foreign securities.
Investing in foreign securities may subject the Fund to certain additional
risks. See "Certain Securities and Investment Techniques and Associated
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
10
<PAGE>
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 thr Prospectus, and
"Other Information--Ratings of Debt Instruments" in the SAI.
MANAGERS BOND FUND
The Fund's investment objective is to seek income by investing in
fixed-income securities having a remaining maturity not greater than forty years
from the date of purchase by the Fund. The Fund invests in a diversified
portfolio of obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities as well as in corporate bonds, debentures,
preferred stocks, mortgage-related securities (including CMOs, IOs and POs),
asset-backed securities, eurodollar certificates of deposit and 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. The Fund's current
sub-adviser has typically invested a significant portion of the Fund in long-
term bonds so that the average duration of the portfolio has been, and will
likely continue to be, significantly longer than the broad index or the
average fixed-income mutual fund. Because of this, the Fund's net asset value
will typically fluctuate more in response to changes in interest rates than
will the broad index. See "Certain Securities and Investment Techniques and
Associated Risks - General Risks Associated with Income Funds." As of
December 31, 1997, the Fund's weighted average duration was 11.1 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
11
<PAGE>
Asset Manager), including securities rated in the lowest investment grade
category. Securities rated in the lowest investment grade category have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to pay principal or
interest on such securities than on higher grade securities. In addition, the
Fund may invest in securities rated below investment grade, but rated at least
Ba by Moody's or BB by Standard & Poor's (or, if unrated, of comparable quality
as determined by the Asset Manager). The Fund does not expect to invest more
than 5% of its net assets in securities rated (or, if unrated, of comparable
quality as determined by the Asset Manager) lower than investment grade
(sometimes referred to as "junk bonds"). However, the rating of an issue of
securities may be reduced subsequent to the purchase of the securities by the
Fund, and this may cause the amount of below investment grade securities held by
the Fund to exceed 5% of the Fund's net assets. The downgrade will not require
sale of the securities by the Fund, but the Asset Manager will consider this
event in its determination of whether the Fund should continue to hold the
securities. Investing in below investment grade securities may subject the Fund
to additional risks. See "Certain Securities and Investment Techniques and
Associated Risks--Special Risks Associated with Lower-Rated Securities" in the
Prospectus, and "Other Information--Ratings of Debt Instruments" in the SAI.
MANAGERS GLOBAL BOND FUND
The Fund's primary objective is to seek a high total return through both
income and capital appreciation by investing in a portfolio of domestic and
foreign fixed-income securities.
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
12
<PAGE>
GENERAL INFORMATION OF THE FUNDS
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 or
an applicable state securities commission (a "Registered Investment Adviser")
or directly from the Trust as indicated below. Shares may also be purchased
by bank trust departments on behalf of their clients, other institutional
investors such as corporations, endowment funds and charitable foundations,
and tax-exempt employee welfare, pension and profit-sharing plans.
The following shows the various methods for purchasing the Trust's shares.
For more complete instructions, see the account application.
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------ -----------------------
<S> <C> <C>
Minimums:
Regular accounts $2,000 (or lower, as No minimum
described above)
Education IRA Minimum/Maximum $500 N/A
IRAs, IRA rollovers, $500 No minimum
SEP, ROTH and SIMPLE IRAs
<CAPTION>
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
A1
<PAGE>
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 Fund, (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
Fund & Account #
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>
- -----------------------------------
[FN]
* For shareholders that invest directly with the Fund only. For Adviser and
Bank Trust accounts, please call (800) 835-7668 for further instructions.
</FN>
The employees and their families of The Managers Funds, L.P. and selected
dealers and their authorized representatives who are engaged in the sale of Fund
shares, may purchase shares of the Funds without regard to a minimum initial
investment.
Certain states may require Registered Investment Advisers that purchase
Fund shares for customers in those states to register as broker-dealers. From
time to time the Trust's distributor may supply materials to Registered
Investment Advisers to assist them in formulating an investment program using
the Trust for their clients. Such materials are designed to be used and
evaluated by investment professionals, do not contain investment advice and are
not available for distribution to the general public.
A2
<PAGE>
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,
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. 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 investent 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 in advance, 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
A3
<PAGE>
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. 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 proomptly 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.
A4
<PAGE>
<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.
For redemptions over $25,000,
signature(s) must be guaranteed.
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
</TABLE>
- -----------------------------------------------------------
[FN]
* Telephone redemptions are available for redemptions under $25,000.
</FN>
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. Withdrawals can be made via check on the 25th day of each month,
or the next Business Day in the event the 25th is a weekend or holiday, unless a
date other than the 25th is specified on the application for ACH accounts.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other Funds on the 15th Business Day of each moth, or can be
done through the Automatic Investment service above. Before investing in
the Trust's Funds, shareholders must obtain a prospectus from the Trust
describing those Funds.
A5
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS, including SEP, ROTH 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 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. 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 such Fund(s) 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 such Fund(s).
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.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value. The Trustees have the authority to create new series of shares in
addition to the existing series of the Trust without the requirement of a
vote of shareholders of the Trust.
A6
<PAGE>
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.
YEAR 2000. Like other mutual funds, financial and business organizations and
individuals around the world, the Trust could be adversely affected if computer
systems used by the manager, sub-advisers and other service providers do not
properly process and calculate date-related information from January 1, 2000 and
after. The Managers Funds is taking steps that it believes are reasonably
designed to address this "Year 2000" problem with respect to the computer
systems that are used and to obtain satisfactory assurances that comparable
steps are being taken by each of the Trust's major service providers. At this
time, however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Trust. Companies or governmental entities in
which the Funds invest could be affected by the "Year 2000" problem, but at this
time, the Funds cannot affect the degree of impact on the Funds.
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,
A7
<PAGE>
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.
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.
ADDITIONAL INFORMATION
Any shareholder inquiries may be directed to the Trust at the address or
telephone number listed on the cover page of this Prospectus. This Prospectus,
including the SAI which has been incorporated by reference herein, does not
contain all the information set forth in the Registration Statement filed with
the Securities and Exchange Commission under the Securities Act of 1933. Copies
of the Registration Statement may be obtained at a reasonable charge from the
Securities and Exchange Commission or may be examined, without charge, at the
website maintained by the Securities and Exchange Commission
(http://www.sec.gov).
A8
<PAGE>
foreign government), at the close of each quarter of the Fund's taxable year
the aggregate amount of such holdings may not exceed 50% of the value of its
total assets, and no more than 25% of the value of its total assets may be
invested in the securities of a single issuer. To the extent that the Fund
holds the securities of a smaller number of issuers than if it were
"diversified" (as defined in the 1940 Act), the Fund will be subject to greater
risk than a fund that invests in a large number of securities, because
changes in the financial condition or market assessment of particular issuers
may cause greater fluctuations in the Fund's net asset value or adversely affect
its total return.
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES AND
ASSOCIATED RISKS
The following are descriptions of types of securities invested in by the
Funds, certain investment techniques employed by the Funds and risks associated
with utilizing either the securities or the investment techniques. Unless
otherwise indicated, all of the Funds may invest in the indicated securities and
use the indicated investment techniques.
GENERAL RISKS ASSOCIATED WITH INCOME FUNDS
The Income Funds are subject to normal interest rate, credit and market
risks. Market prices of fixed-income securities will fluctuate and 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 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. 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.
13
<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.
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
14
<PAGE>
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 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.
15
<PAGE>
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.
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."
16
<PAGE>
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.
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
conract 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 con-
17
<PAGE>
tracts and options thereon for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option or at any
particular time.
OPTIONS. Each Fund may write ("sell") covered put and covered call options
covering the types of financial instruments in which the Fund may invest
(including individual stocks, stock indices, futures contracts, forward foreign
currency exchange contracts and when-issued securities) to provide protection
against the adverse effects of anticipated changes in securities prices. A Fund
may also write covered put options and covered call options as a means of
enhancing its return through the receipt of premiums when the Fund portfolio
manager determines that the underlying securities, indices or futures contracts
have achieved their potential for appreciation. By writing covered call options,
the Fund foregoes the opportunity to profit from an increase in the market price
of the underlying security, index or futures contract above the exercise price
except insofar as the premium represents such a profit. The risk involved in
writing covered put options is that there could be a decrease in the market
value of the underlying security, index or futures contract. If this occurred,
the option could be exercised and the underlying security, index or futures
contract would then be sold to the Fund at a higher price than its then current
market value. A Fund will write only "covered" options.
When writing call options, a Fund will be required to own the underlying
financial instrument, index or futures contract or own financial instruments or
indices whose returns are closely correlated with the returns of the financial
instrument, index or futures contract underlying the option. When writing put
options a Fund will be required to segregate with its custodian bank cash and/or
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
18
<PAGE>
cover for written OTC options as liquid provided it follows a specified
procedure. A Fund may sell OTC options only to qualified dealers who agree that
the Fund may repurchase any OTC options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the amount that the option is "in-the-money" (i.e., current
market value of the underlying security minus the option's strike price). For
more information concerning options transactions, see "Other
Information--Covered Put Options--Covered Call Options," and "--Puts and Calls"
in the SAI.
FUTURES CONTRACTS. A Fund may buy and sell futures contracts as a hedge to
protect the value of the Fund's portfolio against changes in prices of the
financial instruments in which it may invest. There are several risks in
using futures contracts. One risk is that futures prices could correlate
imperfectly with the behavior of cash market prices of the instrument being
hedged so that even a correct forecast of general price trends may not result
in a successful transaction. Another risk is that the Fund's portfolio
manager may be incorrect in its expectation of future prices. There is also
a risk that a secondary market in the instruments that the Fund holds may
not exist or may not be adequately liquid to permit the Fund to close out
positions when it desires to do so. When buying or selling futures contracts the
Fund will be required to segregate cash and/or liquid 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.
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.
19
<PAGE>
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.
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.
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT
TOTAL ASSET FEE PAID DURING
MANAGEMENT MANAGEMENT THE YEAR ENDED
NAME OF FUND FEE FEE DECEMBER 31, 1997
----------- ---------- ---------- -----------------
<S> <C> <C> <C>
Short and Intermediate
Bond Fund ............... 0.50% 0.25% 0.50%
Bond Fund .................... 0.625% 0.25% 0.625%
Global Bond Fund ............. 0.70% 0.35% on 1st 0.70%
$20 million,
0.25% thereafter
</TABLE>
20
<PAGE>
ASSET MANAGERS
The following sets forth certain information about each of the Asset
Managers:
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc. ("SAW")--The firm, founded in 1933, is a
privately owned corporation with 24 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, 1997, the firm managed more than $39.3 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.
BOND FUND
Loomis, Sayles & Company, L.P. ("Loomis, Sayles") -- The firm was founded
in 1926 and is located at One Financial Center, Boston, MA 02111. Loomis,
Sayles' sole general partner, Loomis, Sayles & Co., Inc., is a wholly owned
subsidiary of New England Investment Companies Operating Partnership, L.P.
("NEICOP"). NEICOP's advising general partner is New England Investment
Companies, L.P. ("NEIC"), a publicly-traded company whose interests are listed
on the NYSE. NEICOP's managing partner and NEIC's general partner is a
corporation that is indirectly wholly-owned by Metropolitan Life Insurance
Company. As of December 31, 1997, assets under management totaled $63.8
billion.
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, 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, 1997, assets
under management totaled $4.5 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 operation in 1994. 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, 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,
21
<PAGE>
that advise or act as an intermediary with the Trust's shareholders
("Shareholder Representatives"). The Administrator is paid at a rate not to
exceed 0.25% per annum of each Income Fund's average daily net assets,
except for Global Bond Fund which pays 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. Boston Financial Data Services, Inc. serves as the Trust's
Transfer Agent.
INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends will normally be paid at the frequency noted in the
following table. Income dividends will normally be declared on the fourth
Business Day prior to the end of the dividend period, payable on the
following Business Day, to shareholders of record on the day prior to the
declaration date. Distributions of most capital gains will normally be paid
annually in December.
<TABLE>
<CAPTION>
FREQUENCY FUND
--------- ----
<S> <C>
Quarterly Global Bond Fund
Monthly Short and Intermediate Bond Fund
and Bond Fund
</TABLE>
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.
22
<PAGE>
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."
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Asset Manager is responsible for decisions to buy and sell securities
for each Fund or component of a Fund that it manages, as well as for
broker-dealer selection in connection with such portfolio transactions. In the
case of securities traded on a principal basis, transactions are effected on a
"net" basis, rather than a transaction charge basis, with dealers acting as
principal for their own accounts without a stated transaction charge.
Accordingly, the price of the security may reflect an increase or decrease from
the price paid by the dealer together with a spread between the bid and asked
prices, which provides the opportunity for a profit or loss to the dealer.
Transactions in other securities are effected on a transaction charge basis
where the broker acts as agent and receives a commission in connection with the
trade. In effecting securities transactions, each Asset Manager is responsible
for obtaining best price and execution of orders. The dealer spread or
broker's commission charged in connection with a transaction is a component
of price and is considered together with other relevant factors. Any of the
Funds may effect securities transactions on a transaction charge basis through
a broker-dealer that is an affiliate of the Manager or of one of that Fund's
Asset Managers in accordance with procedures approved by the Trustees.
However, 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.
23
<PAGE>
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.
24
<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, LLC
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management
EMERGING MARKETS
EQUITY FUND
Montgomery Asset Management, LLC
State Street Global Advisors, United
Kingdom, Limited
INCOME FUNDS:
MONEY MARKET FUND
J.P. Morgan
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
SHORT GOVERNMENT FUND
INTERMEDIATE MORTGAGE FUND
- ------------------------
PROSPECTUS
dated May 1, 1998
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
------
<S> <C>
Illustrative Expense Information ........................................ 2
Summary ................................................................. 3
Financial Highlights .................................................... 4
Investment Objectives, Policies and Restrictions ........................ 10
GENERAL INFORMATION ON THE FUNDS
Purchase and Redemption of Fund Shares ................................. A1
Description of Shares, Voting Rights and Liabilities ................... A6
Tax Information ........................................................ A7
Shareholder Reports .................................................... A8
Additional Information............................................. A8
Certain Investment Techniques and Associated Risks ...................... 13
Management of the Funds ................................................. 19
Portfolio Turnover ...................................................... 22
Portfolio Transactions and Brokerage .................................... 23
Performance Information ................................................. 23
</TABLE>
The Managers Funds
THE MANAGERS FUNDS
PROSPECTUS
DATED MAY 1, 1998
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company with 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 "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 INTERMEDIATE MORTGAGE FUND--(the "Intermediate Mortgage Fund")
seeks high current income by investing primarily in mortgage-related securities.
This Prospectus sets forth concisely the information concerning the Trust
and the 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 May 1, 1998, 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.
The Securities and Exchange Commission maintains a website (http://www.sec.gov)
that contains the SAI, material incorporated by reference and other information
regarding the Trust.
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>
ILLUSTRATIVE EXPENSE INFORMATION
The following tables provide the investor with information concerning
annual operating expenses of the Funds.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
(applicable to each Fund)
- ----------------------------------
<S> <C>
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Charges on Redemptions None
Redemption Fees None
Exchange Fees None
</TABLE>
FUNDS' ANNUAL OPERATING EXPENSES: (based on average daily net assets
during fiscal 1997)
<TABLE>
<CAPTION>
SHORT
GOVERNMENT INTERMEDIATE
FUND (AFTER MORTGAGE
WAIVER) FUND
------------ ----------
<S> <C> <C>
Management Fees(1) 0.20% 0.45%
Rule 12b-1 Fees None None
Other Expenses(2) 1.17% 0.82%
--------- ---------
Total Operating
Expenses(2) 1.37% 1.27%
- --------------------
</TABLE>
(1)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%.
(2)Other Expenses reflect the expenses actually incurred by each Fund during
the year ended December 31, 1997, restated to reflect new transfer agency
arrangements currently in effect. 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
1.37% and the Total Operating Expenses would be 1.82%. 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 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.
2
<PAGE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Short Government Fund ................. $14 $43 $75 $165
Intermediate Mortgage Fund ............ 13 40 70 153
</TABLE>
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.
This Prospectus relates to the Short Government Fund and the Intermediate
Mortgage Fund. For more complete information about any of the other Funds in
the Trust 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
these 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.
3
<PAGE>
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 Fund for
the last ten years through December 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 through December 31, 1997, and by other accountants prior to
1993, and should be read in conjunction with such financial statements. See
"Financial Statements" in the SAI.
4
<PAGE>
[This page is intentionally left blank]
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each year)
- --------------------------------------------------------------------------------
MANAGERS SHORT GOVERNMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995(b) 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $17.40 $17.76 $16.96 $19.35 $19.86 $20.35 $19.86
------- ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.97 1.02 0.98 0.86 1.28 1.26 1.58
Net realized and unrealized gain (loss) on
investments (0.02) (0.37) 0.63 (2.01) (0.53) (0.49) 0.49
------- ------ ------ ------ ------ ------ ------
Total from investment operations 0.95 0.65 1.61 (1.15) 0.75 0.77 2.07
------- ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.98) (1.01) (0.50) (1.17) (1.26) (1.26) (1.58)
In excess of net investment income -- -- (0.31) (0.07) -- -- --
------- ------ ------ ------ ------ ------ ------
Total distributions to shareholders (0.98) (1.01) (0.81) (1.24) (1.26) (1.26) (1.58)
------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $17.37 $17.40 $17.76 $16.96 $19.35 $19.86 $20.35
------- ------ ------ ------ ------ ------ ------
- -----------------------------------------------------------------------------------------------------------------
Total Return(c) 5.55% 3.89% 9.71% (6.18)% 3.81% 3.90% 10.82%
- -----------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.15% 1.17% 1.25% 0.97% 0.87% 0.76% 0.58%
Ratio of net investment income to
average net assets(a) 5.51% 5.85% 5.62% 7.06% 8.71% 6.24% 6.08%
Portfolio turnover 191% 169% 238% 140% 189% 168% 84%
Net assets at end of year (000's omitted) $5,074 $6,113 $5,836 $10,263 $87,874 $142,874 $144,042
- -----------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver(d) 1.60% 1.62% 1.65% 1.03% 0.96% 0.83% 0.59%
Ratio of net investment income to
average net assets, absent waiver(d) 5.06% 5.40% 5.22% 7.00% 8.62% 6.17% 8.25%
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1990 1989 1988
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $19.96 $19.85 $20.06
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.42 1.65 1.42
Net realized and unrealized gain (loss) on
investments (0.03) 0.11 (0.21)
------ ------ ------
Total from investment operations 1.39 1.76 1.21
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.49) (1.65) (1.42)
In excess of net investment income -- -- --
------ ------ ------
Total distributions to shareholders (1.49) (1.65) (1.42)
------ ------ ------
NET ASSET VALUE, END OF YEAR $19.86 $19.96 $19.85
------ ------ ------
- -----------------------------------------------------------------------------------
Total Return(c) 7.07% 8.68% 5.90%
- -----------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.01% 0.56% 0.44%
Ratio of net investment income to
average net assets(a) 6.78% 8.34% 7.30%
Portfolio turnover 183% 235% 232%
Net assets at end of year(000's omitted) $27,683 $10,438 $27,056
- ----------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver(d) 2.84% N/A N/A
Ratio of net investment income to
average net assets, absent waiver(d) 8.35% N/A N/A
===================================================================================
</TABLE>
[FN]
(a) Does not reflect investment advisory and management fees paid
by shareholders directly to the Manager for periods prior to May 1990.
(b) Calculated using the average shares outstanding during the year.
(c) Total return would have been lower had certain expenses not been reduced
during the year.
(d) Ratio information assuming no fee waivers or reimbursements had been in
effect during the years shown.
</FN>
6 & 7
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each year)
- --------------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $15.17 $15.54 $14.20 $20.65 $21.13 $21.77 $20.31
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.87 0.87 0.93 1.52 1.94 2.58 2.03
Net realized and unrealized gain
(loss) on investments 0.33 (0.38) 1.45 (6.56) 0.44 (0.40) 1.48
------ ------ ------ ------ ------ ------ ------
Total from investment operations 1.20 0.49 2.38 (5.04) 2.38 2.18 3.51
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.86) (0.86) (1.03) (1.41) (2.28) (2.40) (2.05)
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 (0.86) (0.86) (1.04) (1.41) (2.86) (2.82) (2.05)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $15.51 $15.17 $15.54 $14.20 $20.65 $21.13 $21.77
------ ------ ------ ------ ------ ------ ------
- ---------------------------------------------------------------------------------------------------------------------
Total Return(b) 8.23% 3.33% 17.27% (25.00)% 11.45% 10.50% 18.18%
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 1.20% 1.19% 1.17% 0.85% 0.75% 0.79% 0.69%
Ratio of net investment income to
average net assets(a) 5.76% 5.78% 6.33% 8.37% 8.90% 11.30% 9.91%
Portfolio turnover 317% 232% 506% 240% 253% 278% 172%
Net assets at end of year (000's omitted) $21,600 $24,846 $40,022 $55,986 $271,861 $115,885 $165,358
- ---------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver (c) N/A N/A N/A 0.92% 0.82% 0.84% N/A
Ratio of net investment income to
average net assets, absent waiver(c) N/A N/A N/A 8.30% 8.83% 11.25% N/A
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1990 1989 1988
- ------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $20.19 $19.24 $19.68
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 1.80 1.87 1.90
Net realized and unrealized gain
(loss) on investments 0.17 0.94 (0.43)
------ ------ ------
Total from investment operations 1.97 2.81 1.47
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.85) (1.86) (1.91)
In excess of net investment income -- -- --
From net realized gain on investments -- -- --
In excess of net realized gain on investments -- -- --
------ ------ ------
Total distributions to shareholders (1.85) (1.86) (1.91)
------ ------ ------
NET ASSET VALUE, END OF YEAR $20.31 $20.19 $19.24
------ ------ ------
- ------------------------------------------------------------------------------
Total Return(b) 10.19% 14.69% 7.38%
- ------------------------------------------------------------------------------
Ratio of net expenses to average net assets(a) 0.55% 0.19% 0.22%
Ratio of net investment income to
average net assets(a) 9.06% 9.44% 9.66%
Portfolio turnover 161% 144% 149%
Net assets at end of year (000's omitted) $119,118 $102,229 $81,222
- -------------------------------------------------------------------------------
Ratio of total expenses to average net
assets, absent waiver (c) N/A N/A N/A
Ratio of net investment income to
average net assets, absent waiver(c) N/A N/A N/A
================================================================================
</TABLE>
[FN]
(a) Does not reflect investment advisory and management fees paid
by shareholders directly to the Manager for periods prior to May 1990.
(c) Total return would have been lower had certain expenses not been reduced
during the year.
(d) Ratio information assuming no fee waivers or reimbursements had been in
effect during the years shown.
</FN>
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 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.
These Funds pursue their investment objectives primarily by investing
in various types of debt securities. Each of these Funds may purchase securities
on
a when-issued basis, and, unless otherwise indicated, may engage in options and
futures transactions. The Short Government 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 and Intermediate Mortgage Fund 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 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 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 invest-
ment 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.
10
<PAGE>
Each or both 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" and
"Investment Restrictions" in the SAI. The Funds may also engage in securities
lending, and may invest the collateral for such loans in unaffiliated money
market funds. The following discussions of the individual Government Funds'
objectives and policies is modified by the above.
MANAGERS SHORT GOVERNMENT FUND
The Fund's investment objective is to seek high current income consistent
with the preservation of capital by investing in debt securities.
The Fund will maintain an overall maximum dollar-weighted average maturity
of three years or less. The Fund is not a money market fund and does not seek to
maintain a stable price per share. As a matter of operating policy, under normal
circumstances, the Fund will at all times have at least 65% of its total assets
invested in securities issued or guaranteed as to principal or interest by the
U.S. government, its agencies or instrumentalities. Up to 35% of the Fund's
total assets may be invested in corporate bonds and notes, debentures,
non-convertible fixed-income preferred stocks, eurodollar certificates of
deposit and eurodollar bonds. The Fund may invest a substantial portion of its
assets in mortgage-related securities (including CMOs, IOs and POs) that are
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
In addition, the Fund may invest in privately issued mortgage-related securities
(including CMOs, IOs and POs) and asset-backed securities. The Fund may also
invest in variable rate securities including inverse floating obligations.
See "Certain Securities and Investment Techniques and Associated Risks--
General Risks Associated with the 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."
11
<PAGE>
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 INTERMEDIATE MORTGAGE FUND
The Fund's investment objective is to seek high current income by
investing primarily in mortgage-related securities.
Under normal circumstances, the Fund will invest at least 65% of the value
of its total assets in mortgage-related securities (including CMOs, IOs and POs)
issued by governments and government-related and private organizations, and the
Fund will invest more than 25% of its assets in the mortgage and mortgage
finance industry even during temporary defensive periods. Due to this
concentration, the Fund will be subject to certain risks peculiar to the
mortgage and mortgage finance industry. See "Certain Securities and Investment
Techniques and Associated Risks--Special 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
12
<PAGE>
GENERAL INFORMATION ON THE FUNDS
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 or
an applicable state securities commission (a "Registered Investment Adviser")
or directly from the Trust as indicated below. Shares may also be purchased
by bank trust departments on behalf of their clients, other institutional
investors such as corporations, endowment funds and charitable foundations,
and tax-exempt employee welfare, pension and profit-sharing plans.
The following shows the various methods for purchasing the Trust's shares.
For more complete instructions, see the account application.
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------ -----------------------
<S> <C> <C>
Minimums:
Regular accounts $2,000 (or lower, as No minimum
described above)
Education IRA Minimum/Maximum $500 N/A
IRAs, IRA rollovers, $500 No minimum
SEP, ROTH and SIMPLE IRAs
<CAPTION>
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
A1
<PAGE>
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 Fund, (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
Fund & Account #
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>
- ----------------------------------------------------------------
[FN]
* For shareholders that invest directly with the Fund only. For Adviser and
Bank Trust accounts, please call (800) 835-7668 for further instructions.
</FN>
The employees and their families of The Managers Funds, L.P. and selected
dealers and their authorized representatives who are engaged in the sale of Fund
shares, may purchase shares of the Funds without regard to a minimum initial
investment.
Certain states may require Registered Investment Advisers that purchase
Fund shares for customers in those states to register as broker-dealers. From
time to time the Trust's distributor may supply materials to Registered
Investment Advisers to assist them in formulating an investment program using
the Trust for their clients. Such materials are designed to be used and
evaluated by investment professionals, do not contain investment advice and are
not available for distribution to the general public.
A2
<PAGE>
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,
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. 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 in advance, 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
A3
<PAGE>
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. 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 account 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.
A4
<PAGE>
<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.
For redemptions over $25,000,
signature(s) must be guaranteed.
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
</TABLE>
- --------------------------------------------------------------
[FN]
* Telephone redemptions are available only for redemptions under $25,000.
</FN>
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. Withdrawals can be made via check on the 25th day of each month,
or the next business day in the event the 25th is a weekend or holiday, unless a
date other than the 25th is specified on the application for ACH accounts.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other Funds on the 15th business day of each month, or can be
done through the Automatic Investment service above. Before investing in the
Trust's Funds, shareholders must obtain a prospectus from the Trust describing
those Funds.
A5
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS, including SEP, ROTH 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 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. 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 such Fund(s)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 such Fund(s).
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.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value. The Trustees have the authority to create new series of
shares in addition to the existing series of the Trustwithout the requirement
of a vote of shareholders of the Trust.
A6
<PAGE>
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.
YEAR 2000. Like other mutual funds, financial and business organizations and
individuals around the world, the Trust could be adversely affected if computer
systems used by the manager, sub-advisers and other service providers do not
properly process and calculate date-related information from January 1, 2000 and
after. The Managers Funds is taking steps that it believes are reasonably
designed to address this "Year 2000" problem with respect to the computer
systems that are used and to obtain satisfactory assurances that comparable
steps are being taken by each of the Trust's major service providers. At this
time, however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Trust. Companies or governmental entities in
which the Funds invest could be affected by the "Year 2000" problem, but at this
time, the Funds cannot predict the degree of impact on the Funds.
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,
A7
<PAGE>
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.
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.
ADDITIONAL INFORMATION
Any shareholder inquiries may be directed to the Trust at the address or
telephone number listed on the cover page of this Prospectus. This Prospectus,
including the SAI which has been incorporated by reference herein, does not
contain all the information set forth in the Registration Statement filed with
the Securities and Exchange Commmission under the Securities Act of 1933. Copies
of the Registration Statement may be obtained at a reasonable charge from the
Securities and Exchange Commission or may be examined, without charge, at the
website maintained by the Securities and Exchange Commission
(http://www.sec.gov).
A8
<PAGE>
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.
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 THE FUNDS
The 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 general a Fund with a longer average duration will
experience greater net asset value fluctuation in response to interest rate
changes than a Fund with a shorter duration. 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 Funds may
advertise the duration of their portfolios.
13
<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.
ASSET-BACKED SECURITIES. Asset-backed securities, in which the 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 inter-
14
<PAGE>
ests 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.
OTHER SECURITIES
FOREIGN SECURITIES. Investments in foreign securities involve risks that
differ from investments in securities of domestic issuers. Such risks may
include political and economic developments, the possible imposition of
withholding taxes, possible seizure or nationalization of assets, the possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the Fund's investments. In addition,
foreign countries may have less well developed securities markets, as well as
less regulation of stock exchanges and brokers and different auditing and
financial reporting standards. Not all foreign branches of United States banks
are supervised or examined by regulatory authorities as are United States banks,
and such branches may not be subject to reserve requirements. For additional
information regarding the risks associated with foreign branch
issues, see "Other Information--Obligations of Domestic and Foreign Banks" in
the SAI. Investing in the fixed-income markets of developing countries involves
exposure to economies that are generally less diverse and mature, and to
political systems which may be less stable, than those of developed countries.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar.
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 lim-
15
<PAGE>
its on investments in illiquid securities. For more information concerning
repurchase agreements, see "Other Information--Repurchase Agreements" in the
SAI.
SECURITIES LENDING. Consistent with its investment objective and policies,
each Fund may lend its portfolio securities in order to realize additional
income. Any such loan will be continuously secured by collateral at least equal
in value to the value of the securities loaned. The risk of loss on such
transactions is mitigated because, if a borrower were to default, the collateral
should satisfy the obligation. However, as with other extensions of secured
credit, loans of portfolio securities involve some risk of loss of rights
in the collateral should the borrower fail financially.
WHEN-ISSUED SECURITIES AND DOLLAR ROLLS. Consistent with its investment
objectives and policies, each Fund may purchase or sell U.S. government or
municipal securities on a when-issued or delayed delivery basis. When-issued or
delayed delivery transactions are those where securities are purchased or sold
by a Fund with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous price and yield to the Fund at
the time of entering into the transaction. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund. However, the value of the Fund's assets will fluctuate with
the value of the security to be purchased. Accordingly, these transactions may
have a similar effect on a Fund's net asset value as if the Fund had created a
degree of leverage in its portfolio. See "Segregated Accounts." 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.
16
<PAGE>
The Funds will engage in dollar roll transactions to enhance return and not
for the purpose of borrowing. Each dollar roll transaction is accounted for as a
sale of a portfolio security and a subsequent purchase of a substantially
similar security in the forward market.
SEGREGATED ACCOUNTS. Certain transactions, such as certain options, futures
and forward transactions, dollar rolls, or purchases of when-issued or delayed
delivery securities, may have a similar effect on a Fund's net asset value as if
the Fund had created a degree of leverage in its portfolio. However, if a Fund
enters into such a transaction, the Fund will establish a segregated account
with its Custodian in which it will maintain cash 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
17
<PAGE>
underlying security, index or futures contract would then be sold to the Fund at
a higher price than its then current market value. A Fund will write only
"covered" options.
When writing call options, a Fund will be required to own the underlying
financial instrument, index or futures contract or own financial instruments or
indices whose returns are closely correlated with the returns of the financial
instrument, index or futures contract underlying the option. When writing put
options a Fund will be required to segregate with its custodian bank cash and/or
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 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
18
<PAGE>
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.
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,
19
<PAGE>
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.
The following table sets forth the maximum annual management fee rates
currently paid by each 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.
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT
TOTAL ASSET FEE PAID DURING
MANAGEMENT MANAGEMENT THE YEAR ENDED
NAME OF FUND FEE FEE DECEMBER 31, 1997
----------- ---------- ---------- -----------------
<S> <C> <C> <C>
Short Government
Fund .................... 0.45% 0.20% 0.20%*
Intermediate Mortgage
Fund .................... 0.45% 0.20% 0.45%
- --------------------
</TABLE>
[FN]
*Reflects voluntary fee waivers by the Manager which may be modified or
terminated at any time at the sole discretion of the Manager.
</FN>
ASSET MANAGERS
The following sets forth certain information about each of the Asset
Managers:
SHORT GOVERNMENT FUND
Jennison Associates LLC ("Jennison")--The firm was founded in
1969 and is a wholly-owned subsidiary of The Prudential Insurance Company of
America. As of December 31, 1997, assets under management totaled $37.8 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.
20
<PAGE>
INTERMEDIATE MORTGAGE FUND
Jennison Associates LLC -- See Short Government Fund for a
description.
Thomas F. Doyle serves as the portfolio manager of the Intermediate Mortgage
Fund. He is a Director and Executive Vice President of Jennison, responsible
for fixed-income portfolio management. He has been with Jennison since 1987.
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
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 a rate not to exceed 0.25% per annum of each of the Fund's average daily
net assets. For the Short Government Fund, 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. Boston Financial Data Services, Inc. serves as the Trust's
Transfer Agent.
21
<PAGE>
INCOME DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends will normally be paid at the frequency noted in the
following table. Except for the 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 most
capital gains will normally be paid annually in December.
<TABLE>
<CAPTION>
FREQUENCY FUND
--------- ----
<S> <C>
Daily* Short Government Fund
Monthly Intermediate Mortgage Fund
- ------------------------
<FN>
*Dividends declared daily and paid monthly on the third Business Day prior to
month end.
</FN>
</TABLE>
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.
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."
22
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Asset Manager is responsible for decisions to buy and sell securities
for each Fund or component of a Fund that it manages, as well as for
broker-dealer selection in connection with such portfolio transactions. In the
case of securities traded on a principal basis, transactions are effected on a
"net" basis, rather than a transaction charge basis, with dealers acting as
principal for their own accounts without a stated transaction charge.
Accordingly, the price of the security may reflect an increase or decrease from
the price paid by the dealer together with a spread between the bid and asked
prices, which provides the opportunity for a profit or loss to the dealer.
Transactions in other securities are effected on a transaction charge basis
where the broker acts as agent and receives a commission in connection with the
trade. In effecting securities transactions, each Asset Manager is responsible
for obtaining best price and execution of orders. The dealer spread or
broker's commission charged in connection with a transaction is a component of
price and is considered together with all 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 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
23
<PAGE>
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.
24
<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, LLC
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management
EMERGING MARKETS
EQUITY FUND
Montgomery Asset Management, LLC
State Street Global Advisors, United
Kingdom, Limited
INCOME FUNDS:
MONEY MARKET FUND
J.P. Morgan
SHORT GOVERNMENT FUND
Jennison Associates LLC
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE
FUND
Jennison Associates LLC
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
MONEY MARKET FUND
- ------------------------
PROSPECTUS
dated May 1, 1998
- ------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
The Managers Funds
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
-----
<S> <C>
Illustrative Expense Information ...................................... 2
Summary ............................................................... 3
Financial Highlights .................................................. 4
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........................................................ 25
Performance Information ............................................... 25
Description of Shares, Voting Rights and Liabilities .................. 26
Tax Information ....................................................... 27
Shareholder Reports ................................................... 28
Additional Information................................................. 28
</TABLE>
<PAGE>
THE MANAGERS FUNDS
PROSPECTUS
DATED MAY 1, 1998
MONEY MARKET FUND
MANAGERS MONEY MARKET FUND -- (the "Money Market Fund" or the "Fund") seeks
to maximize current income while maintaining 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
May 1, 1998, 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. The
Securities and Exchange Commission maintains a website (http://www.sec.gov) that
contains the SAI, material incorporated by reference and other information
regarding the Trust.
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>
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.
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.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases ............................ None
Maximum Sales Load Imposed on Reinvested Dividends ................. None
Deferred Sales Load ................................................ None
Redemption Fees .................................................... None
Exchange Fees ...................................................... None
</TABLE>
ANNUAL OPERATING EXPENSES* (AFTER FEE WAIVER):
The expenses set forth below reflect a partial fee waiver by the Fund
Administrator of 0.20% of its fee of 0.25%. See "Expenses" in the SAI.
Management Fees .................................................... 0.12%
Rule 12b-1 Fees .................................................... None
Other Expenses .................................................... 0.43%
-----
Total Fund Operating Expenses ...................................... 0.55%
- --------------
* 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, 1997,
AND HAVE BEEN RESTATED TO REFLECT A PARTIAL FEE WAIVER, THE ABSENCE OF
ANY EXPENSE REIMBURSEMENT AND A NEW TRANSFER AGENCY AGREEMENT IN EFFECT ON THE
DATE OF THIS PROSPECTUS. THESE NUMBERS DO NOT REFLECT CURRENT ASSETS OR
EXPENSES OF THE FUND 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 WOULD HAVE BEEN 0.63% 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.
2
<PAGE>
EXAMPLES
An investor would pay the following expenses on a $1,000 investment in the
Fund over various time periods assuming (1) a 5% annual rate of return, (2)
redemption at the end of each time period, and (3) continuation of any currently
applicable waivers of management fees. As noted above, the Fund does not charge
any redemption fees or deferred sales loads of any kind.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund......................... $6 $18 $31 $69
</TABLE>
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.
This Prospectus relates only to the Money Market Fund. For more complete
information about any of the other Funds in the Trust 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.
3
<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 ten fiscal periods, through November 30, 1997. The
information has been derived from the financial statements of the Trust which
have been audied 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 years ended November
30, 1996 and November 30, 1997, and by other accountants prior to 1993, and
should be read in conjunction with such financial statements. See "Financial
Statements" in the SAI.
4
[This page intentionally left blank]
<PAGE>
5
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of beneficial interest outstanding throughout each period)
- --------------------------------------------------------------------------------
MANAGERS MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ELEVEN MONTHS
ENDED ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------- ---------------------------------------------------
1997 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) 0.052 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 0.052 0.054 0.044 0.035 0.022 0.030 0.057 0.081 0.090
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.052) (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 (0.052) (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) 5.35% 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) 0.40% 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) $36,544 $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 0.74% 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 4.88% 4.71% 4.80%(b) 3.54% 2.23% 2.74% 5.21% 8.04% N/A
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1988
- ----------------------------------------
<S>
<C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.000
------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income(d) 0.075
Net realized and unrealized
gain on investments 0.010
------
Total from investment
operations 0.085
------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.075)
Net realized gain on
investments (0.010)
------
Total distributions to
shareholders (0.085)
------
NET ASSET VALUE, END
OF PERIOD $1.000
======
- ----------------------------------------
Total Return(c) 7.25%
- ----------------------------------------
Ratio of net expenses to
average net assets(d) 0.16%
Ratio of net investment income
to average net assets(d) 7.35%
Net assets at end of period
(000's omitted) $86,567
- ----------------------------------------
Expense Waiver(a)
- -----------------
Ratio of total expenses to
average net assets N/A
Ratio of net investment income
to average net assets N/A
=========================================
</TABLE>
[FN]
(a) Ratio information assuming no waiver of investment advisory and management
fees and/or administrative fees in effect for the periods presented, if
applicable.
(b) Annualized.
(c) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(d) Does not reflect investment advisory and management fees paid directly to
the Manager for periods prior to May 1990.
</FN>
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.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
These other mutual funds and institutions will invest in the Portfolio on the
same terms and conditions and will bear a proportionate share of the
Portfolio's expenses. Other mutual funds investing in the Portfolio may
have different sales charges and other expenses, which may affect performance.
Information concerning other holders of interests in the Portfolio is available
from the Fund Administrator at (800) 835-3879.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same
investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution)
from the Portfolio, which may or may not be readily marketable. The
distribution in kind may result in the Fund having a less diversified
portfo-
8
<PAGE>
lio 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 while
maintining a high level of liquidity. The Fund is designed for investors
who seek to preserve capital and earn current income from a portfolio of high
quality money market instruments. The Fund attempts to achieve its
objective by investing all of its investable assets in The Prime Money Market
Portfolio, a diversified open-end management investment company having the same
investment objective as the Fund.
9
<PAGE>
The Portfolio seeks to achieve its investment objective by maintaining a
dollar-weighted average portfolio maturity of not more than 90 days and by
investing in high quality U.S. dollar-denominated securities which have
effective maturities of not more than thirteen months. The 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.
ASSET-BACKED SECURITIES. The Portfolio may also invest in securities
generally referred to as asset-backed securities, which directly or indirectly
10
<PAGE>
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
11
<PAGE>
price. The Portfolio maintains with the custodian a separate account with a
segregated portfolio of securities in an amount at least equal to these
commitments. When entering into a when-issued or delayed delivery transaction,
the Portfolio will rely on the other party to consummate the transaction; if
the other party fails to do so, the Portfolio may be disadvantaged. It is
currently the policy of the Portfolio not to enter into when-issued
commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created by
these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of the agreement usually ranges from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives as collateral securities with a market value at least equal to
the purchase price plus accrued interest, and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See "Illiquid Investments; Privately Placed and other
Unregistered Securities" below.
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
12
<PAGE>
the credit-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
13
<PAGE>
monetary policies in the United States or abroad could result in appreciation
or depreciation of portfolio securities and could favorably or unfavorably
affect the Portfolio's operations. Furthermore, the economies of
individual foreign nations may differ from the U.S. economy, whether favorably
or unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and
enforce a judgment against a foreign issuer. Any foreign 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 more than $250 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 indicated
parenthetically): Robert R. Johnson, Vice President (since June, 1988,
16
<PAGE>
employed by Morgan since prior to 1993) and Daniel B. Mulvey, Vice President
(since January, 1995, employed by Morgan since prior to 1993).
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.
Administrative services include (i) preparation of Fund performance
information; (ii) responding to telephone and in-person inquiries from
share-
17
<PAGE>
holders 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 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 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 or
an applicable state securities 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.
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENTS
------------------ ----------------------
<S> <C> <C>
Minimums: $2,000(or lower as No minimum
Regular accounts described above)
Education IRA Minimum/Maximum $500 N/A
IRAs, IRA rollovers, $500 No minimum
SEP, ROTH and SIMPLE IRAs
<CAPTION>
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 Fund, at (800) 358-7668 prior
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
19
<PAGE>
AC 9905-001-5
FBO--Shareholder Name
Fund & Account #
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
</TABLE>
- ---------------------------------
[FN]
*For shareholders that invest directly with the Fund only. For Adviser and Bank
Trust accounts, please call (800) 358-7668 for further instructions.
</FN>
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.
20
<PAGE>
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
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
share-
21
<PAGE>
holder 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.
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
------ ------------
<S> <C>
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. For redemptions
over $25,000, signature(s) must be
guaranteed.
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.
- ---------------------------
</TABLE>
[FN]
*Telephone redemptions are available only for redemptions under $25,000.
</FN>
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
22
<PAGE>
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. Withdrawals can be made via check on the 25th day of each month,
or the next Business Day in the event the 25th is a weekend or holiday, unless
a date other than the 25th is specified on the application for ACH accounts.
DOLLAR COST AVERAGING allows for regular automatic exchanges from any Fund
to one or more other Funds on the 15th Business Day of the month, or 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, ROTH 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
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
23
<PAGE>
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.
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 4:00 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
24
<PAGE>
income on any day. Such a negative amount could occur, for instance, upon
default by an issuer of a security held by The Money Market Portfolio. In such
event, the Fund would first offset the negative amount with respect to each
shareholder account from the dividends declared but unpaid during the month
with respect to such account. If and to the extent that such negative amount
exceeds such declared but unpaid dividends, the Trustees of the Trust would
consider what other action might be taken, including reducing the number
of its outstanding shares by treating each shareholder as having contributed
to the capital of the Fund that number of full and fractional shares in the
account of such shareholder which represents its proportion of the amount of
such excess. Each shareholder will be deemed to have agreed to such
contribution in these circumstances by its investment in the Fund.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting
from the value of the Fund's total assets (i.e., the value of its investment in
the Portfolio and other assets) the amount of its liabilities and
dividing the remainder by the number of its outstanding shares, rounded to the
nearest cent. Expenses are accrued daily. The Portfolio values all portfolio
securities by the amortized cost 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
25
<PAGE>
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.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust offers a single class of shares of beneficial interest, without
par value. The Trustees have the authority to create new series of
shares in addition to the existing series of the Trust 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.
26
<PAGE>
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.
YEAR 2000. Like other mutual funds, financial and business organizations and
individuals around the world, the Fund and the Portfolio could be adversely
affected if computer systems used by the Adviser, Fund Administrator or other
service providers do not properly process and calculate date-related information
from January 1, 2000 and after. The Managers Funds is taking steps that it
believes are reasonably designed to address this "Year 2000" problem with
respect to the computer systems that are used and to obtain satisfactory
assurances that comparable steps are being taken by the Fund's major service
providers. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Fund or the Portfolio.
Companies or governmental entities in which the Funds invest could be affected
by the "Year 2000" problem, but at this time, the Funds cannot predict the
degree of impact on the Funds.
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
27
<PAGE>
month and actually received during the following January, will be taxed as
though received by the shareholder on December 31 of such year.
Generally, the Fund is required to back-up withhold 31% of distributions
paid to a shareholder who fails to provide a social security or taxpayer
identification number and certify that such number is correct and that such
shareholder is not subject to, or is otherwise exempt from, back-up withholding.
A shareholder should consult its own tax advisers for more information
regarding the Federal, foreign, state, and local tax treatment of such
shareholder with respect to its own tax situation. For more information
concerning taxes, see "Tax Information" in the SAI.
SHAREHOLDER REPORTS
Shareholders will receive annual and semi-annual reports which include
financial statements showing the results of operations, investment portfolio and
other information of the Fund and Portfolio. Shareholders will also receive
annual tax statements indicating the tax status of distributions made during the
year. Confirmations of transactions will be sent to shareholders following
purchases, redemptions or exchanges by the shareholder, and quarterly statements
of account will be sent to all shareholders.
ADDITIONAL INFORMATION
Any shareholder inquiries may be directed to the Trust at the address or
telephone number listed on the cover page of this Prospectus. This Prospectus,
including the SAI which has been incorporated by reference herein, does not
contain all the information set forth in the Registration Statement filed with
the Securities and Exchange Commission under the Securities Act of 1933. Copies
of the Registration Statement may be obtained at a reasonable charge from the
Securities and Exchange Commission or may be examined, without charge, at the
website maintained by the Securities and Exchange Commission
(http://www.sec.gov).
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, LLC
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management
EMERGING MARKETS
EQUITY FUND
Montgomery Asset Management, LLC
State Street Global Advisors, United
Kingdom, Limited
INCOME FUNDS:
MONEY MARKET FUND
J.P. Morgan
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
THE MANAGERS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1998
40 Richards Avenue, Norwalk, Connecticut 06854
Investor Services: (800) 835-3879
This Statement of Additional Information relates to the
Managers Income Equity Fund (the "Income Equity Fund"), Managers
Capital Appreciation Fund (the "Capital Appreciation Fund"), Managers
Special Equity Fund (the "Special Equity Fund"), Managers
International Equity Fund (the "International Equity Fund"), Managers
Emerging Markets Equity Fund (the "Emerging Markets Equity
Fund"),(collectively the "Equity Funds") and Managers Short Government
Fund (the "Short Government Fund"), Managers Short and Intermediate
Bond Fund (the "Short and Intermediate Bond Fund"), Managers
Intermediate Mortgage Fund (the "Intermediate Mortgage Fund"),
Managers Bond Fund (the "Bond Fund"), and Managers Global Bond Fund
(the "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 May 1, 1998, 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.
0
This Statement of Additional Information is authorized for
distribution to prospective investors only if preceded or accompanied
by effective prospectuses for the Funds.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
---
<S> <C>
I. INVESTMENT RESTRICTIONS 1
II. PORTFOLIO TURNOVER 4
III. TRUSTEES AND OFFICERS 5
IV. MANAGEMENT OF THE FUNDS 8
V. FUND MANAGEMENT AGREEMENT 9
VI. ASSET MANAGER PROFILES 15
VII. ADMINISTRATIVE SERVICES; DISTRIBUTION
ARRANGEMENTS 19
VIII. PORTFOLIO SECURITIES TRANSACTIONS 19
IX. NET ASSET VALUE 21
X. TAX INFORMATION 22
XI. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANT 25
XII. CONTROL PERSONS AND PRINCIPAL
HOLDERS OF SECURITIES 26
XIII. OTHER INFORMATION 27
XIV. PERFORMANCE INFORMATION 42
XV. FINANCIAL STATEMENTS 45
</TABLE>
<PAGE>
I. INVESTMENT RESTRICTIONS
Except as described below, the following investment restrictions
are fundamental and may not be changed with respect to any Fund
without the approval of a majority of the outstanding voting
securities of the Fund, as such term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
Provided that nothing in the following investment restrictions shall
prevent the Trust from investing all or substantially all of a Fund's
assets in an open-end management investment company, or a series
thereof, with the same investment objective or objectives as such
Fund, no Fund may:
1. Invest in securities of any one issuer (other than
securities issued by the U.S. Government, its agencies and
instrumentalities), if immediately after and as a result of such
investment the current market value of the holdings of its securities
of such issuer exceeds 5% of its total assets; except that up to 25%
of the value of the Intermediate Mortgage Fund's total assets may be
invested without regard to this limitation. The Global Bond Fund may
invest up to 50% of its assets in bonds issued by foreign governments
which may include up to 25% of such assets in any single government
issuer.
2. Invest more than 25% of the value of its total assets in the
securities of companies primarily engaged in any one industry (other
than the United States Government, its agencies and
instrumentalities). Such concentration may occur incidentally as a
result of changes in the market value of portfolio securities, but
such concentration may not result from investment; provided, however,
that the Intermediate Mortgage Fund will invest more than 25% of its
assets in the mortgage and mortgage-finance industry even during
temporary defensive periods. Neither finance companies as a group nor
utility companies as a group are considered a single industry for
purposes of this restriction.
3. Acquire more than 10% of the outstanding voting securities
of any one issuer.
4. Borrow 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
<PAGE>
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.
2
<PAGE>
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.
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.
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.
Unless otherwise provided, for purposes of investment restriction
(1) above, the Global Bond Fund may invest more than 5% of its total
assets in the securities of any one foreign government, so long as the
aggregate amount of such greater than 5% holdings does 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 foreign
government.
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.
3
<PAGE>
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 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, 1997, the portfolio
turnover rate for Income Equity Fund was 96%, for Capital Appreciation
Fund was 235%, for Special Equity Fund 49%, and for International
Equity Fund was 37%. For the period February 9, 1998 (commencement of
operations) to March 31, 1998, the portfolio turnover rate for
Emerging Markets Equity Fund was 7%. 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 was 56%, and for International Equity Fund was 30%. The high
turnover rates for Income Equity Fund and Capital Appreciation Fund
were due to changes in the portfolio managers for those Funds during
1997.
For the fiscal year ended December 31, 1997, the portfolio
turnover rate for Short Government Fund was 191%, for Short and
Intermediate Bond Fund was 91% and for Bond Fund was 35%. For the
fiscal year ended December 31, 1996, the annual portfolio turnover
rate for Short Government Fund was 169%, for Short and Intermediate
Bond Fund was 96% and for Bond Fund was 72%.
The Intermediate Mortgage Fund and the Global Bond Fund generally
engage in a significant amount of trading of securities held for less
than one year. Accordingly, it can be expected that these Funds 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, 1997 and December 31, 1996
were 317% and 232%, respectively. The Global Bond Fund's rates of
portfolio turnover for the years ended December 31, 1997 and December
31, 1996 were 197% and 202%, 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
4
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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 Chief
Norwalk, CT 06854 Executive Officer, Evaluation
Chief Executive Officer, Associates Investment Management
President, Trustee Company (predecessor of The
Managers Funds, L.P.) (prior to
Date of birth: 1/21/34 June 1988 and from August 1989 to
August 1990); Partner, The
Managers Funds, L.P. (since August
1990); Executive Vice President,
Evaluation Associates, Inc. (June
1988 to August 1989).
WILLIAM W. GRAULTY Practicing Attorney (1977 to
65 LaSalle Road present); Executive Vice President
West Hartford, CT 06107 and Head of Trust Division, The
Trustee Connecticut Bank and Trust
Company, N.A. (1956 to 1976);
Date of birth: 12/30/23 President, American Bankers
Association, Trust Division (1974
to 1975); President Connecticut
Bankers Association, Trust
Division (1966 to 1968).
MADELINE H. McWHINNEY President, Dale, Elliott & Company
24 Blossom Cove (management consultants) (1977 to
Red Bank, NJ 07701 present); Assistant Vice President
Trustee and Financial Economist, Federal
Reserve Bank of New York (1943 to
Date of birth: 3/11/22 1973); Trustee and Treasurer,
Institute of International
Education (since 1975); Assistant
Director, Operations, Whitney
Museum of American Art (1983 to
1986); Member, Advisory Committee
on Professional Ethics, New Jersey
Supreme Court (March 1983 to
present).
5
<PAGE>
<CAPTION>
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 Group (1986 to
New York, NY 10011 present); Vice President,
Trustee Secretary and Director, First Fund
Distributors, Inc. (1991 to
Date of birth: 4/3/50 present); Vice President,
Secretary and Director; Investment
Company Administration Corporation
(1990 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
40 Richards Avenue Director of Operations, The
Norwalk, CT 06854 Managers Funds, L.P. (December
Secretary, Treasurer (Principal 1994 to present); Vice President,
Financial and Accounting Officer) Signature Financial Group (March
1990 to December 1994); Vice
Date of Birth:5/29/58 President, The Putnam Companies
(August 1980 to March 1990).
6
<PAGE>
<CAPTION>
NAME, ADDRESS AND POSITION WITH PRINCIPAL OCCUPATION DURING PAST
TRUST 5 YEARS
GIANCARLO (JOHN) E. ROSATI
40 Richards Avenue Vice President (July 1992 to
Norwalk, CT 06854 Present) and Assistant Vice
Assistant Treasurer President (July 1986 to June
1992); The Managers Funds, L.P.;
Date of Birth: 3/31/56 Accountant, Gintel Co. (June 1980
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 August
Date of Birth: 9/8/72 1995); College Student (September
1990 to June 1994).
LAURA A. PENTIMONE Legal/Compliance Officer, The
40 Richards Avenue Managers Funds, L.P. (September
Norwalk, CT 06854 1997 to present); Law School
Assistant Secretary Student (August 1994 to June
1997); College Student (August
Date of Birth: 11/10/70 1990 to June 1994).
</TABLE>
Trustees' Compensation:
The Trust's Disinterested Trustees receive an annual retainer of
$10,000, and meeting fees of $750 for each in-person meeting attended
and $200 for participating in each telephonic meeting. There are no
pension or retirement benefits provided by the Trust or any affiliate
of the Trust to the Trustees. The Trust does not pay compensation to
its officers. The following chart sets forth the aggregate
compensation paid to each Disinterested Trustee for the year-ended
December 31, 1997:
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM REGISTRANT
FROM FUNDS (EXCEPT AND FUND COMPLEX
MONEY MARKET FUND) PAID TO TRUSTEES
------------ ----------------
<S> <C>
William W. Graulty $12,746 $13,200
Madeline H. McWhinney 12,746 13,200
Steven J. Paggioli 12,746 13,200
Thomas R. Schneeweis 12,746 13,200
</TABLE>
7
<PAGE>
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, except for Managers Money Market Fund,
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
8
<PAGE>
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 acquire for such Fund a
position in any investment which any of the Asset Manager's other
clients may acquire, and that Fund shall have no first refusal, co-
investment or other rights in respect of any such investment, either
for the Fund or otherwise.
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
9
<PAGE>
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.
<TABLE>
<CAPTION>
MANAGER'S PORTION
TOTAL MANAGEMENT OF THE TOTAL
NAME OF FUND FEE MANAGEMENT FEE
<S> <C> <C>
Income Equity Fund 0.75% 0.40%
Capital Appreciation 0.80% 0.40%
Fund
Special Equity Fund 0.90% 0.40%
International Equity 0.90% 0.40%
Fund
Emerging Markets 1.15% 0.40%
Equity Fund
Short Government 0.20% 0.00%
Fund*
Short and 0.50% 0.25%
Intermediate Bond
Fund
Intermediate 0.45% 0.25%
Mortgage Fund
Bond Fund 0.625% 0.375%
Global Bond Fund 0.70% 0.35%
</TABLE>
10
<PAGE>
[FN]
* Reflects a 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 Manager's portion of the Total Management Fee would
be 0.25%.
</FN>
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, 1995, 1996 and 1997,
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:
11
<PAGE>
<TABLE>
<CAPTION>
JANUARY 1, 1997-DECEMBER 31, 1997 JANUARY 1, 1996-DECEMBER 31, JANUARY 1, 1995-DECEMBER 31,
1996 1995
APPROXIMATE FEE PAID TO APPROXI- FEE PAID APPROXI- FEE PAID
FEE ASSET FEE PAID MATE FEE TO ASSET FEE PAID MATE FEE TO ASSET
NAME OF FUND/ASSET FEE PAID TORETAINED BY MANAGER BY TO RETAINED MANAGER BY TO RETAINED MANAGER BY
MANAGER MANAGER MANAGER MANAGER/1 MANAGER BY MANAGER/1 MANAGER BY MANAGER/1
- ------------------ ------- ---------- ---------- ---------- MANAGER ---------- ------- MANAGER ----------
<S> <C> <C> <C> <C> --------- <C> <C> -------- <C>
<C> <C>
INCOME EQUITY FUND $465,345 $239,197 $349,821 $175,519 $299,824 $150,565
Scudder Kemper
Investments, Inc. $120,096 $86,220 $74,220
Chartwell
Investment
Partners, L.P./2 $29,408
CAPITAL
APPRECIATION FUND $797,930 $398,865 $761,925 $380,963 $635,588 $318,716
Essex Investment
Management
Company, LLC/3 $156,464 N/A N/A
Husic Capital
Management/4 $202,725 $60,917 N/A
SPECIAL EQUITY FUND $4,477,844 $2,007,107 $1,572,135 $698,733 $977,869 $435,343
Liberty Investment
Management $746,314 $266,030 $187,691
Pilgrim Baxter &
Associates, Ltd. $790,994 $305,198 $190,981
Westport Asset
Management, Inc. $873,573 $302,171 $163,854
Kern Capital
Management LLC/5 $59,856
INTERNATIONAL
EQUITY FUND $3,010,430 $1,338,522 $1,856,193 $824,774 $948,514 $422,512
Lazard Asset
Management/6 $838,470 $516,157 $215,232
Scudder Kemper
Investments, Inc. $833,438 $515,262 $310,770
SHORT GOVERNMENT
FUND $10,573 $0 $11,423 $0 $15,835 N/A
Jennison Associates
LLC $10,573 $11,423 $15,835
SHORT AND
INTERMEDIATE BOND
FUND $88,839 $44,419 $116,037 $58,018 $128,254 $64,209
Standish, Ayer &
Wood, Inc. $44,419 $58,019 $34,464
INTERMEDIATE
MORTGAGE FUND $101,414 $56,341 $143,803 $79,890 $214,141 $118,967
Jennison Associates
LLC $45,073 $63,913 $95,174
</TABLE>
<TABLE>
<CAPTION>
JANUARY 1, 1997-DECEMBER 31, JANUARY 1, 1996-DECEMBER 31, JANUARY 1, 1995-DECEMBER
1997 1996 31, 1995
APPROXI-
APPROXI- FEE PAID TO APPROXI- FEE PAID MATE FEE FEE PAID
MATE FEE ASSET MATE FEE TO ASSET FEE PAID RETAINED TO ASSET
NAME OF FUND/ASSET FEE PAID RETAINED MANAGER BY FEE PAID RETAINED MANAGER BY TO BY MANAGER BY
MANAGER TO MANAGERBY MANAGER/1 TO BY MANAGER/1 MANAGER MANAGER MANAGER/1
- ------------------ -------- MANAGER ---------- MANAGER MANAGER ---------- -------- -------- ---------
<S> <C> -------- <C> -------- --------- <C> <C> <C> <C>
<C> <C> <C>
BOND FUND $221,232 $132,739 $180,197 $108,240 $162,594 $97,557
Loomis, Sayles &
Company, L.P. $88,443 $71,957 $65,037
GLOBAL BOND FUND $115,996 $57,998 $126,043 $62,024 $86,482 $43,466
Rogge Global Partners $57,998 $64,019 $43,016
</TABLE>
[FN]
1/ Does not reflect payments made to asset managers whose relationship with a
Fund has been terminated.
2/ Portfolio manager hired during 1997.
3/ Portfolio manager hired during 1997.
4/ Portfolio manager hired during 1996.
5/ Portfolio manager hired during 1997.
6/ Portfolio manager hired during 1995.
</FN>
12-14
<PAGE>
VOLUNTARY FEE WAIVERS AND EXPENSE LIMITATION
From time to time, the Manager may agree voluntarily to waive all
or a portion of the fee it would otherwise be entitled to receive from
a Fund. The Manager may waive all or a portion of its fee for a
number of reasons such as passing on to the Fund and its shareholders
the benefit of reduced portfolio management fees resulting from (i) a
reallocation of Fund assets among Asset Managers, or (ii) 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 75% controlled by the employees of the firm and 25%
controlled by Maverick Partners, L.P. which is controlled by John
McNiff and Michael Kennedy.
15
<PAGE>
SCUDDER KEMPER INVESTMENTS, INC.
Scudder Kemper Investments, Inc. is controlled by the Zurich
Group and is managed by a Board of Directors chaired by Rolf Hueppi,
Chairman and CEO of the Zurich Group. Members include members of
Zurich's Corporate Executive Board, Laurence W. Cheng, Steven M.
Gluckstern, Markus Rohrbasser, and Edmond D. Villani, as well as
Cornelia Small, Director of Global Equity Investments of Scudder
Kemper Investments, Inc. and Lynn S. Birdsong, Director of Scudder
Kemper Investments, Inc.'s Institutional Group.
CAPITAL APPRECIATION FUND
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
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 California limited
partnership. Frank J. Husic is its sole limited partner and Frank J.
Husic & Co., a Sub-Chapter S corporation is its General Partner. The
General Partner 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, LTD.
Pilgrim Baxter & Associates, Ltd. 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.
16
<PAGE>
KERN CAPITAL MANAGEMENT LLC
Kern Capital Management LLC is a Delaware limited liability
company founded in 1997 by Robert E. Kern, Jr. and David G. Kern.
INTERNATIONAL EQUITY FUND
SCUDDER KEMPER INVESTMENTS, INC.
(See INCOME EQUITY FUND)
LAZARD ASSET MANAGEMENT
Lazard Asset Management is a division of Lazard, Freres LLC, 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.
Reinsberg, Michael S. Rome, Michael P. Triguboff, Ira Handler and
Alexander E. Zagoreos.
EMERGING MARKETS EQUITY FUND
MONTGOMERY ASSET MANAGEMENT, LLC
Montgomery Asset Management, LLC is a Delaware limited liability
company. The portfolio managers and principals are Josephine Jimenez,
CFA, Bryan Sudweeks, Ph. D, CFA, Frank Chiang, Jose de Gusmao Fiuza,
Stuart Quint, and Jesus Isidoro Duarte.
STATE STREET GLOBAL ADVISORS, UNITED KINGDOM, LIMITED
State Street Global Advisors, United Kingdom, Limited is an
indirect subsidiary of State Street Corporation. The portfolio
managers are Murray Davey and Ken King.
SHORT GOVERNMENT FUND
JENNISON ASSOCIATES LLC
Jennison Associates LLC is a wholly-owned subsidiary of The
Prudential Securities Company of America.
17
<PAGE>
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. Furman,
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, David H. Cameron,
Karen K. Chandor, , James E. Hollis, III, Laurence A. Manchester,
Arthur H. Parker, Howard B. Rubin, Austin C. Smith, Ralph S. Tate, W.
Charles Cook, Joseph M. Corrado, Mark A. Flaherty, Raymond J. Kubiak,
Thomas P. Sorbo, David C. Stuehr and Michael W. Thompson 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 LLC
(See SHORT GOVERNMENT FUND)
BOND FUND
LOOMIS, SAYLES & COMPANY, L.P.
Loomis, Sayles & Company, L.P.'s sole general partner, Loomis,
Sayles & Company, Inc., is a wholly-owned subsidiary of New England
Investment Companies Operating Partnership, L.P. ("NEICOP"). NEICOP's
advising general partner is New England Investment Comapnies, L.P.
("NEIC"), a publicly-traded company whose interests are listed on the
NYSE. NEICOP's managing partner and NEIC's sole general partner is a
corporation that is indirectly wholly-owned by Metropolitan Life
Insurance Corp.
GLOBAL BOND FUND
ROGGE GLOBAL PARTNERS plc
Rogge Global Partners plc. is owned by United Asset Management, a
public company.
18
<PAGE>
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.
19
<PAGE>
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, 1997, the aggregate
brokerage commissions paid by each of the Funds incurring any such
commissions was $126,564 for Income Equity Fund, $371,969 for Capital
Appreciation Fund, $616,474 for Special Equity Fund and $675,238 for
International Equity Fund. For the period February 9, 1998
(commencement of operations) to March 31, 1998, the aggregate
brokerage commissions paid by Emerging Markets Equity Fund was $8,308.
For the fiscal year ended December 31, 1996, the aggregate brokerage
commissions paid by each of the Funds incurring any such commissions
were $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.
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. 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 and 15% during the fiscal year ended
December 31, 1996. Such commissions were paid in connection with
portfolio transactions the dollar amount of which represented 8% and
16%, respectively, of the aggregate dollar amount of all portfolio
transactions involving the payment of commissions by the Fund during
those fiscal years. Brokerage commissions were paid to Fahnestock in
compliance with procedures established by the Trustees, pursuant to
which the commissions were
20
<PAGE>
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 traded on a domestic or international
securities exchange are valued at the last quoted sales price, or
lacking any sales, on the basis of the last quoted bid price in each
instance on the principal exchange in which the securities trade.
Over-the-counter securities for which market quotations are readily
available are valued at the last quoted bid price. Fixed income
securities are valued based on valuations furnished by independent
pricing services. Some of these services utilize matrix systems which
reflect such factors as security prices, yields, maturities and
ratings, and are supplemented by dealer and exchange quotations.
Short-term investments, having a remaining maturity of 60 days or less
are valued at amortized cost.
In the event that market quotations are not readily available to
price a particular security, then the security must be priced in good
faith by the Manager pursuant to procedures established by the Board
of Trustees, subject to the supervision and approval of the Board or a
committee thereof. . In such an event, the Manager will use its best
efforts to consider various factors to determine the fair value of the
security, such as the overall movement of the market and current
market conditions and their impact on the particular security. The
Manager will arrive at a recommendation of the fair value of the
security, and such recommendation along with the background
information on which the recommendation is based will be presented to
the Pricing Committee of the Board of Trustees for approval.
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 Manager pursuant to
procedures established by the Trustees and subject to the supervision
and approval of the Board or a committee thereof.
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.
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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; and (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. 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.
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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
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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,
and the Fund satisfies the holding period requirements, 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. A foreign tax credit will be allowed for shareholders
who hold the Fund for at least 16 days during the 30-day period
beginning on the date that is 15 days before the ex-dividend date.
Beginning in 1998, shareholders who have been passed through foreign
tax credits of no more than $300 ($600 in the case of married couples
filing jointly) during a tax year can elect to claim the foreign tax
credit for these amounts directly on their federal income tax returns
(IRS Forms 1040) without having to file a separate Form 1116. 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
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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 affiliated with State
Street Global Advisors, United Kingdom, Limited, one of the sub-
advisers to Managers Emerging Markets Equity Fund, and pursuant to
certain interpretations of the staff of the Securities and Exchange
Commission, the assets of Managers Emerging Markets Equity Fund may be
deemed to be in the Fund's custody for purposes of Rule 17f-2 under
the Act. Accordingly, the requirements of Rule 17f-2 will be followed
with respect to Managers Emerging Markets Equity Fund.
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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 April 8, 1998, 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 and International Equity Funds. 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
April 8, 1998 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 (6%)
Huntington National Bank, Columbus, Ohio (13%)
Charles Schwab & Co., Inc., San Francisco, California (21%)
Capital Appreciation Fund
Huntington National Bank, Columbus, Ohio (5%)
Charles Schwab & Co., Inc., San Francisco, California (9%)
Special Equity Fund
Huntington Trust Company, Columbus, Ohio (5%)
Charles Schwab & Co., Inc., San Francisco, California (37%)
International Equity Fund
Huntington Trust Company, Columbus, Ohio (5%)
Resource Bank, Minneapolis, Minnesota (7%)
Charles Schwab & Co., Inc., San Francisco, California (26%)
Emerging Markets Equity Fund
Resource Bank, Minneapolis, Minnesota (8%)
Donaldson, Lufkin & Jenrette, Jersey City, New Jersey (19%)
Short Government Fund
Charles Schwab & Co., Inc., San Francisco, California (8%)
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Short and Intermediate Bond Fund
Huntington Trust Company, Columbus, Ohio (7%)
Intermediate Mortgage Fund
Roman Catholic Diocese, Syracuse, New York (9%)
Bond Fund
Charles Schwab & Co., Inc., San Francisco, California (15%)
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.
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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.
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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
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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.
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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.
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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
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<PAGE>
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 Fund's
Asset Manager to be of good standing and where the Asset Manager
believes that 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 including in
shares of a money market fund. 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,
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<PAGE>
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 event
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.
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<PAGE>
(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.
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<PAGE>
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.
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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)
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<PAGE>
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.
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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, 1997, the weighted
average ratings of the debt obligations held by the Bond Fund and the
Short and Intermediate Bond Fund, expressed as a percentage of each
Fund's total investments, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL INVESTMENTS OF:
SHORT AND
INTERMEDIATE
RATINGS BOND FUND BOND FUND
<S> <C> <C>
Government and
AAA/Aaa 25% 42%
AA/Aa 5% 4%
A/A 7% 18%
BBB/Baa 56% 30%
BB/Ba 3% 6%
Not rated 4% -
</TABLE>
Repurchase Agreements -- Pursuant to guidelines approved and
periodically reviewed by the Trustees, a Fund may enter into
repurchase agreements with such banking institutions and securities
dealers as have been approved by the Trustees. A Fund may enter into
repurchase agreements as a short-term investment of its idle cash in
order to earn income. A repurchase agreement, which provides a means
for the Fund to earn income on funds for periods as short as
overnight, is an arrangement under which the purchaser (i.e., the
Fund) purchases a U.S. Government security ("Government Obligation")
and the seller agrees, at the time of sale, to repurchase the
Government Obligation at a specified time and price. The repurchase
price may be higher than the purchase price, the difference being
income to the Fund, or the purchase and repurchase prices may be the
same, with interest at a stated rate due to the Fund, together with
the repurchase price on repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Government Obligation
subject to the repurchase agreement. Government Obligations will be
held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from the Fund to the seller of the Government Obligation subject
to the repurchase agreement. The Funds' investment restriction which
limits lending by the Funds specifically exempts repurchase
transactions. It is not clear whether a
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<PAGE>
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.
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<PAGE>
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 Asian-
American Development Bank, Central Bank for Cooperatives, District of
Columbia Armory Board, Export-Import Bank of the United States,
Farmers Home Administration, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Housing Administration, Federal
Intermediate Credit Banks, Federal Land Banks, General Services
Administration, Governmental National Mortgage Association, the Inter-
American Development Bank, the International Bank for Reconstruction
and Development, Maritime Administration, Small Business
Administration, Standard & Poor's Depository Receipts, the Student
Loan Marketing Association and the Tennessee Valley Authority.
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.
41
<PAGE>
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, 1997. The average annual total return
quotations for the Emerging Markets Equity Fund is not presented since
it had not commenced operations as of December 31, 1998.
<TABLE>
<CAPTION>
ANNUAL-IZED
SINCE
COMMENCE-
ANNUAL- ANNUAL- MENT OF COMMENCE-
IZED IZED 10 OPERA-TIONSMENT DATE
NAME OF FUND 1 YEAR 5 YEARS YEARS <C> <C>
<S> <C> <C> <C>
Income Equity Fund 27.19% 17.83% 15.82% 15.49% 10/31/84
Capital Appreciation Fund 12.74% 14.46% 15.13% 15.27% 6/30/84
Special Equity Fund 24.45% 19.05% 19.27% 17.04% 6/30/84
International Equity Fund 10.83% 15.42% 11.05% 14.00% 12/31/85
Short Government Fund 5.55% 3.23% 5.22% 5.24% 10/31/87
Short & Int. Bond Fund 5.87% 4.84% 7.18% 8.36% 6/30/84
Intermediate Mortgage Fund 8.23% 1.85% 6.86% 7.22% 5/31/86
Bond Fund 10.42% 9.44% 10.24% 11.30% 6/30/84
Global Bond Fund 0.16% --- --- 5.48% 3/25/94
</TABLE>
[FN]
* 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.
</FN>
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.
42
<PAGE>
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, 1997, the
annualized yield of the Income Equity Fund and each of the Income
Funds, was as follows:
<TABLE>
<CAPTION>
30-DAY
ANNUALIZED YIELD
FUND AT 12/31/97
- ------------------------ ------------------------
<S> <C>
Income Equity Fund 1.77%
Short Government Fund 4.40%
Short and Intermediate
Bond Fund 5.28%
Intermediate Mortgage Fund 5.61%
Bond Fund 6.13%
Global Bond Fund 4.64%
</TABLE>
Performance Comparisons
As set forth in the Prospectus, the performance of any of the
Funds may be compared to the performance of other mutual funds having
similar objectives, expressed as a ranking prepared by independent
services or publications that monitor the performance of mutual funds
such as Lipper Analytical Services, Inc. ("Lipper"), Morningstar,
Inc., and IBC Money Fund Report. In addition, any Fund's performance
may be compared to that of various unmanaged indices such as the
Standard & Poor's 500 Stock Price Index or the Dow Jones Industrial
Average.
43
<PAGE>
"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 by IBC Financial Data,
Inc. in "IBC's Money Market Fund Report," a weekly publication which
tracks net assets, yield, maturity and portfolio holdings on most
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. Yields on these indices are generally higher
than on money market funds, but carry higher risk due to their longer
durations.
Unmanaged government and corporate indices published by Merrill
Lynch, Salomon Smith Barney and Lehman Brothers. Indices which may be
compared to the Short Government Fund, the Short and Intermediate Bond
Fund, the Intermediate Mortgage Fund, the Bond Fund and the Global
Bond Fund include the Merrill Lynch 1-3 Year Treasury Index, the
Merrill Lynch 1-5 Year Government/Corporate Index, the Salomon Smith
Barney Mortgage Index, the Lehman Brothers Government/Corporate Index
and the Salomon Smith Barney World Government Index, respectively.
These indices are all published on Bloomberg and some are published in
the Wall Street Journal, as well as in information provided by Merrill
Lynch, Salomon Smith Barney and Lehman Brothers.
44
<PAGE>
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, 1997. The Financial Statements for Managers
Emerging Markets Equity Fund for the portion of the fiscal year from
February 9, 1998 (commencement of operations) to March 31, 1998 are
unaudited.
45
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
MANAGERS EMERGING MARKETS EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 1998 (unaudited)
- -------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK - 97.9%
CAPITAL GOODS - 8.4%
Cemex S.A., Sponsored ADR Series B
Shares (Mexico)* 10,500 $118,125
New World Infrastructure, Ltd.
(Hong Kong)* 15,000 36,199
Titan Cement Co., S.A. (Greece) 2,000 146,183
----------
TOTAL CAPITAL GOODS 300,507
----------
COMMUNICATION SERVICES - 20.6%
China Telecom (Hong Kong) Ltd.,
Sponsored ADR (Hong Kong)* 1,000 41,062
Compania Anonima National Telefonos
de Venezuela, ADR (Venezuela) 1,100 45,925
Mahanagar Telephone Nigram, Ltd., GDR
(India)* 6,200 106,485
Philippine Long Distance Telephone Co.
(Philippines)* 3,700 102,724
Philippine Long Distance Telephone Co.,
Sponsored ADR (Philippines) 1,800 50,513
Telecomunicacoes Brasileiras S/A,
Telebras, Sponsored ADR (Brazil) 1,320 172,920
Telefonica de Argentina S.A., Sponsored
ADR (Argentina) 2,200 84,150
Telefonos de Mexico S.A., Sponsored
ADR (Mexico) 1,500 85,031
Videsh Sanchar Nigam, Ltd., Sponsored
GDR (India)* 3,800 46,550
----------
TOTAL COMMUNICATION SERVICES 735,360
----------
COMPUTER SOFTWARE - 1.6%
Prokom Software, GDR (Poland)* 3,000 55,500
----------
CONGLOMERATES - 3.8%
Citic Pacific Ltd. (Hong Kong) 28,000 99,009
Shanghai Industrial Holdings, Ltd.
(Hong Kong) 9,000 36,819
----------
TOTAL CONGLOMERATES 135,828
----------
CONSUMER BASICS - 11.3%
Al-Ahram Beverage Co. S.A.E., GDR (Egypt) 2,000 61,700
Efes Sinai Yatirim Holdings A.S.,
Sponsored GDR (Turkey)* 5,100 96,900
Fomento Economico Mexicano, S.A., Series
B (Mexico) 14,500 104,544
Panamerican Beverages, Inc., Class A
(Mexico) 2,200 88,550
Standard Foods Taiwan, Ltd. (Taiwan)* 3,600 49,950
----------
TOTAL CONSUMER BASICS 401,644
----------
CONSUMER DURABLE GOODS - 1.4%
Bajaj Auto, Ltd., Sponsored GDR (a)
(India)* 2,600 48,750
----------
ENERGY - 11.8%
AO Taftnet, Sponsored ADR (Russia) 3,250 75,237
Petroleo Brasileiro S.A., ADR (Brazil) 3,100 73,625
Sasol Limited (South Africa) 20,500 166,101
YPF Sociedad Anonima, Class D, Sponsored
ADR (Argentina) 3,100 105,400
----------
TOTAL ENERGY 420,363
----------
ENTERTAINMENT AND LEISURE - 3.8%
BEC World Public Company Ltd. (Thailand) 26,200 135,827
----------
FINANCE AND INSURANCE - 12.5%
Companhia de Seguros Tranquilidade
(Portugal) 3,700 116,305
Haci Omer Sabanci Holdings AS
(Turkey) 2,321,000 136,044
JCI Limited (South Africa) 27,000 142,091
Komercni Banka A.S., Sponsored ADR
(Czech Republic)* 4,200 49,875
----------
TOTAL FINANCE AND INSURANCE 444,315
----------
REAL ESTATE - 3.9%
China Resources Enterprises, Ltd.
(Hong Kong) 17,000 34,444
New World Development Co., Ltd.
(Hong Kong) 30,000 105,887
----------
TOTAL REAL ESTATE 140,331
----------
TECHNOLOGY - 5.0%
Samsung Electronics, Ltd., GDR
representing 1/2 non-voting Shares,
(a) (South Africa) 2,500 68,125
Synnex Technology International Corp.,
GDR (Taiwan)* 2,000 50,550
Yageo Corp. (Taiwan)* 4,900 61,250
----------
TOTAL TECHNOLOGY 179,925
----------
UTILITIES - 13.8%
Companhia Energetica de Minas Gerais,
S.A., Sponsored ADR (Brasil) 3,100 146,087
Companhia Parananense de Energia,
Sponsored ADR (Brazil) 7,000 101,938
Unified Energy Systems, GDR (Russia)* 3,300 104,742
Unified Energy Systems, Sponsored ADR
(Russia)* 1,500 47,250
YTL Power International Berhad
(Malaysia)* 100,000 93,699
----------
TOTAL UTILITIES 493,716
----------
TOTAL COMMON STOCKS
(cost $3,355,976) 3,492,066
----------
SHORT-TERM INVESTMENTS - 0.5%
OTHER INVESTMENT COMPANIES - 0.5%
JPM Prime Money Market Fund, 5.37%** 19,451 19,451
----------
TOTAL INVESTMENTS - 98.4%
(cost $3,375,427) 3,511,517
OTHER ASSETS, LESS LIABILITIES - 1.6% 56,183
----------
NET ASSETS - 100.0% $3,567,700
----------
</TABLE>
- --------------------------------------------------------------------------
[FN]
Notes:
*Non-income-producing security.
**Yield shown for this investment company represents the March
31, 1998 seven-day yield, which refers to the sum of the previous
seven days' dividend paid, expressed as an annual percentage.
(a)Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normallyto qualified buyers. At March 31, 1998, the value
of these securities amounted to $116,875, or 3.3% of net assets.
INVESTMENT ABBREVIATIONS:
ADR/GDR: Securities whose value is determined or significantly
influenced by trading on exchanges not located in the United States or
Canada. ADR after the name of a holding stands for American
Depositary Receipt, representing ownership of foreign securities on
deposit with a domestic custodian bank; a GDR (Global Depositary
Receipt) is comparable, but foreign securities are held on deposit in
a non-U.S. Bank.
</FN>
46-48
<PAGE>
<TABLE>
<CAPTION>
MANAGERS EMERGING MARKETS EQUITY FUND
Country Allocations Relative to MSCI EAFE Index (unaudited)
- -----------------------------------------------------------
MANAGERS
EMERGING MARKETS MSCI
COUNTRY ALLOCATIONEQUITY FUND EAFE INDEX
<S> <C> <C>
Brazil 14.2% 16.5%
Mexico 11.3 11.4
Hong Kong 10.1 0.0
South Africa 8.8 11.9
Turkey 6.7 2.4
Russia 6.5 4.8
India 5.8 6.4
Argentina 5.4 4.4
Taiwan 4.6 9.5
Philippines 4.4 1.8
Greece 4.2 3.3
Thailand 3.9 2.2
Portugal 3.3 0.0
Malaysia 2.7 7.2
South Korea 2.0 2.3
Egypt 1.8 0.0
Poland 1.6 0.6
Czech Republic 1.4 1.0
Venezuela 1.3 1.4
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
MANAGERS EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (unaudited)
- --------------------------------------------------------------------
<S> <C>
ASSETS:
Investments at value* $3,511,517
Foreign currency (cost $3,982) 3,934
Receivable for investments sold 122,313
Receivable for Fund shares sold 8,190
Dividends, interest and other receivable 6,293
Prepaid expenses 16,523
----------
Total assets 3,668,770
----------
LIABILITIES:
Payable to custodian 42,035
Payable for investments purchased 55,115
Foreign withholding tax payable 36
Accrued expenses:
Administrative fees 835
Other 3,049
----------
Total liabilities 101,070
----------
NET ASSETS $3,567,700
----------
Shares outstanding 342,569
----------
Net asset value, offering and redemption
price per share $ 10.41
----------
NET ASSETS REPRESENT:
Paid-in capital $3,437,965
Undistributed net investment income 4,743
Accumulated net realized loss from investments (11,085)
Net unrealized appreciation of investments
and foreign currency 136,077
----------
NET ASSETS $3,567,700
----------
*Investments at cost $3,375,427
----------
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
MANAGERS EMERGING MARKETS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------
<S> <C>
For the period
ended February 9,
1998 (commencement
of operations) to
March 31, 1998
(unaudited)
-----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 4,743
Net realized loss on investments
and foreign currency transactions (11,085)
Net unrealized appreciation of investments
and foreign currency transactions 136,077
----------
Net increase in net assets
resulting from operations 129,735
----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 3,437,865
----------
Total increase in net assets 3,567,600
NET ASSETS:
Beginning of period 100
----------
End of period $3,567,700
----------
End of period undistributed net
investment income $ 4,743
----------
- -----------------------------------------------------------
SHARE TRANSACTIONS:
Sale of shares 342,559
----------
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
MANAGERS EMERGING MARKETS EQUITY FUND
STATEMENT OF OPERATIONS
For the period February 9, 1998* to March 31, 1998 (unaudited)
- --------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividend income $ 6,136
Interest income 4,738
Foreign withholding tax (35)
----------
Total investment income 10,839
----------
EXPENSES:
Investment advisory and management fees 3,840
Administrative fees 835
Audit fees 2,454
Registration fees 2,112
Custodian fees 256
Organization expenses 211
Transfer agent fees 77
Miscellaneous expenses 151
----------
Total expenses before waiver 9,936
Expense waiver (3,840)
----------
Net expenses 6,096
----------
Net investment income 4,743
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investment
transactions (2,747)
Net realized loss on foreign currency
contracts and translations (8,338)
Net unrealized appreciation of investments 131,606
Net unrealized appreciation from foreign
currency translations 34
----------
Net realized and unrealized gain 120,555
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 125,298
----------
*Commencement of investment operations.
52
<PAGE>
MANAGERS EMERGING MARKETS EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 19968 (unaudited)
- --------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company, organized as a Massachusetts business trust, and
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Currently the Trust is comprised of 11 investment
series. Included in this report is Managers Emerging Markets Equity
Fund (the "Fund").
The Fund's financial statements are prepared in accordance with
generally accepted accounting principles which require the use of
management's to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the
reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Equity securities traded on a domestic or international securities
exchange are valued at the last quoted sales price, or, lacking any
sales, on the basis of the last quoted bid price. Over-the-counter
securities for which market quotations are readily available are
valued at the last quoted bid price. Fixed-income securities are
valued based on valuations furnished by independent pricing services
that utilize matrix systems which reflect such factors as security
prices, yields, maturities, and ratings, and are supplemented by
dealer and exchange quotations. Short-term investments, having a
remaining maturity of 60 days or less, are valued at amortized cost
which approximates market. Securities for which market quotations are
not readily available are valued at fair value, as determined in good
faith and pursuant to procedures establishedadopted by the Board of
Trustees.
(B) SECURITY TRANSACTIONS
Security transactions are accounted for as of trade date. Gains and
losses on securities sold are determined on the basis of identified
cost.
(C) INVESTMENT INCOME AND EXPENSES
Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Trust is informed of the ex-
dividend date. Dividend income on foreign securities is recorded net
of withholding tax. Interest income is recorded on the accrual basis
and includes amortization of discounts and premiums when required for
federal income tax purposes. Non-cash dividends included in dividend
income, if any, are reported at the fair market value of the
securities received. Other income and expenses are recorded on an
accrual basis. Expenses which cannot be directly attributed to a
particular fund are apportioned among the funds in the Trust based
upon their average net assets.
Managers
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends resulting from net investment income, if any, normally will
be declared and paidManagers annually. Managers Fund Fund
Distributions of capital gains, if any, will be made on an annual
basis and when required for federal excise tax purposes. Income and
capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency related transactions,
losses deferred due to wash sales and equalization accounting for tax
purposes. Permanent book and tax basis differences, if any, relating
to shareholder distributions will result in reclassifications to paid-
in capital.
(E) FEDERAL TAXES
The Fund intends to comply with the requirements under Subchapter M
of the Internal Revenue Code of 1986, as amended, and to distribute
substantially all of its taxable income and gains to its shareholders
and to meet certain diversification and income requirements with
respect to investment companies. Therefore, no provision for federal
income or excise tax is included in the accompanying financial
statements.
(F) CAPITAL STOCK
The Trust's Declaration of Trust authorizes for each series the
issuance of an unlimited number of shares of beneficial interest,
without par value. The Fund records sales and repurchases of its
capital stock on the trade date. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
At March 31, 1998, two unaffiliated omnibus accounts individually
held 84% of the outstanding shares of the Fund.Managers
(G) FOREIGN CURRENCY TRANSLATION
The books and records of the Fund are maintained in U.S. dollars. The
value of investments, assets and liabilities denominated in
currencies other than U.S. dollars are translated into U.S. dollars
based upon current foreign exchange rates. Purchases and sales of
foreign investments and income and expenses are converted into U.S.
dollars based on currency exchange rates prevailing on the respective
dates of such transactions. Net realized and unrealized gain (loss)
on foreign currency transactions represent: (1) foreign exchange
gains and losses from the sale and holdings of foreign currencies;
(2) gains and losses between trade date and settlement date on
investment securities transactions and forward foreign currency
exchange contracts; and (3) gains and losses from the difference
between amounts of interest and dividends recorded and the amounts
actually received.
In addition, the Fund does not isolate that portion of the results of
operation resulting from changes in exchange rates from the
fluctuations resulting from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
(2) AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Managers Funds, L.P. (the "Investment Manager") provides or
oversees investment advisory and management services to the Fund
under a Management Agreement. The Investment Manager selects
portfolio managers for the Fund (subject to Trustee approval),
allocates assets among portfolio managers and monitors the portfolio
managers' investment programs and results. The Fund's investment
portfolio is managed by portfolio managers who serve pursuant to
Portfolio Management Agreements with the Investment Manager and the
Fund. Certain trustees and officers of the Fund are officers of the
Investment Manager.
Investment advisory and management fees are paid directly by the Fund
to The Managers Funds, L.P. based on average daily net assets. The
annual investment advisory and management fee rate, as a percentage
of average daily net assets, is 1.15%. For the period February 9,
1998 (commencement of operations) to March 31,1998, the Manager
voluntarily waived its entire investment advisory and management fee,
amounting to $3,840. This voluntary waiver will continue through May
9, 1998.
The Trust has adopted an Administration and Shareholder Servicing
Agreement. The Managers Funds, L.P. serves as the Fund's
administrator (the "Administrator") and is responsible 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, broker-dealers and
registered investment advisers, that advise or act as an intermediary
with the Fund's shareholders. During the period February 9, 1998 to
March 31, 19986, the Fund paid a fee to the Administrator at the
rate of 0.25% per annum of the Fund's average daily net assets.
An aggregate annual fee of $10,000 is paid to each outside Trustee
for serving as a Trustee of the Trust. In addition, these Trustees
receive meeting fees of $750 for each in-person meeting attended, and
$200 for participation in any telephonic meetings. The Trustee fee
expense included in the financial statements represents the Fund's
allocated portion of the total fees.
(3) PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term securities,
for the period February 9, 1998 to March 31, 1998 were $3,481,674 and
$122,951.
There were no purchases or sales of U.S. Government securities.
(4) FORWARD FOREIGN CURRENCY CONTRACTS Manager
During the period from February 9, 1998 to March 31, 19986, Managers
the Fund Fund did not invest in forward foreign currency exchange
contracts, although it may in the future. These investments may
involve greater market risk than the amounts disclosed in the Fund's
financial statements.
A forward foreign currency exchange contract is an agreement between
the Fund and another party to buy or sell a currency at a set price
at a future date. The market value of the contract will fluctuate
with changes in currency exchange rates. The contract is marked-to-
market daily, and the change in market value is recorded as an
unrealized gain or loss. Gain or loss on the purchase or sale of
contracts having the same settlement date, amount and counterparty is
realized on the date of offset, otherwise gain or loss is realized on
settlement date.
The Fund may invest in non-U.S. dollar denominated instruments
subject to limitations, and enter into forward foreign currency
exchange contracts to facilitate transactions in foreign securities
and protect against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and such foreign
currency. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
There were no oThere were no open forward foreign currency exchange
contracts at December 31, 1997.
pen forward foreign currency exchange contracts at March 31, 1998.
53-56
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_______________________________
1Trustee who is an "interested person" of the Trust (as defined in Section
2(a)(19) of the 1940 Act).
THE MANAGERS FUNDS
MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1998
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 series
of the Trust is contained in prospectuses for those Funds, and in
a separate Statement of Additional Information for those Funds,
copies of which may be obtained without charge by contacting the
Trust at the address or telephone number listed above.
This Statement of Additional Information is not a
prospectus; it should be read in conjunction with the Money
Market Fund Prospectus of the Trust, dated May 1, 1998, copies of
which may be obtained without charge by contacting the Trust as
noted above.
This Statement of Additional Information is authorized
for distribution to prospective investors only if preceded or
accompanied by an effective prospectus for the Money Market Fund.
<PAGE>
TABLE OF CONTENTS
</TABLE>
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Page
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I. INVESTMENT OBJECTIVE AND POLICIES 1
II. INVESTMENT RESTRICTIONS 7
III. TRUSTEES AND OFFICERS 9
IV. MANAGEMENT OF THE FUND AND THE PORTFOLIO 17
V. CUSTODIAN, TRANSFER AGENT AND
INDEPENDENT PUBLIC ACCOUNTANTS 21
VI. EXPENSES 22
VII. CODE OF ETHICS 22
VIII. NET ASSET VALUE 23
IX. CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES 23
X. PERFORMANCE DATA 24
XI. ORGANIZATION OF THE PORTFOLIO 25
XII. PORTFOLIO TRANSACTIONS 25
XIII. TAX INFORMATION 26
XIV. FINANCIAL STATEMENTS 28
</TABLE>
<PAGE>
This Statement of Additional Information describes the
financial history, investment objectives and policies, management
and operation of the Managers Money Market Fund. The Fund
operates through a two-tiered master-feeder investment fund
structure. Prior to December 1, 1995, the Fund operated as a
free-standing mutual fund and not through the master-feeder
structure. Where indicated in this Statement of Additional
Information, historical information for the Fund includes
information from the period prior to commencement of operations
in the master-feeder structure.
I. INVESTMENT OBJECTIVE AND POLICIES
The Managers Money Market Fund (the "Money Market Fund" or
the "Fund") has an investment objective of maximizing current
income while 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 not more
than thirteen months. The Portfolio's ability to achieve maximum
current income is affected by its high quality standards. See
"Quality and Diversification Requirements."
The following discussion supplements the information
regarding the investment objective of the Fund and the policies
to be employed to achieve this objective by the Portfolio as set
forth above and in the Prospectus. The investment objective of
the Fund and of the Portfolio are identical. Accordingly,
references below to the Fund also include the Portfolio, and
references to the Portfolio also include the Fund, unless the
context requires otherwise.
Money Market Instruments
As discussed in the Prospectus, the Fund, through the
Portfolio, invests in money market instruments 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
1
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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, the Portfolio
must look principally to the federal agency issuing or
guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its
commitments. Securities in which the Portfolio may invest that
are not backed by the full faith and credit of the United States
include, but are not limited to: (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
2
<PAGE>
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.
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. Aseet-backed securities provide periodic
payments that generally consist of both interest and principle
payments. Consequently, the life of an asset-backed security
varies with the prepayment experience of the underlying
obligations. Payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period
by a letter of credit issued by a financial institution
unaffiliated with the entities issuing the securities. The asset-
backed securities in which the Portfolio may invest are subject
to the Portfolio's overall credit requirements. However, asset-
backed securities, in general, are subject to certain risks.
Most of these risks are related to limited interests in
applicable collateral. For example, credit card debt receivables
are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws,
many of which give such debtors the right to set off certain
amounts on credit card debt thereby reducing the balance due.
Additionally, if the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments or
losses if the full amounts due on underlying sales contracts are
not realized. Because asset-backed securities are relatively
new, the market experience in these securities is limited and the
market's ability to sustain liquidity through all phases of the
market cycle has not been tested.
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
Municipal Bonds. The Portfolio may invest in municipal
bonds issued by or on behalf of states, territories or
possessions of the United States and the District of Columbia and
their political subdivisions, agencies, authorities and
instrumentalities. The Portfolio may also invest in municipal
notes of various types, including notes issued in anticipation of
receipt of taxes, the proceeds of the sale of bonds, other
revenues or grant proceeds, as well as municipal commercial paper
and municipal demand obligations. These
3
<PAGE>
municipal bonds and notes will be taxable securities; income
generated from these instruments will be subject to federal,
state and local taxes.
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 and other fixed-income securities, 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.
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
4
<PAGE>
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. 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." 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 evidencing interests in the trust. The
certificates are generally sold in private placements in reliance
on Rule 144A.
5
<PAGE>
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.
At the time the Portfolio invests in any taxable commercial
paper, master demand obligation or repurchase agreement, the
issuer must have outstanding debt rated A or higher by Moody's or
Standard & Poor's. The issuer's parent corporation, if any, must
have outstanding commercial paper rated Prime-1 by Moody's or A-1
by Standard & Poor's, or if no such ratings are available, the
investment must be of comparable quality in Morgan's opinion.
In order to attain the Fund's objective of maintaining a
stable net asset value, the Portfolio will (i) with respect to
75% of the Portfolio's assets, 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.
6
<PAGE>
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 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 397 days;
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
7
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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
8
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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 other 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.
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<TABLE>
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Name, Address and Position with Principal Occupation During Past
Trust 5 Years
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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).
10
<PAGE>
<CAPTION>
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 Group (1986
New York, NY 10011 to present); Vice President,
Trustee Secretary and Director, First
Fund Distributors, Inc. (1991 to
Date of birth: 4/3/50 present); Vice President,
Secretary and Director;
Investment Company Administration
Corporation (1990 to present);
Trustee of Professionally Managed
Portfolios (1991 to present).
THOMAS R. SCHNEEWEIS Professor of Finance (1985 to
present), Associate Professor of
10 Cortland Drive Finance (1980-1985), Ph.D.
Amherst, MA 01002 Director (Acting) (1985 to 1986),
Chairman (Acting) Department of
Trustee General Business and Finance
(1981-1982), and Assistant
Date of birth: 5/10/47 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).
11
<PAGE>
<CAPTION>
Name, Address and Position with Principal Occupation During Past
Trust 5 Years
GIANCARLO (JOHN) E. ROSATI Vice President (July 1992 to
40 Richards Avenue Present) and Assistant Vice
Norwalk, CT 06854 President (July 1986 to June
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
August 1995); College Student
Date of Birth: 9/8/72 (September 1990 to June 1994).
Legal/Compliance Officer, The
LAURA A. PENTIMONE Managers Funds, L.P. (September
40 Richards Avenue 1997 to present); Law School
Norwalk, CT 06854 Student (August 1994 to June
Assistant Secretary 1997); College Student (August
1990 to June 1994).
Date of birth: 11/10/70
</TABLE>
The Trust's Disinterested Trustees receive an annual
retainer of $10,000, and meeting fees of $750 for each in-person
meeting attended and $200 for participating in each telephonic
meeting. There are no pension or retirement benefits provided by
the Trust or any affiliate of the Trust to the Trustees. The
Trust does not pay compensation to its officers. The following
chart sets forth the aggregate compensation paid to each
Disinterested Trustee for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Total Compensation
from
Registrant and
Aggregate Fund
Compensation Complex Paid to
Name of Trustee from Fund Trustees
--------------- ------------ -------------------
<S> <C> <C>
William W. Graulty $454 $13,200
Madeline H. McWhinney 454 13,200
Steven J. Paggioli 454 13,200
Thomas R. Schneeweis 454 13,200
</TABLE>
12
<PAGE>
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
approximately 2,111,382 of the shares of the Fund outstanding as
of the date of this Statement of Additional Information. This
includes shares held by The Managers Funds, L.P., and by a
pension plan, in which the Trustees and officers have beneficial
interests. Such Trustees and officers disclaim ownership,
control or voting power of the shares held through the pension
plan.
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; Prior to April 1994
Executive Vice President and Chief Financial Officer, 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 1993.
His address is Pine Tree Club Estates, 10286 Saint Andrews Road,
Boynton Beach, FL 33436. Birthdate, August 23, 1937.
Michael P. Mallardi - Trustee; Retired; Prior to April 1996,
Senior Vice President, Capital Cities/ABC, Inc., and President,
Broadcast Group. His address is 10 Charnwood Drive, Suffern, NY
10910. Birthdate, March 17, 1934.
(1) Mr. Healey is an "interested person" of the Portfolio and
the Advisor as that term is defined in the 1940 Act.
Each Trustee of the Portfolio is currently paid an annual
fee of $72,500 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 paid by the Portfolio for the calendar year ended
December 31, 1997 are set forth below.
13
<PAGE>
<TABLE>
<CAPTION>
Total Trustee
Compensation
Aggregate Accrued by the
Trustee Master Portfolios*,
Compensation The J.P. Morgan
Paid by the Funds, J.P.
Portfolio Morgan Institutional
Name of Trustee during 1997 Funds and J.P.Morgan
Series Trust during 1997**
- ----------------------- --------------- ----------------------
<S> <C> <C>
Frederick S. Addy, Trustee $9,756 $72,500
William G. Burns, Trustee 9,754 72,500
Arthur C. Eschenlauer, Trustee 9,754 72,500
Matthew Healey, Trustee, 9,754 72,500
Chairman and Chief Executive
Officer***
Michael P. Mallardi, Trustee 9,754 72,500
<FN>
*Includes the Portfolio and 21 other Portfolios (collectively the
"Master Portfolios") for which Morgan acts as investment advisor.
**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 J.P. Morgan Funds, the J.P. Morgan Institutional
Funds and J.P. Morgan Series Trust) in the Portfolio's fund
complex.
***During 1997, Pierpont Group, Inc. paid Mr. Healey, in his role
as Chairman of Pierpont Group, Inc., compensation in the amount
of $147,500, contributed $22,100 to a defined contribution plan
on his behalf and paid $20,500 in insurance premiums for his
benefit.
</FN>
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, 1995,
November 30, 1996 and November 30, 1997 were $261,045, $157,428
and $143,027, respectively.
14
<PAGE>
The Portfolio's executive officers (listed below), other
than the Chief Executive Officer and the officers who are
employees of the Advisor, 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 1993. 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 and Premier Mutual Fund Services, Inc., an
affiliate of FDI ("Premier Mutual") and an officer of certain
investment companies distributed or administered by FDI. Prior
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 Assistant Department Manager of
Treasury Services and Administration of FDI and an officer of
certain investment companies distributed or administered by FDI.
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. His date of birth is March 31, 1969.
JACQUELINE HENNING; Assistant Secretary and Assistant
Treasurer of the Portfolio 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 was Managing Director of Bank of Nova Scotia Trust
Company (Cayman) Limited prior to September 1993. Address: P.O.
Box 2508 GT, Elizabethan Square, 2nd Floor, Shedden Road, George
Town, Grand Cayman, Cayman Islands, BWI. Her date of birth is
March 24, 1942.
15
<PAGE>
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary.
Vice President and Senior Counsel of FDI and an officer of
certain investment companies distributed or administered by FDI.
From June 1994 to January 1996, Ms. Jacoppo-Wood was a Manager of
SEC Registration at Scudder, Stevens & Clark, Inc. Prior 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.
CHRISTOPHER J. KELLEY; Vice President and Assistant
Secretary. Vice President and Senior Associate General Counsel
of FDI and Premier Mutual and an officer of certain investment
companies distributed or administered by FDI. From April 1994 to
July 1996, Mr. Kelley was Assistant Counsel at Forum Financial
Group. Prior to April 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 Portfolio 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, BWI. 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 and an officer of
certain investment companies distributed or administered by FDI.
Prior to August 1994, Ms. Nelson was an Assistant Vice President
and Client Manager for The Boston Company, Inc. Her date of
birth is April 22, 1964.
MARY JO PACE; Assistant Treasurer. Vice President, Morgan
Guaranty Trust Company of New York. Ms. Pace serves in the Funds
Administration group as a Manager for the Budgeting and Expense
Processing Group. Prior to September 1995, Ms. Pace served as a
Fund Administrator for Morgan Guaranty Trust Company of New York.
Her address is 60 Wall Street, New York, New York 10260. Her
date of birth is March 13, 1966.
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
16
<PAGE>
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.
CHRISTINE ROTUNDO; Assistant Treasurer. Vice President,
Morgan Guaranty Trust Company of New York. Ms. Rotundo serves in
the Fund Administration group as a Manager of the Tax Group and
is responsible for U.S. mutual fund tax matters. Prior to
September 1995, Ms. Rotundo served as a Senior Tax Manager in the
Investment Company Services Group of Deloitte & Touche LLP. Her
address is 60 Wall Street, New York, New York 10260. Her date of
birth is September 26, 1965.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer.
Senior 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 certain investment companies distributed or
administered by FDI. Prior 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."
17
<PAGE>
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
more than $250 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's
First Tier 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 average
daily net assets in excess of $1 billion.
18
<PAGE>
The advisory fees paid by the Portfolio to the Advisor are
as follows: For the fiscal year ended November 30, 1995:
$3,913,479. For the fiscal year ended November 30, 1996:
$4,503,793. For the fiscal year ended November 30, 1997:
$5,063,662.
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,
net fees after waivers 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
19
<PAGE>
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 J.P. Morgan 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
aggregate 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 J.P.
Morgan Funds, the J.P. Morgan Institutional Funds, the Master
Portfolios, the other investors in the Master Portfolios for
which Morgan provides similar services and J.P. Morgan 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, 1995: $373,077. For the
fiscal year ended November 30, 1996: $891,730. For the fiscal
year ended November 30, 1997: $1,256,131.
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
20
<PAGE>
assets to the aggregate net assets of the Master Portfolios and
certain other investment companies subject to similar agreements
with FDI.
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 and the fiscal year ended November
30, 1997 were $33,012 and $96,662, respectively.
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
waived all of this fee through November 30, 1997. 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"), 225
Franklin Street, Boston, Massachusetts 02110, 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.
21
<PAGE>
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.
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<PAGE>
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 April 8, 1998, three shareholders, Benefits Resources,
Independent Trust and The Managers Funds, L.P. each held over 5%
of the outstanding shares of the Fund, holding 6%, 8% and 9%,
respectively.
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<PAGE>
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, 1997, the
current yield and effective yield of the Money Market Fund were
5.16% and 5.29%, respectively. These figures reflect a fee
waiver in effect during the relevant time period. In the absence
of such waiver, these figures would have been 4.91% and 5.03%,
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, 1997, the Money Market Fund's annualized one-, five-
and ten-year total returns were 5.36%, 4.38% and 5.39%,
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.
24
<PAGE>
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 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
25
<PAGE>
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; and (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. 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
26
<PAGE>
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.
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<PAGE>
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, 1997.
The Portfolio's audited Financial Statements and the Notes
thereto at November 30, 1997 and the report of Price Waterhouse
LLP, independent accountants, are herein incorporated by
reference to the Portfolio's filing with the SEC pursuant to
Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder.
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<PAGE>
APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S:
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA has the highest ratings assigned by
Standard & Poor's to a debt obligation. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than for debt in
higher rated categories.
BB - Debt rated BB is regarded as having less near-term
vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which
could lead to inadequate capacity to meet timely interest
and principal payments.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues in
this category are further refined with the designations 1,
2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety
regarding timely payment is very strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the
highest rating assigned by Standard & Poor's and has a very
strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
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<PAGE>
SP-2 - The short-term tax-exempt note rating of SP-2 has
satisfactory capacity to pay principal and interest.
30
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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:
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<PAGE>
-- 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.
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<PAGE>
_______________________________
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. 43 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
Emerging Markets Equity Fund
Short Government Fund
Short and Intermediate Bond Fund
Intermediate Bond 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,
1997 (November 30, 1997 with respect to Managers
Money Market Fund); for the portion of the fiscal
year unaudited from February 9,
1998 (commencement of operations) to March 31,
1998 for Emerging Markets Equity Fund.
PART B:
With reference to each of The Managers:
Income Equity Fund
Capital Appreciation Fund
Special Equity Fund
International Equity Fund
Emerging Markets Equity Fund
Short Government Fund
Short and Intermediate Bond Fund
Intermediate Mortgage Fund
Bond Fund
Global Bond Fund
Money Market Fund
At December 31, 1997 (audited), with respect
to Managers Money Market Fund, at November 30, 1997
(audited) and with respect to Managers Emerging
Markets Equity Fund at March 31, 1998 (unaudited):
Schedule of Investments
Statement of Assets and Liabilities
For the fiscal year ended December 31, 1997
(audited), with respect to Managers Money
Market Fund, at November 30, 1997 (audited)and
with respect to Managers Emerging Markets Equity
Fund, for the period February 9, 1998 (commence-
ment of operations) to March 31, 1998 (unaudited):
Statement of Changes in Net Assets
For the fiscal years ended December 31, 1997
(audited), December 31, 1996 (audited), with
respect to Managers Money Market Fund, for
the fiscal year ended November 30, 1997
(audited) and the fiscal year ended November
30, 1996 (audited) and with respect to Managers
Emerging Markets Equity Fund, for the period
February 9, 1998 (commencement of operations) to
March 31, 1998 (unaudited):
Statement of Operations
Notes to Financial Statements
For the fiscal years (or portions thereof)
from commencement of operations to December
31, 1997 (audited), with respect to Managers
Money Market Fund, for the fiscal year ended
November 30, 1997 (audited) and with respect to
Managers Emerging Markets Equity Fund, for the
period February 9, 1998 (commencement of operations)
to March 31, 1998 (unaudited):
Financial Highlights
With respect to The Prime Money Market
Portfolio:
At November 30, 1997 (audited); and for year
ended November 30, 1997, with respect to
Managers Money Market Fund (audited):
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
(b) Exhibits
1. (A) Declaration of Trust dated November 23, 1987
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 20.
1. (B) Amendment to Declaration of Trust dated
May 12, 1993.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 32.
1. (C) Amendment to Declaration of Trust dated
June 30, 1993.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 32.
* 1. (D) Amendment to Declaration of Trust dated
December 8, 1997.
2. By-Laws of the Trust.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 20.
3. Not Applicable.
4. Instruments Defining Rights of Shareholders.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 34.
5. (A) Fund Management Agreement dated August 17,
1990 between EAIMC Partners, L.P. (now "The
Managers Funds, L.P.") and the Trust.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 32.
5. (B) Asset Management Agreements between The
Managers Funds, L.P. and each of the Asset
Managers identified in the Registration
Statement.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 32.
6. Form of Distribution Agreement between The
Managers Funds and The Managers Funds, L.P.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 28.
7. Not Applicable.
8. Form of the Custodian Agreement with State
Street Bank and Trust Company.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 28.
9. (A) Transfer Agency Agreement between The Managers
Funds and State Street Bank and Trust Company.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 33.
9. (B) Form of Administration and Shareholder Servicing
Agreement between the Trust and The Managers
Funds, L.P.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 28.
9. (C) Form of License Agreement Relating to the Use
of Name between The Managers Funds and The
Managers Funds, L.P.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 28.
10. Opinion and Consent of Shereff, Friedman,
Hoffman and Goodman, L.L.P.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 20.
*11. Consent of Independent Accountants
Coopers and Lybrand, L.L.P.
Price Waterhouse, L.L.P.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Not Applicable.
16. Computation of Performance Quotations.
Refiled electronically in and incorporated
by reference to PEA 41; initially filed in
PEA 19.
*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
Incorporated by reference to PEA 42 filed
electronically on December 31, 1997.
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
Incorporated by reference to PEA 41 filed
electronically on November 19, 1997.
- ------------------
* 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 April 8, 1998, 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 2,591
Capital Appreciation Fund 2,114
Special Equity Fund 14,488
International Equity Fund 8,586
Emerging Markets Equity Fund 33
Short Government Fund 744
Short and Intermediate Bond Fund 1,029
Intermediate Mortgage Fund 1,305
Bond Fund 2,335
Global Bond Fund 1,799
Money Market Fund 1,349
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:
Section 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 the 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 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 aid 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 Co., LLC 801-12548
Jennison Associates LLC 801-5608
Kern Capital Management LLC 801-54766
Lazard Asset Management 801-6568
Liberty Investment Management 801-21343
Loomis, Sayles & Company, L.P. 801-17000
Montgomery Asset Management, LLC 801-54803
Pilgrim Baxter Associates, Ltd. 801-19165RC
Rogge Global Partners, Inc. 801-25482
Scudder Kemper Investments, Inc. 801-252
Standish, Ayer & Wood, Inc. 801-584
State Street Global Advisers,
United Kingdom, Limited 801-49368
Westport Asset Management, Inc. 801-21854
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 the Registrant
certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Norwalk, and the
State of Connecticut on this 29th day of April, 1998.
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.
Robert P. Watson*
- --------------------
Robert P. Watson
Trustee and President
Principal Executive
Officer
Donald S. Rumery*
- --------------------
Donald S. Rumery
Principal Financial
and Accounting Officer
William W. Graulty*
- --------------------
William W. Graulty
Trustee
Madeline H. McWhinney*
- ---------------------
Madeline H. McWhinney
Trustee
Steven J. Paggioli*
- ---------------------
Steven J. Paggioli
Trustee
Thomas R. Schneeweis*
- ---------------------
Thomas R. Schneeweis
Trustee
By: /s/Robert P. Watson
Robert P. Watson, as attorney-in-fact pursuant to a
power of attorney previously filed.
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 21st day of April, 1998.
THE PRIME MONEY MARKET PORTFOLIO
By: /s/ Jacqueline Henning
Jacqueline Henning
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 April
21, 1998.
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/ Jacqueline Henning
- -------------------------
Jacqueline Henning, as attorney-in-fact pursuant to a
power of attorney previously filed.
EXHIBIT 1(D)
THE MANAGERS FUNDS
CERTIFICATE OF AMENDMENT
---------------------------
The undersigned, constituting a majority of the
Trustees of The Managers Funds (hereinafter referred to as
the "Trust"), a Massachusetts business trust with
transferable shares of beneficial interest, DO HEREBY
CERTIFY, that, pursuant to the authority conferred upon the
Trustees of the Trust by Sections 2.8, 2.9, 5.11 and 8.3 of
the Declaration of Trust, dated November 23, 1987, as
amended to date (the "Declaration of Trust"), and by
resolution adopted by the affirmative vote of a majority of
the Trustees at a regular meeting of the Trustees held on
December 8, 1997 attached as Exhibit A hereto, there is
hereby established an additional series of shares of the
Trust which shall be designated:
Managers Emerging Markets Equity Fund
The Managers Emerging Markets Equity Fund shall have
all the rights and preferences with respect to series of
shares of the Trust set forth in the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned have set their
hands this 8th day of December, 1997.
/s/Robert P. Watson
---------------------
Robert P. Watson
/s/William W. Graulty
---------------------
William W. Graulty
/s/Madeline H. McWhinney
---------------------
Madeline H. McWhinney
/s/Steven J. Paggioli
---------------------
Steven J. Paggioli
/s/Thomas R. Schneeweis
----------------------
Thomas R. Schneeweis
ACKNOWLEDGEMENT
STATE OF CONNECTICUT )
)ss.
COUNTY OF FAIRFIELD )
December 8, 1997
Then personally appeared the above-named Robert P.
Watson, William W. Graulty, Madeline H. McWhinney, Steven J.
Paggioli, and Thomas R. Schneeweis, each of whom
acknowledged the foregoing act to be his or her free act and
deed.
Before me,
/s/Laura Ann Pentimone
----------------------
Notary Public
My Commission expires:
10/31/2002
----------------------
EXHIBIT A
---------
THE MANAGERS FUNDS
RESOLUTION OF THE BOARD OF TRUSTEES
AT A REGULAR MEETING HELD ON DECEMBER 8, 1997
---------------------------------------------
RESOLVED, that the Trustees hereby determine that it is
desirable to establish an additional investment series (the
"Additional Fund") of The Managers Funds (the "Trust"), and
the proper officers of the Trust be, and they hereby are,
authorized to file such documents and reports, including any
necessary filings or amendments to the Trust's Declaration
of Trust, or to the Trust's Registration Statement on Form N-
1A with the Securities and Exchange Commission or any state
securities commissions and to do all such other acts and
things as they or any of them deem necessary or desirable to
effectuate the establishment of the Additional Fund.
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.
43 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 20, 1998 (except for Managers Money
Market Fund which report is dated January 20, 1998) 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, 1997, (except for Managers
Money Market Fund which is for the year ended November 30,
1997) 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
April 29, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information
constituting parts of this Post-Effective Amendment No. 43
to the registration statement on Form N-1A (the
"Registration Statement") of our report dated January 20,
1998, relating to the financial statements and supplementary
data of The Prime Money Market Portfolio appearing in the
November 30, 1997 Annual Report, which are also incorporated
by reference into the Registration Statement.
We also consent to the references to us under the headings
"Custodian, Transfer Agent and Independent Public
Accountants" and "Financial Statements" in the Statement of
Additional Information.
/s/Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
April 27, 1998
EXHIBIT 17
- ----------
Financial Data Schedules for all Funds
- --------------------------------------
[ARTICLE] 6
[SERIES]
[NUMBER] 2
[NAME] MANAGERS CAPITAL APPRECIATION FUND
[MULTIPLIER] 1000
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 62469
[INVESTMENTS-AT-VALUE] 72186
[RECEIVABLES] 5320
[ASSETS-OTHER] 5734
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 83240
[PAYABLE-FOR-SECURITIES] 2487
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 6893
[TOTAL-LIABILITIES] 9380
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 63142
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1001
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 9717
[NET-ASSETS] 73860
[DIVIDEND-INCOME] 600
[INTEREST-INCOME] 138
[OTHER-INCOME] 64
[EXPENSES-NET] 1253
[NET-INVESTMENT-INCOME] (451)
[REALIZED-GAINS-CURRENT] 13436
[APPREC-INCREASE-CURRENT] (1801)
[NET-CHANGE-FROM-OPS] 11184
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 12542
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 81018
[NUMBER-OF-SHARES-REDEEMED] 118642
[SHARES-REINVESTED] 11559
[NET-CHANGE-IN-ASSETS] 27423
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 610
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 798
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1317
[AVERAGE-NET-ASSETS] 99741
[PER-SHARE-NAV-BEGIN] 26.34
[PER-SHARE-NII] (0.13)
[PER-SHARE-GAIN-APPREC] 3.15
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 5.12
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 24.24
[EXPENSE-RATIO] 1.26
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 3
[NAME] MANAGERS SPECIAL EQUITY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 572479
[INVESTMENTS-AT-VALUE] 716732
[RECEIVABLES] 9742
[ASSETS-OTHER] 30345
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 756819
[PAYABLE-FOR-SECURITIES] 2663
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 34449
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 576393
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 75
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 1014
[ACCUM-APPREC-OR-DEPREC] 144253
[NET-ASSETS] 719707
[DIVIDEND-INCOME] 4307
[INTEREST-INCOME] 3146
[OTHER-INCOME] 122
[EXPENSES-NET] 6742
[NET-INVESTMENT-INCOME] 833
[REALIZED-GAINS-CURRENT] 17631
[APPREC-INCREASE-CURRENT] 98018
[NET-CHANGE-FROM-OPS] 116482
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 788
[DISTRIBUTIONS-OF-GAINS] 23238
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 594942
[NUMBER-OF-SHARES-REDEEMED] 259296
[SHARES-REINVESTED] 20172
[NET-CHANGE-IN-ASSETS] 448274
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 4624
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4478
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6766
[AVERAGE-NET-ASSETS] 497538
[PER-SHARE-NAV-BEGIN] 50.95
[PER-SHARE-NII] 0.08
[PER-SHARE-GAIN-APPREC] 12.29
[PER-SHARE-DIVIDEND] 0.07
[PER-SHARE-DISTRIBUTIONS] 2.07
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 61.18
[EXPENSE-RATIO] 1.35
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 4
[NAME] MANAGERS INCOME EQUITY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 54837
[INVESTMENTS-AT-VALUE] 65824
[RECEIVABLES] 1816
[ASSETS-OTHER] 534
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 68174
[PAYABLE-FOR-SECURITIES] 2512
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 716
[TOTAL-LIABILITIES] 3228
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 51815
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 24
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2120
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10987
[NET-ASSETS] 64946
[DIVIDEND-INCOME] 1849
[INTEREST-INCOME] 187
[OTHER-INCOME] 3
[EXPENSES-NET] 816
[NET-INVESTMENT-INCOME] 1223
[REALIZED-GAINS-CURRENT] 13071
[APPREC-INCREASE-CURRENT] 595
[NET-CHANGE-FROM-OPS] 14889
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1254
[DISTRIBUTIONS-OF-GAINS] 11843
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 35568
[NUMBER-OF-SHARES-REDEEMED] 36961
[SHARES-REINVESTED] 11484
[NET-CHANGE-IN-ASSETS] 11883
[ACCUMULATED-NII-PRIOR] 62
[ACCUMULATED-GAINS-PRIOR] 894
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 465
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 838
[AVERAGE-NET-ASSETS] 62046
[PER-SHARE-NAV-BEGIN] 30.49
[PER-SHARE-NII] 0.67
[PER-SHARE-GAIN-APPREC] 7.27
[PER-SHARE-DIVIDEND] 0.69
[PER-SHARE-DISTRIBUTIONS] 6.68
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 31.06
[EXPENSE-RATIO] 1.32
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 5
[NAME] MANAGERS INTERNATIONAL EQUITY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 330155
[INVESTMENTS-AT-VALUE] 375565
[RECEIVABLES] 32693
[ASSETS-OTHER] 104
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 408362
[PAYABLE-FOR-SECURITIES] 1263
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 20475
[TOTAL-LIABILITIES] 21738
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 339314
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 2074
[ACCUMULATED-NET-GAINS] 4136
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 45248
[NET-ASSETS] 386624
[DIVIDEND-INCOME] 5804
[INTEREST-INCOME] 1564
[OTHER-INCOME] 0
[EXPENSES-NET] 4863
[NET-INVESTMENT-INCOME] 2505
[REALIZED-GAINS-CURRENT] 21874
[APPREC-INCREASE-CURRENT] 7660
[NET-CHANGE-FROM-OPS] 32039
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5098
[DISTRIBUTIONS-OF-GAINS] 16879
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 306117
[NUMBER-OF-SHARES-REDEEMED] 217076
[SHARES-REINVESTED] 17953
[NET-CHANGE-IN-ASSETS] 117056
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 99
[OVERDIST-NET-GAINS-PRIOR] 241
[GROSS-ADVISORY-FEES] 3010
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4867
[AVERAGE-NET-ASSETS] 334492
[PER-SHARE-NAV-BEGIN] 43.69
[PER-SHARE-NII] 0.42
[PER-SHARE-GAIN-APPREC] 4.27
[PER-SHARE-DIVIDEND] 0.65
[PER-SHARE-DISTRIBUTIONS] 2.15
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 45.58
[EXPENSE-RATIO] 1.45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER]
[NAME] MANAGERS EMERGING MARKETS EQUITY FUND(UNAUDITED)
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 2-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] MAR-31-1998
[INVESTMENTS-AT-COST] 3375427
[INVESTMENTS-AT-VALUE] 3511517
[RECEIVABLES] 136796
[ASSETS-OTHER] 20457
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3668770
[PAYABLE-FOR-SECURITIES] 97150
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3920
[TOTAL-LIABILITIES] 101070
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3437965
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 4743
[ACCUMULATED-NET-GAINS] (11085)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 136077
[NET-ASSETS] 3567700
[DIVIDEND-INCOME] 6136
[INTEREST-INCOME] 4738
[OTHER-INCOME] (35)
[EXPENSES-NET] 6096
[NET-INVESTMENT-INCOME] 4743
[REALIZED-GAINS-CURRENT] (11085)
[APPREC-INCREASE-CURRENT] 131640
[NET-CHANGE-FROM-OPS] 125298
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3437865
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3563163
[ACCUMULATED-NII-PRIOR] 100
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 3563263
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.01
[PER-SHARE-GAIN-APPREC] 0.40
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.41
[EXPENSE-RATIO] 1.83
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 9
[NAME] MANAGERS INTERMEDIATE MORTGAGE FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 25986
[INVESTMENTS-AT-VALUE] 26360
[RECEIVABLES] 168
[ASSETS-OTHER] 13
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 26541
[PAYABLE-FOR-SECURITIES] 4869
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 72
[TOTAL-LIABILITIES] 4941
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 101357
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 10
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 80140
[ACCUM-APPREC-OR-DEPREC] 373
[NET-ASSETS] 21600
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1567
[OTHER-INCOME] 0
[EXPENSES-NET] 270
[NET-INVESTMENT-INCOME] 1297
[REALIZED-GAINS-CURRENT] 109
[APPREC-INCREASE-CURRENT] 358
[NET-CHANGE-FROM-OPS] 1764
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1261
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4166
[NUMBER-OF-SHARES-REDEEMED] 8856
[SHARES-REINVESTED] 941
[NET-CHANGE-IN-ASSETS] 3246
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 3
[OVERDIST-NET-GAINS-PRIOR] 80275
[GROSS-ADVISORY-FEES] 101
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 270
[AVERAGE-NET-ASSETS] 22536
[PER-SHARE-NAV-BEGIN] 15.17
[PER-SHARE-NII] 0.87
[PER-SHARE-GAIN-APPREC] 0.33
[PER-SHARE-DIVIDEND] 0.86
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.51
[EXPENSE-RATIO] 1.20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 6
[NAME] MANAGERS BOND FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 39775
[INVESTMENTS-AT-VALUE] 40717
[RECEIVABLES] 775
[ASSETS-OTHER] 17
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 41509
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 211
[TOTAL-LIABILITIES] 211
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 39780
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 12
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 565
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 941
[NET-ASSETS] 41298
[DIVIDEND-INCOME] 115
[INTEREST-INCOME] 2505
[OTHER-INCOME] 0
[EXPENSES-NET] 448
[NET-INVESTMENT-INCOME] 2173
[REALIZED-GAINS-CURRENT] 1061
[APPREC-INCREASE-CURRENT] 276
[NET-CHANGE-FROM-OPS] 3510
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2141
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 19635
[NUMBER-OF-SHARES-REDEEMED] 13431
[SHARES-REINVESTED] 1907
[NET-CHANGE-IN-ASSETS] 9480
[ACCUMULATED-NII-PRIOR] 26
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 542
[GROSS-ADVISORY-FEES] 221
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 448
[AVERAGE-NET-ASSETS] 35397
[PER-SHARE-NAV-BEGIN] 22.83
[PER-SHARE-NII] 1.39
[PER-SHARE-GAIN-APPREC] 0.90
[PER-SHARE-DIVIDEND] 1.40
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 23.72
[EXPENSE-RATIO] 1.27
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 7
[NAME] MANAGERS SHORT AND INTERMEDIATE BOND FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 14979
[INVESTMENTS-AT-VALUE] 15038
[RECEIVABLES] 196
[ASSETS-OTHER] 11
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 15245
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 163
[TOTAL-LIABILITIES] 163
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 28152
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 14
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 13143
[ACCUM-APPREC-OR-DEPREC] 59
[NET-ASSETS] 15082
[DIVIDEND-INCOME] 1
[INTEREST-INCOME] 1232
[OTHER-INCOME] 0
[EXPENSES-NET] 249
[NET-INVESTMENT-INCOME] 984
[REALIZED-GAINS-CURRENT] (177)
[APPREC-INCREASE-CURRENT] 156
[NET-CHANGE-FROM-OPS] 963
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 954
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 6970
[NUMBER-OF-SHARES-REDEEMED] 15047
[SHARES-REINVESTED] 770
[NET-CHANGE-IN-ASSETS] (7298)
[ACCUMULATED-NII-PRIOR] 6705
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 12041
[GROSS-ADVISORY-FEES] 89
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 249
[AVERAGE-NET-ASSETS] 17768
[PER-SHARE-NAV-BEGIN] 19.45
[PER-SHARE-NII] 1.08
[PER-SHARE-GAIN-APPREC] 0.03
[PER-SHARE-DIVIDEND] 1.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 19.51
[EXPENSE-RATIO] 1.40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 8
[NAME] MANAGERS SHORT GOVERNMENT FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 5045
[INVESTMENTS-AT-VALUE] 5058
[RECEIVABLES] 28
[ASSETS-OTHER] 8
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 5094
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 20
[TOTAL-LIABILITIES] 20
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 18516
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 13457
[ACCUM-APPREC-OR-DEPREC] 15
[NET-ASSETS] 5074
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 352
[OTHER-INCOME] 0
[EXPENSES-NET] 61
[NET-INVESTMENT-INCOME] 291
[REALIZED-GAINS-CURRENT] (65)
[APPREC-INCREASE-CURRENT] 51
[NET-CHANGE-FROM-OPS] 277
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 293
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2165
[NUMBER-OF-SHARES-REDEEMED] 3459
[SHARES-REINVESTED] 271
[NET-CHANGE-IN-ASSETS] (1039)
[ACCUMULATED-NII-PRIOR] 2
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 13392
[GROSS-ADVISORY-FEES] 24
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 84
[AVERAGE-NET-ASSETS] 5287
[PER-SHARE-NAV-BEGIN] 17.40
[PER-SHARE-NII] 0.97
[PER-SHARE-GAIN-APPREC] (0.02)
[PER-SHARE-DIVIDEND] 0.98
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 17.37
[EXPENSE-RATIO] 1.15
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 13
[NAME] MANAGERS GLOBAL BOND FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 17000
[INVESTMENTS-AT-VALUE] 17339
[RECEIVABLES] 7299
[ASSETS-OTHER] 16
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 24654
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7189
[TOTAL-LIABILITIES] 7189
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 17404
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 303
[ACCUMULATED-NET-GAINS] 109
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 255
[NET-ASSETS] 17465
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1058
[OTHER-INCOME] 0
[EXPENSES-NET] 271
[NET-INVESTMENT-INCOME] 787
[REALIZED-GAINS-CURRENT] (919)
[APPREC-INCREASE-CURRENT] 128
[NET-CHANGE-FROM-OPS] (4)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 139
[DISTRIBUTIONS-OF-GAINS] 277
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 8504
[NUMBER-OF-SHARES-REDEEMED] 7882
[SHARES-REINVESTED] 411
[NET-CHANGE-IN-ASSETS] 613
[ACCUMULATED-NII-PRIOR] 149
[ACCUMULATED-GAINS-PRIOR] 196
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 116
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 271
[AVERAGE-NET-ASSETS] 16571
[PER-SHARE-NAV-BEGIN] 21.40
[PER-SHARE-NII] 0.97
[PER-SHARE-GAIN-APPREC] (0.93)
[PER-SHARE-DIVIDEND] 0.17
[PER-SHARE-DISTRIBUTIONS] 0.34
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 20.93
[EXPENSE-RATIO] 1.63
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[SERIES]
[NUMBER] 12
[NAME] MANAGERS MONEY MARKET FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 36596
[INVESTMENTS-AT-VALUE] 36596
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 10
[TOTAL-ASSETS] 36607
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 63
[TOTAL-LIABILITIES] 63
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 36544
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 36544
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2313
[OTHER-INCOME] 0
[EXPENSES-NET] 163
[NET-INVESTMENT-INCOME] 2150
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 2150
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2150
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 317466
[NUMBER-OF-SHARES-REDEEMED] 318776
[SHARES-REINVESTED] 1762
[NET-CHANGE-IN-ASSETS] 453
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 51
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 303
[AVERAGE-NET-ASSETS] 41168
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.052
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.052
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.004
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
The Managers Funds
40 Richards Avenue
Norwalk, CT 06854
(203)857-5321
April 29, 1998
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: The Managers Funds Post-Effective Amendment 43
to Registration Statement on Form N-1A
File Nos. 2-84012; 811-3752
-----------------------------------------------
Commissioners:
We are hereby filing Post Effective Amendment No. 43 to The
Managers Funds' (the "Trust") Registration Statement on Form
N-1A (the "Amendment") under the Securities Act of 1933 (the
"1933 Act") and the Investment Company Act of 1940 (the
"1940 Act"), as amended.
The Amendment is filed pursuant to paragraph (b) of Rule 485
under the 1933 Act in order to update certain financial
information and to make other non-material changes since
Post-Effective Amendment No. 42 was filed on December 29,
1997. Furthermore, this Amendment provides financial
information for Managers Emerging Markets Equity Fund which
satisfies the undertaking to file a Post-Effective
Amendment, using financial statements which need not be
certified, within four to six months from the effective date
of Post-Effective Amendment No. 42.
It is proposed that this Amendment become effective on May
1, 1998.
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.
