THE MANAGERS FUNDS
MANAGERS INCOME EQUITY FUND
MANAGERS CAPITAL APPRECIATION FUND
MANAGERS SPECIAL EQUITY FUND
MANAGERS INTERNATIONAL EQUITY FUND
MANAGERS EMERGING MARKETS EQUITY FUND
MANAGERS SHORT AND INTERMEDIATE BOND FUND
MANAGERS BOND FUND
MANAGERS GLOBAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1999,
as supplemented August 20, 1999
You can obtain a free copy of the Prospectus for any of these
Funds by calling The Managers Funds at (800) 835-3879. The
Prospectus provides the basic information about investing in
the Funds.
This Statement of Additional Information is not a Prospectus.
It contains additional information regarding the activities
and operations of the Funds. It should be read in conjunction
with each Fund's Prospectus.
The Financial Statements of the Funds, including the report of
independent accountant, for the fiscal year ended December 31,
1998 are included in each Fund's Annual Report and are
available without charge by calling the Fund at (800) 835-
3879. They are incorporated by reference to this document.
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TABLE OF CONTENTS
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1 GENERAL INFORMATION
1 INVESTMENT OBJECTIVES AND POLICIES
2 Investment Techniques and Associated Risks
11 Quality and Diversification Requirements forthe Funds
12 Fundamental Investment Restrictions
14 Non-Fundamental Investment Restrictions
15 Temporary Defensive Position
15 Portfolio Turnover
16 BOARD OF TRUSTEES AND OFFICERS OF THE FUNDS
17 Trustees' Compensation
18 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
18 Control Persons
19 Management Ownership
19 MANAGEMENT OF THE FUNDS
19 Investment Advisor
20 Sub-Advisors
24 Voluntary Fee Waivers and Expense Limitations
25 Compensation of Manager and Sub-Advisers
26 Fund Management Agreement
27 Administrative Services; Distribution Arrangements
28 Custodian
28 Transfer Agent
28 Independent Public Accountants
28 BROKERAGE ALLOCATION AND OTHER PRACTICES
30 PURCHASE, REDEMPTION AND PRICING OF SHARES
30 Purchasing Shares
31 Redeeming Shares
32 Exchange of Shares
32 Net Asset Value
33 Dividends and Distributions
33 TAXATION OF THE FUNDS
36 PERFORMANCE DATA
36 Yield
37 Total Return
37 Performance Comparisons
38 Massachusetts Trust
39 Description of Shares
41 Additional Information
41 FINANCIAL STATEMENTS
Appendix A DESCRIPTION OF SECURITY RATINGS
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GENERAL INFORMATION
This Statement of Additional Information relates only to
Managers Income Equity Fund, Managers Capital Appreciation
Fund, Managers Special Equity Fund, Managers International
Equity Fund, Managers Emerging Markets Equity Fund, Managers
Short and Intermediate Bond Fund, Managers Bond Fund and
Managers Global Bond Fund. Each Fund is a series of shares of
beneficial interest of The Managers Funds, a no-load mutual
fund family, formed as a Massachusetts business trust (the
"Trust"). A separate Statement of Additional Information
covers Managers Money Market Fund, a separate series of the
Trust.
This Statement of Additional Information describes the
financial history, management and operation of each of the
Funds, as well as each Fund's investment objectives and
policies. It should be read in conjunction with each Fund's
current Prospectus. The Trust's executive office is located
at 40 Richards Avenue, Norwalk, Connecticut 06854.
Unlike other mutual funds which directly acquire and
manage their own portfolios, the Trust employs a multi-manager
investment approach to these Funds which achieves added
diversification within each of their portfolios. See
"Management of the Funds."
The Managers Funds, L.P. LLC, a subsidiary of Affiliated
Managers Group, Inc., serves as investment manager to each
Fund and is responsible for the Fund's overall administration
and distribution. It selects and recommends, subject to the
approval of the Board of Trustees, an independent asset
manager, or a team of independent asset managers ("Sub-
Adviser" or "Sub-Advisers"), to manage each Fund's investment
portfolio. The Managers Funds, L.P. LLC also monitors the
performance, security holdings and investment strategies of
these external Sub-Advisers and researches any potential new
Sub-Advisers for the Fund family. See "Management of the
Funds."
Investments in the Fund are not:
* Deposits or obligations of any bank
* Guaranteed or endorsed by any bank
* Federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other federal
agency
INVESTMENT OBJECTIVES AND POLICIES
The following is additional information regarding the
investment objectives and policies used by each Fund in an
attempt to achieve its objective as stated in its Prospectus.
Each Fund in the Trust is an open-end management investment
company. Each Fund, with the exception of Managers Global
Bond Fund, is diversified.
Managers Income Equity Fund (the "Income Equity Fund") is
designed for investors who seek a high level of current income
from investing in a diversified portfolio of equity
securities. The Income Equity Fund seeks to achieve this
objective by investing at least 65% of its total assets in the
equity securities of U.S. companies.
Managers Capital Appreciation Fund (the "Capital
Appreciation Fund") is designed for investors who seek long-
term capital appreciation by investing in a diversified
portfolio of equity securities. Income is the Fund's
secondary objective. The Capital Appreciation Fund seeks to
achieve this objective by investing its assets in equity
securities in U.S. companies with mid- to large-
capitalizations.
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Managers Special Equity Fund (the "Special Equity Fund")
is designed for investors who seek long-term capital
appreciation by investing in a diversified portfolio of equity
securities of small- and medium-capitalization companies. The
Special Equity Fund seeks to achieve this objective by
investing at least 65% of its total assets in the equity
securities of U.S. companies whose shares have a market
capitalization of under $1.5 billion.
Managers International Equity Fund (the "International
Equity Fund") is designed for investors who seek long-term
capital appreciation by investing in a diversified portfolio
of equity securities of companies domiciled outside the U.S.
The International Equity Fund seeks to achieve this objective
by investing at least 65% of its total assets in the equity
securities of non-U.S. companies whose shares have a market
capitalization of over $1 billion.
Managers Emerging Markets Equity Fund (the "Emerging
Markets Equity Fund") is designed for investors who seek long-
term capital appreciation by investing in a diversified
portfolio of equity securities of companies in emerging or
developing markets. The Emerging Markets Equity Fund seeks to
achieve this objective by investing at least 65% of its total
assets in the equity securities of companies considered to be
emerging or developing by the World Bank or the United
Nations.
Managers Short and Intermediate Bond Fund (the "Short and
Intermediate Bond Fund") is designed for investors who seek
high current income by investing in a diversified portfolio of
fixed-income securities with an average maturity of one to
five years. The Short and Intermediate Bond Fund seeks to
achieve this objective by investing at least 65% of its total
assets in bonds.
Managers Bond Fund (the "Bond Fund") is designed for
investors who seek income by investing in a diversified
portfolio of primarily fixed-income securities. The Bond Fund
seeks to achieve this objective by investing at least 65% of
its total assets in bonds having a maturity of less than 40
years from the date of purchase by the Fund. Compared to the
benchmark, the Bond Fund typically maintains a longer average
duration. As a result, the Bond Fund may tend to be more
interest rate sensitive than the benchmark or other mutual
funds whose average durations are similar to the benchmark.
Managers Global Bond Fund (the "Global Bond Fund") is
designed for investors who seek high total return, through
both income and capital appreciation, by investing in
primarily domestic and foreign fixed-income securities. It
seeks to achieve this objective by investing at least 65% of
its total assets in a portfolio of domestic and foreign bonds
issued by governments, corporations and supranational
organizations. The Global Bond Fund is nondiversified.
Investment Techniques and Associated Risks
The following are descriptions of the types of securities
that may be purchased by the Funds. Also see "Quality and
Diversification Requirements of the Funds."
(1) Asset-Backed Securities. Each Fund may invest in
securities referred to as asset-backed securities. These
securities directly or indirectly represent a participation
interest in, or are secured by and are payable from, a stream
of payments generated from particular assets, such as
automobile and credit card receivables and home equity loans
or other asset-backed securities collateralized by those
assets. Asset-backed securities provide periodic payments
that generally consist of both principal and interest payments
that must be guaranteed by a letter of credit from an
unaffiliated bank for a specified amount and time.
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Asset-Backed securities are subject to additional risks.
These risks are limited to the security interest in the
collateral. For example, credit card receivables are generally
unsecured and the debtors are entitled to a number of
protections from the state and through federal consumer laws,
many of which give the debtor the right to offset certain
amounts of the credit card debts and thereby reducing the
amounts due. In general, these types of loans have a shorter
life than mortgage loans and are less likely to have
substantial prepayments.
(2) Cash Equivalents. Each of the Funds may invest in cash
equivalents. Cash equivalents include certificates of
deposit, bankers acceptances, commercial paper, short-term
corporate debt securities and repurchase agreements.
* Bankers Acceptances. Each of the Funds may invest in
bankers acceptances. Bankers acceptances are short-term
credit instruments used to finance the import, export,
transfer or storage of goods. These instruments become
"accepted" when a bank guarantees their payment upon maturity.
Eurodollar bankers acceptances are bankers acceptances
denominated in U.S. Dollars and are "accepted" by foreign
branches of major U.S. commercial banks.
* Certificates of Deposit. Each of the Funds may invest in
certificates of deposit. Certificates of deposit are issues
against money deposited into a bank (including eligible
foreign branches of U.S. banks) for a definite period of time.
They earn a specified rate of return and are normally
negotiable.
* Commercial Paper. Each of the Funds may invest in
commercial paper. Commercial Paper refers to promissory notes
that represent an unsecured debt of a corporation or finance
company. They have a maturity of less than 9 months.
Eurodollar commercial paper refers to promissory notes
payable in U.S. Dollars by European issuers.
* Repurchase Agreements. Each of the Funds may enter into
repurchase agreements with brokers, dealers or banks that meet
with the credit guidelines which have been approved by the
Fund's Board of Trustees. In a repurchase agreement, the Fund
buys a security from a bank or a broker-dealer that has agreed
to repurchase the same security at a mutually agreed upon date
and price. The resale price normally is the purchase price
plus a mutually agreed upon interest rate. This interest rate
is effective for the period of time the Fund is invested in
the agreement and is not related to the coupon rate on the
underlying security. The period of these repurchase
agreements will be short, as short as overnight, and at no
time will any Fund enter into repurchase agreements for more
than seven days.
Repurchase agreements could have certain risks that may
adversely affect a Fund. If a seller defaults, a Fund
may incur a loss if the value of the collateral securing
the repurchase agreement declines and may incur
disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are
commenced with respect to a seller of the security,
realization of disposition of the collateral by a Fund
may be delayed or limited.
* Reverse Repurchase Agreements. Each of the Funds may
enter into reverse repurchase agreements. In a reverse
repurchase agreement, a Fund sells a security and agrees to
repurchase the same security at a mutually agreed upon date
and price. The price reflects the interest rates in effect
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for the term of the agreement. For the purposes of the
Investment Company Act of 1940, as amended, (the "1940 Act"),
a reverse repurchase agreement is also considered as the
borrowing of money by a Fund and, therefore, a form of
leverage which may cause any gains or losses for a Fund to
become magnified.
The Funds will invest the proceeds of borrowings under
reverse repurchase agreements. In addition, a Fund will
enter into reverse repurchase agreements only when the
interest income to be earned from the investment of the
proceeds is more than the interest expense of the
transaction. A Fund will not invest the proceeds of a
reverse repurchase agreement for a period that is longer
than the reverse repurchase agreement itself. Each Fund
will establish and maintain a separate account with the
Custodian that contains a segregated portfolio of
securities in an amount which is at least equal to the
amount of its purchase obligations under the reverse
repurchase agreement.
(3) Eurodollar Bonds. Eurodollar bonds are bonds issued
outside of the United States which are denominated in U.S.
Dollars.
(4) European Currency Unit Bonds. European Currency Unit
Bonds are bonds denominated in European Currency Units
("ECU"). An ECU is a basket of European currencies which
contains the currencies of ten members of the European
Community. It is used by members of the European Community to
determine their official claims and debts. The ECU may
fluctuate in relation to the daily exchange rates of its
member's currencies. The ECU is comprised of 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.
(5) Emerging Market Securities. The nature of the Emerging
Markets Equity Fund is to invest most of its total assets in
the securities of emerging market countries. The
International Equity Fund may also invest some of its assets
in the securities of emerging market countries. Investments
in securities in emerging market countries may be considered
to be speculative and may have additional risks from those
associated with investing in the securities of U.S. issuers.
There may be limited information available to investors which
is publicly-available, and generally emerging market issuers
are not subject to uniform accounting, auditing and financial
standards and requirements like those required by U.S.
issuers.
Investors should be aware that the value of a Fund's
investments in emerging markets securities may be adversely
affected by changes in the political, economic or social
conditions, expropriation, nationalization, limitation on the
removal of funds or assets, controls, tax regulations and
other foreign restrictions in emerging market countries.
These risks may be more severe than those experienced in
foreign countries. Emerging market securities trade with less
frequency and volume than domestic securities and therefore
may have greater price volatility and lack liquidity.
Furthermore, there is often no legal structure governing
private or foreign investment or private property in some
emerging market countries. This may adversely affect the
Fund's operations and the ability to obtain a judgement
against an issuer in an emerging market country.
(6) Foreign Securities. The International Equity Fund and
the Emerging Markets Equity Fund may invest in certain foreign
securities. The Global Bond Fund may invest in foreign bonds
but all investments in the Global Bond Fund must be
denominated in U.S. Dollars. Investments in securities of
foreign issuers and in obligations of domestic banks involve
different and additional risks from those associated with
investing in securities of U.S. issuers. There may be limited
information available to investors which is publicly-
available, and generally foreign issuers are not subject to
uniform accounting, auditing and financial standards and
requirements like those applicable to U.S. issuers. Any
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foreign commercial paper must not be subject to foreign
withholding tax at the time of purchase.
Investors should be aware that the value of a Fund's
investments in foreign securities may be adversely affected by
changes in the political or social conditions, confiscatory
taxation, diplomatic relations, expropriation,
nationalization, limitation on the removal of funds or assets,
or the establishment of exchange controls or other foreign
restrictions and tax regulations in foreign countries. In
addition, due to the differences in the economy of these
foreign countries compared to the U.S. economy, whether
favorably or unfavorably, portfolio securities may appreciate
or depreciate and could therefore adversely affect a Fund's
operations. It may also be difficult to obtain a judgement
against a foreign creditor. Foreign securities trade with
less frequency and volume than domestic securities and
therefore may have greater price volatility. Furthermore,
changes in foreign exchange rates will have an affect on those
securities that are denominated in currencies other than the
U.S. Dollar.
* Forward Foreign Currency Exchange Contracts. The
International Equity Fund, the Emerging Markets Equity Fund
and the Global Bond Fund may purchase or sell equity
securities of foreign countries. Therefore, substantially all
of the Fund's income may be derived from foreign currency. A
forward foreign currency exchange contract is an obligation to
purchase or sell a specific currency at a mutually agreed upon
date and price. The contract is usually between a bank and
its customers. The contract may be denominated in U.S.
Dollars or may be referred to as a "cross-currency" contract.
A cross-currency contract is a contract which is denominated
in another currency other than in U.S. Dollars.
In such a contract, the Fund's custodian will segregate
cash or marketable securities in an amount not less than
the value of the Fund's total assets committed to these
contracts. Generally, the Funds will not enter into
contracts that are greater than ninety days.
Forward foreign currency contracts have additional risks.
It may be difficult to determine the market movements of
the currency. The value of the Fund's assets may be
adversely affected by changes in foreign currency
exchange rates and regulations and controls on currency
exchange. Therefore, the Funds may incur costs in
converting foreign currency.
If a Fund engages in an offsetting transaction, the Fund
will experience a gain or a loss determined by the
movement in the contract prices. An "offsetting
transaction" is one where the Fund enters into a
transaction with the bank upon maturity of the original
contract. The Fund must sell or purchase on the same
maturity date as the original contract the same amount of
foreign currency as the original contract.
* Foreign Currency Considerations. The Emerging Markets
Equity Fund will invest substantially all of its total assets
in securities denominated in foreign currencies. The Fund
will compute and distribute the income earned by the Fund at
the foreign exchange rate in effect on that date. If the
value of the foreign currency declines in relation to the U.S.
Dollar between the time that the Fund earns the income and the
time that the income is converted into U.S. Dollars, the Fund
may be required to sell its securities in order to make its
distributions in U.S. dollars. As a result, the liquidity of
the Fund's securities may have an adverse affect on the Fund's
performance.
The Sub-Advisers of the Fund will not routinely hedge the
Fund's foreign currency exposure unless the Fund has to
be protected from currency risk.
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(7) Futures Contracts. Each of the Funds may buy and sell
futures contracts to protect the value of the Fund's portfolio
against changes in the prices of the securities that it
invests. When a Fund buys or sells a futures contact, the
Fund must segregate cash and/or liquid securities for the
value of the contract.
There are additional risks associated with futures
contracts. It may be impossible to determine the future price
of the securities, and securities may not be marketable enough
to close out the contract when the Fund desires to do so.
* Equity Index Futures Contracts. The Income Equity Fund,
the Capital Appreciation Fund and the Special Equity Fund may
enter into equity index futures contracts. An equity index
future contract is an agreement for the Fund to buy or sell an
index relating to equity securities at a mutually agreed upon
date and price. Equity index futures contracts are often used
to hedge against anticipated changes in the level of stock
prices. When the Fund enters into this type of contract, the
Fund makes a deposit called an "initial margin." This initial
margin must be equal to a specified percentage of the value of
the contract. The rest of the payment is made when the
contract expires.
* Interest Rate Futures Contracts. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may enter into interest rate futures contracts. An interest
rate futures contract is an agreement for a Fund to buy or
sell fixed-income securities at a mutually agreed upon date
and price. Interest rate futures contracts are often used to
hedge against anticipated changes in the level of stock
prices. When the Fund enters into this type of contract, the
Fund makes a deposit called an "initial margin." This initial
margin must be equal to a specified percentage of the value of
the contract. The rest of the payment is made when the
contract expires.
(8) Illiquid Securities, Private Placements and Certain
Unregistered Securities. Each of the Funds may invest in
privately placed, restricted, Rule 144A or other unregistered
securities. No Fund may acquire illiquid holdings if, as a
result, more than 15% of the Fund's total net assets would be
in illiquid investments. Subject to this Fundamental policy
limitation, the Fund 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, as amended (the "1933 Act") and cannot be offered for
public sale in the United States without first being
registered under the 1933 Act. An investment is considered
"illiquid" if it cannot be disposed of within seven (7) days
in the normal course of business at approximately the same
amount in which it was valued in the Fund's portfolio. The
price the Fund's portfolio may pay 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 valuations of these securities will reflect
any limitations on their liquidity.
The Funds' may purchase Rule 144A securities eligible for
sale without registration under the 1933 Act. These
securities may be determined to be illiquid in accordance with
the guidelines established by The Managers Funds, L.P.The
Managers Funds LLC and approved by the Trustees. The Trustees
will monitor these guidelines on a periodic basis.
Investors should be aware that a Fund may be subject to a
risk if the Fund should decide to sell these securities when a
buyer is not readily available and at a price which the Fund
believes represents the security's value. In the case where
an illiquid security must be registered under the 1933 Act
before it may be sold, a Fund may be obligated to pay all or
part of the registration expenses. Therefore, a considerable
time may elapse between the time of the decision to sell and
the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period,
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adverse market conditions develop, a Fund may obtain a less
favorable price than was available when it had first decided
to sell the security.
(9) Inverse Floating Obligations. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may invest
up to 25% of each Fund's total assets in inverse floating
obligations. Inverse floating obligations, also referred to
as residual interest bonds, are variable rate securities which
have interest rates that decline when market rates increase
and vice versa. They are typically purchased directly from
the issuing agency.
There are additional risks associated with these
obligations. They may be more volatile than fixed-rate
securities, especially in periods where interest rates are
fluctuating. In order to limit this risk, the Sub-Adviser may
purchase inverse floaters that have a shorter maturity or
contain limitations on their interest rate.
(10) Mortgage-Related Securities. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may invest
in mortgage-related securities. Mortgage-related securities,
also known as "pass-throughs," are certificates that are
issued by governmental, government-related or private
organizations. They are backed by pools of mortgage loans and
provide investors with monthly payments.
There are additional risks associated with mortgage-
related securities such as prepayment risk. See "Other Risk
Factors" in the Fund's Prospectus for more information on
prepayment risk. Pools that are created by non-government
issuers generally have a higher rate of interest than those
pools that are issued by the government. This is because
there is no guarantee of payment associated with non-
government issuers. Although there is generally a liquid
market for these investments, those certificates issued by
private organizations may not be readily marketable. The
value of mortgage-related securities depends on the level of
interest rates, the coupon rates of the certificates and the
payment history of the underlying mortgages of the pools. The
following are types of mortgage-related securities.
* Collateralized Mortgage Obligations ("CMOs"). CMOs are
obligations that are fully collateralized by a portfolio of
mortgages or mortgage-related securities. There are different
classes of CMOs, and certain classes have priority over others
with respect to prepayment on the mortgages. Therefore, a
Fund may be subject to greater or lesser prepayment risk
depending on the type of CMOs in which the Fund invests.
Some mortgage-related securities have "Interest Only" or
"IOs" where the interest goes to one class of holders and
"Principal Only" or "POs" where the principal goes to a
second class of holders. In general, the Funds treat IOs
and POs as subject to the restrictions that are placed on
illiquid investments, except if the IOs or POs are issued
by the U.S. government.
* GNMA Mortgage Pass-Through Certificates ("Ginnie Maes").
Ginnie Maes are undivided interests in a pool of mortgages
insured by the Federal Housing Administration, the Farmers
Home Administration or the Veterans Administration. They
entitle the holder to receive all payments of principal and
interest, net of fees due to GNMA and the issuer. Payments
are made to holders of Ginnie Maes whether payments are
actually received on the underlying mortgages. This is
because Ginnie Maes are guaranteed by the full faith and
credit of the United States. GNMA has the unlimited authority
to borrow funds from the U.S. Treasury to make payments to
these holders. Ginnie Maes are highly liquid and the market
for these certificates is very large.
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* FNMA Guaranteed Mortgage Pass-Through Certificates
("Fannie Maes"). Fannie Maes are undivided interests in a
pool of conventional mortgages. They are secured by the first
mortgages or deeds of trust on residential properties. There
is no obligation to distribute monthly payments of principal
and interest on the mortgages in the pool. They are
guaranteed only by FNMA and do not receive the full faith and
credit of the United States.
(11) Municipal Bonds. The Funds may invest in three types of
municipal bonds: General Obligation Bonds, Revenue Bonds and
Industrial Development Bonds. General obligation bonds are
bonds issued by states, counties, cities towns and regional
districts. The proceeds from these bonds are used to fund
municipal projects. Revenue bonds are bonds that receive net
revenues from a particular facility or other specific source.
Industrial development bonds are considered to be municipal
bonds if the interest paid on these bonds is exempt from
federal taxes. They are issued by public authorities and are
used to raise money to finance public and privately owned
facilities for business, manufacturing and housing.
(12) Obligations of Domestic and Foreign Banks. Banks are
subject to extensive governmental regulations. These
regulations place limitations on the amounts and types of
loans and other financial commitments which may be made by the
bank and the interest rates and fees which may be charged on
these loans and commitments. The profitability of the banking
industry depends on the availability and costs of capital
funds for the purpose of financing loans under prevailing
money market conditions. General economic conditions also
play a key role in the operations of the banking industry.
Exposure to credit losses arising from potential financial
difficulties of borrowers may affect the ability of the bank
to meet its obligations under a letter of credit.
(13) Option Contracts.
* Covered Call Options. The Income Equity Fund, the
Capital Appreciation Fund and the Special Equity Fund may
write ("sell") covered call options on individual stocks,
equity indices and futures contracts, including equity index
futures contracts. The Short and Intermediate Bond Fund, the
Bond Fund and the Global Bond Fund may write ("sell") covered
call options on individual bonds and on interest rate futures
contracts. The Funds' written call options must be listed on
a national securities exchange or a futures exchange.
A call option is a short-term contract that is generally
for no more than nine months. This contract gives a
buyer of the option, in return for a paid premium, the
right to buy the underlying security or contract at an
agreed upon price prior to the expiration of the option.
The buyer can purchase the underlying security or
contract regardless of its market price. A call option
is considered "covered" if the Fund that is writing the
option owns or has a right to immediately acquire the
underlying security or contract.
A Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." A
Fund makes a closing purchase transaction when it buys a
call option on the same security or contract with the
same price and expiration date. As a result, the Fund
will realize a loss if the amount paid is less than the
amount received from the sale. A closing purchase
transaction may only be made on an exchange that has a
secondary market for the option with the same price and
expiration date. There is no guarantee that the
secondary market will have liquidity for the option.
There are risks associated with writing covered call
options. A Fund is required to pay brokerage fees in
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order to write covered call options as well as fees for
the purchases and sales of the underlying securities or
contracts. The portfolio turnover rate of the Fund may
increase due to the Fund writing a covered call option.
* Covered Put Options. The Income Equity Fund, the Capital
Appreciation Fund and the Special Equity Fund may write
("sell") covered put options on individual stocks, equity
indices and futures contracts, including equity index futures
contracts. The Short and Intermediate Bond Fund, the Bond
Fund and the Global Bond Fund may write ("sell") covered put
options on individual bonds and on interest rate futures
contracts.
A put option is a short-term contract that is generally
for no more than nine months. This contract gives a
buyer of the option, in return for a paid premium, the
right to sell the underlying security or contract at an
agreed upon price prior to the expiration of the option.
The buyer can sell the underlying security or contract at
the option price regardless of its market price. A put
option is considered "covered" if the Fund which is
writing the option owns or has a right to immediately
acquire the underlying security or contract. The seller
of a put option assumes the risk of the decrease of the
value of the underlying security. If the underlying
security decreases, the buyer could exercise the option
and the underlying security or contract could be sold to
the seller at a price that is higher than its current
market value.
A Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." A
Fund makes a closing purchase transaction when it buys a
put option on the same security or contract with the same
price and expiration date. As a result, the Fund will
realize a loss if the amount paid is less than the amount
received from the sale. A closing purchase transaction
may only be made on an exchange that has a secondary
market for the option with the same price and expiration
date. There is no guarantee that the secondary market
will have liquidity for the option.
There are risks associated with writing covered put
options. A Fund is required to pay brokerage fees in
order to write covered put options as well as fees for
the purchases and sales of the underlying securities or
contracts. The portfolio turnover rate of the Fund may
increase due to the Fund writing a covered put option.
* Dealer Options. Dealer Options are also known as Over-
the-Counter options ("OTC"). Dealer options are puts and
calls where the strike price, the expiration date and the
premium payment are privately negotiated. Each of the Funds
may use dealer options if the options are with major banks who
are members of the Federal Reserve System and are approved as
primary dealers in U.S. government securities by the Federal
Reserve Bank of New York. The bank's creditworthiness and
financial strength are judged by the Sub-Adviser and must be
determined to be as good as the creditworthiness and strength
of the banks to whom the Fund lends its portfolio securities.
* Puts and Calls. The Income Equity Fund, the Capital
Appreciation Fund and the Special Equity Fund may buy options
on individual stocks, equity indices and equity futures
contracts. The Short and Intermediate Bond Fund, the Bond
Fund and the Global Bond Fund may buy puts and calls on
individual bonds and on interest rate futures contracts. A
Fund's purpose in buying these puts and calls is to protect
itself against an adverse affect in changes of the general
level of market prices in which the Fund operates. A put
option gives the buyer the right upon payment to deliver a
security or contract at an agreed upon date and price. A call
option gives the buyer the right upon payment to ask the
seller of the option to deliver the security or contract at an
agreed upon date and price.
9
<PAGE>
(14) Rights and Warrants. Each Fund may purchase rights and
warrants. Rights are short-term obligations issued in
conjunction with new stock issues. Warrants give the holder
the right to buy an issuer's securities at a stated price for
a stated time.
(15) Securities Lending. Each of the Funds may lend its
portfolio securities in order to realize additional income.
This lending is subject to the Fund's investment policies and
restrictions. Any loan of portfolio securities must be
secured at all times by collateral that is equal to or greater
than the value of the loan. If a seller defaults, a Fund may
use the collateral to satisfy the loan. However, if the buyer
defaults, the buyer may lose some rights to the collateral
securing the loans of portfolio securities.
(16) Segregated Accounts. Each Fund will establish a
segregated account with its Custodian after it has entered
into either a repurchase agreement or certain options, futures
and forward contracts. The segregated account will maintain
cash and/or liquid securities that are equal in value to the
obligations in the agreement.
(17) Short Sales. Each Fund may enter into short sales. A
Fund enters into a short sale when it sells a security that it
does not own in anticipation of a decrease in the market price
of that security. A broker retains the proceeds of the sales
until the Fund replaces the sold security. The Fund arranges
with the broker to borrow the security. The Fund must replace
the security at its market price at the time of the
replacement. As a result, the Fund may have to pay a premium
to borrow the security and the Fund may, but will not
necessarily, receive any interest on the proceeds of the sale.
The Fund must pay to the broker any dividends or interest
payable on the security until the security is replaced.
Collateral, consisting of cash, or marketable securities, is
used to secure the Fund's obligation to replace the security.
The collateral is deposited with the broker.
If the price of the security sold increases between the
time of the sale and the time the Fund replaces the security,
the Fund will incur a loss. If the price declines during that
period, the Fund will realize a capital gain. The capital
gain will be decreased by the amount of transaction costs and
any premiums, dividends or interest the Fund will have to pay
in connection with the short sale. The loss will be increased
by the amount of transaction costs and any premiums, dividends
or interest the Fund will have to pay in connection with the
short sale.
(18) U.S. Treasury Securities. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may invest
in direct obligations of the U.S. Treasury. These obligations
include Treasury bills, notes and bonds, all of which have
their principal and interest payments backed by the full faith
and credit of the United States government.
* Additional U.S. Government Securities. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may invest in obligations issued by the agencies or
instrumentalities of the United States Government. These
obligations may or may not be backed by the "full faith and
credit" of the United States. Securities which are backed by
the full faith and credit of the United States include
obligations of the Government National Mortgage Association,
the Farmers Home Administration and the Export-Import Bank.
For those securities which are not backed by the full faith
and credit of the United States, the Fund must principally
look to the federal agency guaranteeing or issuing the
obligation for ultimate repayment and therefore may not be
able to assert a claim against the United States itself for
repayment in the event that the issuer does not meet its
commitments. The securities which the Funds may invest that
are not backed by the full faith and credit of the United
States include, but are not limited to: (a) obligations of
the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation, the Federal Home Loan Banks and the U.S. Postal
10
<PAGE>
Service, each of which has the right to borrow from the U.S.
Treasury to meet its obligations; (b) 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 (c) 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.
(19) Variable Rate Securities. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may invest
in variable rate securities. Variable rate securities are
debt securities which do not have a fixed coupon rate. The
amount of interest to be paid to the holder is typically
contingent on another rate ("contingent security") such as the
yield on 90-day Treasury bills. Variable rate securities may
also include debt securities which have an interest rate which
resets in the opposite direction of the rate of the contingent
security.
(20) When-Issued Securities. Each of the Funds may purchase
securities on a when-issued basis. The purchase price and the
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 these securities is subject to
market fluctuation. For fixed-income securities, no interest
accrues to a Fund until a settlement takes place. At the time
a Fund makes a commitment to purchase securities on a when-
issued basis, the Fund will record the transaction, reflect
the daily value of the securities when determining the net
asset value of the Fund, and if applicable, calculate the
maturity for the purposes of determining the average maturity
from the date of the Transaction. At the time of settlement,
a when-issued security may be valued below the amount of the
purchase price.
To facilitate these transactions, the Fund will maintain
a segregated account with the Custodian that will include
cash, or marketable securities, in an amount which is at least
equal to the commitments. On the delivery dates of the
transactions, the Fund will meet its obligations from
maturities or sales of the securities held in the segregated
account and/or from cash flow. If the Fund chooses to dispose
of the right to acquire a when-issued security prior to its
acquisition, it could incur a loss or a gain due to market
fluctuation. Furthermore, the Fund may be at a disadvantage
if the other party to the transaction defaults. When-issued
transactions may allow the Fund to hedge against unanticipated
changes in interest rates.
Quality and Diversification Requirements for the Funds
Each Fund, with the exception of the Global Bond Fund,
intends to meet the diversification requirements of the1940
Act as currently in effect. Investments not subject to the
diversification requirements could involve an increased risk
to an investor 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. See
"Appendix A" for a description of Security Ratings.
* Ratings Requirements of Commercial Paper. At the time
any of the Funds invest in taxable commercial paper, the
issuer must have an outstanding debt rated A-1 or higher by
Standard & Poor's Ratings Group ("S&P") or the issuer's parent
corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's Investors Services, Inc. ("Moody's")
(or a similar rating by any nationally recognized statistical
rating organization). If no such ratings are available, the
investment must be of comparable quality in the opinion of The
Managers Funds, L.P.The Managers Funds LLC or the Sub-Adviser.
* Rating of Debt Instruments. The Short and Intermediate
Bond Fund and the Bond Fund may each invest in debt securities
that are rated Bb by S&P or Ba by Moody's (or a similar rating
11
<PAGE>
by any nationally recognized statistical rating organization).
Such securities are frequently referred to as "junk bonds."
Junk bonds are more likely to react to market developments
affecting market and credit risk than more highly rated debt
securities.
For the last fiscal year ended December 31, 1998, the
weighted average ratings of the debt obligations held by the
Short and Intermediate Bond Fund and the Bond Fund, expressed
as a percentage of each of the Fund's total investments, were
as follows:
<TABLE>
<CAPTION>
Ratings Short and Bond Fund
Intermediate Bond
Fund
_________________________________________________________________
<S> <C> <C>
Government and AAA/Aaa 44% 9%
AA/Aa 5% 5%
BBB/Baa 28% 51%
BB/Ba 4% 0%
Not Rated 8% 14%
</TABLE>
Fundamental Investment Restrictions
The following investment restrictions have been adopted
by the Trust with respect to each of the Funds contained in
this Statement of Additional Information. Except if otherwise
stated, these investment restrictions are "fundamental"
policies which is defined in the 1940 Act to mean that the
restrictions cannot be changed without the vote of a "majority
of the outstanding voting securities" of a Fund. 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.
Each of the Funds of the Trust may not:
(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. 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. 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
12
<PAGE>
bank borrowings). It will not mortgage, pledge or in any
other manner transfer any of its assets as security for
any indebtedness, except in connection with any such
borrowing and in amounts up to 10% of the value of the
Fund's net assets at the time of such borrowing.
(5) Invest in securities of an issuer which together with any
predecessor, has been in operation for less than three
years if, as a result, more than 5% of its total assets
would then be invested in such securities.
(6) Invest more than 15%, of the value of its net assets in
illiquid instruments including, but not limited to,
securities for which there are no readily available market
quotations, dealer (OTC) options, assets used to cover
dealer options written by it, repurchase agreements which
mature in more than 7 days, variable rate industrial
development bonds which are not redeemable on 7 days
demand and investments in time deposits which are non-
negotiable and/or which impose a penalty for early
withdrawal.
(7) Invest in companies for the purpose of exercising control
or management.
(8) Purchase or sell real estate; provided, however, that it
may invest in securities secured by real estate or
interests therein or issued by companies which invest in
real estate or interests therein.
(9) Purchase or sell physical commodities, except that each
Fund may purchase or sell options and futures contracts
thereon.
(10) Engage in the business of underwriting securities issued
by others.
(11) Participate on a joint or a joint and several basis in any
trading account in securities. The "bunching" of orders
for the sale or purchase of marketable portfolio
securities with other accounts under the management of The
Managers Funds, L.P.The Managers Funds LLC 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. 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
13
<PAGE>
invested in any one such company or (c) 10% of the Fund's
total assets, taken at market value, would be invested in
such securities.
(14) Purchase from or sell portfolio securities to its
officers, trustees or other "interested persons" (as
defined in the l940 Act) of the Fund, including its
portfolio managers and their affiliates, except as
permitted by the l940 Act.
(15) Purchase or retain the securities of an issuer if, to the
Trust's knowledge, one or more of the directors, trustees
or officers of the Trust, or the portfolio manager
responsible for the investment of the Trust's assets or
its directors or officers, individually own beneficially
more than l/2 of l% of the securities of such issuer and
together own beneficially more than 5% of such securities.
(16) Issue senior securities.
(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 Equity 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.
Non-Fundamental Investment Restrictions
The following investment restrictions have been adopted
by the Trust with respect to each of the Funds contained in
this Statement of Additional Information. Except if otherwise
stated, these investment restrictions are not fundamental
policies and may be changed without shareholder approval.
Each of the Funds of the Trust may not:
(1) Invest in real estate limited partnership interests.
(2) Invest in oil, gas or mineral leases.
14
<PAGE>
(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 that
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.
(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.
Temporary Defensive Position
Each of the Funds may, at the discretion of its Sub-
Advisers, invest up to 100% of its assets in cash for
temporary defensive purposes. This strategy may be
inconsistent with the Fund's principal investment strategies
and may be used in an attempt to respond to adverse market,
economic, political or other conditions. During such a
period, a Fund may not achieve its investment objective.
Portfolio Turnover
Generally, each of the Funds purchase securities for
investment purposes and not for short-term trading profits.
However, a Fund may sell securities without regard to the
length of time that the security is held in the portfolio if
such sale is consistent with the Fund's investment objectives.
A higher degree of portfolio activity may increase brokerage
costs to a Fund.
The portfolio turnover rate is computed by dividing the
dollar amount of the securities which are purchased or sold
(whichever amount is smaller) by the average value of the
securities owned during the year. Short-term investments such
as commercial paper, short-term U.S. Government securities and
variable rate securities (those securities with intervals of
less than one- year) are not considered when computing the
portfolio turnover rate.
For the last two fiscal years, each of the Fund's
portfolio turnover rates were as follows:
<TABLE>
<CAPTION>
Fund 1997 1998
- ---------------------------------------------------------------
<S> <C> <C>
Income Equity Fund 96% 84%
Capital Appreciation Fund 235% 252%
Special Equity Fund 5049% 64%
International Equity Fund 37% 56%
Emerging Markets Equity Fund* ----* 89%
Short and Intermediate Bond 91% 115%
Fund
Bond Fund 35% 55%
Global Bond Fund 197% 232%
- -------------------------------------------------------------
*The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
</TABLE>
15
<PAGE>
BOARD OF TRUSTEES AND OFFICERS OF THE FUNDS
The Board of Trustees and Officers of the Funds, their
business addresses, principal occupations and dates of birth
are listed below. The Board of Trustees provides broad
supervision over the affairs of the Trust and the Funds. The
Board of Trustees and Officers of the Funds, their business
addresses, principal occupations and dates of birth are listed
below. Unless otherwise noted, the address of the Trustees
and Officers is the address of the Trust: 40 Richards Avenue,
Norwalk, Connecticut 06854.
JACK W. ABER-Trustee; Professor of Finance, Boston
University School of Management since 1972. His address is
595 Commonwealth Avenue, Boston, Massachusetts 02215. His
date of birth is September 9, 1937.
WILLIAM E. CHAPMAN, II-Trustee; President and Owner,
Longboat Retirement Planning Solutions. From 1990 to 1998, he
served in a variety of roles with Kemper Funds, the last of
which was President of the Retirement Plans Group. Prior to
joining Kemper, he spent 24 years with CIGNA in investment
sales, marketing and general management roles. His address is
380 Gulf of Mexico Drive, Longboat Key, Florida 34228. His
date of birth is September 23, 1941.
SEAN M. HEALEY*-Trustee; Executive Vice President for
Affiliated Managers Group, Inc. since April 1995. From August
1987 through March 1995, he served in a variety of roles in
the Mergers and Acquisitions Department of Goldman, Sachs &
Co., the last of which was as Vice President. His address is
Two International Place, 23rd Floor, Boston, Massachusetts
02110. His date of birth is May 9, 1961.
EDWARD J. KAIER-Trustee; Partner, Hepburn Willcox
Hamilton & Putnam since 1977. His address is 1100 One Penn
Center, Philadelphia, Pennsylvania 19103. His date of birth
is September 23, 1945.
MADELINE H. MCWHINNEY-Trustee; From 1977 to 1994, she was
President of Dale, Elliott & Company, Inc., Management
Consultants. Member of the Investment Committee, New Jersey
Supreme Court since 1990; Member of Advisory Committee on
Professional Ethics, New Jersey Supreme Court from 1983 to
1998. Her address is 24 Blossom Cove Road, Red Bank, New
Jersey 07701. Her date of birth is March 11, 1922.
STEVEN J. PAGGIOLI-Trustee; Executive Vice President and
Director of The Wadsworth Group since 1986. Vice President,
Secretary and Director of First Fund Distributors, Inc. since
1991. Executive Vice President, Secretary and Director of
Investment Company Administration, LLC since 1990. Trustee of
Professionally Managed Portfolios since 1991. His address is
915 Broadway, Suite 1605, New York, New York 10010. His date
of birth is April 3, 1950.
ERIC RAKOWSKI-Trustee; Professor, University of
California at Berkeley School of Law since 1990. Visiting
Professor, Harvard Law School 1998-1999. His address is 1535
Delaware Street, Berkeley, California 94703-1281. His date
of birth is June 5, 1958.
16
<PAGE>
THOMAS R. SCHNEEWEIS-Trustee; Professor of Finance,
University of Massachusetts since 1985. He also serves as the
Managing Director of CISDM at the University of Massachusetts,
a position he has held since 1994. His address is 10 Cortland
Drive, Amherst, Massachusetts 01002. His date of birth is May
10, 1947.
ROBERT P. WATSON*-- Trustee; From June 1988 to April
1999, he was Chief Executive Officer and President of The
Managers Funds, and President and Partner of The Managers
Funds, L.P. Prior to June 1988 and from August 1989 to August
1990, he was the Chairman and Chief Executive Officer of
Evaluation Associates Investment Management Company, the
predecessor to The Managers Funds, L.P. His date of birth is
January 21, 1934.
PETER M. LEBOVITZ-President; ; President of The Managers
Funds LLC. From September 1994 to April 1999, he was Vice
President of The Managers Funds and Managing Director of The
Managers Funds, L.P. From June 1993 to June 1994, he was the
Director of Marketing for Hyperion Capital Management, Inc.
From April 1989 to June 1993, he was Senior Vice President
for Greenwich Asset Management, Inc. His date of birth is
January 18, 1955.
DONALD S. RUMERY-Secretary, Treasurer; Chief Financial
Officer of The Managers Funds LLC (formerly The Managers
Funds, L.P.) since December 1994. From March 1990 to December
1994, he was a Vice President of Signature Financial Group.
From August 1980 to March 1990, he served in a variety of
roles at The Putnam Companies, the last of which was Vice
President. His date of birth is May 29, 1958.
GIANCARLO (JOHN) E. ROSATI-Assistant Treasurer; Vice
President of The Managers Funds LLC (formerly The Managers
Funds, L.P.) since July 1992. From July 1986 to June 1992, he
was an Assistant Vice President of The Managers Funds, L.P.
PETER M. MCCABE-Assistant Treasurer; Portfolio
Administrator of The Managers Funds LLC (The Managers Funds,
L.P.) since August 1995. From July 1994 to August 1995, he
was a Portfolio Administrator withat Oppenheimer Capital, L.P.
From September 1990 to June 1994, he was a college student.
His date of birth is September 8, 1972.
LAURA A. DESALVO-Assistant Secretary; Legal/Compliance
Officer of The Managers Funds LLC (formerly The Managers
Funds, L.P.) since September 1997. From August 1994 to June
1997, she was a law student and from 1990 to June 1994 she was
a college student. Her date of birth is November 10, 1970.
*Mr. Watson and Mr. Healey are "interested persons" (as
defined in the 1940 Act) of the Funds.
Trustees' Compensation
Each Trustee is currently paid an annual fee of $16,000
for serving as Trustee of the Trust and the Funds. Each
Trustee also receives an additional fee of $1,000 for each in-
person meeting attended and $500 for each telephonic meeting.
The Trustees may serve as directors of other corporations that
are unrelated to these Funds.
17
<PAGE>
The following table sets forth each Trustee's
compensation expenses paid by the Trust for the calendar year
ended December 31, 1998.
<TABLE>
<CAPTION>
Pension
or Estimat Total
Retiremen ed Compensat
Aggregate t Annual ion from
Compensat benefits benefit Funds and
Name & Position ion from accrued s upon Fund
FundsTrus as part Retirem ComplexTr
t of ent ust Paid
FundTrust to
expenses Trustees
___________________________________________________________
<S> <C> <C> <C> <C>
William W. $ ---- ---- $
Graulty* 8,650.00 8,650.00
Madeline H. 13,950.00 ---- ---- 13,950.00
McWhinney
Steven J. 13,950.00 ---- ---- 13,950.00
Paggioli
Thomas R. 13,200.00 ---- ---- 13,200.00
Schneeweis
Robert P. Watson 0.00 ---- ---- 0.00
- ----------------------------------------------------------
*Mr. Graulty resigned as Trustee of The Managers Funds on
September 14, 1998.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of March 11, 1999, Charles Schwab & Co.
"controlled" (within the meaning of the 1940 Act) the Special
Equity Fund, the International Equity Fund and the Emerging
Markets Equity Fund. As of January 21March 11, 1999, National
Financial "controlled" the Global Bond Fund. An entity or
person which "controls" a particular Fund could have effective
voting control over that Fund. Certain of these shareholders
are omnibus processing organizations.
As of March 11, 1999, the following persons or
entities owned more than 5% of the outstanding shares of a
Fund. Certain of these shareholders are omnibus processing
organizations.
* Income Equity Fund
Charles Schwab & Co., Inc., San Francisco, CA 21%
Huntington National Bank, Columbus, OH 14%
National Financial Services Corp., New York, NY 7%
Huntington Trust Company, Columbus, OH 6%
* Capital Appreciation Fund
Charles Schwab & Co., Inc., San Francisco, CA 12%
National Financial Services Corp., New York, NY 8%
Huntington National Bank, Columbus, OH 6%
* Special Equity Fund
Charles Schwab & Co., Inc., San Francisco, CA 36%
National Financial Services Corp., New York, NY 9%
* International Equity Fund
Charles Schwab & Co., Inc., San Francisco, CA 27%
National Financial Services Corp., New York, NY 9%
Merrill Lynch Trust Company, Somerset, NJ 6%
Resource Bank, Minneapolis, MN 5%
18
* Emerging Markets Equity Fund
Charles Schwab & Co., Inc., San Francisco, CA 33%
Resource Bank, Minneapolis, MN 8%
National Financial Services Corp., New York, NY 6%
* Short and Intermediate Bond Fund
Crotched Mountain Foundation Profit Sharing Plan,
Greenfield, NH 7%
* Bond Fund
Charles Schwab & Co., Inc., San Francisco, CA 16%
National Financial Services Corp., New York, NY 11%
* Global Bond Fund
National Financial Services Corp., New York, NY 31%
Charles Schwab & Co., Inc., San Francisco, CA 6%
Management Ownership
As of March 11, 1999, all management personnel
(i.e., Fund officers, Trustees and advisory board members) as
a group owned beneficially less than 1% of the outstanding
shares of each of the Funds.
MANAGEMENT OF THE FUNDS
Investment Advisor
The Trustees provide broad supervision over the operations
and affairs of the Trust and the Funds. The Managers Funds,
L.P. LLC (the "Manager") serves as investment manager and
administrator to each of the Funds. The Managers Funds LLC is
a subsidiary of Affiliated Managers Group, Inc. ("AMG"), and
AMG serves as the Managing Member of the LLC. AMG is located
at Two International Place, 23rd Floor, Boston, Massachusetts
02110.
The assets of the Funds are managed by a Sub-Adviser or a
team of Sub-Advisers which are selected by the Manager, subject
to the review and approval of the Trustees. The Manager also
serves as administrator of the Funds and carries out the daily
administration of the Trust and the Funds. The Manager and its
corporate predecessor have had over 20 years of experience in
evaluating Sub-Advisers for individuals and institutional
investors.
The Manager recommends Sub-Advisers for each Fund to the
Trustees based upon its continuing quantitative and qualitative
evaluation of the Sub-Advisers' skills in managing assets
subject 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 a Sub-Adviser,
and the Manager does not expect to recommend frequent changes
of Sub-Advisers.
The Manager allocates the assets of each Fund among the
Sub-Adviser(s) selected for that Fund. Each Sub-Adviser has
discretion, subject to oversight by the Trustees and the
Manager, to purchase and sell portfolio assets, consistent with
19
<PAGE>
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 portion of the fee paid to the Manager is used by
the Manager to pay the advisory fees of the Sub-Adviser(s).
Generally, the Sub-Adviser(s) only provides the Fund with
asset management and related recordkeeping services. However,
a Sub-Adviser or its affiliated broker-dealer may execute
portfolio transactions for a Fund and receive brokerage
commissions, or markups, in connection with the transaction 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.
A Sub-Adviser may also serve as a discretionary or non-
discretionary investment adviser to management or advisory
accounts which are unrelated in any manner to the Manager or
its affiliates. The Manager enters into an advisory agreement
with each Sub-Adviser known as an "Asset Management
Agreement." This Agreement requires the Sub-Adviser of a Fund
to provide fair and equitable treatment to the Fund in the
selection of portfolio investments and the allocation of
investment opportunities. However, it does not obligate the
Sub-Adviser to acquire for the Fund a position in any
investment which any of the Sub-Adviser's other clients may
acquire. The 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 Sub-Advisers 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 a Sub-Adviser 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 the amount is allocated
between the Portfolio and the other client(s) pursuant to a
formula considered equitable by the Sub-Adviser. In specific
cases, this system could have an adverse affect on the price or
volume of the security to be purchased or sold by the Fund.
However, the Trustees believe, over time, that coordination and
the ability to participate in volume transactions should
benefit the Fund.
The 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 restrictions are applicable to all employees
of the Manager and include a ban on trading securities based on
information about the trading within a Fund.
Sub-Advisers
The Sub-Adviser(s) for each Fund are set forth below. The
Income Equity Fund, the Capital Appreciation Fund, the Special
Equity Fund and the International Equity Fund currently
allocate the Fund's assets among more than one Sub-Adviser to
provide diversification among investment strategies. However,
not all Sub-Advisers that have Asset Management Agreements in
effect will be funded at all times. As of the date of this
Statement of Additional Information, the following are the Sub-
Advisers for each of the Funds. The information has been
supplied by each of the Sub-Advisers. None of these Sub-
Advisers are currently affiliated with the Manager or the
Funds.
20
<PAGE>
Income Equity Fund
* Chartwell Investment Partners, L.P. ("Chartwell")
Chartwell is a limited partnership founded in 1997. It is
75% controlled by the employees of Chartwell and 25%
controlled by Maverick Partners, L.P. ("Maverick"). Maverick
is controlled by John McNiff and Michael Kennedy. As of
December 31, 1998, Chartwell's assets under management
totaled approximately $2.7 billion. Chartwell's address is
1235 Westlakes Drive, Suite 330, Berwyn, PA 19312.
Chartwell uses a team approach to managing its portion of the
Income Equity Fund.
* Scudder Kemper Investments, Inc. ("Scudder")
Scudder was founded in 1919 and is owned and controlled by
the Zurich Group ("Zurich"). It is managed by a Board of
Directors chaired by Rolf Hueppi, Chairman and CEO of Zurich.
The members include members of Zurich's Corporate Executive
Board, Laurence W. Cheng, Steven M. Gluckstern, Markus
Rohrbasser,William H. Bolinder, Gunther Gose, and Edmond D.
Villani, as well as Cornelia Small, Director of Global Equity
Investments of Scudder and Lynn S. Birdsong, Director of
Scudder's Institutional Group. As of December 31, 1998,
Scudder's assets under management totaled approximately
$281.2 billion. Scudder's address is 345 Park Avenue, New
York, NY 10154.
Robert T. Hoffman is the portfolio manager of the portion of
the Income Equity Fund which is managed by Scudder. He is a
Managing Director of Scudder and has been employed by Scudder
since 1989.
Capital Appreciation Fund
* Essex Investment Management Company, LLC ("Essex")
Essex was founded in 1976 and is owned jointly by the
employees of Essex and an institutional partner, Affiliated
Managers Group, Inc. As of December 31, 1998, Essex's assets
under management totaled approximately $5.6 billion. Essex's
address is 125 High Street, Boston, MA 02110.
Joseph C. McNay, Chairman and Chief Investment Officer, and
Daniel Beckham, Principal and Vice President, are the
portfolio managers for the portion of the Capital
Appreciation Fund which is managed by Essex.
* Roxbury Capital Management, LLC ("Roxbury")
Roxbury Capital Management is a California corporation which
was founded in 1986. In order to facilitate a strategic
partnership with WT Investments, Inc., a subsidiary of
Wilmington Trust Company and a wholly-owned subsidiary of
Wilmington Trust Corporation, Roxbury Capital Management
transferred all of its assets in 1998 to Roxbury which is
jointly owned by employees and WT Investments, Inc., a
subsidiary of Wilmington Trust Company. As of December 31,
1998, Roxbury's assets under management totaled approximately
$6,026.56.0 billion. Roxbury's address is 100 Wilshire
Boulevard, Suite 600, Santa Monica, CA 90401.
21
<PAGE>
Kevin P. Riley is the portfolio manager of the portion of the
Capital Appreciation Fund which is managed by Roxbury. He is
a Senior Managing Director, Senior Portfolio Manager and
Chief Investment Officer of Roxbury.
Special Equity Fund
* Liberty Investment Management ("Liberty")
Liberty was originally formed in 1976 and is a division of
Goldman Sachs Asset Management. Goldman Sachs Asset
Management 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. As of December 31, 1998, Liberty's
assets under management totaled approximately $10.9 billion.
Liberty's 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 has been a
Vice President of Liberty since 1988.
* Pilgrim Baxter & Associates, Ltd. ("Pilgrim")
Pilgrim was formed in 1982 and is owned by United Asset
Management, a public company. As of December 31, 1998,
Pilgrim's assets under management totaled approximately $13.9
billion. Pilgrim's address is 825 Duportail Road, Wayne, PA
19087.
Jeffrey WronaGary L. Pilgrim is the lead portfolio manager
and Gary L. Pilgrim, CFA,Jeffrey Wrona is the co-portfolio
manager of the portion of the Special Equity Fund which is
managed by Pilgrim. Mr. Pilgrim is the Chief Investment
Officer and one of the founding members of the firm. Mr.
Wrona is responsible for managing small capitalization and
technology portfolios. Mr. Pilgrim is the Chief Investment
Officer and one of the founding members of the firm.
* Westport Asset Management, Inc. ("Westport")
Westport was formed in 1983 and is 51%-owned by Andrew J.
Knuth and 49%-owned by Ronald H. Oliver. Each is active as a
portfolio manager/analyst of the firm. As of December 31,
1998, Westport's assets under management totaled
approximately $2.0 billion. Westport's address is 253
Riverside Avenue, Westport, CT 06880.
Andrew J. Knuth is the portfolio manager of the portion of
the Special Equity Fund managed by Westport. He is the
Chairman and one of the founders of Westport.
* Kern Capital Management LLC ("KCM")
KCM is a Delaware limited liability company founded in 1997
by Robert E. Kern, Jr. and David G. Kern. As of December 31,
1998, KCM's assets under management totaled approximately
$405.9 million. KCM'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 which is managed by KCM. He has
been the Managing Member, Chairman and Chief Executive
Officer of KCM since the firm's inception.
22
<PAGE>
International Equity Fund
* Scudder Kemper Investments, Inc. ("Scudder")
See description above for Income Equity Fund
William E. Holzer is the portfolio manager of the portion of
the International Equity Fund which is managed by Scudder.
He is a Managing Director of Scudder.
* Lazard Asset Management ("Lazard")
Lazard is a division of Lazard Freres & Co. LLC, a New York
limited liability company founded in 1848. It is a division
of Lazard, Freres LLC. The mManaging dDirectors assigned to
Lazard are Eileen D. Alexanderson, Thomas F. Dunn, Norman
Eig, Herbert W. Gullquist, Ina O. Handler, Larry A. Kohn,
Robert P. Morgenthau, John R. Reinsberg, Michael S. Rome,
Michael P. Triguboff, Ira Handler and Alexander E. Zagoreos.
As of December 31, 1998, Lazard's assets under management
including its global affiliates totaled approximately $60
billion. Lazard's address is 30 Rockefeller Plaza, New York,
NY 10112.
Herbert W. Gullquist, Vice Chairman, Managing Director and
Chief Investment Officer and John R. Reinsberg, Managing
Director, are is the portfolio managers of the portion of the
International Equity Fund managed by Lazard. He is the
Managing Director of Lazard.
Emerging Markets Equity Fund
* Rexiter Capital Management Limited ("Rexiter")
Rexiter was founded in 1997 and is 75% owned by State Street
Corporation through two subsidiaries. As of December 31,
1998, Rexiter's assets under management totaled approximately
$361.64 million. Rexiter's address is Almack House, 28 King
Street, London, England SW1Y 6QW.
Murray Davey and Ken King are the portfolio managers the
Emerging Markets Equity Fund managed by Rexiter.
Short and Intermediate Bond Fund
* Standish, Ayer & Wood, Inc. ("Standish")
Standish was founded in 1933 and is a privately owned
corporation with 24 directors. Edward H. Ladd, Chairman and
Managing Director, and George W. Noyes, CEO, President and
Managing Directort, each own more than 10% of the outstanding
voting securities of Standish. Caleb F. Aldrich, Managing
Director and Vice President, Davis B. Clayson, Director and
Vice President, Dolores S. Driscoll, Managing Director and
Vice President, Richard C. Doll, Director and Vice President,
Maria D. Furman, Managing Director and Vice President, and
Richard S. Wood, Managing 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, 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. Ralph S. Tate is Managing Director and Vice
President of Standish. Each owns less than 5% of the
outstanding voting securities of Standish. As of December
31, 1998, Standish's assets under management totaled
approximately $46.2 billion. Standish's address is
One Financial Center, Suite 26, Boston, MA 02111.
23
<PAGE>
Howard B. Rubin is the portfolio manager for the Short and
Intermediate Bond Fund which is managed by Standish. He is a
Director and Vice President of Standish and has been with the
firm since 1984.
Bond Fund
* Loomis, Sayles & Company, L.P. ("Loomis")
Loomis was founded in 1926. Its sole general partner,
Loomis, Sayles & Company, Inc., is a special purpose
corporation that is an indirect wholly-owned subsidiary of
Nvest Companies, L.P. ("Nvest Companies"). Nvest Companies'
managing general partner, Nvest Corporation, is a direct
wholly-owned subsidiary of Metropolitan Life Insurance
Company ("Met Life"), a mutual life insurance company. Nvest
Companies' advising general partner, Nvest L.P., is a
publicly-traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of
Nvest L.P. As of December 31, 1998, Loomis' assets under
management totaled approximately $70.7 billion. Loomis'
address is One Financial Center, Boston, MA 02111.
Daniel J. Fuss, CFA, is the portfolio manager of the Bond
Fund which is managed by Loomis. He has been a Managing
Director of Loomis since 1976.
Global Bond Fund
* Rogge Global Partners, plc. ("Rogge")
Rogge was founded in 1984 and is owned by United Asset
Management, a public company. As of December 31, 1998,
Rogge's assets under management totaled approximately $5.6
billion. Rogge's address is Sion Hill, 56 Victoria
Embankment, London, England EC4Y-0DZ.
Olaf Rogge is the portfolio manager of the Global Bond Fund
which is managed by Rogge. He is the Managing Director and
Principal Executive of Rogge, which he founded in 1984.
Voluntary Fee Waivers and Expense Limitations
From time to time, the Manager may voluntarily agree 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 Sub-Advisers or (ii) a voluntary waiver by a
Sub-Adviser 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
below and in the Expense Information located in the front of
each of the Fund's Prospectuses. Voluntary fee waivers by the
Manager or by any Sub-Adviser may be terminated or reduced in
amount at any time and solely in the discretion of the Manager
or Sub-Adviser concerned. Shareholders will be notified of any
change on or about the time that it becomes effective.
24
<PAGE>
Compensation of Manager and Sub-Advisers
As compensation for the services rendered and related
expenses under the Fund Management Agreement, the Funds have
agreed to pay the Manager a fee, which is computed daily and
may be paid monthly. Furthermore, as compensation for the
services rendered and related expenses under the Asset
Management Agreement, the Manager has agreed to pay each of the
Sub-Advisers a fee for managing their respective portfolios,
which is also computed daily and paid monthly. The fee paid to
each Sub-Adviser is paid out from the Manager's fee received
from the Funds.
During the last three fiscal years ended December 31,
1996, 1997 and 1998, the Manager was paid the following fees by
the Funds under the Fund Management Agreement.
<TABLE>
<CAPTION>
Fund 1996 1997 1998
- ---------------------------------------------------------------
<S> <C> <C> <C>
Income Equity Fund $ 349,821 $ 465,345 $ 513,862
Capital Appreciation Fund$ 761,925 $ 797,930 $ 590,610
Special Equity Fund $1,572,135 $ 4,477,844 $7,575,757
International EquityFund$1,856,193 $ 3,010,430 $4,490,305
Emerging Markets Equity Fund*----- ----- $ 40,849 (a)
Short and Intermediate
Bond Fund $ 116,037 $ 88,839 $ 84,177
Bond Fund $ 180,197 $ 221,232 $ 281,699
Global Bond Fund $ 126,043 $ 115,996 $ 132,587
- --------------------------------------------------------------
*The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
(a) The fee paid to the Manager for the Fund, restated to
reflect a waiver of a portion of the fee in effect, would have
been $18,312.
</TABLE>
During the last three fiscal years ended December 31,
1996, 1997 and 1998, the Sub-Advisers were paid the following
fees by the Manager under the Asset Management Agreement.
Fund 1996 1997 1998
- -----------------------------------------------------------------
Income Equity Fund
Scudder Kemper Investments, Inc. $ 86,220 $ 120,096 $ 114,374
Chartwell Investment Partners, L.P. ----- $ 29,408 $ 25,429
Capital Appreciation Fund
Essex Investment Mgmt. Co., LLC ----- $ 156,464 $ 143,597
Roxbury Capital Management, LLC ----- ----- $ 29,210
Special Equity Fund
Liberty Investment Management $ 266,030 $ 746,314 $ 945,730
Pilgrim, Baxter & Associates,Ltd.$ 305,198 $ 790,994 $1,337,508
Westport Asset Management $ 302,171 $ 873,573 $1,422,275
Kern Capital Management LLC ----- $ 59,856 $ 441,940
International Equity Fund
Scudder Kemper Investments,Inc.$ 515,262 $ 833,438 $1,237,987
Lazard Asset Management $ 516,157 $ 838,470 $1,254,650
25
<PAGE>
Emerging Markets Equity Fund**
Rexiter Capital Management Limited
(King Street Advisors, Limited) --- ----- $ 18,312
Short and Intermediate Bond Fund
Standish, Ayer & Wood, Inc. $ 58,019 $ 44,419 $ 42,089
Bond Fund
Loomis, Sayles & Co., L.P. $ 71,957 $ 88,443 $ 112,679
Global Bond Fund
Rogge Global Partners plc $ 64,019 $ 57,998 $ 65,556
- -----------------------------------------------------------------------
*Managers Emerging Markets Equity Fund commenced operations on
February 9, 1998.
Fund Management Agreement
The Trust has entered into a Fund Management Agreement
with the Manager. The Manager, in turn, has entered into Asset
Management Agreements with each of the Sub-Advisers selected
for the Funds.
The Manager is a Delaware limited partnershipliability
company. Affiliated Managers Group, Inc. serves as its
Managing MemberIts 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 Sub-Advisers
for each Fund and allocate the Fund's assets among these Sub-
Advisers; (iv) provide financial, accounting and statistical
information required for registration statements and reports
with the SEC; and (v) provide the Trust with the office space,
facilities and personnel necessary to manage and administer the
operations and business of the Trust, including compliance with
state and federal securities and tax laws, shareholder
communications and record keeping.
The Fund Management Agreement provide that it will
continue in effect for a period of onetwo years after execution
and will be specifically approved thereafter annually by the
Trustees in the same manner as the Distribution and
Administration Agreements. See "Administrative Services;
Distribution Arrangements" below. The Fund Management Agreement
will terminate automatically if assigned and is terminable at
any time without penalty by a vote of a majority of the Trust's
Disinterested Trustees, or by a vote of the shareholders of a
majority of each Fund's outstanding voting securities, on 60
days written notice to the Manager or by the Manager on 60 days
written notice to the Fund.
The following table illustrates 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 Sub-Advisers.
26
<PAGE>
MANAGER'S PORTION
TOTAL MANAGEMENT OF THE TOTAL
NAME OF FUND FEE MANAGEMENT FEE
- --------------------------------------------------------------
Income Equity Fund 0.75% 0.40%
Capital Appreciation 0.80% 0.40%
Fund
Special Equity Fund 0.90% 0.40%
International Equity 0.90% 0.40%
Fund
Emerging Markets 1.15% 0.40%*
Equity Fund
Short and 0.50% 0.25%
Intermediate Bond
Fund
Bond Fund 0.625% 0.375%
Global Bond Fund 0.70% 0.35% up to $20
million
0.455% over $20
million
*Manager is waiving all of its fee as of the date of this
Statement of Additional Information.
The amount of the Fund's management fee retained by the
Manager may vary for a Fund due to changes in the allocation of
assets among its Sub-Advisers, the effect of an increase in the
Fund's net asset value on the fees payable to its Sub-Advisers,
and/or the implementation, modification or termination of
voluntary fee waivers by the Manager and/or one or more of the
Sub-Advisers.
The Trust has obtained from the SEC an order permitting
the Manager, subject to certain conditions, to enter into Asset
Management Agreements with Sub-Advisers approved by the
Trustees but without the requirement of shareholder approval.
Under 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 Sub-Advisers for new or existing Funds,
change the terms of particular sub-advisory agreements or
continue the employment of existing Sub-Advisers 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.
Administrative Services; Distribution Arrangements
The Managers Funds, L.P.The Managers Funds LLC serves as
administrator of the Trust (the "Administrator"). The Managers
Funds, L.P.The Managers Funds LLC 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
Disinterested Trustees 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.
27
<PAGE>
Custodian
State Street Bank and Trust Company ("State Street" or the
"Custodian"), 1776 Heritage Drive, North Quincy, Massachusetts,
02110 is the Custodian for all the Funds. It 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 Rexiter Capital
Management Limited, one of the sub-advisers to Managers
Emerging Markets Equity Fund. Under 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.
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.
Transfer Agent
Boston Financial Data Services, Inc., P.O. Box 8517,
Boston, Massachusetts 02266-8517, is the Transfer Agent for
each of the Funds.
Independent Public Accountants
PricewaterhouseCoopers LLP, One Post Office Square, Boston,
Massachusetts 02109, is the independent public accountant for
each of the Funds. PricewaterhouseCoopers LLP conducts an
annual audit of the financial statements of each of the Funds,
assists in the preparation and/or review of each of the Fund's
federal and state income tax returns and consults with the
Funds as to matters of accounting and federal and state income
taxation.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Management Agreements between the Manager and the Sub-
Advisers provides that the Sub-Advisers place all orders for
the purchase and sale of securities which are held in each
Fund's portfolio. In executing portfolio transactions and
selecting brokers or dealers, it is the policy and principal
objective of each Sub-Adviser to seek best price and execution.
It is expected that securities will ordinarily be purchased in
the primary markets. The Sub-Adviser shall consider all
factors that it deems relevant when assessing best price and
execution for the Fund, 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 when selecting brokers to execute transactions
and in evaluating the best available net price and execution,
the Sub-Advisers 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 Sub-Advisers 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 Sub-Advisers 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 Sub-Adviser 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 Sub-Adviser. The
Funds may purchase and sell portfolio securities through
brokers who provide the Funds with research services.
The Trustees will periodically review the total amount of
commissions paid by each Fund to determine if the commissions
paid over representative periods of time were reasonable in
relation to commissions being charged by other brokers and the
benefits to each Fund of using particular brokers or dealers.
It is possible that certain of the services received by the Sub-
Adviser attributable to a particular transaction will primarily
benefit one or more other accounts for which investment
discretion is exercised by the Sub-Advisers.
The fees of the Sub-Advisers are not reduced by reason of
their receipt of such brokerage and research services.
Generally, no Sub-Adviser provides any services to any Fund
except portfolio investment management and related record-
keeping services. However, a Sub-Adviser 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. A Sub-Adviser 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, a Sub-Adviser 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.
Brokerage Commissions
During the last three fiscal years, the Funds paid the
following brokerage fees:
Fund 1996 1997 1998
Income Equity Fund $ 44,936 $ 126,564 $118,253
Capital Appreciation Fund $ 421,852(b)$ 371,969 $238,292
Special Equity Fund $ 278,627 $ 616,474 $937,439
International Equity Fund $ 555,519 $ 657,238 $984,751
Emerging Markets EquityFund(a) ----- ----- $ 31,571
- -----------------------------------------
(a) The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
(b) The Capital Appreciation Fund paid brokerage commissions
totaling $49,756 to Fahnestock & Co., an affiliated broker-
dealer of Hudson Capital Advisors which then served as an Asset
Manager.
Brokerage Recapture Arrangements
During the last three fiscal years, the Funds paid the
following fees to the following list of brokers with which the
Funds have entered into brokerage recapture arrangements:
Fund 1996 1997 1998
- ----------------------------------------------------------------
Income Equity Fund
* Capital Institutional Services, Inc.$ 7,866 $19,771 $ 6,809
* Salomon Smith Barney --- $53,306 ---
Capital Appreciation Fund
* Capital Institutional Services, Inc. --- --- $ 8,016
* Salomon Smith Barney $ 7,758 $55,771 $ 6,858
* Donaldson & Co., Inc. $ 13,956 --- $ 4,794
* Westminster Research Assoc. Inc. $ 5,170 $ 9,408 $117,362
* LJB Associates $ 55,224 $11,057 ---
Special Equity Fund
* Capital Institutional Services, Inc.$ 22,009 $33,840 $ 16,680
International Equity Fund
* Capital Institutional Services, Inc.$ 5,400 $ 1,188 $ 1,254
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchasing Shares
Investors may open accounts with the Funds through their
financial planners or investment professionals, or by the
Trust in limited circumstances as described in the Prospectus.
Shares may also be purchased through 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.
There are no charges by the Trust for being a customer for
this purpose. The Trust reserves the right to determine which
customers and which purchase orders the Trust will accept.
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 this service. Shares purchased in this way
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 or the Trust's transfer
agent. Certain processing organizations may receive
compensation from the Trust's Manager, Administrator and/or a
Sub-Adviser.
Purchase orders received by the Trust before 4:00 p.m.
New York Time, c/o Boston Financial Data Services, Inc. (the
"Transfer Agent") at the address listed in the prospectus on
any Business Day will receive the net asset value computed
that day. Orders received after 4:00 p.m. by certain
processing organizations which have entered into special
arrangements with the Manager will also receive that day's
offering price. The broker-dealer, omnibus processor or
investment professional is responsible for promptly
transmitting orders to the Trust. Orders transmitted to the
Trust at the address indicated in the Prospectus will be
promptly forwarded to the Transfer Agent.
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. To ensure that checks are collected by the Trust,
redemptions of shares which were purchased by check are not
effected until the clearance of the check which may take up to
15 days after the date of purchase, unless arrangements are
made with the Administrator. However, during this 15 day
period, such shareholder may exchange such shares into any
other Funds of The Managers Funds (note: the 15 day holding
period for redemptions is still applicable to these exchanged
shares).
If the check accompanying any purchase order does not
clear, or if there are insufficient funds in your bank
account, the transaction will be canceled and you will be
responsible for any loss the Trust incurs. For current
shareholders, each Fund can redeem shares from any identically
registered account in such Fund or any other Fund in the Trust
as reimbursement for any loss incurred. The Trust has the
right to prohibit or restrict all future purchases in the
Trust in the event of any nonpayment for shares.
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.
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.
Redeeming Shares
Any redemption orders received by the Trust 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. Redemption orders
transmitted to the Trust at the address indicated in the
Prospectus will be promptly forwarded to the Transfer Agent.
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.
If the Fund determines that it would be detrimental to
the best interest of the remaining shareholders of the Fund to
make payment wholly or partly in cash, payment of the
redemption price may be made in whole or in part by a
distribution in kind of securities from the Fund, in lieu of
cash, in conformity with the applicable rule of the SEC. If
shares are redeemed in kind, the redeeming shareholder might
incur transaction costs in converting the assets to cash. The
method of valuing portfolio securities is described under the
"Net Asset Value", and such valuation will be made as of the
same time the redemption price is determined.
Investors should be aware that redemptions from a Fund
may not be processed if a redemption request is not submitted
in proper form. To be in proper form, the request must
include the shareholder's taxpayer identification number,
address, account number, Fund number and signatures of all
account holders. All redemptions will be mailed to the
address of record on the shareholder's account. In addition,
if a shareholder sends a check for the purchase of fund shares
and shares are purchased before the check has cleared, the
transmittal of redemption proceeds from the shares will occur
upon clearance of the check which may take up to 15 days. The
Fund reserves the right to suspend the right of redemption and
to postpone the date of payment upon redemption beyond seven
days as follows: (i) during periods when the New York Stock
Exchange is closed for other than weekends and holidays or
when trading on such Exchange is restricted as determined by
the SEC by rule or regulation, (ii) during periods in which an
emergency, as determined by the SEC, exists that causes
disposal by the Fund of, or evaluation of the net asset value
of, portfolio securities to be unreasonable or impracticable,
or (iii) for such other periods as the SEC may permit.
Exchange of Shares
An investor may exchange shares from any Fund into shares
of any other of The Managers Funds without any charge. An
exchange may be made as long as after the exchange the
investor has shares, in each Fund where he or she remains an
investor, with a value of at least that Fund's minimum
investment amount. Shareholders should read the Prospectus of
the Fund that they are exchanging into. Investors may
exchange only into accounts that are registered in the same
name with the same address and taxpayer identification number.
Shares are exchanged on the basis of the relative net asset
value per share. Exchanges are in effect purchases of one
Fund and redemptions of another Fund, and therefore, the usual
purchase and redemptions procedures and requirements apply to
each exchange. Shareholders are subject to federal income tax
and may recognize capital gains or losses on the exchange for
federal income tax purposes. Shares of the Fund to be
acquired or purchased for settlement when the proceeds from
redemption become available. The Trust reserves the right to
discontinue, alter or limit the exchange privilege at any
time.
Net Asset Value
Each of the Funds computes its Net Asset value once daily
on Monday through Friday on each day on which the New York
Stock Exchange ("NYSE") is open for trading, at the close of
business of the NYSE, usually 4:00 p.m. New York Time. The
net asset value will not be computed on the day the following
legal holidays are observed: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day,
Thanksgiving Day and Christmas Day. The Funds may close for
purchases and redemptions at such other times as may be
determined by the Board of Trustees to the extent permitted by
applicable law. The time at which orders are accepted and
shares are redeemed 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 net asset value of each Fund is equal to the value of
the Fund (assets minus liabilities) divided by the number
of shares outstanding. Fund securities listed on an
exchange are valued at the last quoted sale price on the
exchange where such securities are principally traded on
the valuation date, prior to the close of trading on the
NYSE, or, lacking any sales, at 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 at 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.
Dividends and Distributions
Each of the Funds declares and pays dividends and
distributions as described in the Prospectus.
If a shareholder has elected to receive dividends and/or
their distributions in cash and the postal or other delivery
service is unable to deliver the checks to the shareholder's
address of record, the dividends and/or distribution will
automatically be converted to having the dividends and/or
distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed dividend or
redemption checks.
TAXATION OF THE FUNDS
The following discussion of tax consequences is based on
U.S. Federal tax laws in effect as of the date of this SAI.
These laws and regulations are subject to change by legislative
or administrative action.
Each Fund intends to qualify and remain qualified as a
regulated investment company ("RIC") under Subchapter M of the
Code. As a RIC, a Fund must, among other things, (i) derive at
least 90% of its gross income from dividends, interest,
payments with respect to loans of certain securities, 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 foreign currencies; and (ii) diversify its holdings so that,
at the end of each fiscal quarter of its taxable year, (a) at
least 50% of the value of the Fund's total assets is
represented by cash, cash items, U.S. Government securities,
investments in other regulated investment companies, and other
securities limited, in respect of any one issuer, to an amount
not greater than 5% of the Fund's total assets, and 10% of the
outstanding voting securities of such issuer, and (b) not more
than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment
companies). As a RIC, a Fund (as opposed to its shareholders)
will not be subject to federal income taxes on the net
investment income and capital gain that it distributes to its
shareholders, provided that at least 90% of its net investment
income and realized net short-term capital gain in excess of
net long-term capital loss for the taxable year is distributed
in accordance with the Code's timing requirements.
Under the Code, a Fund will be subject to a 4% excise tax
on a portion of its undistributed taxable income and capital
gains if it fails to meet certain distribution requirements a
by the end of the calendar year. The Funds intends to make
distributions in a timely manner, and accordingly, does not
expect to be subject to the excise tax.
For federal income tax purposes, dividends that are
declared by a Fund in October, November or December as of a
record date in such month and actually paid in January of the
following year generally will be treated as if they were paid
on December 31 of the year declared. Therefore, such dividends
will be taxable to a shareholder in the year declared rather
than the year paid.
Distributions of net investment income and realized net
short-term capital gain in excess of net long-term capital
losses (other than exempt interest dividends) are generally
taxable to shareholders of the Fund as ordinary income whether
such distributions are taken in cash or reinvested in
additional shares. Distributions to corporate shareholders of
the Fund are not eligible for the dividends received deduction.
Distributions of net long-term capital gains (i.e., net long-
term capital gain in excess of net short-term capital loss) are
taxable to shareholders of the Fund as long-term capital gains,
regardless of whether such distributions are taken in cash or
reinvested in additional shares and regardless of how long a
shareholders has held shares in the Fund. In general, long-
term capital gain of an individual shareholder will be subject
to a reduced rate of tax. Investors should consult their tax
advisors concerning the treatment of capital gains and losses.
Additionally, any loss realized on a redemption or exchange of
shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning
30 days before such disposition, such as pursuant to
reinvestment of a dividend of shares in the 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.
Gains and losses on the sales of portfolio
securities will be treated as long-term capital gains or losses
if the securities have been held for more than one year, except
in certain cases where, if applicable, a put is acquired or a
call option is written thereon or straddle rules are otherwise
applicable. Other gains or losses on the sale of securities
will be short-term capital gains or losses. Gains and losses
on the sale, lapse or other termination of options on
securities will be treated as gains and losses from the sale of
securities. Except as described below, if an option written by
the Funds lapse or is terminated through a closing transaction,
such as a repurchase by the Fund of the option from its holder,
the Fund will realize a short-term capital gain or loss,
depending on whether the premium income is greater or less than
the amount paid by the Fund in the closing transaction. If
securities are purchased by the Fund pursuant to the exercise
of a put option written by the Fund, the Fund will subtract the
premium received from its cost basis in the securities
purchased.
Any distribution of net investment income or capital gains
will have the effect of reducing the net asset value of the
Fund's shares held by a shareholder by the same amount as the
distribution. If the net asset value of the shares is reduced
below a shareholder's cost as a result of such a distribution,
the distribution, although constituting a return of capital to
the shareholder, will be taxable as described above.
Any gain or loss realized on the redemption or exchange of
the Fund's shares by a shareholder who is not a dealer in
securities will be treated as a long-term capital gain or loss
if the shares have been held for more than one year, and
otherwise as a short-term capital gain or loss. However, any
loss realized by a shareholder upon the redemption or exchange
of shares in the Fund held for six months or less will be
treated as a long-term capital loss to the extent of any long-
term capital gain distributions received by the shareholder
with respect to such shares.
If a correct and certified taxpayer identification number
is not on file, the Fund is required, subject to certain
exemptions, to withhold 31% of certain payments made or
distributions to non-corporate shareholders.
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.
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.
Foreign Shareholders. Dividends of net investment income
and distribution of realized net short-term gain in excess of
net long-term loss to a shareholder who, as to the United
States, is a nonresident alien individual, fiduciary of a
foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate)
unless the dividends are effectively connected with a U.S.
trade of business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the
graduated rates applicable to U.S. individuals or domestic
corporations. Distributions treated as long-term capital gains
to foreign shareholders will not be subject to U.S. tax unless
the distributions are effectively connected with the
shareholder's trade of business in the United States or, in the
case of a shareholder who is a nonresident alien individual,
the shareholder was present in the United States for more than
182 days during the taxable year and certain other conditions
are met.
In the case of a foreign shareholder who is a nonresident
alien individual or foreign entity, the Fund may be required to
withhold U.S. federal income tax as "backup withholding" at the
rate of 31% from distributions treated as long-term capital
gains and from the proceeds of redemptions, exchanges or other
dispositions of the Fund's shares unless IRS Form W-8 is
provided. Transfers by gift of shares of the Fund by a foreign
shareholder who is a non-resident alien individual will not be
subject to U.S. federal gift tax, but the value of shares of
the Fund held by such shareholder at his or her death will be
includible in his or her gross estate for U.S. federal estate
tax purposes.
The International Equity, Emerging Markets Equity, Global
Bond, Bond and Short and Intermediate Bond 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 that 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 that itemize deductions may deduct
foreign income taxes paid by them.
State and Local Taxes. The Funds may also be subject to
state and/or local taxes in jurisdictions in which the Funds
are deemed to be doing business. In addition, the treatment of
the Fund and its shareholders in those states, which have
income tax laws, might differ from treatment under the federal
income tax laws. Shareholders should consult with their own
tax advisers concerning the foregoing state and local tax
consequences of investing in the Funds.
Other Taxation. The Funds are series of a Massachusetts
business trust. Under current law, neither the Trust nor any
Fund in the Trust is liable for any income or franchise tax in
The Commonwealth of Massachusetts, provided that each Fund of
the Trust continues to qualify as a regulated investment
company under Subchapter M of the Code.
PERFORMANCE DATA
From time to time, the Funds may quote performance in
terms of yield, actual distributions, total return or capital
appreciation in reports, sales literature, and advertisements
published by the Funds. Current performance information for
each of the Funds may be obtained by calling the number
provided on the cover page of this Statement of Additional
Information. See the Funds' Prospectus.
Yield
The Income Equity Fund, the Short and Intermediate Bond
Fund, the Bond Fund and the Global Bond Fund may include in
advertisements or sales literature certain total return and
yield information in terms of a 30-day yield quotation. "Yield"
refers to income generated by an investment in the Fund during
the previous 30-day (or one-month) period. The 30-day yield
quotation is computed by dividing the net investment income per
share on the last day of the period, according to the following
formula:
Yield = 2[((a-b) / (cd) + 1)^6 - 1]
In the above formula, a = dividends and interest earned
during the period
b = expenses accrues for the period, net of
reimbursements
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = 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.
The 30-day yields for the period ended December 31, 1998,
were as follows:
Fund 30-Day Yield at 12/31/98
Income Equity Fund 1.15%
Short and Intermediate Bond 5.19%
Fund
Bond Fund 6.86%
Global Bond Fund 3.61%
Total Return
Each of the Funds may advertise performance in terms of
average annual total return for 1-, 5- and 10-year periods, or
for such lesser periods that a Fund has been in existence.
Average Annual return is computed by finding the average annual
compounded rates of return over the periods that would equate
the initial amount invested to the ending redeemable value,
according to the following formula:
P (1 + T) N = ERV
In the above formula, P = a hypothetical initial payment of
$1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of
the hypothetical $1,000 payment made at the
beginning of the 1-, 5- or 10-year periods at
the end of the year or period
The figure is then annualized. The formula assumes that any
charges are deducted from the initial $1,000 payment and
assumes that all dividends and distributions by the Fund are
reinvested at the price stated in the Prospectus on the
reinvestment dates during the period
Average Annual Returns
NAME OF FUND 1 5 YEARS 10 SINCE
YEAR YEARS INCEPTION*
Income Equity Fund 17.68% 14.43% 11.73%
Capital Appreciation 21.51% 18.36% 57.34%
Special Equity Fund 15.35% 16.64% 0.20%
International Equity 11.16% 11.62% 14.54%
Emerging Markets --- --- --- -22.60
Equity Fund
Short & Int. Bond 4.23%
Fund 5.31% 7.13%
Bond Fund 7.77% 3.29% 9.75%
Global Bond Fund --- --- 8.24% 19.27%
* Data since inception are shown for Funds that are less than
10 years old. Global Bond Fund commenced operations on
3/25/94. The Emerging Markets Equity Fund commenced operations
on 2/9/98.
Performance Comparisons
Each of the Funds may compare its performance to the
performance of other mutual funds having similar objectives.
This comparison must be expressed as a ranking prepared by
independent services or publications that monitor the
performance of various mutual funds such as Lipper, Inc.
("Lipper"), Morningstar, Inc., ("Morningstar") and IBC Money
Fund Report ("IBC"). Each Fund's performance may also be
compared to the performance of various unmanaged indices such
as the Standard & Poor's 500 Stock Price Index or the Dow Jones
Industrial Average.
"Lipper-Fixed Income Fund Performance Analysis" is a
monthly publication prepared by Lipper, which tracks net
assets, total return, principal return and yield on
approximately 950 fixed-income mutual funds offered in the
United States. Lipper also prepares the "Lipper Composite
Index," a performance benchmark based upon the average
performance of publicly offered stock funds, bond funds, and
money market funds as reported by Lipper.
Morningstar, Inc., a widely used independent research
firm, also ranks mutual funds by overall performance,
investment objectives and assets.
From time to time, in reports and sales literature, the
Funds may compare their performance, risk quality and liquidity
characteristics to money market funds, treasury bills and
notes, GIC's and various indices of unmanaged securities.
Charts may be shown depicting the relative yield and risk
relationships between the Fund and these indices. In general,
instruments with shorter maturities or durations tend to be
less risky (have lower price volatility) than those with longer
maturities or durations. Risk and yield tend to be greater for
corporate issues than for government securities or money market
funds. Money market funds invest only in high quality
instruments that are denominated in U.S. dollars and that have
relatively short periods to maturity. Accordingly, money
market funds tend to have fairly low risk and price volatility.
The indices used, and the basis for these comparisons, may
include:
The IBC Money Market Fund Index, prepared by IBC Financial
Data, Inc. in "IBC's Money Market Fund Report," is 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.
Yields on two-year Treasury notes or one-year Treasury
bills are 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 are published
by Merrill Lynch, Salomon Smith Barney and Lehman Brothers.
Indices which may be compared to the Short and Intermediate
Bond 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 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.
Massachusetts Trust
Each of the Funds is a separate and distinct series of the
Trust which is commonly known as a "Massachusetts business
trust." A copy of the Declaration of Trust for the Trust is on
file in the office of the Secretary of The Commonwealth of
Massachusetts. The Declaration of Trust and the By-Laws of the
Trust are designed to make the Trust similar in most respects
to a Massachusetts business corporation. The principal
distinction between the two forms concerns shareholder
liability and are described below.
Under Massachusetts's law, shareholders of such a trust
may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. This is not the
case for a Massachusetts business corporation. However, the
Declaration of Trust of the Trust provides that the
shareholders shall not be subject to any personal liability for
the acts or obligations of the Fund and that every written
agreement, obligation, instrument or undertaking made on behalf
of the Fund shall contain a provision to the effect that the
shareholders are not personally liable thereunder.
No personal liability will attach to the shareholders
under any undertaking containing such provision when adequate
notice of such provision is given, except possibly in a few
jurisdictions. With respect to all types of claims in the
latter jurisdiction, (i) tort claims, (ii) contract claims
where the provision referred to is omitted from the
undertaking, (iii) claims for taxes, and (iv) certain statutory
liabilities in other jurisdictions, a shareholder may be held
personally liable to the extent that claims are not satisfied
by the Fund. However, upon payment of such liability, the
shareholder will be entitled to reimbursement from the general
assets of a Fund. The Trustees of the Trust intend to conduct
the operations of the Trust in a way as to avoid, as far as
possible, ultimate liability of the shareholders of a Fund.
The Declaration of Trust further provides that the name of
the Trust refers to the Trustees collectively as Trustees, not
as individuals or personally, that no Trustee, officer,
employee or agent of the Fund or to a shareholder, and that no
Trustee, officer, employee or agent is liable to any third
persons in connection with the affairs of the Fund, except if
the liability arises from his or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his or
its duties to such third persons. It also provides that all
third persons shall look solely to the property of the Fund for
any satisfaction of claims arising in connection with the
affairs of the Fund. With the exceptions stated, the Trust's
Declaration of Trust provides that a Trustee, officer, employee
or agent is entitled to be indemnified against all liability in
connection with the affairs of the Fund.
The Trust shall continue without limitation of time
subject to the provisions in the Declaration of Trust
concerning termination by action of the shareholders or by
action of the Trustees upon notice to the shareholders.
Description of Shares
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which each of
the Funds represent a separate series of shares of beneficial
interest. See "Massachusetts Trust" above.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares ($0.001 par
value) of one or more series and to divide or combine the
shares of any series, if applicable without changing the
proportionate beneficial interest of each shareholder in the
Fund or assets of another series, if applicable. Each share of
the Fund represents an equal proportional interest in the Fund
with each other share. Upon liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets
of the Fund available for distribution to such shareholders.
See "Massachusetts Trust" above. Shares of the Funds have no
preemptive or conversion rights and are fully paid and
nonassessable. The rights of redemption and exchange are
described in the Prospectus and in this Statement of Additional
Information.
The shareholders of the Trust are entitled to one vote for
each share held (or a proportionate fractional vote in respect
of a fractional share amount), on matters on which shares of
the Fund shall be entitled to vote. Subject to the 1940 Act,
the Trustees themselves have the power to alter the number and
the terms of office of the Trustees, to lengthen their own
terms, or to make their terms of unlimited duration subject to
certain removal procedures, and appoint their own successors,
provided however, that immediately after such appointment the
requisite majority of the Trustees have been elected by the
shareholders of the Trust. The voting rights of shareholders
are not cumulative so that holders of more than 50% of the
shares voting can, if they choose, elect all Trustees being
selected while the shareholders of the remaining shares would
be unable to elect any Trustees. It is the intention of the
Trust not to hold meetings of shareholders annually. The
Trustees may call meetings of shareholders for action by
shareholder vote as may be required by either the 1940 Act or
by the Declaration of Trust of the Trust.
Shareholders of the Trust have the right, upon the
declaration in writing or vote of more than two-thirds of its
outstanding shares, to remove a Trustee from office. The
Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of
10% of the shares of the Trust. In addition, whenever ten or
more shareholders of record who have been shareholders of
record for at least six months prior to the date of the
application, and who hold in the aggregate either shares of the
Fund having a net asset value of at least $25,000 or at least
1% of the Trust's outstanding shares, whichever is less, shall
apply to the Trustees in writing, stating that they wish to
communicate with other shareholders with a view to obtaining
signatures to request a meeting for the purpose of voting upon
the question of removal of any of the Trustees and accompanies
by a form of communication and request which they wish to
transmit, the Trustees shall within five business days after
receipt of such application either: (1) afford to such
applicants access to a list of the names and addresses of all
shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of
shareholders of record, and the approximate cost of mailing to
them the proposed shareholder communication and form of
request. If the Trustees elect to follow the latter, the
Trustees, upon the written request of such applicants
accompanies by a tender of the material to be mailed and the
reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at
their addresses as recorded on the books, unless within five
business days after such tender the Trustees shall mail to such
applicants and file with the SEC, together with a copy of the
material to be mailed, a written statement signed by at least a
majority of the Trustees to the effect that in their opinion
either such material contains untrue statements of fact or
omits to state facts necessary to make the statements contained
therein not misleading, or would be in violation of applicable
law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the
written statements filed, the SEC may, and if demanded by the
Trustees or by such applicants shall, enter an order either
sustaining one or more objections or refusing to sustain any of
such objections, or if, after the entry of an order sustaining
one or more objections, the SEC shall find, after notice and
opportunity for a hearing, that all objections so sustained
have been met, and shall enter an order so declaring, the
Trustees shall mail copies of such material to all shareholders
with reasonable promptness after the entry of such order and
the renewal of such tender.
The Trustees have authorized the issuance and sale to the
public of shares of ten series of the Trust. The Trustees may
authorize the issuance of additional series of the Trust. The
proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with
distinct investment objectives, policies and restrictions, and
share purchase, redemption and net asset value procedures. All
consideration received by the Trust for shares of any
additional series, and all assets in which such consideration
is invested, would belong to that series, subject only to the
rights of creditors of the Trust and would be subject to the
liabilities related thereto. Shareholders of the additional
series will approve the adoption of any management contract,
distribution agreement and any changes in the investment
policies of the Fund, to the extent required by the 1940 Act.
Additional Information
This Statement of Additional Information and the
Prospectus do not contain all of the information included in
the Trust's Registration Statement filed with the SEC under the
1933 Act and the Portfolio's Registration Statement filed under
the 1940 Act. Pursuant to the rules and regulations of the
SEC, certain portions have been omitted. The Registration
Statements including the Exhibits filed therewith may be
examined at the office of the SEC in Washington DC.
Statements contained in the Statement of Additional
Information and the Prospectus concerning the contents or any
contract or other document are not necessarily complete, and in
each instance, reference is made to the copy of such contract
or other document filed as an Exhibit to the applicable
Registration Statement. Each such statement is qualified in
all respects by such reference.
No dealer, salesman or any other person has been
authorized to give any information or to make any
representations, other than those contained in the Prospectus
or this Statement of Additional Information, in connection with
the offer of shares of the Fund and, if given or made, such
other representations or information must not be relied upon as
having been authorized by the Trust, the Fund or the
Distributor. The Prospectus and this Statement of Additional
Information do not constitute an offer to sell or solicit an
offer to buy any of the securities offered thereby in any
jurisdiction to any person to whom it is unlawful for the Fund
or the Distributor to make such offer in such jurisdictions.
FINANCIAL STATEMENTS
The following audited Financial Statements and the Notes
for each of the Funds, and the Report of Independent
Accountants of PricewaterhouseCoopers LLP are incorporated by
reference to this SAI from their respective annual report
filings made with the SEC pursuant to Section 30(b) of the 1940
Act and Rule 30b2-1 thereunder. Any of the Financial
Statements and reports are available without charge by calling
The Managers Funds at (800) 835-3879, on The Managers Funds
Internet website at http://www.managersfunds.com or on the
SEC's Internet website at http://www.sec.gov.
Fund Date of Annual Report; Date of
Filing of Annual Report; and
Accession Number
- ---------------------------------------------------------------
Income Equity Fund 12/31/98; 2/26/99; 0000720309-99-
000010
Capital Appreciation 12/31/98; 2/26/99; 0000720309-99-
Fund 000010
Special Equity Fund 12/31/98; 2/26/99; 0000720309-99-
000010
International Equity 12/31/98; 2/26/99; 0000720309-99-
Fund 000011
Emerging Markets Equity 12/31/98; 2/26/99; 0000720309-99-
Fund 000011
Short and Intermediate 12/31/98; 2/26/99; 0000720309-99-
Bond Fund 000012
Bond Fund 12/31/98; 2/26/99; 0000720309-99-
000012
Global Bond Fund 12/31/98; 2/26/99; 0000720309-99-
000012
APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S:
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA has the highest ratings assigned by
Standard & Poor's to a debt obligation. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest rated
issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than for debt
in higher rated categories.
BB - Debt rated BB is regarded as having less near-term
vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely
interest and principal payments.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues
in this category are further refined with the
designations 1, 2, and 3 to indicate the relative degree
of safety.
A-1 - This designation indicates that the degree of safety
regarding timely payment is very strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the
highest rating assigned by Standard & Poor's and has a
very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics are given a "plus" (+)
designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has
satisfactory capacity to pay principal and interest.
MOODY'S:
CORPORATE AND MUNICIPAL BONDS
Aaa - Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long term risks appear somewhat larger than in
Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as
well-assured. Often the protection of interest and
principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in
this class.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
Prime-1 - Issuers rated Prime-1 (or related supporting
institutions) have a superior capacity for repayment
of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the
following characteristics:
-- Leading market positions in well established
industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
-- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
-- Well established access to a range of financial
markets and assured sources of alternate
liquidity.
SHORT-TERM TAX EXEMPT NOTES
MIG-1 - The short-term tax-exempt note rating MIG-1 is the
highest rating assigned by Moody's for notes judged
to be the best quality. Notes with this rating enjoy
strong protection from established cash flows of
funds for their servicing or from established and
broad-based access to the market for refinancing, or
both.
MIG-2 - MIG-2 rated notes are of high quality but with
margins of protection not as large as MIG-1.
