<PAGE>
MONEY MARKET FUND
- ------------------------------------
ANNUAL REPORT
November 30, 1998
- --------------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
MANAGERS MONEY MARKET FUND
ANNUAL REPORT
November 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
President's Message..................................................... 1
The Managers Funds Performance.......................................... 4
COMPLETE PERFORMANCE TABLE FOR ALL OF THE MANAGERS FUNDS AS OF
December 31, 1998
Managers Money Market Fund
Statement of Assets and Liabilities................................ 5
FUND'S BALANCE SHEET AND NET ASSET VALUE (NAV) PER SHARE
COMPUTATION
Statement of Operations............................................ 5
DETAIL OF SOURCES OF INCOME AND FUND LEVEL EXPENSES
Statement of Changes in Net Assets................................. 6
DETAIL OF CHANGES IN FUND ASSETS AND DISTRIBUTIONS TO SHAREHOLDERS
FOR THE LAST TWO PERIODS
Financial Highlights............................................... 7
HISTORICAL NET ASSET VALUES, DISTRIBUTIONS, TOTAL RETURNS, EXPENSE
RATIOS AND NET ASSETS
Notes to Financial Statements...................................... 8
ACCOUNTING AND DISTRIBUTION POLICIES, DETAILS OF AGREEMENTS AND
TRANSACTIONS WITH FUND MANAGEMENT AND DESCRIPTION OF CERTAIN
INVESTMENT RISKS
Report of Independent Accountants.................................. 10
The Prime Money Market Portfolio (The commingled investment pool which
holds all investable assets of the Fund)
Schedule of Investments............................................ 12
DETAILED PORTFOLIO LISTINGS BY SECURITY TYPE, AS VALUED AT
November 30, 1998, OF WHICH MANAGERS MONEY MARKET FUND OWNS A
PRO RATA SHARE
Statement of Assets and Liabilities................................ 16
PORTFOLIO'S BALANCE SHEET
Statement of Operations............................................ 16
DETAIL OF THE PORTFOLIO'S SOURCES OF INCOME, EXPENSES, AND REALIZED
GAINS (LOSSES) DURING THE PERIOD
Statement of Changes in Net Assets................................. 17
DETAIL OF CHANGES IN THE PORTFOLIO'S ASSETS DURING THE PAST TWO
PERIODS
Supplementary Data................................................. 17
HISTORICAL RATIOS OF THE PORTFOLIO'S EXPENSES, NET INVESTMENT
INCOME AND IMPACT OF EXPENSE REIMBURSEMENTS ON THE EXPENSE RATIOS
Notes to Financial Statements...................................... 18
THE PORTFOLIO'S ACCOUNTING POLICIES AND DETAILS OF AGREEMENTS AND
TRANSACTIONS WITH PORTFOLIO MANAGEMENT
Report of Independent Accountants.................................. 21
</TABLE>
INVESTMENTS IN MANAGERS MONEY MARKET FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR
ANY OTHER BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
CONTINUE TO DO SO.
<PAGE>
PRESIDENT'S MESSAGE
- -----------------------------------------------
<TABLE>
<S> <C>
</TABLE>
DEAR FELLOW SHAREHOLDER:
The past year will be remembered as one of the most tumultuous years for
financial assets in recent history. While the U.S. economy grew steadily
throughout the year and inflation remained very moderate, several important
events sent financial markets throughout the world on a roller-coaster of
valuation. Within that environment, Managers Money Market Fund achieved its
goal of maintaining a stable net asset value while providing a competitive
yield in excess of inflation. The Fund began its 1998 fiscal year with a
30-day annualized yield of 5.12% and finished with a 30-day annualized
yield of 5.09%.
Early in the year, despite continued uncertainty about the health of many
emerging economies, U.S. equity and fixed-income markets rose as continued
growth in gross domestic product (GDP) and the reality of low inflation
encouraged investors and consumers. Consumer spending continued to rise along
with personal income, while unemployment reached post-WWII lows. As might be
expected, consumer confidence estimates reached all-time highs.
During the summer, however, the continuing problems in foreign economies
threw a wrench into the works. A 7.7% drop in exports confirmed that the
economic crises in the Far East was having an impact on the U.S. economy, and
raised the possibility that the emerging markets could drag relatively healthy
developed markets, including the U.S., into recession. The Malaysian government
instituted capital controls over its currency, effectively eliminating further
foreign investment. In mid-August, Russia devalued its currency by one third
and defaulted on much of its debt to foreign creditors. Long Term Capital
Management (LTCM), a hedge fund consisting of some of the "smartest money"
on Wall Street, had to be bailed out by a consortium of large investment banking
institutions after LTCM's funds lost nearly 90 percent of their value. These
events set off a vicious cycle that led to sharp declines of almost all of the
world's financial markets. In addition, U.S. manufacturing activity and
construction spending leveled off and U.S. job growth grew at a slower than
expected pace in September. Again, not surprisingly, consumer confidence fell
for three straight months into September. From their peak in mid-July most
foreign and domestic stock indices fell 20% or more by the end of August.
Liquidity in the credit markets dwindled as dealers and
1
<PAGE>
- -----------------------------------------------
investors attempted to reduce their risk exposure at all costs, sending
corporate bond and all lower credit quality debt prices lower. The beneficiaries
were U.S. Treasury securities along with a few other countries' government debt
which rose dramatically in price during the period.
In reaction to these events and the market weakness, the Federal Reserve Board
reduced the Federal Funds Rate by one-quarter percentage point on
September 29th, and followed that with a surprise reduction in mid-October. In
explaining his decision, Fed Chairman Greenspan told the Senate Budget Committee
that "deteriorating foreign economies and their spillover to domestic markets
have increased the possibility that the slowdown in the growth of the American
economy will be more than sufficient to hold inflation in check." Several
foreign central banks augmented the Fed's move by reducing their own rates.
The global equity markets celebrated the rate reductions along with some
encouraging cororate earnings news by surging to one of their best quarterly
performances ever. Before the end of the calendar year, the broad large and
medium capitalization indices were hitting all time highs.
Because inflation has remained extremely moderate, and there is no hard
evidence to indicate any acceleration going forward, interest rates have fallen
over the past year. While short-term interest rates have dropped moderately,
which obviously has an effect on the portfolio of this fund, long-term interest
rates have fallen even more. As of the Fund's fiscal year end (November 30,
1998) the yield for 30-year U.S. Treasury bonds was 5.07%, which was less than
the yield for short-term treasury securities at the beginning of the year.
While low, declining interest rates are very good for the economy, it has been
a challenging environment in which to maintain a stable yield in a short-term
investment portfolio. Given this Fund's primary goal of protecting capital
while seeking a competitive yield in excess of inflation, we believe that the
Fund's portfolio management team led by Robert Johnson at J.P. Morgan has done
an excellent job. During the one-year period ending November 30, 1998, the
yield on short-term Treasury securities has fallen approximately 75 basis points
(0.75%) to an annualized yield in the range of 4.5%. Meanwhile, over the same
period, Managers Money Market Fund has provided a yield which essentially
remained stable between 5.0% and 5.3%. As of November 30, 1998 the 30-day
average annualized yield for the Fund was 5.09%. For comparison, the 30-day
average yield for the IBC All Taxable Money Fund Average (an index compiled by
IBC Financial Data Corp. which serves as an appropriate benchmark for the Fund)
for the same period was 4.63%.
Changes in the portfolio's maturity positioning along with the manager's
changes in asset mix were beneficial to the overall performance
2
<PAGE>
- -----------------------------------------------
during the year. The average maturity was typically managed to within 45 to 55
days throughout the first half of the year. However, during January and
February, the maturity was managed down to a low of 30 days in anticipation of a
rise in rates, after which the manager quickly added longer-term securities to
take advantage of the rise andbring the average maturity back to the 50-day
range. Again toward the end of May, the portfolio manager was taking the
maturity down in order to provide more liquidity for buying opportunities
during June. Throughout the second half of the year the average maturity was
typically managed between 50 and 60 days except for a brief low of 43 days in
early November. Particular emphasis was placed upon laddering the maturities in
the belief that as the yield curve steepens, the steadily maturing securities
will provide liquidity to purchase higher yielding securities. At the end of the
period, the average maturity for the portfolio was 57 days which was slightly
shorter than the IBC All Taxable Money Fund Average Maturity of 60 days.
Recently the portfolio manager has been adding to the holdings in floating
rate notes and asset-backed commercial paper while almost eliminating holdings
in time deposits. Foreign holdings have been reduced substantially throughout
the year.
The accompanying chart provides a breakdown of the portfolio as of November 30,
1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
<S> <C>
Floating Rate Notes 45%
Commercial Paper 36%
Certificates of
Deposit 15%
Time Deposits 2%
Other 2%
</TABLE>
For the twelve months ended November 30, 1998, the Fund provided a total
return of 5.30%. During the same period, the IBC All Taxable Money Fund
Average returned 5.23%. The annual rate of inflation during the period was
1.5%, as measured by the Consumer Price Index. The average seven-day simple
yield for the IBC All Taxable Money Fund Average was 4.53% on December 31,
1998, and the seven-day compound yield was 4.63%. The simple and compound
yields for the Managers Money Market Fund for the same period were 4.79%, and
4.91%, respectively.
As always, should you have any questions on this report, please feel free to
contact us at 1-800-835-3879.
We thank you for your continued investment in The Managers Funds.
Sincerely,
Robert P. Watson
President
3
<PAGE>
(LOGO)
THE MANAGERS FUNDS PERFORMANCE (UNAUDITED)
All periods ending December 31, 1998
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
----------------------------------------------------------
SINCE INCEPTION MORNINGSTAR
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION DATE RATING**
------ ------ ------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Funds:
Income
Equity Fund 11.77% 18.49% 17.68% 14.43% 15.22% Oct. '84 ###
Capital
Appreciation Fund 57.41% 26.34% 21.51% 18.36% 17.77% Jun. '84 ####
Special Equity Fund 0.18% 15.87% 15.35% 16.64% 15.79% Jun. '84 ###
International
Equity Fund 14.54% 12.70% 11.16% 11.62% 14.05% Dec. '85 ####
Emerging Markets
Equity Fund -- -- -- -- (22.60)% Feb. '98 N/A
Income Funds:
Short & Intermediate
Bond Fund 5.36% 5.13% 4.23% 7.13% 8.15% Jun. '84 ###
Intermediate
Mortgage Fund 6.08% 5.84% 0.83% 6.72% 7.12% May '86 #
Bond Fund 3.34% 6.19% 7.77% 9.75% 10.73% Jun. '84 ###
Global Bond Fund 19.27% 7.64% -- -- 8.24% Mar. '94 ##
Money Market Fund 5.25% 5.36% 4.94% 5.19% 5.83% Jun. '84 N/A
</TABLE>
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND SHARE
PRICE WILL FLUCTUATE. THE REDEMPTION PRICE OF A MUTUAL FUND MAY BE MORE OR LESS
THAN THE PURCHASE PRICE. FOR ADDITIONAL OR MORE RECENT INFORMATION ON ANY OF THE
MANAGERS FUNDS, PLEASE CALL (800) 835-3879, OR YOUR INVESTMENT ADVISER. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST.
* Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. Returns are net
of fees and may reflect fee waivers or the reimbursement of fund expenses as
described in the prospectus. No adjustment has been made for taxes payable by
shareholders on their reinvested dividends and capital gain distributions.
Returns for periods greater than one year are annualized.
** Morningstar proprietary ratings reflect risk-adjusted performance through
12/31/98 and are subject to change every month. The ratings are by asset
class and are calculated from the funds' three-, five- and ten-year returns
(with fee adjustments) in excess of 90-day Treasury bill returns, and a risk
factor that reflects fund performance below 90-day T-bill returns. For the
three-, five- and ten-year periods, respectively, each of the Equity Funds
other than the International Equity Fund was rated against 2,821, 1,721 and
751 equity funds, the International Equity Fund was rated against 872, 417
and 124 international equity funds, and each of the Income Funds was rated
against 1,499, 988 and 378 taxable fixed-income funds. Ten percent of the
funds in each asset class receive five stars, 22.5% receive 4 stars, 35%
receive 3 stars, 22.5% receive 2 stars and 10% receive 1 star.
4
<PAGE>
MANAGERS MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in The Prime Money Market Portfolio ("Portfolio") $45,330,000
Prepaid expenses 14,578
-----------
Total assets 45,344,578
-----------
LIABILITIES:
Dividends payable to shareholders 40,306
Administration fee payable 1,731
Other accrued expenses 20,924
-----------
Total liabilities 62,961
-----------
NET ASSETS $45,281,617
-----------
-----------
Shares outstanding 45,281,617
-----------
-----------
Net asset value, offering and redemption price per share $1.00
----
----
NET ASSETS REPRESENT:
Paid-in capital $45,281,617
-----------
-----------
</TABLE>
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended November 30, 1998
- ----------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME FROM PORTFOLIO:
Interest income $2,076,637
EXPENSES:
Administration fees $ 91,547
Transfer agent fees 41,814
Registration fees 26,932
Audit fees 9,552
Reports to Shareholders 9,474
Accounting fees 6,000
Legal fees 1,563
Trustees' fees 587
Miscellaneous expenses 6,454
Allocated Portfolio expenses 61,427
--------
Total expenses 255,350
Less: Waiver of administration fees (73,238)
--------
Net expenses 182,112
--------
NET INVESTMENT INCOME $1,894,525
--------
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MANAGERS MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997
---------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 1,894,525 $ 2,150,158
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,894,525) (2,150,158)
---------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS
(AT A CONSTANT $1.00 PER SHARE)
Proceeds from sale of shares 601,974,751 317,466,320
Net asset value of shares issued in
connection with reinvestment of
dividends 1,674,537 1,762,742
Cost of shares repurchased (594,911,842) (318,775,835)
---------------- --------------
Net increase (decrease) from capital
share transactions 8,737,446 453,227
---------------- --------------
Total increase (decrease) in net assets 8,737,446 453,227
---------------- --------------
NET ASSETS:
Beginning of period 36,544,171 36,090,944
---------------- --------------
End of period $45,281,617 $36,544,171
---------------- --------------
---------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MANAGERS MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each period
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
ELEVEN MONTHS YEAR ENDED
YEAR ENDED NOVEMBER 30, ENDED DECEMBER 31,
------------------------- NOVEMBER 30, ----------------
1998 1997 1996 1995 1994 1993
------- ------- ------ ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING
OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------ ----------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income 0.052 0.052 0.054 0.044 0.035 0.022
LESS DISTRIBUTIONS
TO SHAREHOLDERS
FROM:
Net investment
income (0.052) (0.052) (0.054) (0.044) (0.035) (0.022)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- -------------------------------------------------------------------------------
Total
Return (c) 5.30% 5.35% 5.53% 4.51%(b) 3.61% 2.48%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratio of net
expenses to average
net assets 0.50% 0.40% 0.12% 1.13%(b) 0.73% 0.74%
Ratio of net investment
income to average
net assets 5.17% 5.22% 5.35% 4.85%(b) 3.84% 2.48%
Net assets at end
of period (000's
omitted) $45,282 $36,544 $36,091 $11,072 $17,269 $7,368
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Expense Waiver/Reimbursement (a)
Ratio of total
expenses to average
net assets 0.70% 0.74% 0.75% 1.18%(b) 1.03% 0.99%
Ratio of net investment
income
to average net
assets 4.97% 4.88% 4.71% 4.80%(b) 3.54% 2.23%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(a) Ratio information assuming no waiver or reimbursement of investment
advisory and management fees and/or administrative fees in effect for the
periods presented, if applicable. (See Note 2).
(b) Annualized.
(c) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
------------------------------------------------------------------------------
7
<PAGE>
MANAGERS MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
- ----------------------------------------------------------------------
Managers Money Market Fund (the "Fund") is a series of The Managers Funds (the
"Trust"), a no-load, diversified, open-end management investment company,
organized as a Massachusetts business trust, and registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). Currently the Trust is
comprised of 10 investment series (collectively the "Funds").
The Fund invests all of its investable assets in The Prime Money Market
Portfolio (the "Portfolio"), a diversified, open-end management investment
company having the same investment objectives as the Fund. The value of such
investment included in the statement of assets and liabilities reflects the
Fund's proportionate interest in the net assets of the Portfolio (0.58% at
November 30, 1998). The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio,
including the schedule of investments, are included elsewhere in this
report and should be read in conjunction with the Fund's financial statements.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles, which requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reported
period. Actual amounts could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements:
(A) VALUATION OF INVESTMENTS
Valuation of securities by the Portfolio is discussed in Note 1(a) of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
(B) SECURITY TRANSACTIONS
The Fund records its share of interest income, expenses and realized gains and
losses and adjusts its investment in the Portfolio each day.
(C) INVESTMENT INCOME
AND EXPENSES
All the net investment income, and realized gains and losses of the Portfolio
are allocated pro rata among the Fund and other investors in the Portfolio at
the time of such determination. Expenses incurred by the Trust with respect to
one or more funds in the Trust are allocated in proportion to the net assets of
each fund in the Trust, except where allocations of direct expenses to each
8
<PAGE>
MANAGERS MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1998
- ---------------------------------------------------------------------------
fund can otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends resulting from net investment income normally will be declared daily,
payable on the third to the last business day of the month.
Distributions classified as capital gains for federal income tax purposes, if
any, will be made on an annual basis and when required for federal excise tax
purposes. Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. Permanent book and tax differences, if any, relating to shareholder
distributions will result in reclassifications to paid-in capital .
(E) FEDERAL TAXES
The Fund intends to comply with the requirements under Subchapter M of the
Internal Revenue Code of 1986, as amended, and to distribute substantially all
of its taxable income and gains, if any, to its shareholders and to meet certain
diversification and income requirements with respect to investment companies.
Therefore, no federal income or excise tax provision is included in the
accompanying financial statements.
(F) CAPITAL STOCK
The Trust's Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest, without par value. The Fund records sales and
repurchases of its capital stock on the trade date. Dividends and distributions
to shareholders are recorded as of the ex-dividend date.
(2) AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Trust has adopted an Administrative and Shareholder Servicing Agreement
under which The Managers Funds, L.P. serves as the Fund's administrator (the
"Administrator") and is responsible for all aspects of managing the Fund's
operations, including administration and shareholder services to the Fund, its
shareholders, and certain institutions, such as bank trust departments, dealers
and registered investment advisers, that advise or act as an intermediary with
the Fund's shareholders.
As amended on December 1, 1995, the Trustees approved a fee for these services,
payable to the Administrator, of 0.25% of the Fund's average net assets per
annum, 0.20% of which has been voluntarily waived for the fiscal year ended
November 30, 1998. (Effective December 1, 1998, the voluntary waiver was reduced
to 0.15%).
9
<PAGE>
MANAGERS MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1998
- -----------------------------------------------------------------------------
This waiver and expense reimbursement may be modified or terminated at any time
at the sole discretion of the Administrator.
An aggregate annual fee of $10,000 is paid to each outside Trustee for serving
as a Trustee of the Trust. In addition, these Trustees receive meeting fees of
$750 for each in-person meeting attended, and $200 for participation in any
telephonic meetings. The Trustee fee expense shown in the financial statements
represents the Fund's allocated portion of the total fees.
- ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
To the Trustees of The Managers Funds and the Shareholders of Managers Money
Market Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Managers Money Market Fund (the "Fund") at November 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for
each of the three years in the period then ended, the eleven month period ended
November 30, 1995, and for each of the two years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the resonsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 19, 1999
10
<PAGE>
- ----------------------------------------------------------------------------
SUPPLEMENTARY DATA (UNAUDITED)
PROXY RESULT INFORMATION
- ----------------------------------------------------------------------------
At the Joint Special Meeting of Shareholders held on June 25, 1998,the following
votes were recorded by ChaseMellon Shareholder Services in their capacity as
proxy tabulator for the Fund. The proposals are explained in further detail in
the proxy statement dated May 14, 1998:
<TABLE>
<CAPTION>
PROPOSAL 1 PROPOSAL 2 PROPOSAL 3
---------- ---------- ----------
<S> <C> <C> <C>
Shares For 17,661,102 17,278,944 16,531,533
Shares Against 451,842 124,633 595,701
Shares Abstained 0 709,467 985,819
</TABLE>
<TABLE>
<CAPTION>
PROPOSAL 4 PROPOSAL 5 PROPOSAL 6
---------- ---------- ----------
<S> <C> <C> <C>
Shares For 16,761,286 N/A 17,269,415
Shares Against 387,465 N/A 27,110
Shares Abstained 942,322 N/A 572,333
</TABLE>
PURSUANT TO ARTICLE III, SECTION 1 OF EACH FUND'S BY-LAWS AND THE 1940 ACT, SUCH
VOTES REPRESENTS A QUORUM AND AN AFFIRMATIVE VOTE FOR EACH PROPOSAL BY THE FUND.
11
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
November 30, 1998
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT YIELD TO
(IN MATURITY/
THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- ----------- ------------------------ -------------- --------- ---------
CERTIFICATES OF DEPOSIT -- DOMESTIC (2.5%)
<C> <S> <C> <C> <C>
$ 150,000 Dresdner Bank.................. 11/09/99 4.950% $ 101,583,955
45,000 Nationsbank Corp........12/22/98-12/28/98 5.830 49,999,058
--------------
TOTAL CERTIFICATES OF DEPOSIT --
DOMESTIC............................... 194,943,688
------------
CERTIFICATES OF DEPOSIT -- FOREIGN (12.0%)
150,000 Abbey National PLC....06/11/99-07/27/99 5.650-5.720 149,948,475
14,000 Bank of New York................03/26/99 5.640 13,997,463
60,000 Bank of Nova Scotia.............06/07/99 5.142 59,975,719
207,500 Bayerische Landesbank.02/02/99-07/22/99 5.600-5.720 207,448,771
100,000 Canadian Imperial Bank..........04/01/99 5.750 99,980,955
25,000 Commerzbank.....................03/05/99 5.670 24,996,915
150,000 Credit Suisse First Boston......07/20/99 5.710 150,000,000
165,000 Deutsche Bank...................03/04/99 5.730 164,976,276
34,400 Rabobank Nederland..............02/03/99 5.620 34,399,598
25,000 Westpac Banking Corp............03/04/99 5.680 24,997,558
---------------
TOTAL CERTIFICATES OF DEPOSIT --
FOREIGN................................ 680,801,857
---------------
COMMERCIAL PAPER -- DOMESTIC (32.1%)
150,000 ABB Treasury Centre...12/14/98-02/18/98 5.040-5.340 148,797,583
206,506 Alpine Securitization
Corp.....12/01/98-12/03/98 5.220-5.530 206,472,303
99,000 Aspen Funding Corp....12/07/98-12/18/98 5.350 98,805,468
75,000 Associates Corp. of
North America.....12/09/98-02/17/99 5.030-5.410 74,667,431
166,000 Bank Brussels Lambert.12/04/98-12/21/98 5.200-5.300 165,611,328
369,955 Bavaria Trust.........12/01/98-03/02/99 5.220-5.570 366,256,149
125,000 CXC Inc...............12/08/98-02/04/99 5.220-5.270 123,739,764
325,000 Citibank Capital
Markets.......02/17/99-03/10/99 5.200-5.350 320,685,792
213,500 General Electric
Capital Corp..............12/16/98 5.410 213,018,735
15,000 Monsanto Co...........04/15/99-04/20/99 4.950 14,718,125
200,000 Newport Funding Corp...........03/15/99 5.300 196,937,778
39,500 Receivables Capital Corp.......02/05/99 5.310 39,115,467
225,000 Trident Capital
Finance.........02/11/99-02/24/99 5.150-5.250 222,315,729
309,297 Windmill Funding Corp.12/02/98-03/10/99 5.240-5.450 305,966,085
--------------
TOTAL COMMERCIAL PAPER -- DOMESTIC...... 2,497,107,737
--------------
COMMERCIAL PAPER -- FOREIGN (4.2%)
125,000 Credit Communal
de Belgique.....12/15/98-12/29/98 5.150-5.340 124,692,195
54,000 Generale Bank..................12/16/98 5.340 53,879,850
50,000 Royal Bank of Scotland PLC.....12/09/98 5.180 49,942,444
100,000 Union Bank of Switzerland......04/19/99 4.951 98,088,364
-----------
TOTAL COMMERCIAL PAPER-FOREIGN 326,602,853
-----------
CORPORATE BONDS (0.6%)
50,000 IBM Credit Corp................08/10/99 5.625 49,967,896
-----------
</TABLE>
12
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
November 30, 1998
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT YIELD TO
(IN MATURITY/
THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- ----------- ----------------------- -------------- ------ ---------
FLOATING RATE NOTES (45.3%) (V)
<C> <S> <C> <C> <C>
$ 38,000 American Express Centurion
Bank, (resents monthly to
one month LIBOR - 6 basis
points, due 05/17/99)..... 12/07/98(a) 5.222% $ 38,000,000
50,000 American Express Centurion
Bank, (resents monthly to
one month LIBOR - 6 basis
points, due 05/10/99)..... 12/10/98(a) 5.190 50,000,000
50,000 American Expres Centurion
Bank, (resents monthly to
one month LIBOR - 6 basis
points, due 06/18/99).... 12/18/98(a) 5.216 50,000,000
50,000 ABSIT Series 97-E N, (resets
monthly to Prime rate - 281
basis points, due
08/15/99) (144A)......... 12/15/98(a) 5.273 50,000,000
100,000 BankBoston Corp., (resets
daily to Fed Funds rate
+5 basis points, due
04/08/99)................ 12/01/98(a) 4.890 99,982,886
27,500 Bankers Trust, (resets
daily to Prime rate - 293
basis points, due
05/14/99)................ 12/01/98(a) 4.820 27,491,726
235,000 Barclays Bank PLC, (resets
monthly to one month LIBOR
- 14 basis points, due
06/04/99)................ 12/04/98(a) 5.135 234,906,142
75,000 Barclays Bank PLC, (resets
daily to Prime rate (296
basis points, due
08/24/99))............... 12/01/98(a) 4.790 74,961,740
51,000 CIT Group Inc., (resets
daily to Prime rate - 280
basis points, due
10/22/99)................ 12/01/98(a) 4.950 51,004,378
25,000 CIT Group Inc., (resets
daily to Prime rate - 282
basis points, due
11/02/99................. 12/01/98(a) 5.180 24,990,652
100,000 Corestates Bank, (resets
monthly to one month LIBOR
- 5.5 basis points, due
05/07/99)................ 12/07/98(a) 5.202 100,000,000
15,000 Corestates Bank, (resets
monthly to one month LIBOR
- 5.5 basis points, due
05/14/99)................ 12/14/98(a) 5.005 15,000,000
50,000 Corestates Bank, (resets
monthly to one month LIBOR
- 5.5 basis points, due
04/20/99)................ 12/21/98(a) 5.005 50,000,000
50,000 Corestates Bank, (resets
monthly to one month LIBOR
- 5.5 basis points, due
04/21/99)................ 12/21/98(a) 5.005 50,000,000
16,000 Ford Motor Credit, (resets
daily to Fed Fund rate
+45 basis points, due
04/19/99)................ 12/01/98(a) 5.290 16,020,202
91,000 General Electric Capital
Corp., (resets daily to
Prime rate (289 basis
points, due 05/04/99))... 12/01/98(a) 4.860 91,000,000
</TABLE>
13
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
November 30, 1998
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT YIELD TO
(IN MATURITY/
THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- ----------- ------------------------ --------------- ------------ ----------
FLOATING RATE NOTES (45.3%) (v) (CONTINUED)
<C> <S> <C> <C> <C>
$ 43,000 Household Finance Corp.,
(resets quarterly to three
month LIBOR - 12 basis
points, due 06/26/98)....12/30/98(a) 5.192% $ 42,989,829
100,000 IBM Corp., (resets quarterly to
three month LIBOR - 3.5 basis
points, due 10/22/99).....01/22/99(a) 5.153 99,951,829
200,000 Key Bank, (resets daily to Prime
rate - 295 basis points, due
02/24/99).................12/01/98(a) 4.800 199,968,329
65,000 Key Bank, (resets daily to Fed funds
rate +4.5 basis points, due
04/16/99).................12/01/98(a) 4.800 64,984,197
48,000 Key Bank, (resets daily to Prime
rate -291.5 basis points, due
02/24/99).................12/01/98(a) 4.835 47,991,118
25,000 Key Bank, (resets daily to Prime
rate -287 basis points, due
10/13/99).................12/01/98(a) 4.880 24,997,218
225,000 LINCS, Series 98-4 Class 1,
(resets monthly to one month
LIBOR, due 02/18/99)
(144A)....................12/18/98(a) 5.060 224,994,229
225,000 LINCS, Series 98-3 (resets
monthly to one month LIBOR,
due 01/29/99).............12/29/98(a) 5.276 225,000,000
200,000 PNC Bank, N.A., (resets daily
to Prime rate -290 basis
points, due 01/19/99).....12/01/98(a) 4.850 199,993,342
150,000 Pepsico Inc., (resets quarterly
to three month LIBOR
- 19 basis points, due
08/19/99).................02/19/99(a) 5.209 149,878,967
200,000 RACERS 98-MM-8-5, (resets
monthly to one month LIBOR
- 1 basis point, due
09/02/99)(144A)...........12/02/98(a) 5.240 200,000,000
220,000 RACERS 98-MM-7-1, (resets
monthly to one month LIBOR
- 1 basis point, due
08/13/99)(144A)...........12/14/98(a) 5.263 220,000,000
245,000 Societe Generale, (resets
monthly to one month LIBOR
-8.5 basis points, due
(05/26/99)................12/28/98(a) 4.949 244,918,521
175,000 SPARCS Series 98-5, (resets
quarterly to 3 month LIBOR
+22 basis points, due
(05/24/99)................02/24/99(a) 5.470 174,974,765
97,480 STEERS Series 97-A-34 (resets
monthly to one month LIBOR
+3 basis points, due
11/15/99).................12/15/98(a) 5.347 97,479,763
153,053 STEERS Series 97-A-36 (resets
monthly to one month LIBOR
+3 basis points, due
11/15/99).................12/15/98(a) 5.347 153,053,435
28,000 STEERS Series 98-A-40 (resets
monthly to one month LIBOR,
due 01/15/99).............12/15/98(a) 5.347 28,000,000
100,000 Toyota Motor Credit Corp.,
(resets quarterly to three
month LIBOR +4 basis points,
due, 10/22/99)............01/22/99(a) 5.240 100,000,000
------------
TOTAL FLOATING RATE NOTES 3,522,533,268
------------
14
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
November 30, 1998
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT YIELD TO
(IN MATURITY/
THOUSANDS) SECURITY DESCRIPTION MATURITY DATES RATE VALUE
- ----------- ----------------------- ---------------- --------- --------
TAXABLE MUNICIPALS (1.2%)(V)
<C> <S> <C> <C> <C>
$ 43,690 Jacksonville Health Facility
Hospital, (resets weekly, due
08/15/19).................12/02/98(a) 5.100% $ 43,690,000
41,145 Sacramento County, (resets
quarterly to three month
LIBOR, due 08/15/14)......02/15/99(a) 5.450 41,142,062
6,200 Wake Forest University, (resets
weekly, due 07/01/17).....12/02/98(a) 5.260 6,200,000
-----------
TOTAL TAXABLE MUNICIPALS 91,032,062
-----------
TIME DEPOSITS -- DOMESTIC (1.6%)
124,931 Suntrust Bank Cayman.......12/01/98 4.875 124,931,000
-----------
TOTAL INVESTMENTS AT AMORTIZED
COST AND VALUE (99.5%)................... 7,737,840,234
OTHER ASSETS IN EXCESS OF LIABILITIES (0.5%).. 42,383,672
-------------
NET ASSETS (100.0%)........................... $ 7,780,223,906
-------------
-------------
</TABLE>
- -----------------------------------
(a) The date listed under the heading maturity date represents an optional
tender date or the next interest rate reset date. The final maturity date
is indicated in the security description.
(v) Rate shown reflects current rate on variable or floating rate instrument
or instrument with step coupon rate.
144A -- Securities restricted for resale to Qualified Institutional Buyers.
LOC -- Letter of Credit
LIBOR -- London Interbank Offered Rate
15
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at amortized cost and value $7,737,840,234
Cash 19,472
Interest receivable 43,479,692
Prepaid trustees' fees 5,898
Prepaid expenses and other assets 46,829
--------------
Total assets 7,781,392,125
--------------
LIABILITIES
Advisory fee payable 715,332
Custody fee payable 209,379
Administrative services fee payable 175,676
Fund services fee payable 8,420
Administration fee payable 6,754
Accrued expenses 52,658
--------------
Total liabilities 1,168,219
--------------
NET ASSETS
Applicable to investors' beneficial interests $7,780,223,906
--------------
--------------
</TABLE>
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the fiscal year ended November 30, 1998
- ----------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income $350,050,856
EXPENSES
Advisory fee $ 7,199,733
Administrative services fee 1,788,454
Custodian fees and expenses 825,693
Fund services fee 173,032
Professional fees and expenses 137,361
Administration fee 115,137
Trustees' fees and expenses 74,479
Miscellaneous 37,576
---------
Total expenses 10,351,465
-----------
NET INVESTMENT INCOME 339,699,391
NET REALIZED LOSS ON INVESTMENTS (55,967)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $339,643,424
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997
----------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net investment income $ 339,699,391 $ 220,786,337
Net realized loss on investments (55,967) (105,748)
----------------- -----------------
Net increase in net assets resulting from
operations 339,643,424 220,680,589
----------------- -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 48,705,487,837 22,011,079,297
Withdrawals (45,584,553,162) (21,760,363,996)
----------------- -----------------
Net increase from investors'
transactions 3,120,934,675 250,715,301
----------------- -----------------
Total increase in net assets 3,460,578,099 471,395,890
NET ASSETS
Beginning of fiscal period 4,319,645,807 3,848,249,917
----------------- -----------------
End of fiscal period $ 7,780,223,906 $ 4,319,645,807
----------------- -----------------
----------------- -----------------
</TABLE>
- ----------------------------------------------------------------------
SUPPLEMENTARY DATA
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED NOVEMBER 30,
-------------------------------------------
1998 1997 1996 1995 1994
------- ------- -------- ----- ----
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.17% 0.18% 0.19% 0.19% 0.20%
Net investment income 5.48% 5.43% 5.29% 5.77% 3.90%
Expenses without reimbursement 0.17% 0.18% 0.19% 0.19% 0.20%
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
- ----------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Prime Money Market Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on November 4, 1992. The
Portfolio's investment objective is to maximize current income while
maintaining a high level of liquidity. The Portfolio commenced operations on
July 12, 1993. The Declaration of Trust permits the Trustees to issue an
unlimited number of beneficial interests in the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the Portfolio:
a) Investments are valued at amortized cost which approximates market value.
The amortized cost method of valuation values a security at its cost at the time
of purchase and thereafter assumes a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instruments.
The portfolio's custodian or designated subcustodians, as the case may be under
tri-party repurchase agreements takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the Portfolio. It is the
policy of the portfolio to value the underlying collateral daily on a mark-to-
market basis to determine that the value, including accrued interest, is at
least equal to the repurchase price plus accrued interest. In the event of
default of the obligation to repurchase, the portfolio has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
b) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any, is
recorded on an accrual basis. For financial and tax reporting purposes, realized
gains and losses are determined on the basis of specific lot identification.
c) The Portfolio intends to be treated as a partnership for federal income tax
purposes. As such, each investor in the portfolio will be taxed on its share of
the portfolio's ordinary income and capital gains. It
18
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
November 30, 1998
- ----------------------------------------------------------------------
is intended that the portfolio's assets will be managed in such a way that an
investor in the portfolio will be able to satisfy the requirements of
Subchapter M of the Internal Revenue Code. The cost of securities is
substantially the same for book and tax purposes.
2. TRANSACTIONS WITH AFFILIATES
a) Prior to October 1, 1998, the portfolio has an Investment Advisory
Agreement with Morgan Guaranty Trust Company of New York ("Morgan") a wholly
owned subsudiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under the
terms of the agreement, the portfolio paid Morgan at an annual rate of 0.20%
of the portfolio's average daily net assets up to $1 billion and 0.10% on any
excess over $1 billion. Effective October 1, 1998 the portfolio's investment
advisor is J.P. Morgan Investmetn Management Inc., ("JPMIM"), an affiliate of
Morgan and a wholly owned subsidiary of J.P. Morgan, and the terms of the
agreement have remained the same. For the fiscal year ended November 30, 1998,
such fees amounted to $7,199,733.
b) The portfolio has retained Funds Distributor, Inc. ("FDI"), a registered
broker-dealer, to serve as the co-administrator and exclusive placement agent.
Under a Co-Administration Agreement between FDI and the portfolio, FDI provides
administrative services necessary for the operations of the portfolio, furnishes
office space and facilities required for conducting the business of the
portfolio and pays the compensation of the officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to the portfolio is based on the ratio of the portfolio's net assets
to the aggregate net assets of the portfolio and certain other investment
companies subject to similar agreements with FDI. For the fiscal year ended
November 30, 1998, the fee for these services amounted to $115,137.
c) The Portfolio has an Administrative Services Agreement (the "Services
Agreement") with Morgan under which Morgan is responsible for certain aspects
of the administration and operation of the portfolio. Under the Services
Agreement, the portfolio had agreed to pay Morgan a fee equal to its allocable
share of an annual complex-wide charge. This charge is calculated based on the
aggregate average daily net assets of the portfolio and certain other portfolios
for which JPMIM acts as investment advisor (the "master portfolios") and J.P.
Morgan Series Trust in accordance with the following annual schedule: 0.09% on
the first $7 billion of their aggregate average daily net assets and 0.04% of
their aggregate average daily net assets in
19
<PAGE>
THE PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1998
- -----------------------------------------------------------------------------
excess of $7 billion less the complex-wide fees payable to FDI. The portion of
this charge payable by the portfolio is determined by the proportionate share
that its net assets bear to the net assets of the master portfolios, other
investors in the master portfolios for which Morgan provides similar services,
and J.P. Morgan Series Trust. For the fiscal year ended November 30, 1998, the
fee for these services amounted to $1,788,454.
d) The Portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the portfolio
represent all the existing shareholders of Group. The portfolio's allocated
portion of Group's costs in performing its services amounted to $173,032 for
the fiscal year ended November 30, 1998.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as a
trustee of the trust, the J.P. Morgan Funds, the J.P. Morgan Institutional
Funds, the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees
and Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman and
Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's Chairman.
The allocated portion of such compensation and benefits included in the Fund
Services Fee shown in the financial statements was $36,300.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Trustees adn Investors of The Prime Money Market Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Prime Money Market Portfolio (the
"portfolio") at November 30, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of materal misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, adn evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 19, 1999
21
<PAGE>
(LOGO)
WHERE LEADING MONEY MANAGERS CONVERGE
FUND DISTRIBUTOR
THE MANAGERS FUNDS, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203) 857-5321 or (800) 835-3879
CUSTODIAN
State Street Bank and Trust
Company
1776 Heritage Drive
North Quincy, Massachusetts
02171
LEGAL COUNSEL
Swidler Berlin Shereff
Friedman, LLP
919 Third Avenue
New York, New York 10022
TRANSFER AGENT
Boston Financial Data Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) 252-0682
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded by an effective
prospectus.
THE MANAGERS FUNDS
EQUITY FUNDS:
- ----------------
INCOME EQUITY FUND
Scudder Kemper Investments, Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management
Co., LLC
Roxbury Capital Management, LLC
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management, LLC
INTERNATIONAL EQUITY
FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management Co.
EMERGING MARKETS
EQUITY FUND
King Street Advisors, Limited
INCOME FUNDS:
- ------------------------
MONEY MARKET FUND
J.P. Morgan
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE FUND
Jennison Associates Capital Corp.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
