As filed with the Securities and Exchange Commission on January 29, 1999
1933 Act File No. 2-84012
1940 Act File No. 811-3752
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ___
Post-Effective Amendment No. 44
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 46
THE MANAGERS FUNDS
-------------------------------------------------
(Exact name of Registrant as Specified in Charter)
40 Richards Avenue, Norwalk, Connecticut 06854
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 857-5321
Copy to:
Joel H. Goldberg, Esq.
Donald S. Rumery, Secretary Swidler Berlin Shereff
The Managers Funds, L.P. Friedman, LLP
40 Richards Avenue 919 Third Avenue
Norwalk, Connecticut 06854 New York, New York 10022
---------------------------------------------------
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective (check appropriate
box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on April 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ X ] on April 1, 1998 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
THE MANAGERS FUNDS
SUPPLEMENT DATED JANUARY 29, 1999
TO PROSPECTUS DATED MAY 1, 1998
The Prospectus is hereby supplemented as follows:
On January 29, 1999, The Managers Funds, L.P. (the "Manager")
and its partners entered into an agreement (the "Purchase Agreement")
with Affiliated Managers Group, Inc. ("AMG"). Under the Purchase Agreement,
at the closing, The Managers Funds, L.P. will convert into a Delaware
limited liability company ("LLC") and AMG will acquire a 95% interest in
its profits and a 100% in the capital of the Manager with the remaining 5%
interest in the profits to be retained by certain key employees of the
Manager (the "Transaction"). AMG will become managing member of the
LLC. AMG is a publicly-traded Delaware corporation that acquires and
holds interests in management investment companies. The Transaction is
expected to close on or about April 2, 1999, subject to various conditions.
At an in-person meeting held on January 13, 1999, the Board of
Trustees of The Managers Funds considered the proposed Transaction and
approved a new advisory agreement between each Fund (other than Managers
Money Market Fund) and the LLC, new sub-advisory agreements and other
contracts with the LLC on the same terms as the existing contracts to take
effect upon the effective date of the Transaction. The approval of the
advisory agreements with the LLC and of the Sub-Advisory Agreement
on behalf of the Managers Capital Appreciation Funbd and Essex Investment
Management Company, LLC (an affiliate of AMG) are subject to the approval
by the shareholders of the applicable Funds. A special meeting of shareholders
will be held to consider these matters before the proposed Transaction is
consummated. A proxy statement describing the matters to be considered
will be mailed to each shareholder in advance of the meeting.
January 29, 1999
THE MANAGERS FUNDS
- ---------------------
INCOME EQUITY FUND
CAPITAL APPRECIATION FUND
SPECIAL EQUITY FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
- ----------------------
PROSPECTUS
DATED APRIL 1, 1999
- ----------------------
WHERE LEADING MONEY MANAGERS CONVERGE
The Securities and Exchange Commission has not approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
KEY INFORMATION ABOUT THE EQUITY FUNDS
<S> <C> <C>
Risk/Return Goals and Principal Strategies of the Funds 1
Summary Risk Summary 2
Performance Summary 5
Fees and Expenses of the Fund 6
THE MANAGERS FUNDS
The Management Team 8
The Year 2000 Issue 8
____________________________________________________________________
Summary of INCOME EQUITY FUND
the Objective and Investment Strategy 9
Funds Should I Invest In This Fund? 10
Principal Risks and Rewards 10
Fees and Expenses 11
Portfolio Management of the Fund 11
CAPITAL APPRECIATION FUND
Objective and Investment Strategy 12
Should I Invest In This Fund? 13
Principal Risks and Rewards 13
Fees and Expenses 14
Portfolio Management of the Fund 14
SPECIAL EQUITY FUND
Objective and Investment Strategy 15
Should I Invest In This Fund? 16
Principal Risks and Rewards 16
Fees and Expenses 17
Portfolio Management of the Fund 17
INTERNATIONAL EQUITY FUND
Objective and Investment Strategy 19
Should I Invest In This Fund? 20
Principal Risks and Rewards 20
Fees and Expenses 21
Portfolio Management of the Fund 21
EMERGING MARKETS EQUITY FUND
Objective and Investment Strategy 22
Should I Invest In This Fund? 23
Principal Risks and Rewards 23
Fees and Expenses 24
Portfolio Management of the Fund 24
____________________________________________________________________
Additional OTHER RISK FACTORS
Risks of A Few Words About Risk 25
Investing
____________________________________________________________________
Information FINANCIAL HIGHLIGHTS
About your Financial Information for the Funds 31
Investment
YOUR ACCOUNT
Minimum Investments 36
How to Purchase Shares 37
How to Sell Shares 38
INVESTOR SERVICES
General Fund Policies 39
ACCOUNT POLICIES, DIVIDENDS AND TAXES
Account Statements 41
Dividends and Distributions 41
Tax Information 41
____________________________________________________________________
FOR MORE INFORMATION Back Cover
</TABLE>
<PAGE>
KEY INFORMATION ABOUT THE EQUITY FUNDS
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
GOALS AND PRINCIPAL STRATEGIES OF THE FUNDS
Fund/Principal Risk Factors Goal Strategy
- ----------------------------------------------------------------------------
<S> <C> <C>
* Income Equity Fund High current income -Invests principally in income-producing
from income-producing equity securities thereby achieving returns
Risk Factors: equity securities from such income
Market Risk -Seeks to achieve capital appreciation
Economic Risk through improvements in the relative
Sector (Industry) Risk valuation of the securities in the portfolio
-Eliminates securities if and when the price
appreciation such that the dividend yield
drops below a certain level relative to the
market or when the fundamental attributes
of a company deteriorate
* Capital Appreciation Fund Long-term capital -Invests principally in equity securities
appreciation from of companies with growing revenues
Risk Factors: equity securities. or earnings
Market Risk Income is the -Seeks to achieve returns through price
Price Risk secondary objective appreciation through earnings growth
Sector (Industry) Risk -Eliminates securities if and when the valuation
exceeds expected future earnings growth rates
or when the fundamental attributes of a
company deteriorate
* Special Equity Fund Long-term capital -Invests principally in equity securities of
appreciation from small-capitalization companies
Risk Factors: equity securities of -Seeks to achieve returns from capital
Market Risk small- and medium- appreciation through price multiple
Liquidity Risk capitalization companies expansion, earnings growth and takeovers
Price Risk -Each manager has individual sell disciplines
which are based on price relative to expected
growth rates or intrinsic value or when the
fundamental attributes of a company
deteriorate
* International Equity Long-term capital -Invests principally in equity securities of
Fund appreciation from non-U.S. companies
Risk Factors: foreign equity securities -Seeks to achieve returns from capital
Market Risk appreciation through price multiple
Currency Risk expansion and earnings growth
Political Risk -Eliminates securities if and when the original
investment thesis has matured; when the
fundamental attributes of a company deteriorate;
or when the price of the security exceeds
expected earnings growth rates
* Emerging Markets Equity Long-term capital -Invests principally in equity securities of
Fund appreciation from companies in emerging market countries
emerging market -Seeks to achieve returns from capital
Risk Factors: equity securities appreciation through price multiple
Market Risk expansion and earnings growth
Liquidity Risk -Eliminates securities if and when the
Currency Risk fundamental attributes of a company or
Political Risk country of a company deteriorate; when price
exceeds expected earnings growth rates; or in
order to rebalance the portfolio toward country
diversification targets
</TABLE>
1
<PAGE>
Risk/Return Summary
- ----------------------------------------------------------------------------
This Prospectus contains important information for anyone
interested in investing in The Managers Funds no-load mutual
fund family. Please read this document carefully before you
invest and keep it with you for future reference.
You should base your purchase of these Funds on your own goals,
risk preferences and time horizons.
RISK SUMMARY
[GRAPHIC]
All investments involve some type and level of risk. Risk is the
possibility that you will lose money or not make any additional money
by investing in these Funds.
The following are the principal risk factors associated with the Equity
Funds. Before you invest, please make sure that you have read, and
understand, the risk factors that apply to the specific Fund in which
you are interested. As with any mutual fund, you could lose money over
a period of time.
Please keep in mind that shares of these Funds:
* Are not deposits or obligations of any bank
* Are not guaranteed or endorsed by any bank
* Are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other federal agency
MARKET RISK
[GRAPHIC]
Market risk is also called systematic risk. It typically refers to the
basic variability that stocks exhibit as a result of stock market
fluctuations. Despite the unique influences on individual companies,
stock prices in general rise and fall as a result of investors' perceptions
of the market as a whole. The consequences of market risk are that if the
stock market drops in value, your stock investments will also likely
decrease in value. Conversely, if the stock market rises in value, your
stock investment will also likely increase in value.
2
<PAGE>
Risk/Return Summary
- ------------------------------------------------------------------------
PRICE RISK
[GRAPHIC]
As investors perceive and forecast good business prospects, they
are willing to pay higher prices for securities. Higher prices
therefore reflect higher expectations. If expectations are not met,
or if expectations are lowered, the prices of the securities will drop.
This happens with the individual securities or the financial markets
overall. For more information regarding Price Risk, see OTHER RISK FACTORS.
SECTOR (INDUSTRY) RISK
[GRAPHIC]
Companies that are in similar businesses may be similarly affected
by particular economic or market events. To measure sector (industry) risk,
one would group the holdings of the portfolio into sectors or industries
and observe the amounts which are invested in each group. Diversification
of groups may reduce sector (industry) risk but may also dilute potential
returns. For more information regarding Sector (Industry) Risk, see OTHER
RISK FACTORS.
LIQUIDITY RISK
Liquidity Risk is the risk that you cannot sell a security at a
reasonable price in a reasonable time frame when you want or need to.
This risk applies to all assets. For more information regarding Liquidity
Risk, see OTHER RISK FACTORS.
ECONOMIC RISK
The prevailing economic environment is important to the health of all
businesses. However, some companies are more sensitive to changes in the
domestic and/or global economy than others. These types of companies are
often referred to as cyclical businesses. Countries in which a large
portion of businesses are in cyclical industries are thus also very
economically sensitive and carry a higher amount of economic risk.
CURRENCY RISK
[GRAPHIC]
The value of foreign securities in an investor's home currency depends
both upon the price of the securities and the exchange rate of the
currency. Adverse currency fluctuations are an additional risk of
foreign investing. Currency risk may be
3
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------
reduced through diversification among currencies or hedging with the
use of foreign currency contracts.
[GRAPHIC]
*EURO CONVERSION. The introduction of a new single European currency,
known as the "euro," may result in uncertainties for securities in
European companies, European markets and the operation of the Funds.
The euro was introduced on January 1, 1999, by 11 European Union member
countries who are participating in the European Monetary Unit. The
introduction of the euro results in the redenomination of certain
European debt and equity securities over a period of time, which may
bring differences in various tax, accounting and legal treatments that
would not otherwise occur. Any market disruptions due to the euro could
have an adverse effect on the Funds. At this stage, no one knows what
degree of impact the introduction of the euro will have on the Funds and
to the extent that the impact adversely affects a particular holding in a
Fund's portfolio, the Fund's performance may be affected.
POLITICAL RISK
[GRAPHIC]
Changes in the political status of any country can have profound
effects on the values of securities within that country as well as
the credit quality of the securities. Related risk factors are the
regulatory environment within any country or industry and the sovereign
health of the country. These risks may be reduced only by carefully
monitoring the economic, political and regulatory atmosphere within
countries and diversifying across countries.
4
<PAGE>
Risk/Return Summary
- --------------------------------------------------------------------
PERFORMANCE SUMMARY
The following bar chart illustrates each of the Fund's year-by-year
total return and how performance of each of the Funds has varied over
the past ten years. The chart assumes that all dividend and capital
gain distributions have been reinvested. However, past performance
does not guarantee future results.
<TABLE>
<CAPTION>
MANAGERS EQUITY FUNDS
ANNUAL RETURNS - LAST TEN CALANDER YEARS
Fund 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -------- ----- ----- ---- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Equity Fund 22.2% -13.0 29.7 10.0 12.4 1.0 34.4 17.1 27.2 11.7
Capital Appreciation Fund 21.0 - 1.9 32.9 10.5 16.7 -1.5 33.4 13.7 12.7 57.3
Special Equity Fund 32.8 -15.8 49.8 16.1 17.4 -2.0 33.9 24.8 24.4 57.3
International Equity Fund 15.1 - 9.5 18.2 4.3 38.2 2.0 16.2 12.8 10.8 14.5
Emerging Markets Equity Fund --- --- --- --- ---- ---- --- --- ---- ----
- --------------
<FN>
*For the Income Equity Fund over this period, the highest quarterly return
was 14.40% and the lowest quarterly return was -16.52%.
*For the Capital Appreciation Fund over this period, the highest quarterly
return was 31.25% and the lowest quarterly return was -14.17%.
*For the Special Equity Fund over this period, the highest quarterly return
was 21.64% and the lowest quarterly return was -20.97%.
*For the International Equity Fund over this period, the highest quarterly
return was 13.86% and the lowest quarterly return was -16.18%.
*For the Emerging Markets Equity Fund over this period, the highest
quarterly return was 15.35% and the lowest quarterly return was -20.59%.
</FN>
</TABLE>
The following table compares each of the Fund's performance to that of
a broadly based securities market index and other indexes, if applicable.
Again, the table assumes that dividends and capital gains distributions have
been reinvested for both the Fund and the Index. As always, the past is not
an indication of what will happen in the future.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN (AS A PERCENTAGE) AS OF 12/31/98
1 YEAR 5 YEARS 10 YEARS
------ ------- -------
<S> <C> <C> <C>
Income Equity Fund 11.73% 17.68% 14.43%
S&P 500 Index 28.61% 24.06% 19.19%
Capital Appreciation
Fund 57.34% 21.51% 18.36%
S&P 500 Index 28.61% 24.06% 19.19%
Special Equity Fund 0.20% 15.35% 16.64%
Russell 2000 Index -2.31% 11.91% 12.94%
International Equity
Fund 14.54% 11.16% 11.62%
MSCI EAFE 19.99% 9.19% 5.70%
Emerging Markets
Equity Fund** N/A N/A N/A
MSCI EM Free -25.54% -9.31% 10.92%
- --------------------------
<FN>
*All returns for the Funds are after expenses.
**The Fund commenced operations on February 9, 1998.
</FN>
</TABLE>
[TEXT BOX]
Total Return is used by all mutual funds to calculate the hypothetical
change in the value of a share over a specified period of time,
assuming reinvestment of all dividends and distributions.
5
<PAGE>
Risk/Return Summary
- ------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
[GRAPHIC]
As an investor, you pay certain fees and expenses in connection with
buying and holding shares of the Funds. The following table illustrates
those fees and expenses. Keep in mind that each of these Funds has no
sales charge (load).
SHAREHOLDER FEES (fees paid directly from your investment)
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price)............. None
Maximum Deferred Sales Charge (Load).................. None
Meximum Sales Charge (Load) Imposed on Reinvested
Dividends and Other Distributions................... None
Redemption Fee........................................ None
Exchange Fee.......................................... None
Maximum Account Fee................................... None
</TABLE>
ANNUAL FUND OPERATION EXPENSES (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Income Capital Special International Emerging Markets
Equity Appreciation Equity Equity Equity
Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management Fee 0.75% 0.80% 0.90% 0.90% 1.15%(a)
Distribution (12b-1)
Fees 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.57% 0.56% 0.44% 0.52% 2.17% (b)
Total Expenses before
Expense Reductions 1.32% 1.36% 1.34% 1.42% 3.32%
Expense Reductions(c) (0.04)% (0.07)% (0.00)%(d) (0.01)% (0.14)%
Total Annual Fund
Operating Expenses 1.28% 1.29% 1.34% 1.41% 3.18%(e)
- ---------------------
<FN>
(a) The Management Fee of the Fund, restated to reflect a waiver in effect,
would have been 0.75%
(b) Other Expenses of the Fund, restated to reflect a waiver in effect, would
have been 1.79%
(c) Includes earnings on overnight cash balances and Fund expenses paid by
certain brokers to whom the Fund has directed business.
(d) Less than 0.01%
(e) Total Annual Fund Operating Expenses of the Fund, restated to reflect a
waiver in effect, would have been 2.54%
</FN>
</TABLE>
[TEXT BOX]
The Management Fee is the fee paid to The Managers Funds, L.P. and in turn,
a portion of which is paid to the external asset manager who manage the Fund's
portfolios.
Distribution (12b-1) Fees are those expenses charged by some mutual funds
for the cost of marketing and advertising. THESE FUNDS DO NOT HAVE ANY 12B-1
FEES.
6
<PAGE>
Risk/Return Summary
- ---------------------------------------------------------------------------
EXAMPLE
The following Example will help you
compare the costs of investing in various
funds. It assumes that you invest $10,000
as an initial investment in each Fund for
the time periods indicated and then redeem
all of your shares at the end of those
periods. It also assumes that your
investment has a 5% total return each year
and each of the Fund's operating expenses
remain the same. Although your actual
costs may be higher or lower, based on the
above assumptions, your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 5 Years 10 Years
- ------------- ---------- ----------- ---------
<S> <C> <C> <C>
Income Equity Fund $130 $702 $1545
Capital Appreciation Fund 131 708 1556
Special Equity Fund 136 734 1613
International Equity
Fund 144 771 1691
Emerging Markets Equity
Fund 321 1664 3485
</TABLE>
7
<PAGE>
The Managers Funds
- -----------------------------------------------------------------
THE MANAGEMENT TEAM
[GRAPHIC]
The Managers Funds (referred to in this Prospectus as "We" and "Us")
is a no-load mutual fund family currently comprised of ten different
Funds, each having distinct investment management objectives, strategies,
risks and policies. Many of our Funds employ a multi-manager investment
approach which can provide added diversification within each portfolio.
The Managers Funds, L.P. 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, one or more independent asset managers to manage each Fund's
investment portfolio. The Managers Funds, L.P. also monitors the
performance, security holdings and investment strategies of these
external asset managers and when appropriate, researches any potential
new asset managers for our Fund family.
THE YEAR 2000 ISSUE
[GRAPHIC]
The "Year 2000 problem," a date-related computer issue, could have
an adverse impact on the nature and quality of the services provided
to the Funds and their shareholders. In addition to verifying that
all internal systems are compliant, we are taking steps to address
the problem by working with all of our sub-advisers and outside
vendors. We have obtained assurances from each of our key service
providers that they are taking steps within their organizations to
make their systems and products Year 2000 compliant. However, we cannot
be completely certain that all sub-advisers and vendors will be fully
"Year 2000 compliant." We are unable to predict the impact of this
problem on the portfolio companies in which the Funds invest. We will
continue to monitor developments relating to this issue.
8
<PAGE>
Managers Income Equity Fund Ticker Symbol: MGIEX
- -----------------------------------------------------------------
OBJECTIVE AND INVESTMENT STRATEGY
[GRAPHIC]
The Fund's objective is to achieve a high level of current income
from a diversified portfolio of income-producing equity securities.
In view of the risks associated with investing in equity securities,
there is no guarantee that the Fund will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65%
of its total assets in the equity securities of U.S. companies.
The Fund may invest a substantial portion of its portfolio in
cash, cash equivalents or securities of any type in response to
abnormal market conditions.
Important Strategic Considerations
[GRAPHIC]
The Fund relies on the professional judgement of its two independent
asset managers to make decisions about the securities held in the Fund's
portfolio. Each asset manager utilizes investment guidelines provided by
us to capitalize on each asset manager's strengths.
Each asset manager rigorously analyzes each of the prospective holdings
in their portfolios. In selecting securities, both asset managers:
* Identify securities with attractive valuations that, at the time
of purchase, yield more than the S&P 500.
* Select primarily mid- to large-capitalization companies.
* Expect to generate return from capital appreciation through price
multiple expansion and dividend income.
* Eliminate securities if and when the price appreciation such that
dividend yield drops below a certain level relative to the market
of when the fundamental attributes of a company deteriorate.
Please be aware that the above criteria is not a full investment strategy
of the asset managers and is subject to change at the discretion of The
Managers Funds, L.P.
[TEXT BOX]
Capitalization is the market value of the company. It is equal to the per
share price of the company's stock times the number of shares outstanding.
More information on the Fund's investment strategies and holdings can be
found in our current Annual and Semi-Annual Reports or on our Internet
website at www.managersfunds.com.
9
<PAGE>
Ticker Symbol: MGIEX
- ---------------------------------------------------------------------
SHOULD I INVEST IN THIS FUND?
[graphic]
This Fund may be suitable if you:
* Are seeking an opportunity for some equity returns in
your investment portfolio
* Are seeking return from current dividends
* Are willing to accept a moderate risk investment
* Have an investment time horizon of five years or more
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
PRINCIPAL RISKS AND REWARDS
[graphic]
By investing in stocks, the value of your investment will fluctuate
on a day-to-day basis in connection with movements in the stock market.
In addition, the prices of equity securities held by the Fund may be
affected by the activities of the individual companies in the portfolio.
The Fund may also invest a portion of its assets in foreign securities
which may expose shareholders to additional risks, such currency exchange
rates and lack of adequate and available company information. Some foreign
stock markets tend to be more volatile than the U.S. market due to economic
and political instability and regulatory conditions in some foreign
countries. Therefore, you could lose money if the foreign currency
in which a security in the portfolio is denominated declines against the
U.S. Dollar.
In an effort to manage this risk, this Fund invests in a diversified
portfolio of common stocks across various companies and industries. The
allocation of the portfolio among different industry sectors is a result
of each manager's individual stock selection. To the extent that the Fund
invests in different industries and/or securities relative to the Standard
& Poor's 500 Composite Index ("S&P 500"), the Fund may be more or less
volatile than the S&P 500. For more information on Risk, see OTHER RISK
FACTORS.
[TEXT BOX]
The S&P 500 Index is an unmanaged index of common stocks chosen by
Standard & Poor's to reflect the leading companies in the leading
industries of the U.S. economy.
10
<PAGE>
Ticker Symbol: MGIEX
- -------------------------------------------------------------------
[graphic]
The Fund may invest some assets in options, futures and foreign
currencies. These practices are used primarily to hedge the Fund's
portfolio but they may be used to increase returns. Some of these
practices may reduce returns and will increase volatility. At times,
the Fund may engage in short-term trading, which could result in higher
taxable distributions.
The Fund may also buy securities with borrowed money which has the
effect of magnifying the Fund's gains or losses. This is a form of
leverage.
The Fund may, at the discretion of its portfolio managers, invest
up to 100% of its assets in cash equivalents for temporary defensive
purposes to respond to adverse market, political, economic or other
conditions. During such a period, the Fund may not achieve its investment
objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.75%
Distribution (12b-1) Fees................................ 0.00%
Other Expenses.......................................... 0.57%
Total Expenses before Expense Reductions................. 1.32%
Expense Reductions (a)................................ (0.04)%
Total Annual Fund Operating Expenses....................... 1.28%
- -----------------
<FN>
(a) Includes earnings on overnight cash balances and Fund expenses
paid by certain brokers to whom the Fund has directed business.
PORTFOLIO MANAGEMENT OF THE FUND
Scudder Kemper Investments, Inc. and Chartwell Investment Partners,
L.P. each manages a portion of the Fund. Robert T. Hoffman is the
portfolio manager for the portion of the Income Equity Fund managed
by Scudder. Harold Ofstie leads a team of portfolio managers for the
portion of the Income Equity Fund managed by Chartwell.
[TEXT BOX]
WHAT AM I INVESTING IN?
You are buying shares of a pooled investment known as a mutual
fund. It is professionally managed and gives you the opportunity to invest
in a wide variety of companies, industries and markets.
This Fund is not a complete investment program and there is no
guarantee that our Funds will reach their stated goals.
11
<PAGE>
Managers Capital Appreciation Fund Ticker Symbol: MGCAX
- --------------------------------------------------------------------------
OBJECTIVE AND INVESTMENT STRATEGY
[graphic]
The Fund's objective is to achieve long-term capital appreciation through a
diversified portfolio of equity securities. Income is the Fund's secondary
objective. In view of the risks associated with investing in equity
securities, there is no guarantee that the Fund will achieve this objective.
In achieving this goal, the Fund intends to invest its assets principally
in the equity securities of mid- to large-capitalization companies in the
United States. The Fund may invest a substantial portion of its portfolio
in cash, cash equivalents or securities of any type in response to abnormal
market conditions.
Important Strategic Considerations
[graphic]
The Fund relies on the professional judgement of its two independent
asset managers to make decisions about the securities held in the Fund's
portfolio. Each asset manager utilizes investment guidelines provided by
us to capitalize on each asset manager's strengths.
Each asset manager rigorously analyzes each of the prospective holdings
in their portfolios. In selecting securities, both asset managers:
* Identify securities of companies in which they expect substantial
revenue or earnings growth.
* Select primarily mid- to large-capitalization companies.
* Expect to generate return almost exclusively from capital appreciation
through earnings growth.
* Eliminate securities if and whenthe valuation exceeds expected future
earnings growth rates or when the fundamental attributes of a company
deteriorate.
Please be aware that the above criteria is not a full investment strategy
of the asset managers and is subject to change at the discretion of The
Managers Funds, L.P.
12
<PAGE>
Ticker Symbol: MGCAX
SHOULD I INVEST IN THIS FUND?
[graphic]
This Fund may be suitable if you:
* Are seeking an opportunity for some equity returns in your
investment portfolio
* Are willing to accept a higher degree of risk for the opportunity
of higher potential returns
* Have an investment time horizon of five years or more
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with risk
PRINCIPAL RISKS AND REWARDS
[graphic]
By investing in stocks, the value of your investment will fluctuate on
a day-to-day basis in connection with movements in the stock market.
In addition, the prices of equity securities held by the Fund may be
affected by the activities of the individual companies in the portfolio.
The Fund may also invest a portion of its assets in foreign securities
which may expose shareholders to additional risks, such currency exchange
rates and lack of adequate and available company information. Some foreign
stock markets tend to be more volatile than the U.S. market due to economic
and political instability and regulatory conditions in some foreign countries.
Therefore, you could lose money if the foreign currency in which a security in
the portfolio is denominated declines against the U.S. Dollar.
In an effort to manage this risk, this Fund invests in a diversified
portfolio of common stocks across mid- to large-capitalization companies and
multiple industries. The allocation of the portfolio among different
industry sectors is a result of each manager's individual stock selection.
To the extent that the Fund invests in different industries and/or securities
relative to the Standard & Poor's 500 Composite Index ("S&P 500"), the Fund
may be more or less volatile than the S&P 500. For more information on Risk,
see OTHER RISK FACTORS.
13
<PAGE>
Ticker Symbol: MGCAX
[Graphic]
The Fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the Fund's portfolio but they
may be used to increase returns. Some of these practices may reduce returns
and will increase volatility. At times, the Fund may engage in short-term
trading, which could result in higher taxable distributions.
The Fund may also buy securities with borrowed money which has the effect
of magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio managers, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes to respond
to adverse market, political, economic or other conditions. During such a
period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.80%
Distribution (12b-1) Fees................................ 0.00%
Other Expenses........................................... 0.56%
Total Expenses before Reductions...................... 1.36%
Expense Reductions (a) .................................. (0.07)%
Total Annual Fund Operating Expenses............... 1.29%
<FN>
(a) Includes earnings on overnight cash balances and Fund expenses
paid by certain brokers to whom the Fund has directed business.
PORTFOLIO MANAGEMENT OF THE FUND
Essex Investment Management Co., LLC and Roxbury Capital Management, LLC
each manages a portion of the Fund. Joseph C. McNay and Daniel Beckham are
the portfolio managers for the portion of the Capital Appreciation Fund
managed by Essex. Kevin P. Riley is the portfolio manager for the portion
of the Capital Appreciation Fund managed by Roxbury.
14
<PAGE>
Managers Special Equity Fund Ticker Symbol: MGSEX
OBJECTIVE AND INVESTMENT STRATEGY
[graphic]
The Fund's objective is to achieve long-term capital appreciation through
a diversified portfolio of equity securities of small- and medium-
capitalization companies. In view of the risks associated with investing
in small-capitalization equity securities, there is no guarantee that the
Fund will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65% of its
total assets in the equity securities of small- and medium-capitalization
companies in the United States. An emphasis is placed on security selection
of those companies whose shares have a market capitalization of under $1.5
billion. Once purchased, shares may continue to be held even if the market
capitalization grows above $1.5 billion. The Fund may invest a substantial
portion of its portfolio in cash, cash equivalents or securities of any type
in response to abnormal market conditions.
Important Strategic Considerations
[graphic]
The Fund relies on the professional judgement of its four independent asset
managers to make decisions about the securities held in the Fund's portfolio.
Each of the four asset managers has dramatically different approaches to
investment. Each asset manager utilizes investment guidelines provided by
us to capitalize on each asset manager's strengths.
Each asset manager rigorously analyzes each of the prospective holdings
in their portfolios. In selecting securities:
* Two of the asset managers identify securities of companies in which they
expect substantial revenue or earnings growth and thus expect to generate
returns primarily through capital appreciation concurrent with earnings
growth.
* The other two asset managers consider valuation extremely important and
thus expect to generate returns from capital appreciation through price
multiple expansion, earnings growth and takeovers.
* The asset managers select primarily small capitalization securities.
* The asset managers have individual sell disciplines which are based on
price relative to expected growth rates or intrinsic value or when the
fundamental attributes of a company deteriorate.
Please be aware that the above criteria is not a full investment strategy
of the asset managers and is subject to change at the discretion of The
Managers Funds, L.P.
15
<PAGE>
Ticker Symbol: MGSEX
SHOULD I INVEST IN THIS FUND?
[graphic]
This Fund may be suitable if you:
* Are seeking an opportunity for small company equity returns in your
investment portfolio
* Are willing to accept a high risk investment for the opportunity of
higher potential returns
* Have an investment time horizon of 5 years or more
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with risk
* Are seeking current income
PRINCIPAL RISKS AND REWARDS
[graphic]
By investing in stocks, the value of your investment will fluctuate on a
day-to-day basis in connection with movements in the stock market. In
addition, the prices of equity securities held by the Fund may be affected
by the activities of the individual companies in the portfolio.
The Fund invests a significant portion of its assets in small-capitalization
companies. These companies may offer a greater potential of capital
appreciation than larger companies but also involve potentially greater
risk. Smaller companies may have more limited product lines, markets or
financial resources than larger companies. The securities of smaller
companies may trade less frequently and in more limited volume than those
of larger, more mature companies. As a result, small-cap stocks, and the
Fund, may fluctuate significantly more in value than larger-cap stocks and
the funds that focus in larger-cap stocks.
The Fund may also invest a portion of its assets in foreign securities
which may expose shareholders to additional risks, such as currency exchange
rates and lack of adequate and available company information. Some foreign
stock markets tend to be more volatile than the U.S. market due to economic
and political instability and regulatory conditions in some foreign countries.
Therefore, you could lose money if the foreign security in which a security in
the portfolio is denominated declines against the U.S Dollar.
16
<PAGE>
Ticker Symbol: MGSEX
[graphic]
In an effort to manage this risk, this Fund invests in a diversified
portfolio of common stocks across small- and medium-capitalization companies
and in multiple industries.
The allocation of the portfolio among different industry sectors is a result
of each manager's individual stock selection. To the extent that the Fund
invests in different industries and/or securities relative to the Russell
2000 Small Capitalization Index ("Russell 2000"), the Fund may be more or
less volatile than the Russell 2000. For more information on Risk, see
OTHER RISK FACTORS.
[TEXT BOX]
The Russell 2000 Index is an index of the smallest 2000 companies
of the Russell 3000 Index. The Russell 3000 Index is composed of 3000
large U.S. companies, as determined by their market capitalization.
The Fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the Fund's portfolio but they may
be used to increase returns. Some of these practices may reduce returns and
will increase volatility. At times, the Fund may engage in short-term trading,
which could result in higher taxable distributions.
The Fund may also buy securities with borrowed money which has the effect
of magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio managers, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes to respond
to adverse market, political, economic or other conditions. During such a
period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.90%
Distribution (12b-1) Fees................................ 0.00%
Other Expenses........................................... 0.44%
Total Expenses before Reductions..........................1.34%
Expense Reductions .......................................0.00%(a)
Total Annual Fund Operating Expenses..................... 1.34%
<FN>
(a) Less than 0.01%.
</FN>
</TABLE>
17
Ticker Symbol: MGSEX
________________________________________________________________________
PORTFOLIO MANAGEMENT OF THE FUND
Liberty Investment Management, Pilgrim, Baxter & Associates, Ltd.,
Westport Asset Management and Kern Capital Management LLC each manage a
portion of the Fund. Timothy G. Ebright is the portfolio manager for the
portion of the Special Equity Fund managed by Liberty. Gary L. Pilgrim is
the lead portfolio manager for the portion of the Special Equity Fund
managed by Pilgrim. Mr. Pilgrim is assisted by Jeffrey Wrona in managing
the portfolio for Pilgrim. Andrew J. Knuth is the portfolio manager for
the portfolio manager for the portion of the Special Equity Fund
managed by Westport. Robert E. Kern, Jr. is the portfolio manager for the
portion of the Special Equity Fund managed by Kern.
Managers International Equity Fund Ticker Symbol: MGITX
OBJECTIVE AND INVESTMENT STRATEGY
[graphic]
The Fund's objective is to achieve long-term capital appreciation through
a diversified portfolio of equity securities of non-U.S. companies. Income
is the Fund's secondary objective. In view of the risks associated with
investing in both equity and foreign securities, there is no guarantee that
the Fund will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65% of its total
assets in the equity securities of medium to large capitalization companies
outside of the United States. An emphasis is placed on security selection
of those companies whose shares have a market capitalization of over $1
billion. The Fund intends to diversify investments among countries outside
the United States.
Important Strategic Considerations
[graphic]
The Fund may invest in both developed and developing countries. A
substantial portion of the Fund's portfolio may be investing in cash,
cash equivalents or securities of any type in response to abnormal market
conditions.
The Fund relies on the professional judgement of its two independent asset
managers to make decisions about the securities held in the Fund's portfolio.
Each asset manager utilizes investment guidelines provided by us to
capitalize on each asset manager's strengths.
Each asset manager rigorously analyzes each of the prospective holdings in
their portfolios. In selecting securities, the asset managers:
* Identify securities of companies with attractive valuations; one asset
manager seeks companies undergoing change while the other asset manager
seeks to identify long-term investment themes.
* Select primarily mid- to large-capitalization international stocks.
* Expect to generate returns almost exclusively from capital appreciation.
* Eliminate securities if and when the original investment thesis has matured;
when the fundamental attributes of a company deteriorate; or when the price of
the security exceeds expected earnings growth rates.
Please be aware that the above criteria is not a full investment strategy of
the asset managers and is subject to change at the discretion of The Managers
Funds, L.P.
19
<PAGE>
Ticker Symbol: MGITX
SHOULD I INVEST IN THIS FUND?
[graphic]
This Fund may be suitable if you:
* Are seeking an opportunity for some international market equity returns
in your investment portfolio
* Are willing to accept a moderate risk investment
* Have an investment time horizon of five years or more
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with risk
* Are seeking current income
PRINCIPAL RISKS AND REWARDS
[graphic]
By investing in stocks, the value of your investment will fluctuate on a
day-to-day basis in connection with movements in the stock market. In
addition, the prices of equity securities held by the Fund may be affected
by the activities of the individual companies in the portfolio.
By investing primarily in foreign stocks, the Fund may expose shareholders
to additional risks such as currency exchange rates and lack of adequate and
available company information. Some foreign stock markets tend to be more
volatile than the U.S. market due to economic and political instability and
regulatory conditions in some foreign countries.
In addition, most foreign securities in which the Fund invests are
denominated in foreign currencies, whose value may decline against the
U.S. Dollar and cause you to lose money.
In an effort to manage this risk, this Fund invests in a diversified portfolio
of common stocks across mid to large capitalization companies and multiple
industries and countries. The allocation of the portfolio among different
industry sectors is a result of each manager's individual stock selection.
To the extent that the Fund invests in different industries and/or securities
relative to the Morgan Stanley Capital International EAFE Index ("MSCI EAFE"),
the Fund may be more or less volatile than the MSCI EAFE. For more information
on Risk, see OTHER RISK FACTORS.
[TEXT BOX]
The MSCI EAFE Index is an index consisting of over 1,000 large, publicly
traded stocks from 20 countries of Europe, Austrailia and the Far East.
20
<PAGE>
Ticker Symbol: MGITX
[graphic]
The Fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the Fund's portfolio but they
may be used to increase returns. Some of these practices may reduce returns
and will increase volatility. At times, the Fund may engage in short-term
trading, which could result in higher taxable distributions.
The Fund may also buy securities with borrowed money which
has the effect of magnifying the Fund's gains or losses. This is a form of
leverage.
The Fund may, at the discretion of its portfolio managers, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes to respond
to adverse market, political, economic or other conditions. During such a
period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.90%
Distribution (12b-1) Fees................................ 0.00%
Other Expenses........................................... 0.52%
Total Expenses before Expense Reductions................. 1.42%
Expense Reductions (a)................................. (0.01)%
Total Annual Fund Operating Expenses..................... 1.41%
</FN>
(a) Includes earnings on overnight cash balances and Fund expenses paid
by certain brokers to whom the Fund has directed business.
PORTFOLIO MANAGEMENT OF THE FUND
Scudder Kemper Investments, Inc. and Lazard Asset Management each manage a
portion of the Fund. William E. Holzer and Diego Espinosa are the portfolio
managers for the portion of the International Equity Fund managed by Scudder.
John R. Reinsberg is the portfolio manager for the portion of the
International Equity Fund managed by Lazard.
21
<PAGE>
Managers Emerging Markets Equity Fund Ticker Symbol: MGMEX
OBJECTIVE AND INVESTMENT STRATEGY
[graphic]
The Fund's objective is to achieve long-term capital appreciation through a
diversified portfolio of equity securities of companies in countries
considered to be emerging or developing by the World Bank or the United
Nations. In view of the risks associated with investing in both equity and
emerging market securities, there is no guarantee that the Fund will achieve
this objective.
In achieving this goal, the Fund intends to invest at least 65% of its total
assets in the equity securities of companies based or operating primarily in
developing economies in the world. The Fund may invest a substantial portion
of its portfolio in cash, cash equivalents or securities of any type in
response to abnormal market conditions.
Important Strategic Considerations
[graphic]
The Fund relies on the professional judgement of its independent asset manager
to make decisions about the securities held in the Fund's portfolio. The
asset manager utilizes investment guidelines provided by us to capitalize on
the asset manager's strengths.
The asset manager rigorously analyzes each of the prospective holdings in the
portfolio. In selecting securities, the asset manager:
* Identifies companies that are profitable and growing.
* Seeks to limit country risk by diversifying across many individual
countries and industries.
* Expects to generate returns almost exclusively from capital appreciation.
* Eliminates securities if and when the fundamental attributes of a company
or a country of a company deteriorate; when price exceeds expected earnings
growth rates; or in order to rebalance the portfolio toward country
diversification targets.
Please be aware that the above criteria is not a full investment strategy of
the asset manager and is subject to change at the discretion of The Managers
Funds, L.P.
22
<PAGE>
Ticker Symbol: MGMEX
SHOULD I INVEST IN THIS FUND?
[graphic]
This Fund may be suitable if you:
* Are willing to accept a high degree of risk and volatility
* Have an investment time horizon of seven years or more
This Fund may not be suitable if you:
* Are a conservative investor
* Are investing with a shorter time horizon in mind
* Are seeking stability of principal or current income
PRINCIPAL RISKS AND REWARDS
[graphic]
By investing in stocks, the value of your investment will fluctuate on a
day-to-day basis in connection with movements in the stock market. In
addition, the prices of equity securities held by the Fund may be affected
by the activities of the individual companies in the portfolio.
By investing in emerging market securities, the Fund may expose shareholders
to considerable additional risks such as currency exchange rates and lack of
adequate and available company information. Typically, stock markets in
emerging markets countries tend to be much more volatile than the U.S.
market due to economic and political instability and relative immaturity.
In the past, some emerging market countries have restricted the flow of
money into and out of their stock markets and imposed regulatory restrictions on
foreign investors.
In addition, some foreign securities in which the Fund invests may be
considered illiquid and may offer less regulatory protection for investors.
Most of the foreign securities in which the Fund invests are denominated in
foreign currencies, whose value may decline against the U.S. Dollar and cause
you to lose money.
In an effort to manage this risk, this Fund invests in a diversified
portfolio of common stocks across companies and multiple countries and
industries. The allocation of the portfolio among different industry
sectors is a result of the manager's individual stock selection. To the
extent that the Fund invests in different industries and/or securities
relative to the Morgan Stanley Capital International Emerging Markets Free
Index ("MSCI EM Free"), the Fund may be more or less volatile than the MSCI
EM Free Index. For more information on Risk, see OTHER RISK FACTORS.
[TEXT BOX]
The MSCI EM Fee Index is an index of about 1,000 securities in 30
emergiung market countries. The index recognizes that certain countries have
significant restrictions on foreign ownership and only measures the
companies and securities generally available to foreign investors.
23
<PAGE>
Ticker Symbol: MGMEX
[graphic]
The Fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the Fund's portfolio but they
may be used to increase returns. Some of these practices may reduce returns
and will increase volatility. At times, the Fund may engage in short-term
trading, which could result in higher taxable distributions.
The Fund may also buy securities with borrowed money which has the effect of
magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio manager, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes to respond
to adverse market, political, economic or other conditions. During such a
period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 1.15%(a)
Distribution (12b-1) Fees.................................. 0.00%
Other Expenses.............................................. 2.17%
Total Expenses before Expense Reductions......... 3.32%
Expense Reductions (b).................................. (0.14)%
Total Annual Fund Operating Expenses............... 3.18(c)
<FN>
(a) Management Fee, restated to reflect a current waiver in effect, would
have been 0.75%.
(b) Includes earnings on overnight cash balances and Fund expenses paid by
certain brokers to whom the Fund has directed business.
(c) Total Annual Operating Expenses, restated to reflect a current waiver in
effect, would have been 2.54%.
PORTFOLIO MANAGEMENT OF THE FUND
King Street Advisors, Limited manages the Fund. Kenneth King and Murray
Davey lead a team of portfolio managers for King Street.
24
<PAGE>
A Few Words About Risk
[graphic]
In the normal course of every day life, each of us takes risk. What is risk?
Risk can be thought of as the likelihood of an event turning out differently
than planned and the consequences of that outcome.
If you drive to work each day, you do so with the plan of arriving safely
with time to accomplish your tasks. There is a possibility, however, that
some unforeseen factor such as bad weather or a careless driver will disrupt
your plan. The likelihood of your being delayed or even injured will depend
upon a number of factors including the route you take, your driving ability,
the type and condition of your vehicle, the geographic location, or the time
of day.
[graphic]
The consequence of something going wrong could range from a short delay to
serious injury or death. If you wanted, you could try to quantitatively
estimate the risk of driving to work, which, along with your expectations
about the benefits of getting to work, will help you determine whether or
not you will be willing to drive each day. A person who works in a city may
find the risk of driving very high and the relative rewards minimal in that
he or she could more easily walk or ride a train. Conversely, a person who
works in the country may find the risk of driving minimal and the reward
great in that it is the only way he or she could get to work. Fortunately,
moost people do not need to quantitively analyze most of their everyday
actions.
The point is that everyone takes risks, and subconsciously or otherwise,
everyone compares the benefit that they expect from taking risk with the
cost of not taking risk, to determine their actions. In addition, there are
a few principles from this example which are applicable to investing as well.
* Despite statistics, the risks of any action are different for every person
and may change as a person's circumstances change.
* Everybody's perception of reward is different.
* High risk does not in itself imply high reward.
While higher risk does not imply higher reward, proficient investors demand
a higher return when they take higher risks. This is often referred to as
the risk premium. The risk premium for any investment is the extra return,
over the available risk-free return, that an investor expects for the risk
that he or she takes. The risk-free return is a return that one could expect
with absolute certainty.
U.S. investors often consider the yield for short-term U.S. Treasury
securities to be as close as they can get to a risk-free return since the
principal and interest are guaranteed by the U.S. Government. Investors get
paid only for taking risks, and successful investors are those who have been
able to correctly estimate and diversify the risks to which they expose their
portfolios along with the risk premium they expect to earn.
In order to better understand and quantify the risks investors take versus the
rewards they expect, investors separate and estimate the individual risks to
their portfolio. By diversifying the risks in an investment portfolio, an
investor can often lower the overall risk, while maintaining a reasonable
return expectation.
The following are descriptions of many of the risks that portfolio managers
of our Funds take to earn investment returns. Investors should be aware that
this is not a comprehensive list and the risks discussed below are only some
of the primary risks which your investments are exposed. Further below is a
matrix illustrating the relative amounts of each kind of risk to which each
of the Funds is exposed.
[graphic]
Market Risk This is also called systematic risk. It typically refers to the
basic variability that stocks exhibit as a result of stock market fluctuations.
Despite the unique influences on individual companies, all stock prices rise and
fall as a result of investors' perceptions of the market as a whole. Many of
the risks described below contribute to market risk. Other types of securities
such as corporate bonds can also have some market risk; their prices can be
affected by changing perceptions of the market as a whole. Many of the risks
described below contribute to market risk. Other types of securiies such as
corporate bonds can also have some market risk; their prices can be
affected by changing perceptions of the stock market.
Since foreign securities trade on different markets, which have differing
supply and demand characteristics, their prices are not as closely linked
to the U.S. markets. Foreign securities markets have their own market risks
and they may be more or less volatile than U.S. markets, and may move in
different directions. However, as all markets become more open to global
trading, and as communications between investors improves, international
stock and bond markets have become more closely linked with U.S. markets.
The consequences of market risk are that if the stock market drops in value,
your stock investments will be likely to also drop in value. Conversely, as
the stock market rises in value, your stock investments will likely rise in
value as well. The potential return for taking market risk is the "market
return" - the fact that historically over long periods of time, investments
in the stock market have provided returns in excess of available risk-free
returns.
[graphic]
Specific Risk This is the risk that any particular security will drop in
price due to adverse effects on a specific business. Specific risk can be
reduced through diversification. It can be measured by calculating how much
of a portfolio is concentrated into the few largest holdings and by
estimating the individual business risks which these companies face.
An extension of specific risk is Sector (Industry) Risk. Companies that are
in similar businesses may be similarly affected by particular economic or
market events. To measure sector (industry) risk, one would group the
holdings of a portfolio into sectors or industries and observe the amounts
invested in each. Again, diversification among industry groups will reduce
sector (industry) risk but may also dilute potential returns.
Price Risk As investors perceive and forecast good business prospects, they
are willing to pay higher prices for securities. Higher prices therefore
reflect higher expectations. If expectations are not met, or if expectations
are lowered, the prices of the securities will drop. This happens with
individual securities or with the financial markets overall. For stocks,
price risk is often measured by comparing the price of any security or
portfolio to the book value, earnings or cash flow of the underlying company or
companies. A higher ratio denotes higher expectations and higher risk that the
expectations will not be sustained. This is likely the clearest difference
between "growth" and "value" styles of investing. Growth managers are
typically willing to take more price risk in order to own companies which are
performing well and are expected to continue to perform well.Value investors
prefer to take less price risk by avoiding situations where current
expectations, and thus prices, are high.
Liquidity Risk This is the risk that you cannot sell a security at a
reasonable price within a reasonable time frame when you want or need to.
This risk applies to all assets. For example, an asset such as a house has
reasonably high liquidity risk because it is unique and has a limited number
of potential buyers. Thus, it often takes a significant effort to market,
and a takes at least a few days and often a few months to sell.
On the other hand, a U.S. Treasury note is one of thousands of identical
notes with virtually unlimited potential buyers and can thus be sold very
quickly and easily. The liquidity of financial securities in orderly markets
can be measured by observing the amount of daily or weekly trading in the
security, the prices at which the security trades and the difference between
the price buyers offer to pay and the price sellers want to get. However,
estimating the liquidity of securities during market upheavals is very
difficult.
[graphic]
Credit Risk The likelihood that a debtor will be unable to pay interest or
principal payments as planned is typically referred to as default risk.
Default risk for most debt securities is constantly monitored by several
nationally recognized statistical rating agencies (NRSRA) such as Moody's
and Standard & Poor's. Even if the likelihood of default is remote, changes
in the perception of an institution's financit the
valuation of its debt securities. This extension of default risk is typically
known as credit risk.
Inflation Risk This is the risk that the price of an asset, or the income
generated by an asset, will not keep up with an increase in the general cost
of living. Almost all financial assets have some inflation risk, but most
particularly fixed-income securities.
Interest Rate Risk Changes in interest rates can impact stock and bond
prices in several ways. As interest rates rise, the fixed coupon payments of
debt securities become less competitive with the market and thus the price of
the securities will fall. Similarly, the expected earnings and dividend
payments for equity securities become relatively less competitive as interest
rates rise. Conversely, prices will rise as available interest rates fall.
The longer into the future that these cash flows are expected, the greater will
be the effect on the price of the security. Interest rate risk is thus
measured by analyzing the length of time or "duration" over which the return
on the investment is expected. The longer the duration the higher the
interest rate risk.
While this is typically measured for debt securities, it also applies to
equity securities. A company which has high current earnings, is paying
dividends and is valued based on a slower expectation of growth has a shorter
duration than a rapidly growing company in which the bulk of its earnings are
expected farther off into the future.
Reinvestment Risk As debtors pay interest or return capital to investors,
there is no guarantee that investors will be able to reinvest these payments
and receive rates equal to or better than their original investment. If
interest rates fall, the rate of return available to reinvested money will
also fall. The purchaser of a 30-year, 8% coupon bond can be reasonably
assured that she will receive an 8% return on her original capital, but
unless she can reinvunless she can reinvest all of the interest receipts at or above 8%
turn over 30 years will be below 8%. The higher the coupon and prepayment
risk, the higher the reinvestment risk.
Here is a good example of how consequences differ for various investors.
An investor who plans on spending (as opposed to reinvesting) the income
generated by his portfolio is likely less to be concerned with reinvestment
risk and more likely to be concerned with inflation and interest rate risk
than is an investor who will be reinvesting all income.
Prepayment Risk Many bonds have call provisions which allow the debtors to
pay them back before maturity. This is especially true with mortgage
securities, which can be paid back anytime. Typically debtors prepay their
debt when it is to their advantage (when interest rates drop making a new
loan at current rates more attractive), and thus likely to the disadvantage
of the bond holders. Prepayment risk will vary depending on the provisions
of the security and current interest rates relative to the interest rate of
the debt.
Extension Risk Because of prepayment risk, most investors estimate the
prepayments which they expect for a bond or portfolio and invest accordingly.
Extension risk represents the possibility that as conditions change debtors
will slow their capital payments thus extending the duration of the securities
beyond expectations.
[graphic]
Political Risk Changes in the political status of any country can have
profound effects on the value of securities within that country as well as
the credit quality of the debt securities. Related risk factors are the
regulatory environment within any country or industry and the sovereign
health of the country. These risks can only be reduced by carefully
monitoring the economic, political and regulatory atmosphere within
countries and diversifying across countries.
[graphic]
Currency Risk The value of foreign securities in an investor's home
currency depends both upon the price of the securities and the exchange
rate of the currency. Thus, the value of an investment in a foreign security
will drop if the price for the foreign currency drops in relation to the U.S.
Dollar. Adverse currency fluctuations are an added risk to foreign
investments. Currency risk can be reduced through diversification among
currencies or through hedging with the use of foreign currency contracts.
Economic Risk Obviously, the prevailing economic environment is important to
the health of all businesses, however, some companies are more sensitive to
changes in the domestic and/or global economy than others. These types of
companies are often referred to as cyclical businesses. Countries in which
a large portion of businesses are in cyclical industries are thus also very
economically sensitive, and carry a higher amount of economic risk.
[graphic]
Intelligence Risk Intelligence risk is a term created by The Managers Funds
to describe the risks taken by mutual fund investors in hiring professional
portfolio managers to invest assets. Portfolio managers evaluate investments
relative to all of the above risks, among others, and allocate accordingly.
To the extent that they are intelligent and make accurate projections about
the future of individual businesses and markets they will make money for
investors. While most managers diversify many of these risks, their
portfolios are constructed based upon central underlying assumptions
and investment philosophies which proliferate through their management
organizations and reflected in their portfolios.
Intelligence risk can be defined as the risk that investment managers
may make poor decisions or use investment philosophies that turn out to be
wrong. The Managers Funds believes that intelligence risk can be reduced
through diversification of investment managers from differing organizations
and with differing investment philosophies.The above chart attempts to
displays the or approximates the relative risks taken by the various funds
discussed in this prospectus.
[RELATIVE RISK MATRIX FOR THE MANAGERS FUNDS]
There are many ways of summarizing these risks, but keep in mind that
summarization can lead one to overlook some important factors. Life
insurance companies do not attempt to estimate the individual risks that
each of its policy holders intends to take throughout life. Not only would
this be impossible from a data collection standpoint, but the sheer number
of estimates involved would compound to make the final life expectancy
estimate very imprecise. Instead, life insurance companies use historical
data to make broad estimates about the life expectancy of people and then
adjust them based on some other broad measures such as sex, general health,
heredity and lifestyle factors such as smoking and flying. The circumstance
in which this model falters is when any significant factor, which is not
represented in the historical results, becomes relevant. Nuclear war,
plague or climatic shifts could detrimentally affect the life insurers'
results, while a cure for cancer and improving health habits could
incrementally affect life expectancies.
In the investment industry, risk is often simplified using a
statistical measure called standard deviation. While standard deviation
is a useful tool, its drawbacks are noteworthy. Although every mutual fund
performance report will warn that past performance is no guarantee of future
results, the standard deviation is purely a measure of past performance.
Because of this, it summarizes only the events that have occurred during
the period in which the standard deviation was measured. There is no
forward looking factor inherent in a standrad deviation statistic. It is
also important to note that even the standard
That said, standard deviation is worthwhile if understood and applied
correctly. If some basic assumptions are met which need not be discussed
here, standard deviation describes ranges within which returns for securities
or portfolios have varied. The statistic represents how returns have
differed from the average return such that in 68% (about 2/3) of the events
(time periods), the actual return was the average return plus or minus
something less than or equal to the standard deviation. For example a fu
The standard deviation is a worthwhile first step in assessing whether or not
an investment fits an investor's risk tolerance. However, some recognition
of the possible future risks, and a judgement as to whether or not they are
properly represented in historical data is necessary. The following chart
shows the relative returns and standard deviations for all of The Managers
Funds as well as a few notable investment indices over the past ten years.
Keep in mind some of the following important influences to investment returns
over this time period (past 10 years):
* Absence of major global wars;
* Relatively strong U.S. Dollar;
* Fall of communism in many countries leading to an increase in cross
border trade;
* Falling rate of inflation; and
* Falling interest rates.
[RETURN VS. VOLATILITY FOR LATEST 10 YEARS SCATTERGRAM]
Financial Highlights
FINANCIAL INFORMATION FOR THE FUNDS
The following Financial Highlights tables are intended to
help you understand each Fund's financial performance for
the past five years or, if shorter, since inception.
Certain information reflects financial results for a single
Fund share. The total returns in each table represent the
rate that an investor would have earned or lost on an
investment in that Fund. It assumes reinvestment of all
dividends and distributions. This information, extracted
from each Fund's Financial Statements, has been audited by
PricewaterhouseCoopers LLP, whose report, is included in the
Fund's Annual Report, which is available upon request.
</TABLE>
<TABLE>
<CAPTION>
MANAGERS INCOME EQUITY FUND
For the years ended 1998 1997 1996 1995 1994
December 31
<S> <C> <C> <C> <C> <C>
Net Asset Value, $30.49 $28.43 $24.90 $27.89
Beginning of Year
Income From Investment
Operations
Net Investment 0.67 0.76 0.87 0.80
Income
Net Gains or Losses
on Securities (both 7.27 3.97 7.47 (0.50)
realized and
unrealized)
Total From 7.94 4.73 8.34 0.30
Investment Operations
Less Distributions
Dividends (from net (0.69) (0.76) (0.86) (0.83)
investment income)
Distributions (from (6.68 (1.91) (3.95) (2.46
capital gains) ) )
Returns of Capital ---- ---- ---- ----
Total (7.37 (2.67) (4.81) (3.29
Distributions ) )
Net Asset Value, End of $31.0 $30.49 $28.43 $24.9
Year 6 0
Total Return 27.19 17.08% 34.36% 0.99%
%
Ratios/Supplemental
Data
Net Assets, End of Year $64,9 $53,06 $37,80 $48,8
(000's omitted) 46 3 7 75
Ratio of Net Expenses 1.32% 1.44%( 1.45% 1.33%
to Average Net Assets (a) a)
Ratio of Net Income to
Average Net Assets 1.97% 2.63% 2.85% 3.06%
Portfolio Turnover Rate 96% 33% 36% 46%
<FN>
(a) The Funds have entered into arrangements with one or
more third-party broker-dealers who have paid a portion of
the Fund's custodian expenses. Absent these expense
reductions, the ratio of expenses to average net assets for
the years ended December 31, 1998, 1997 and 1996, would have
been ____%, 1.35% and 1.44%, respectively.
</FN>
</TABLE>
MANAGERS CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
For the years ended 1998 1997( 1996 1995 1994
December 31 b)
<S> <C> <C> <C> <C> <C>
Net Asset Value, $26.3 $27.14 $23.25 $25.1
Beginning of Year 4 7
Income From Investment
Operations
Net Investment (0.13 0.09 0.09 0.12
Income (Loss) )
Net Gains or Losses
on Securities (both 3.15 3.66 7.62 (0.49
realized and )
unrealized)
Total From 3.02 3.75 7.71 (0.37
Investment Operations )
Less Distributions
Dividends (from net --- (0.10) (0.08) (0.12
investment income) )
Distributions (from (5.12 (4.45) (3.74) (1.43
capital gains) ) )
Returns of Capital ---- ---- ---- ----
Total (5.12 (4.55) (3.82) (1.55
Distributions ) )
Net Asset Value, End of $24.2 $26.34 $27.14 $23.2
Year 4 5
Total Return 12.74 13.73% 33.39% (1.50
% )%
Ratios/Supplemental
Data
Net Assets, End of Year $73,8 $101,2 $83,35 $86,0
(000's omitted) 60 82 3 42
Ratio of Net Expenses 1.26% 1.33%( 1.36% 1.29%
to Average Net Assets (a) a)
Ratio of Net Income
(Loss) to Average Net (0.45 0.34% 0.31% 0.53%
Assets )%
Portfolio Turnover Rate 235% 172% 134% 122%
<FN>
(a) The Funds have entered into arrangements with one or
more third-party broker-dealers who have paid a portion of
the Fund's custodian expenses. Absent these expense
reductions, the ratio of expenses to average net assets for
the years ended December 31, 1998, 1997 and 1996, would have
been ____%, 1.32% and 1.38%, respectively.
(b) Financial information was calculated by using the
average shares outstanding during the year.
</FN>
</TABLE>
MANAGERS SPECIAL EQUITY FUND
<TABLE>
<CAPTION>
For the years ended 1998 1997 1996 1995(b 1994
December 31 )
<S> <C> <C> <C> <C> <C>
Net Asset Value, $50.9 $43.34 $36.79 $38.9
Beginning of Year 5 0
Income From Investment
Operations
Net Investment 0.08 (0.00) (0.07) (0.01
Income (Loss) )
Net Gains or Losses
on Securities (both 12.29 10.68 12.28 (0.76
realized and )
unrealized)
Total From 12.37 10.68 12.21 (0.77
Investment Operations )
Less Distributions
Dividends (from net --- --- ---
investment income) (0.07
)
Distributions (from (2.07 (3.07) (5.66) (1.34
capital gains) ) )
Returns of Capital ---- ---- ---- ---- ----
Total (2.14 (3.07) (5.66) (1.34
Distributions ) )
Net Asset Value, End of $61.1 $50.95 $43.34 $36.7
Year 8 9
Total Return 24.45 24.75% 33.94% (1.99
% )%
Ratios/Supplemental
Data
Net Assets, End of Year $719, $271,4 $118,3 $111,
(000's omitted) 707 33 62 584
Ratio of Net Expenses 1.35% 1.43% 1.44% 1.37%
to Average Net Assets (a)
Ratio of Net Income
(Loss) to Average Net 0.17% (0.10) (0.16) (0.06
Assets % % )%
Portfolio Turnover Rate 49% 56% 65% 66%
<FN>
(a) The Funds have entered into arrangements with one or
more third-party broker-dealers who have paid a portion of
the Fund's custodian expenses. Absent these expense
reductions, the ratio of expenses to average net assets for
the years ended December 31, 1998 and 1997 would have been
____% and 1.36%, respectively.
(b) Financial information was calculated by using the
average shares outstanding during the year.
</FN>
</TABLE>
MANAGERS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
For the years ended 1998 1997 1996 1995(b 1994
December 31 )
<S> <C> <C> <C> <C> <C>
Net Asset Value, $43.6 $39.97 $36.35 $35.9
Beginning of Year 9 2
Income From Investment
Operations
Net Investment 0.42 0.32 0.31 0.16
Income
Net Gains or Losses
on Securities (both 4.27 4.76 5.59 0.56
realized and
unrealized)
Total From 4.69 5.08 5.90 0.72
Investment Operations
Less Distributions
Dividends (from net (0.33) (0.13) (0.08
investment income) (0.65 )
)
Distributions (from (2.15 (1.03) (2.15) (0.21
capital gains) ) )
Returns of Capital ---- ---- ---- ----
Total (2.80 (1.36) (2.28) (0.29
Distributions ) )
Net Asset Value, End of $45.5 $43.69 $39.97 $36.3
Year 8 5
Total Return 10.83 12.77% 16.24% 2.00%
%
Ratios/Supplemental
Data
Net Assets, End of Year $386, $269,5 $140,4 $86,9
(000's omitted) 624 68 88 24
Ratio of Net Expenses 1.45% 1.53% 1.58% 1.49%
to Average Net Assets (a)
Ratio of Net Income to
Average Net Assets 0.75% 0.97% 0.80% 0.60%
Portfolio Turnover Rate 37% 30% 73% 22%
<FN>
(a) The Funds have entered into arrangements with one or
more third-party broker-dealers who have paid a portion of
the Fund's custodian expenses. Absent these expense
reductions, the ratio of expenses to average net assets for
the years ended December 31, 1998 and 1997 would have been
____% and 1.45%, respectively.
(b) Financial information was calculated by using the
average shares outstanding during the year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
MANAGERS EMERGING MARKETS EQUITY FUND
Since
Inception
(February 9,
1998) to
December 31,
1998
<S> <C>
Net Asset Value,
Beginning of Period
Income From Investment
Operations
Net Investment
Income
Net Gains or Losses
on Securities (both
realized and
unrealized)
Total From
Investment Operations
Less Distributions
Dividends (from net
investment income)
Distributions (from
capital gains)
Returns of Capital
Total
Distributions
Net Asset Value, End of
Period
Total Return
Ratios/Supplemental
Data
Net Assets, End of
Period (000's omitted)
Ratio of Net Expenses
to Average Net Assets
Ratio of Net Income to
Average Net Assets
Portfolio Turnover Rate
Expense Waiver
Ratio of Total Expenses
to Average Net Assets
Ratio of Net
Invvestment Income to
Average Net Assets
</TABLE>
Your Account
As an investor, you pay no sales charges to invest in our Funds.
Furthermore, you pay no charges to transfer within the Fund family or even
to redeem out of our Funds. The price at which you purchase and redeem your
shares is equal to the net asset value per share (NAV) which is determined
after your purchase or redemption order is received on each day the NYSE is
open for trading. The NAV is equal to the Fund's net worth (assets minus
liabilities) divided by the number of shares outstanding. Each Fund
se of regular business of the New York Stock Exchange (NYSE), usually
4:00 p.m. New York Time.
Securities traded in foreign markets may trade when the NYSE is closed.
Those securities are generally valued at the closing of the exchange where
they are primarily traded. Therefore, a Fund's NAV may change on days when
investors may not be able to purchase or redeem Fund shares.
Each Fund's investments are valued based on market values. If a particular
event would materially affect a Fund's NAV or if market quotations are not
readily available, then the Pricing Committee of the Board of Trustees may
value the Fund's investments based on a good faith evaluation of fair value.
MINIMUM INVESTMENTS IN OUR FUNDS
All investments in our Funds must be in U.S. Dollars. We cannot accept any
third-party checks from an existing shareholder, unless the check is payable
to an individual and is signed over to either a specific Fund or State Street
Bank and Trust Company.
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENT
<S> <C> <C>
Regular accounts* $2,000 $100
Education IRA 500 N/A
Traditional IRA 500 100
SEP IRA 500 100
SIMPLE IRA 500 100
ROTH IRA 500 100
<FN>
*For Regular accounts, arrangements can be made to open accounts with less
than the required initial investment. Call (800) 835-3879 for more details.
</FN>
</TABLE>
[Text Box]
A Traditional IRA is an individual retirement account. Assets are tax-
deferred while your withdrawals and distributions are taxable in the year
that they are made
An Education IRA is an IRA with a non-deductible contributions and tax-free
growth of assets and distributions. The account must be used to pay qualified
educational expenses.
A SEP IRA is an IRA that allows employers to make contributions to an
employee's account.
A Simple IRA is an employer plan and a series of IRAs that allows contributions
HOW TO PURCHASE SHARES
Initial Purchase
Additional Purchases
Through your Investment Advisor
Contact your investment advisor or other investment professional
Send any additional funds to your investment professional at the address
appearing on your account statement
Advisors, Bank Trust and 401(k) agents only
Call (800) 358-7668 for further instructions
Call (800) 358-7668 for further instructions
Direct Shareholders:
?By Mail
?By Telephone
Complete the account application.
Mail the application and a check payable to The Managers Funds to:
The Managers Funds
c/o Boston Financial
Data Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
Call (800) 358-7668
Write a letter of instruction and a check payable to The Managers Funds to:
The Managers Funds
c/o Boston Financial
Data Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
Include your account # on your check.
Call the Transfer Agent at (800) 252-0682. The minimum additional investment
is $100
**For Bank Wires: Please call and notify the Fund at (800) 358-7668. Then
instruct your bank to wire the money to State Street Bank and Trust Company,
Boston, MA 02101; ABA #011000028; BFN - The Managers Funds. Please be aware
that your bank may charge you a fee for this service.
HOW TO SELL SHARES
You may sell your shares at any time. Your shares will be sold at the NAV
calculated after the Fund's Transfer Agent accepts your order. Orders
received after 4:00 p.m. New York Time will receive the NAV per share
determined at the close of trading on the next NYSE trading day.
Instructions
Through your Investment Advisor
Contact your investment advisor
Advisor, Bank Trust and 401(k) agents only
Call (800) 358-7668 for further instructions
Direct Shareholders:
?By Mail
?By Telephone
Write a letter of instruction containing:
* the name of the Fund
* dollar amount or number of shares to be sold
* your name
* your account number
* signatures of all owners on account
Mail letter to:
The Managers Funds
c/o Boston Financial Data
Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
If you elected telephone redemption privileges on your account application,
call us at (800) 252-0682
It is important to keep in mind that if you invest through a third party
such as a bank, broker-dealer or financial supermarket rather than directly
with us, the policies and fees may be different than those described in this
material.
Investor Services
Automatic Reinvestment Plan allows your dividends and capital gain
distributions to be reinvested in additional shares of your Fund or another
Fund. You can elect to receive cash.
Automatic Investments allows you to make automatic deductions from a
designated bank account.
Systematic Withdrawals allows you to make automatic monthly withdrawals of
$100 or more per Fund. Withdrawals are normally completed on the 25th
Business day of each month. If the 25th business day is a Sunday or a
holiday, the withdrawal will be completed on the next business day.
Dollar Cost Averaging allows you to make automatic monthly exchanges from one
Fund to another. Exchanges are completed on the 15th business day of each
month. Be sure to read the current Prospectus for any Fund that you are
exchanging into. There is no fee associated with this service. If the 15th
business day is a Sunday or a holiday, the exchange will be completed on the
next business day.
Individual Retirement Accounts are available to you at no additional cost.
Call us at (800) 835-3879 for more information and an IRA kit.
Checkwriting Privileges are available only to those investors in our Money
Market Fund. Be sure to read the Money Market Fund's Prospectus about this
privilege.
Exchange Privilege allows you to exchange your shares of one Fund for shares
of another of our Funds. There is no cost associated with this service. Be
sure to read the Prospectus of any Fund that you wish to exchange into. You
can request your exchange in writing, by telephone (if elected on the
application) or through your investment advisor, bank or investment
professional.
GENERAL FUND POLICIES
We reserve the right to:
* redeem an account with notice if the value of the account falls below
$500 due to redemptions
* Suspend redemptions or postpone payments when the NYSE is closed for
any reason other than its usual weekend or holiday closings or when trading
is restricted by the SEC
* Change our minimum investment amounts
* Delay sending out redemption proceeds for up to seven days
(this usually applies to very large redemptions without notice, excessive
trading or during unusual market conditions)
* Make a redemption-in-kind (a payment in portfolio securities instead of in
cash) if we determine that a redemption is too large and/or may cause harm to
the Fund and its shareholders
* Refuse any purchase or exchange request if we determine that such request
could adversely affect the Fund's NAV, including if such person or group has
engaged in excessive trading (to be determined in our discretion)
* Close an account due to excessive trading after prior warning and
notification
Account Policies, Dividends and Taxes
ACCOUNT STATEMENTS
You will receive quarterly statements detailing your account activity. All
investors will also receive a yearly statement detailing the tax
characteristics of any dividends and distributions that you have received in
your account. You will also receive confirmations after each trade executed
in your account.
DIVIDENDS AND DISTRIBUTIONS
Income dividends and any net capital gain distributions, if any are normally
paid annually in December for each of the Equity Funds, with the exception of
the Income Equity Fund. The Income Equity Fund distributes any income
dividends monthly and normally makes capital gain distributions yearly in
August and December.
We will automatically reinvest your distributions of dividends and capital
gains unless you tell us otherwise. You may change your election by writing
to us at least 10 days prior to the scheduled payment date.
TAX INFORMATION
Please be aware that this tax information is general and refers to the
provisions of the Internal Revenue Code of 1986, as amended, which are in
effect as of the date of this Prospectus. You should consult a tax adviser
about the status of your distributions from your Funds.
All dividends and short-term capital gains distributions are generally
taxable to you as ordinary income, whether you receive the distribution in
cash or reinvest it for additional shares. An exchange of one Fund's shares
for shares of another Fund will be treated as a sale of the Fund's shares and
any gain on the transaction may be subject to federal income tax.
Keep in mind that distributions may be taxable to you at different rates
depending on the length of time the Fund held the applicable investment not
the length of time that you held your Fund shares. When you do sell your
Fund shares, a capital gain may be realized, except for IRA accounts.
Federal law requires a Fund to withhold taxes on distributions paid to
shareholders who:
* fail to provide a social security number or taxpayer identification number
* fail to certify that their social security number or taxpayer
identification number is correct
* fail to certify that they are exempt from withholding
For More Information
Additional Information for these Funds, including the
Statement of Additional Information and the Annual and Semi-
Annual Reports, is available to you free upon request. In
the Annual Report for each of the Funds, you will find a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during the last fiscal year.
By telephone Call 1-800-835-3879
By Mail Write to: The Managers Funds
40 Richards Avenue
Norwalk, CT 06854
On the Internet Electronic copies are available on ur
website at http://www.managersfunds.com
Text-only copies of these documents are also available on the SEC's website
at http://www.sec.gov, by sending a request and a duplication fee to the SEC's
Public Reference Section, Washington, D.C. 20549-6009, or by visiting the SEC's
Public Reference Room in Washington, DC (1-800-SEC-0330)
Investment Company Act Registration Number 811-3752.
<PAGE>
THE MANAGERS FUNDS
SHORT AND INTERMEDIATE BOND FUND
INTERMEDIATE MORTGAGE FUND
BOND FUND
GLOBAL BOND FUND
- ----------------------------
PROSPECTUS
DATED APRIL 1, 1999
- ---------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
The Securities and Exchange Commission has not approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
KEY INFORMATION ABOUT THE INCOME FUNDS
<S> <C> <C>
Risk/Return Goals and Principal Strategies of the Funds 1
Summary Risk Summary 2
Performance Summary 5
Fees and Expenses of the Fund 6
THE MANAGERS FUNDS
The Management Team 8
The Year 2000 Issue 8
____________________________________________________________________
Summary of SHORT AND INTERMEDIATE BOND FUND
the Objective and Investment Strategy 9
Funds Should I Invest In This Fund? 10
Principal Risks and Rewards 10
Fees and Expenses 12
Portfolio Management of the Fund 12
INTERMEDIATE MORTGAGE FUND
Objective and Investment Strategy 13
Should I Invest In This Fund? 14
Principal Risks and Rewards 14
Fees and Expenses 16
Portfolio Management of the Fund 16
BOND FUND
Objective and Investment Strategy 17
Should I Invest In This Fund? 18
Principal Risks and Rewards 18
Fees and Expenses 19
Portfolio Management of the Fund 19
GLOBAL BOND FUND
Objective and Investment Strategy 20
Should I Invest In This Fund? 21
Principal Risks and Rewards 21
Fees and Expenses 23
Portfolio Management of the Fund 23
____________________________________________________________
________
Additional OTHER RISK FACTORS
Risks of A Few Words About Risk 24
Investing
____________________________________________________________
________
Information FINANCIAL HIGHLIGHTS
About your Financial Information for the Funds 30
Investment
YOUR ACCOUNT
Minimum Investments 34
How to Purchase Shares 35
How to Sell Shares 36
INVESTOR SERVICES
General Fund Policies 37
ACCOUNT POLICIES, DIVIDENDS AND TAXES
Account Statements 39
Dividends and Distributions 39
Tax Information 39
____________________________________________________________
________
FOR MORE INFORMATION Back Cover
</TABLE>
Key Information about the Income Funds
GOALS AND PRINCIPAL STRATEGIES OF THE FUNDS
<TABLE>
<CAPTION>
Fund/Principal Risk Factors Goal Strategy__________
<S> <C> <C>
* Short and Intermediate High current income -Invests principally in investment grade
Bond Fund from fixed-income securities short or intermediate duration debt
in an intermediate duration securities thereby achieving returns
Risk Factors: portfolio. from such income
Interest Rate Risk -Seeks to achieve incremental return
Credit Risk through analysis of relative credit and
valuation of debt securities
-Eliminates securities if and when the asset
manager believes the security is overvalued
based on its credit, sector and duration or
to rebalance the portfolio relative to sector
diversification targets
* Intermediate Mortgage High current income -Invests principally in mortgage securities
Fund from mortgage-related thereby achieving returns from such
securities income
Risk Factors: -Seeks to achieve incremental return
Interest Rate Risk through analysis of relative valuation
Prepayment/Extension Risk of debt securities
Sector (Industry) Risk -Eliminates securities if and when the asset
manager believes the security is overvalued
based on its credit, structure and duration
* Bond Fund High current income -Invests principally in investment grade
from fixed-income securities debt securities thereby achieving returns
Risk Factors: from such income
Interest Rate Risk -Seeks to achieve incremental return
Credit Risk through analysis of relative credit and
Economic Risk valuation of debt securities
Liquidity Risk -Eliminates securities if and when the asset
manager believes the security is overvalued
based on its credit, sector and duration
* Global Bond Fund Income and capital -Invests principally in high quality debt
appreciation from securities of government, corporate and
Risk Factors: high quality foreign and supranational organizations
Interest Rate Risk domestic fixed-income -Seeks to achieve incremental return
Currency Risk securities through credit analysis and anticipation of
Political Risk changes in interest rates within various
countries
-Eliminates securities if and when the asset
manager believes the security is overvalued
based on its credit, country and duration
</TABLE>
Risk/Return Summary
This Prospectus contains important information for anyone interested in
investing in The Managers Funds no-load mutual fund family. Please read
this document carefully before you invest and keep it with you for future
reference.
You should base your purchase of these Funds on your own goals, risk
preferences and time horizons.
RISK SUMMARY
All investments involve some type and level of risk. Risk is the
possibility that you will lose money or not make any additional money by
investing in these Funds.
The following are the principal risk factors associated with the Income
Funds. Before you invest, please make sure that you have read, and
understand, the risk factors that apply to the specific Fund in which you
are interested. As with any mutual fund, you could lose money over a period
of time.
Please keep in mind that shares of these Funds:
* Are not deposits or obligations of any bank
* Are not guaranteed or endorsed by any bank
* Are not federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other federal agency
Interest Rate Risk
Changes in interest rates can impact stock and bond prices in several ways.
As interest rates rise, the fixed coupon payments of debt securities become
less competitive with the market and thus the prices of securities will fall.
Interest rate risk is measured by analyzing the length of time or "duration"
over which the return on the investment is expected. The longer the duration
the higher the interest rate risk. For more information regarding Interest
Rate Risk, see OTHER RISK FACTORS.
Risk/Return Summary
Credit Risk
The likelihood that a debtor will be unable to pay interest or principal
payments as planned is typically referred to as default risk. Default risk
for most debt securities is constantly monitored by nationally recognized
statistical rating agencies (NRSRA) such as Moody's and Standard & Poor's.
Even if the likelihood of default is remote, changes in the perception of an
institution's financial health will affect the valuation of its debt
securities. This extension of default risk is typically known as credit risk.
Prepayment Risk
Many bonds have call provisions which allow the debtors to pay them back
before maturity. This is especially true with mortgage securities, which
can be paid back anytime. Typically debtors prepay their debt when it is to
their advantage (when interest rates drop), and thus likely to the
disadvantage of the bond holders. Prepayment risk will vary depending on
the provisions of the security and interest rates relative to the interest
rate of the debt.
Extension Risk
Because of prepayment risk, most investors estimate the prepayments which
they expect for a bond or portfolio and invest accordingly. Extension risk
represents the possibility that as conditions change debtors will slow their
capital payments thus extending the duration of the securities beyond
expectations.
Sector (Industry) Risk
Companies that are in similar businesses may be similarly affected by
particular economic or market events. To measure sector (industry) risk,
one would group the holdings of a portfolio into sectors or industries and
observe the amounts which are invested in each group. Diversification of
groups may reduce sector (industry) risk but may also dilute potential
returns. For more information regarding Sector (Industry) Risk, see
OTHER RISK FACTORS.
Liquidity Risk
Liquidity Risk is the risk that you cannot sell a security at a reasonable
price in a reasonable time frame when you want or need to. This risk applies
to all assets. For more information regarding Liquidity Risk, see OTHER RISK
FACTORS.
Risk/Return Summary
________________________________________________________________________
Economic Risk
The prevailing economic environment is important to the health of all
businesses. However, some companies are more sensitive to changes in the
domestic and/or global economy than others. These types of companies are
often referred to as cyclical businesses. Countries in which a large portion
of businesses are in cyclical industries are thus also very economically
sensitive and carry a higher amount of economic risk.
Currency Risk
The value of foreign securities in an investor's home currency depends
both upon the price of the securities and the exchange rate of the currency.
Adverse currency fluctuations are an additional risk of foreign investing.
Currency risk may be reduced through diversification among currencies or
hedging with the use of foreign currency contracts.
* Euro Conversion. The introduction of a new single European currency, known
as the "euro," may result in uncertainties for securities in European
companies, European markets and the operation of the Funds. The euro was
introduced on January 1, 1999, by 11 European Union member countries who are
participating in the European Monetary Unit. The introduction of the euro
results in the redenomination of certain European debt and equity securities
over a period of time, which may bring differences in various
tments that would not otherwise occur. Any market disruptions due to the
euro could have an adverse effect on the Funds. At this stage, no one knows
what degree of impact the introduction of the euro will have on the Funds and
to the extent that the impact adversely affects a particular holding in a Fund's
portfolio, the Fund's performance may be affected.
Political Risk
Changes in the political status of any country can have profound effects on
the values of securities within that country as well as the credit quality of
the securities. Related risk factors are the regulatory environment within
any country or industry and the sovereign health of the country. These risks
may be reduced only by carefully monitoring the economic, political and
regulatory atmosphere within countries and diversifying across countries.
Risk/Return Summary
PERFORMANCE SUMMARY
The following bar chart illustrates each of the Fund's year-by-year total
return and how performance of each of the Funds has varied over the past ten
years. The chart assumes that all dividend and capital gain distributions
have been reinvested. However, past performance does not guarantee future
results.
<TABLE>
<CAPTION>
Annual Returns - Last 10 Years
Fund 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short and Intermediate
Bond Fund 10.6 7.2 12.6 11.6 8.4 -8.4 15.6 4.2 5.9 5.3
Intermediate Mortgage
Fund 14.7 10.2 18.2 10.5 11.5 -25.0 17.3 3.3 8.2 6.0
Bond Fund 13.1 7.5 19.1 7.9 11.6 -7.3 30.9 5.0 10.4 3.3
Global Bond Fund --- --- --- --- --- --- 19.1 4.4 0.2 19.3
<FN>
*For the Short and Intermediate Bond Fund over this period, the highest
quarterly return was 5.15% and the lowest quarterly return was -4.77%.
*For the Intermediate Mortgage Fund over this period, the highest quarterly
return was 7.90% and the lowest quarterly return was -14.06%.
*For the Bond Fund over this period, the highest quarterly return was 9.69%
and the lowest quarterly return was -3.57%.
*For the Global Bond Fund over this period, the highest quarterly return was
12.52% and the lowest quarterly return was -4.77%.
The following table compares each of the Fund's performance to that of a
broadly based securities market index and other indexes, if applicable.
Again, the table assumes that dividends and capital gains distributions have
been reinvested for both the Fund and the Index. As always, the past is not
an indication of what will happen in the future.
Average Annual Total Return (as a percentage) as of 12/31/98
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 Year 5 Years 10 Years
Short and Intermediate
Bond Fund 5.31% 4.23% 7.13%
ML 1-3 yr Treasury 7.00% 5.99% 7.37%
Intermediate Mortgage Fund 6.01% 0.83% 7.12%
ML 1-5 Yr Govt/Corp 7.68% 6.28% 7.95%
Bond Fund 3.29% 7.77% 9.75%
LB Govt/Corp 9.47% 7.30% 9.33%
Global Bond Fund** 19.27% --- ---
Salomon World Govt 15.30% 7.85% 8.96%
<FN>
*All returns for the Funds are after expenses.
**The Fund commenced operations on March 25, 1994.
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from Fund Assets)
<TABLE>
<CAPTION>
Short and Intermediate
Intermediate Mortgage Bond Global
Bond Fund Fund Fund Bond Fund
<S> <C> <C> <C> <C>
Management Fee 0.50% 0.45%(a) 0.625% 0.70%
Distribution
(12b-1) Fees 0.00% 0.00% 0.00% 0.00%
Other Expenses 0.83% 0.75% (b) 0.585% 0.86%
Total Expenses
before Expense
Reductions 1.33% 1.20% 1.21% 1.56%
Expense
Reductions(c) (0.01)% (0.00)% (0.00)% (d) (0.03)%
Total Annual
Fund Operating
Expenses 1.32% 1.20%(e) 1.21% 1.53%
<FN>
(a) The Management Fee of the Fund, restated to reflect a waiver in effect,
would have been 0.20%
(b) Other Expoenses of the Fund, restate to reflect a waiver in effect, would
have been 0.50%
(c) Includes earnings on overnight cash balances and Fund expenses paid by
certain brokers to whom the Fund has directed business.
(d) Less than 0.01%
(e) Total Annual Fund OIperating Expenses of the Fund, restated to reflect
a waiver in effect, would have been 0.70%
</FN>
</TABLE>
Risk/Return Summary
FEES AND EXPENSES OF THE FUND
As an investor, you pay certain fees and expenses in connection with
buying and holding shares of the Funds. The following table illustrates
those fees and expenses. Keep in mind that each of these Funds has no sales
charge (load).
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
<S> <C>
Maximium Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price) ......None
Mmaximum Deferred Sales Charge (Load)..........................None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions........................................None
Redemption Fee.................................................None
Exchange Fee...................................................None
Maximum Account Fee............................................None
</TABLE>
Summary
Example
The following Example will help you
compare the costs of investing in various
funds. It assumes that you invest $10,000
as an initial investment in each Fund for
the time periods indicated and then redeem
all of your shares at the end of those
periods. It also assumes that your
investment has a 5% total return each year
and each of the Fund's operating expenses
remain the same. Although your actual
costs may be higher or lower, based on the
above assumptions, your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 5 Years 10 Years
<S> <C> <C> <C>
Short and Intermediate
Bond Fund $134 $723 $1590
Intermediate Mortgage
Fund 122 660 1455
Bond Fund 123 665 1466
Global Bond Fund 156 834 1824
</TABLE>
THE MANAGEMENT TEAM (See Equity Prospectus)
THE YEAR 2000 ISSUE (See Equity Prospectus)
Managers Short and Intermediate Bond Fund Ticker Symbol: MGSIX
OBJECTIVE AND INVESTMENT STRATEGY
The Fund's objective is to achieve high current income through a
diversified portfolio of fixed-income securities with an average
portfolio maturity between one to five years. In view of the risks
associated with investing in fixed-income securities, there is no guarantee
that the Fund will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65% of its
total assets in bonds. The Fund invests in a diversified portfolio of
investment-grade bonds, including U.S. Government securities, corporate
bonds, debentures, non-convertible fixed-income preferred stocks, eurodollar
certificates of deposit and eurodollar bonds, as well as mortgage-related
securities. The Fund may invest up to 10% of its total assets in non-dollar
denominated securities. The Fund may invest a substantial portion of
ivalents or securities of any type in response to abnormal market conditions.
Important Strategic Considerations
The Fund relies on the professional judgement of its independent asset
manager to make decisions about the securities held in the Fund's portfolio
The asset manager utilizes investment guidelines provided by us to capitalize
on the asset manager's strengths.
The asset manager rigorously analyzes the credit quality, structure and
valuation for each of the prospective holdings in its portfolio. In
selecting securities, the asset manager:
* Identifies investment-grade debt securities with short or intermediate
durations.
* Expects to generate incremental returns from income and capital
appreciation derived from purchasing securities at attractive yields and
valuations.
* Eliminates securities if and when the security is overvalued based on
credit, sector and duration or to rebalance the portfolio relative to sector
diversification targets.
Please be aware that the above criteria is not a full investment strategy of
the asset manager and is subject to change at the discretion of The Managers
Funds, L.P.
Ticker Symbol: MGSIX
SHOULD I INVEST IN THIS FUND?
This Fund may be suitable if you:
* Are seeking the opportunity for fixed-income returns in your
investment portfolio
* Are willing to accept a conservative risk investment
* Have an intermediate time horizon for investing (2 years or more)
This Fund may not be suitable if you:
* Are seeking absolute stability of principal
* Are seeking an aggressive investment
PRINCIPAL RISKS AND REWARDS
By investing in bonds, the value of your investment will fluctuate on a
day-to-day basis in connection with movements in interest rates. When
interest rates rise, a bond's market price generally declines.
Alternatively, when interest rates fall, the bond's price usually increases.
Therefore a fund, such as this Fund which invests a large portion of its
total assets in bonds, will typically behave the same way. Although the
short and intermediate nature of the portfolio will limit price fluctuation
to a uitable for an investor who is seeking absolute stability of principal.
Managers Short and Intermediate Bond Fund is not a money market fund.
The Fund may also invest up to 10% of its assets in foreign bonds which may
expose shareholders to additional risks, such as fluctuating currency exchange
rates. Some foreign bond markets tend to be more volatile than the U.S. market
due to economic and political instability and regulatory conditions in some
foreign countries.
In an effort to manage this risk, this Fund invests in a diversified
portfolio of investment-grade bonds, including U.S. Government securities,
corporate bonds, debentures, non-convertible fixed-income preferred stocks,
eurodollar certificates of deposit and eurodollar bonds. The Fund may also
invest a substantial portion of its total assets in mortgage-related
securities (including CMOs, IOs and POs) that are issued by or guaranteed by
the U.S. Government, its agencies or instrumentalities. The Fund may
d mortgage-related securities and asset-backed securities. Investment-grade
bonds are those rated
Ticker Symbol: MGSIX
within the four highest rating grades by rating agencies such as Standard &
Poor's (at least BBB) and Moody's (at least Baa). From time to time, the
Fund may also invest up to 5% of its net assets in unrated bonds that the
portfolio manager believes are comparable to investment-grade securities or
securities rated below investment-grade. Investing in bonds that are below
investment-grade quality may be considered speculative and changes in
economic conditions or other circumstances may have an adverse affect on the
principal or interest than on higher grade securities.
The Fund generally includes bonds with an overall interest rate duration
between one to five years. Typically, a lower duration means that the
portfolio or bond has less price sensitivity to interest rates. The Fund
invests in bonds that the portfolio manager believes offer attractive yields
and are undervalued relative to issues of similar credit quality and interest
rate sensitivity. For more information on Risk, see OTHER RISK FACTORS.
The Fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the Fund's portfolio but they may
be used to increase returns. Some of these practices may reduce returns and
will increase volatility. At times, the Fund may engage in short-term trading,
which could result in higher taxable distributions.
The Fund may also buy securities with borrowed money which has the effect of
magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio manager, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes. This
strategy may be inconsistent with the Fund's principal investment strategies
in an attempt to respond to adverse market, political, economic or other
conditions. During such a period, the Fund may not achieve its investment
objective.
Ticker Symbol: MGSIX
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.50%
Distribution (12b-1) Fees.................................. 0.00%
Other Expenses.............................................. 0.83%
Total Expenses before Expense Reductions........... 1.33%
Expense Reductions (a)................................. (0.01)%
Total Annual Fund Operating Expenses............... 1.32%
<FN>
(a) Includes earnings on overnight cash balances and Fund expenses paid
by certain brokers to whom the Fund has directed business.
</TABLE>
PORTFOLIO MANAGEMENT OF THE FUND
Standish, Ayer & Wood, Inc. manages the entire Fund. Howard B. Rubin is
the portfolio manager for the Short and Intermediate Bond Fund managed by
Standish.
Managers Intermediate Mortgage Fund Ticker Symbol: MGIGX
OBJECTIVE AND INVESTMENT STRATEGY
The Fund's objective is to achieve high current income through a diversified
portfolio of mortgage-related securities. In view of the risks associated
with investing in mortgage-related securities, there is no guarantee that
the Fund will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65% of its total
assets in mortgage-related securities (including CMOs, IOs and POs) which are
issued by governments and government-related and private organizations. The
Fund may invest a substantial portion of its portfolio in cash, cash
equivalents or securities of any type in response to abnormal market
conditions.
Important Strategic Considerations
The Fund relies on the professional judgement of its independent asset
manager to make decisions about the securities held in the Fund's portfolio.
The asset manager utilizes investment guidelines provided by us to capitalize
on the asset manager's strengths.
The asset manager rigorously analyzes the credit quality, structure and
valuation for each of the prospective holdings in its portfolio. In
selecting securities, the asset manager:
* Identifies investment-grade mortgage-related securities.
* Expects to generate incremental returns from income and capital
appreciation derived from purchasing securities at attractive yields and
valuations.
* Eliminates securities if and when the security is overvalued based on
credit, structure and duration.
Please be aware that the above criteria is not a full investment strategy of
the asset manager and is subject to change at the discretion of The Managers
Funds, L.P.
Ticker Symbol: MGIGX
SHOULD I INVEST IN THIS FUND?
This Fund may be suitable if you:
* Are seeking an opportunity for mortgage returns in your investment
portfolio
* Are willing to accept a moderate risk investment
* Have an intermediate time horizon for investing (3 years or more)
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are investing with a short time horizon in mind
* Are uncomfortable with risk
PRINCIPAL RISKS AND REWARDS
By investing in mortgage-related securities, the value of your investment
will fluctuate on a day-to-day basis in connection with movements in interest
rates. When interest rates rise, a security's market price generally declines.
Alternatively, when interest rates fall, the security's price usually increases.
Therefore a fund, such as this Fund which invests a large portion of its total
assets in mortgage-related securities, will typically behave the same way. In
addition, there are other risks inherent to mortgage-related securities.
As a result, this Fund may not be suitable for an investor who is seeking
high stability of principal. Managers Intermediate Mortgage Fund is not a
money market fund.
In an effort to manage this risk, this Fund invests in a diversified
portfolio of mortgage-related securities (including CMOs, IOs and POs) which
are issued by governments, government-related and private organizations.
The Fund may invest up to 35% of the value of its total assets in (i) non-
mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, (ii) certificates of deposit, bankers'
acceptances and interest-bearing savings deposits of banks which have t
e operating policy of the Asset
Ticker Symbol: MGIGX
Manager to invest 100% of the Fund's assets in securities which are rated AAA
by Standard and Poor's or Aaa by Moody's. From time to time, the Fund may
also invest in unrated securities that the portfolio manager believes are
comparable to investment-grade securities or securities rated below
investment-grade. Investing in securities that are below investment-grade
quality may be considered speculative and changes in economic conditions or
other circumstances may have an adverse affect on the ability to pn higher
grade securities. For more information on Risk, see OTHER RISK FACTORS.
The Fund may invest some assets in options and dollar rolls. These
practices are used primarily to hedge the Fund's portfolio but they may be
used to increase returns. Some of these practices may reduce returns and
will increase volatility. At times, the Fund may engage in short-term
trading, which could result in higher taxable distributions.
The Fund may also invest in securities that have a fixed rate of interest
and in variable rate securities, including inverse floaters. In addition,
at times the Fund may invest a portion of its assets in repurchase agreements
due to portfolio purchases and sales to manage cash flows.
The Fund may also buy securities with borrowed money which has the effect
of magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio manager, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes. This
strategy may be inconsistent with the Fund's principal investment strategies
in an attempt to respond to adverse market, political, economic or other
conditions. During such a period, the Fund may not achieve its investment
objective.
Ticker Symbol: MGIGX
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee......................................... 0.45%(a)
Distribution (12b-1) Fees................................ 0.00%
Other Expenses............................................ 0.75%(b)
Total Expenses before Expense Reductions........ 1.20%
Expense Reductions (c)................................ (0.00)%
Total Annual Fund Operating Expenses............. 1.20%(d)
<FN>
(a) The Management Fee, restated to reflect a waiver in effect, would have
been 0.20%.
(b) Other Expenses, restated to reflect a waiver in effect, would
have been 0.50%.
(c) Includes earnings on overnight cash balances and Fund
expenses paid by certain brokers to whom the Fund has directed business.
(d) Total Annual Fund Operating Expenses, restated to reflect a waiver
in effect, would have been 0.70%.
</FN>
</TABLE>
PORTFOLIO MANAGEMENT OF THE FUND
Jennison Associates LLC manages the entire Fund. Thomas F. Doyle serves as
the portfolio manager for the Intermediate Mortgage Fund managed by Jennison.
Managers Bond Fund Ticker Symbol: MGFIX
OBJECTIVE AND INVESTMENT STRATEGY
The Fund's objective is to achieve a high level of current income from a
diversified portfolio of fixed-income securities. In view of the risks
associated with investing in fixed-income securities, there is no guarantee
that the Fund will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65% of its
total assets in bonds. The Fund invests in a diversified portfolio investment-
grade bonds, including U.S. Government securities, corporate bonds, mortgage-
related securities, debentures, asset-backed securities, eurodollar
certificates of deposit, eurodollar bonds and preferred stocks. The Fund
may invest up to 10% of its total assets in non-U.S. dollar-denominated
securities. The Fund may invest a substantial portion of its portfolio
curities of any type in response to abnormal market conditions.
Important Strategic Considerations
The Fund relies on the professional judgement of its independent asset
manager to make decisions about the securities held in the Fund's portfolio.
The asset manager utilizes investment guidelines provided by us to capitalize
on the asset manager's strengths.
The asset manager rigorously analyzes the credit quality, structure and
valuation for each of the prospective holdings in its portfolio. In
selecting securities, the asset manager:
* Identifies investment-grade debt securities.
* Expects to generate incremental returns from income and capital
appreciation derived from purchasing securities at attractive yields and
valuations.
* Eliminates securities if and when the security is overvalued based on
credit, sector and duration.
Please be aware that the above criteria is not a full investment strategy
of the asset manager and is subject to change at the discretion of The
Managers Funds, L.P.
Ticker Symbol: MGFIX
SHOULD I INVEST IN THIS FUND?
This Fund may be suitable if you:
* Are seeking an opportunity for fixed-income returns in your
investment portfolio
* Are willing to accept a moderate risk investment
* Have an investment time horizon of 4 years or more
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are seeking a conservative risk investment
PRINCIPAL RISKS AND REWARDS
By investing in bonds, the value of your investment will fluctuate on a
day-to-day basis in connection with movements in interest rates. When
interest rates rise, a bond's market price generally declines.
Alternatively, when interest rates fall, the bond's price usually
increases. Therefore a fund, such as this Fund which invests a large
portion of its total assets in bonds will typically behave the same way.
As a result, this Fund may not be suitable for an investor who is seeking
stability of principal. money market fund.
The Fund may also invest at least 10% of its assets in foreign bonds which
may expose shareholders to additional risks, such as fluctuating currency
exchange rates. Some foreign bond markets tend to be more volatile than the
U.S. market due to economic and political instability and regulatory
conditions in some foreign countries.
In an effort to manage this risk, this Fund invests in a diversified
portfolio of investment-grade bonds, including U.S. Government securities,
corporate bonds, mortgage-related securities (CMOs, IOs and POs), debentures,
asset-backed securities, eurodollar certificates of deposit, eurodollar bonds
and preferred stocks. Investment-grade bonds are those rated within the four
highest rating grades by rating agencies such as Standard & Poor's (at least
BBB) and Moody's (at least Baa). From time to time, the an 5% of its net
assets in unrated bonds that the portfolio manager believes are comparable to
investment-grade securities or below investment-grade. Investing in bonds
that are below investment-grade
Ticker Symbol: MGFIX
quality may be considered speculative and changes in economic conditions or
other circumstances may have an adverse affect on the ability to pay
principal or interest than on higher grade securities.
The Fund may include bonds of any maturity. In the recent past, it has been
he asset manager's policy to maintain a relatively long average portfolio
duration (7 to 10 years). However, there is no guarantee that this strategy w
ill continue in the future. Typically, a higher duration means that the
portfolio or bond has more sensitivity to interest rates. The Fund invests
in bonds that the portfolio manager believes offer attractive yields and are
undervalued relative to issues of similar credit quality For more
information on Risk, see OTHER RISK FACTORS.
The Fund may invest some assets in options, futures and foreign currencies.
These practices are used primarily to hedge the Fund's portfolio but they may
be used to increase returns. Some of these practices may reduce returns and
will increase volatility. At times, the Fund may engage in short-term trading
, which could result in higher taxable distributions.
The Fund may also buy securities with borrowed money which has the effect of
magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio manager, invest up to 100%
of its assets in cash equivalents for temporary defensive purposes to respond
to adverse market, political, economic or other conditions. During such a
period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.625%
Distribution (12b-1) Fees.................................. 0.00%
Other Expenses.............................................. 0.585%
Total Expenses before Expense Reductions.......... 1.21%
Expense Reductions (a)............................... (0.00)%(b)
Total Annual Fund Operating Expenses............... 1.21%
<FN>
(a) Includes earnings on overnight cash balances and Fund
expenses paid by certain brokers to whom the Fund has directed business.
(b) Less than 0.01%.
</FN>
</TABLE>
PORTFOLIO MANAGEMENT OF THE FUND
Loomis, Sayles & Company, L.P. manages the entire Fund. Daniel J. Fuss
is the portfolio manager for the Bond Fund managed by Loomis.
Managers Global Bond Fund Ticker Symbol: MGGBX
OBJECTIVE AND INVESTMENT STRATEGY
The Fund's objective is to achieve income and capital appreciation
through a portfolio of high quality foreign and domestic fixed-income
securities. In view of the risks associated with investing in foreign
securities and fixed-income securities, there is no guarantee that the Fund
will achieve this objective.
In achieving this goal, the Fund intends to invest at least 65% of
its assets in an actively managed portfolio of domestic and foreign
bonds issued by governments, corporations and supranational organizations
such as the World Bank, Asian Development Bank, European Investment Bank and
European Economic Community. The Fund may invest a substantial portion of
its portfolio in cash, cash equivalents or securities of any type in response
to abnormal market conditions.
Important Strategic Considerations
The Fund relies on the professional judgement of its independent asset
manager to make decisions about the securities held in the Fund's portfolio.
The asset manager utilizes investment guidelines provided by us to capitalize
on the asset manager's strengths.
The asset manager rigorously analyzes the credit quality, structure and
valuation for each of the prospective holdings in its portfolio. In selecting
securities, the asset manager:
* Identifies high quality investment-grade debt securities of government,
corporate and supranational organizations.
* Expects to generate incremental returns through credit analysis and
anticipation of changes in interest rates within various countries.
* Eliminates securities if and when the security is overvalued based on its
credit country and duration.
Please be aware that the above criteria is not a full investment strategy of
the asset manager and is subject to change at the discretion of The Managers
Funds, L.P.
Ticker Symbol: MGGBX
SHOULD I INVEST IN THIS FUND?
This Fund may be suitable if you:
* Are seeking an opportunity for global fixed-income returns in your
investment portfolio
* Are willing to accept a moderate risk investment
* Have a intermediate time horizon for investing (4 years or more)
This Fund may not be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with currency and political risk
PRINCIPAL RISKS AND REWARDS
The Fund is "non-diversified" but intends to qualify as a "regulated
investment company" for income tax purposes. "Non-diversified" means that
generally more than 5% (but no more than 25%) of the Fund's total assets may
be invested in the securities of any one issuer (including a foreign
government) and the aggregate amount of such holdings may not exceed 50% of
the value of the Fund's total assets. Since the Fund typically holds
securities of a smaller number of issuers, the Fund may be subject to a
grea\und (a Fund that invests in a large number of securities). Changes in
the financial condition or market assessment of particular issuers may cause
greater fluctuation in the Fund's net asset value or may have an adverse
affect on the Fund's total return.
By investing in bonds, the value of your investment will fluctuate on a
day-to-day basis in connection with movements in interest rates. When
interest rates rise, a bond's market price generally declines.
Alternatively, when interest rates fall, the bond's price usually increases.
Therefore a fund, such as this Fund which invests a large portion of its
total assets in bonds, will typically behave the same way. As a result,
this Fund may not be suitable for an investor who is seeking stability of
principrs Global Bond Fund is not a money market fund.
Ticker Symbol: MGGBX
The Fund may also invest a large portion of its assets in foreign bonds and
in securities denominated in currencies other than the U.S. Dollar which may
expose shareholders to additional risks, such as fluctuating currency
exchange rates. Some foreign bond markets tend to be more volatile than the
U.S. market due to economic and political instability and regulatory
conditions in some foreign countries.
In an effort to manage this risk, this Fund invests in a portfolio of high
quality investment-grade foreign and domestic bonds, including those issued
by the U.S. Government, corporations and supranational organizations.
Investment-grade bonds are those rated within the four highest rating grades
by rating agencies such as Standard & Poor's (at least BBB) and Moody's (at
least Baa). From time to time, the Fund may also invest in unrated bonds
that the portfolio manager believes are comparable to investmen
estment-grade. Investing in bonds that are below investment-grade quality
may be considered speculative and changes in economic conditions or other
circumstances may have an adverse affect on the ability to pay principal
or interest than on higher grade securities.
The Fund may include bonds of any maturity,
but generally the portfolio's average interest rate duratio
n is expected to be ten years or less. The Fund invests in bonds
that the portfolio manager believes offer attractive yields and are
undervalued relative to issues of similar credit quality and interest
rate sensitivity. For more information on Risk, see OTHER RISK FACTORS.
The Fund may invest some assets in options, futures and foreign
currencies. These practices are used primarily to hedge the Fund's
portfolio but they may be used to increase returns. Some of these practices
may reduce returns and will increase volatility. At times, the Fund may
engage in short-term trading, which could result in higher taxable
distributions.
The Fund may also buy securities with borrowed money which has the effect
of magnifying the Fund's gains or losses. This is a form of leverage.
The Fund may, at the discretion of its portfolio manager, invest up to
100% of its assets in cash equivalents for temporary defensive purposes.
This strategy may be inconsistent with the Fund's principal investment
strategies in an attempt to respond to
Ticker Symbol: MGGBX
adverse market, political, economic or other conditions. During such a
period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee........................................... 0.70%
Distribution (12b-1) Fees.................................. 0.00%
Other Expenses.............................................. 0.86%
Total Expenses before Expense Reductions.......... 1.56%
Expense Reductions (a)................................... (0.03)%
Total Annual Fund Operating Expenses............... 1.53%
<FN>
(a) Includes earnings on overnight cash balances and Fund
expenses paid by certain brokers to whom the Fund has directed business.
</FN>
</TABLE>
PORTFOLIO MANAGEMENT OF THE FUND
Rogge Global Partners, plc. manages the entire Fund. Olaf Rogge is
the portfolio manager for the Global Bond Fund managed by Rogge.
A Few Words About Risk (See Equity Prospectus)
FINANCIAL INFORMATION FOR THE FUNDS
The following Financial Highlights tables are intended to
help you understand each Fund's financial performance for
the past five years or, if shorter, since inception.
Certain information reflects financial results for a single
Fund share. The total returns in each table represent the
rate that an investor would have earned or lost on an
investment in that Fund. It assumes reinvestment of all
dividends and distributions. This information, extracted
from each Fund's Financial Statements, has been audited by
PricewaterhouseCoopers LLP, whose report is included in the
Fund's Annual Report, which is available upon request.
MANAGERS SHORT AND INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
For the years ended 1998 1997 1996 1995 1994
December 31
<S> <C> <C> <C> <C> <C>
Net Asset Value, $19.4 $19.67 $18.06 $21.2
Beginning of Year 5 3
Income From Investment
Operations
Net Investment 1.08 1.03 1.28 1.45
Income
Net Gains or Losses
on Securities (both 0.03 (0.24) 1.45 (3.17
realized and )
unrealized)
Total From 1.11 0.79 2.73 (1.72
Investment Operations )
Less Distributions
Dividends (from net (1.05 (1.01) (1.09) (1.37
investment income) ) )
Distributions (from ----- ------ (0.03) (0.08
capital gains) - )
Returns of Capital ---- ---- ---- ----
Total (1.05 (1.01) (1.12) (1.45
Distributions ) )
Net Asset Value, End of $19.5 $19.45 $19.67 $18.0
Year 1 6
Total Return 5.87% 4.15% 15.57% (8.37
)%
Ratios/Supplemental
Data
Net Assets, End of Year $15,0 $22,38 $25,24 $30,9
(000's omitted) 82 0 1 56
Ratio of Net Expenses
to Average Net Assets 1.40% 1.45% 1.50% 1.05%
Ratio of Net Income to
Average Net Assets 5.54% 5.43% 6.52% 7.11%
Portfolio Turnover Rate 91% 96% 131% 57%
</TABLE>
MANAGERS INTERMEDIATE MORTGAGE FUND
<TABLE>
<CAPTION>
For the years ended 1998 1997 1996 1995 1994
December 31
<S> <C> <C> <C> <C> <C.
Net Asset Value, $15.1 $15.54 $14.20 $20.6
Beginning of Year 7 5
Income From Investment
Operations
Net Investment 0.87 0.87 0.93 1.52
Income
Net Gains or Losses
on Securities (both 0.33 (0.38) 1.45 (6.56
realized and )
unrealized)
Total From 1.20 0.49 2.38 (5.04
Investment Operations )
Less Distributions
Dividends (from net (0.86 (0.86) (1.04) (1.41
investment income) ) )
Distributions (from --- ---- ---- ---
capital gains) - -
Returns of Capital ---- ----- ---- ----
Total (0.86 (0.86) (1.04) (1.41
Distributions ) )
Net Asset Value, End of $15.5 $15.17 $15.54 $14.2
Year 1 0
Total Return (a) 8.23% 3.33% 17.27% (25.0
0)%
Ratios/Supplemental
Data
Net Assets, End of Year $21,6 $24,84 $40,02 $55,9
(000's omitted) 00 6 2 86
Ratio of Net Expenses
to Average Net Assets 1.20% 1.19% 1.17% 0.85%
Ratio of Net Income to
Average Net Assets 5.76% 5.78% 6.33% 8.37%
Portfolio Turnover Rate 317% 232% 506% 240%
Ratio of Net Expenses
to Average Net Assets, N/A N/A N/A 0.92%
absent waiver (b)
Ratio of Net Income to
Average Net Assets, N/A N/A N/A 8.30%
absent waiver (b)
<FN>
(a) Total return would have been lower had certain expenses
not been reduced during the year.
(b) Ratio information assuming no fee waivers or
reimbursements had been in effect during the year.
</FN>
</TABLE>
MANAGERS BOND FUND
<TABLE>
<CAPTION>
For the years ended 1998 1997 1996 1995 1994
December 31
<S> <C> <C> <C> <C> <C>
Net Asset Value, $22.8 $23.13 $18.92 $22.1
Beginning of Year 3 8
Income From Investment
Operations
Net Investment 1.39 1.35 1.44 1.59
Income
Net Gains or Losses
on Securities (both 0.90 (0.29) 4.23 (3.16
realized and )
unrealized)
Total From 2.29 1.06 5.67 (1.57
Investment Operations )
Less Distributions
Dividends (from net (1.36) (1.46) (1.55
investment income) (1.40 )
)
Distributions (from ----- ------ ------ (0.14
capital gains) - )
Returns of Capital ---- ---- ---- ----
Total (1.40 (1.36) (1.46) (1.69
Distributions ) )
Net Asset Value, End of $23.7 $22.83 $23.13 $18.9
Year 2 2
Total Return 10.42 4.97% 30.91% (7.25
% )%
Ratios/Supplemental
Data
Net Assets, End of Year $41,2 $31,81 $26,37 $30,7
(000's omitted) 98 9 6 60
Ratio of Net Expenses 1.27% 1.36% 1.34% 1.20%
to Average Net Assets
Ratio of Net Income to
Average Net Assets 6.14% 6.13% 6.84% 7.28%
Portfolio Turnover Rate 35% 72% 46% 84%
</TABLE>
MANAGERS GLOBAL BOND FUND
<TABLE>
<CAPTION>
Since
commencem
ent on
For the years ended 1998 1997( 1996 1995 March 25,
December 31 f) 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, $21.4 $21.74 $19.10 $20.00
Beginning of Year 0
Income From Investment
Operations
Net Investment 0.97 1.21 0.95 0.48
Income
Net Gains or Losses
on Securities (both (0.93 (0.27) 2.66 (0.77)
realized and )
unrealized)
Total From 0.04 0.94 3.61 (0.29)
Investment Operations
Less Distributions
Dividends (from net (0.87) (0.93) (0.50)
investment income) (0.17
)
Distributions (from (0.41) (0.04) (0.11)
capital gains) (0.34
)
Returns of Capital ---- ---- ---- ----
Total (0.51 (1.28) (0.61)
Distributions ) (0.97)
Net Asset Value, End of $20.9 $21.40 $21.74 $19.10
Year 3
Total Return (a) (d) 0.16% 4.39% 19.08% (1.52)%
Ratios/Supplemental
Data
Net Assets, End of Year $17,4 $16,85 $18,82 $9,520
(000's omitted) 65 2 3
Ratio of Net Expenses
to Average Net Assets 1.63% 1.57% 1.55% 1.73%(b)
Ratio of Net Income to
Average Net Assets 4.75% 4.98% 5.07% 4.19% (b)
Portfolio Turnover Rate 197% 202% 214% 266% (c)
Ratio of Net Expenses
to Average Net Assets N/A 1.60% 1.69% 2.03%(b)
(e)
Ratio of Net Income to
Average Net Assets (e) N/A 4.95% 4.93% 3.89%(b)
<FN>
(a) For periods less than one year, returns are not
annualized.
(b) Annualized.
(c ) Not Annualized.
(d) Total return would have been lower had certain expenses
not been reduced during the periods shown.
(e) Ratio information assuming no fee waivers or
reimbursements had been in effect during the periods shown.
(f) Calculated using the average shares outstanding during
the year.
</FN>
</TABLE>
Your Account (See Equity Funds Prospectus)
For More Information (See Equity Funds Prospectus)
THE MANAGERS FUNDS
MANAGERS MONEY MARKET FUND
PROSPECTUS DATED APRIL 1,1999
WHERE LEADING MONEY MANAGERS CONVERGE
The Securities and Exchange Commission has not approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
KEY INFORMATION ABOUT THE MONEY MARKET FUND
<S> <C> <C>
Risk/Return Goals and Principal Strategies of the Fund1
Summary Risk Summary 1
Performance Summary 2
Fees and Expenses of the Fund 3
THE MANAGERS FUNDS
The Management Team 5
The Year 2000 Issue 5
____________________________________________________________
________
Summary of MONEY MARKET FUND
the Objective and Investment Strategy 6
Fund Should I Invest In This Fund? 7
Principal Risks and Rewards 7
Fees and Expenses 8
Portfolio Management of the Fund 8
____________________________________________________________
________
Additional OTHER RISK FACTORS
Risks of A Few Words About Risk 9
Investing
____________________________________________________________
________
Information FINANCIAL HIGHLIGHTS
About your Financial Information for the Fund 15
Investment
YOUR ACCOUNT
Minimum Investments 16
How to Purchase Shares 17
How to Sell Shares 18
INVESTOR SERVICES
General Fund Policies 19
ACCOUNT POLICIES, DIVIDENDS AND TAXES
Account Statements 21
Dividends and Distributions 21
Tax Information 21
____________________________________________________________
________
FOR MORE INFORMATION Back Cover
</TABLE>
Key Information about the Money Market Fund
GOALS AND PRINCIPAL STRATEGIES OF THE FUND
Managers Money Market Fund seeks to maximize high current income
consistent with the preservation of capital and same-day liquidity.
In achieving this goal, the Fund invests all of its investable assets
in a master portfolio (another fund with the same goal). The Fund accrues
dividends daily, pays them to shareholders monthly, and seeks to maintain
a stable $1.00 share price.
This Prospectus contains important information for anyone interested
in investing in The Managers Funds no-load mutual fund family. Please
read this document carefully before you invest and keep it with you for
future reference.
You should base your purchase of these Funds on your own goals, risk
preferences and time horizons.
RISK SUMMARY
All investments involve some type and level of risk. Risk is
the possibility that you will lose money or not make any additional
money by investing in this Fund.
The following are the principal risk factors associated with the Money
Market Fund. Before you invest, please make sure that you have read, and
understand, the risk factors that apply to the Fund. As with any mutual
fund, you could lose money over a period of time.
Please keep in mind that shares of the Fund:
* Are not deposits or obligations of any bank
* Are not guaranteed or endorsed by any bank
* Are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other federal agency
Credit Risk
The likelihood that a debtor will be unable to pay interest or
principal payments as planned is typically referred to as default risk.
Default risk for most debt securities is constantly monitored by nationally
recognized statistical rating agencies (NRSRA) such as Moody's and Standard
& Poor's. Even if the
Risk/Return Summary
likelihood of default is remote, changes in the perception of an
institution's financial health will affect the valuation of its debt
securities. This extension of default risk is typically known as credit
risk.
Inflation Risk
This is the risk that the price of an asset, or the income generated by
the asset, will not keep up with the cost of living. Almost all financial
assets have some inflation risk.
PERFORMANCE SUMMARY
The following bar chart illustrates the Fund's year-by-year total return
and how performance of the Fund has varied over the past ten years. The
chart assumes that all dividend and capital gain distributions have been
reinvested. However, past performance does not guarantee future results.
<TABLE>
<CAPTION>
Annual Returna - Last Ten Years
1989 1990 1991 1992 1993 1994 1995 1996 1997
1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Fund 8.7% 7.7% 5.3% 3.1% 2.5% 3.6% 5.0% 5.5% 5.4%
5.2%
<FN>
*For the Money Market Fund over this period, the highest
quarterly return was 2.23% and the lowest quarterly return was 0.55%.
</FN>
</TABLE>
The following table compares the Fund's performance to that of a
broadly based securities market index and other indexes, if applicable.
Again, the table assumes that dividends and capital gains distributions
have been reinvested for both the Fund and the Index. As always, the past
is not an indication of what will happen in the future.
<TABLE>
<CAPTION>
Average Annual Total Return (as a percentage) as of 12/31/98
Fund 1 Year 5 Years 10 Years
<S> <C> <C> <C>
Money Market Fund 5.14% 4.92% 5.18%
2 Mo. Treasury Bill 5.01% 5.12% 5.64%
</TABLE>
FEES AND EXPENSES OF THE FUND
As an investor, you pay certain fees and expenses in connection with
buying and holding shares of the Funds. The following table illustrates
those fees and expenses. Keep in mind that each of these Funds has no
sales charge (load).
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
<S> <C>
Minimum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) None
Minimum Sales Charge (Load) Imposed on
Reinvested Dividends and Other Distributions None
Redemption Fee None
Exchange fee None
Maximum Account Fee None
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee 0.12%
Distribution (12b-1) Fees 0.00%
Other Expenses 0.59% (a)
Total Annual Fund Operating
Expenses 0.,70% (b)
<FN>
(a) Other Expenses, restates to reflect a partial fee waiver in effect, would
have been 0.43%
(b) Total Annual Fund operating Expenses, restated to reflect a partial
fee waiver in effect, would have been 0.50
</FN>
</TABLE>
Risk/Return Summary
Example
The following Example will help you
compare the costs of investing in various
funds. It assumes that you invest $10,000
as an initial investment in the Fund for
the time periods indicated and then redeem
all of your shares at the end of those
periods. It also assumes that your
investment has a 5% total return each year
and the Fund's operating expenses remain
the same. Although your actual costs may
be higher or lower, based on the above
assumptions, your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 5 Years 10 Years
<S> <C> <C> <C>
Money Market Fund $160 $280 $628
</TABLE>
THE MANAGEMENT TEAM (See Equity Prospectus)
THE YEAR 2000 ISSUE
Managers Money Market Fund
OBJECTIVE AND INVESTMENT STRATEGY
The Fund's objective is to maximize current income consistent with
the preservation of capital and same-day liquidity. Although the Fund
seeks to maintain a stable net asset value of $1.00 per share, there
is no guarantee that the Fund will achieve this objective.
In achieving this goal, the Fund invests 100% of its total assets in
The Prime Money Market Portfolio. This Portfolio is a diversified open-end
investment management company that has the same investment objective as the
Fund. The Fund invests in the Portfolio through a two-tier master-feeder
investment fund structure.
The Portfolio seeks to achieve its investment objective by maintaining
a weighted average maturity of no more than 90 days, and generally may
not invest in any securities with a remaining maturity of thirteen months
or more. Keeping the weighted average maturity short helps the Fund to
achieve a stable $1.00 share price.
Important Strategic Considerations
All of the Fund's investable assets are invested in the Portfolio
which is managed by a portfolio team of J.P. Morgan Investment Management.
In selecting securities, the portfolio team:
* Identifies investments in diversified high-quality U.S. Dollar-
denominated money market securities to take advantage of yield differentials.
* Expects to generate income by investing in highly-liquid money market
instruments.
* Eliminates securities if and when they exceed the desired weighted
average portfolio duration.
Please be aware that the above criteria is not a full investment strategy
of the portfolio team and is subject to change at the discretion of J.P.
Morgan Investment Management.
Ticker Symbol:MGMXX
SHOULD I INVEST IN THIS FUND?
This Fund may be suitable if you:
* Are seeking an opportunity to preserve capital in your
investment portfolio
* Are uncomfortable with risk
* Are investing with a shorter time horizon in mind
* Are seeking absolute stability of principal
This Fund may not be suitable if you:
* Are investing for high current income
* Are seeking a moderate or high risk investment
* Are investing with a longer time horizon in mind
PRINCIPAL RISKS AND REWARDS
By investing in money market instruments, the value of your investment
will fluctuate on a day-to-day basis in connection with movements in
interest rates. When interest rates rise, an instrument's market price
generally declines. Alternatively, when interest rates fall, the
instruments's price usually increases. Therefore a fund, such as this
Fund will typically behave the same way. This Fund may not be suitable for
an investor who is seeking high current income.
As with all money market funds, the Fund's investments are subject to
various risks, while generally considered to be minimal, could cause its
share price to fall below $1.00 causing you to lose money. Also, the Fund
may have difficulty valuing its illiquid holdings and may be unable to sell
them at the price or at the time that it desires.
The Fund may also invest a portion of its assets in foreign securities
which may expose shareholders to additional risks, such as fluctuating
currency exchange rates and political instability. Some foreign markets
tend to be more volatile than the U.S. market due to economic and political
instability and regulatory conditions in some foreign countries.
While these possibilities exist, the Fund's investment process and
management policies are designed to minimize the likelihood and impact of
these risks. The Fund may invest in obligations issued by the U.S. Government
and the U.S. Treasury, domestic and foreign banks and corporations, and
foreign governments. To date, through this process, the Fund's share price
has never deviated from $1.00 per share. For more information on Risk, see
OTHER RISK FACTORS.
Ticker Symbol:MGMXX
The Fund may invest some assets in repurchase agreements, asset-backed
securities and other money market instruments. Some of these investments
may be illquid or purchased on a when-issued or delayed delivery basis.
The Fund may also buy securities with borrowed money which
has the effect of magnifying the Fund's gains or losses. This is
a form of leverage.
The Fund may, at the discretion of the portfolio team, invest up to
100% of its assets in cash equivalents for temporary defensive purposes
to respond to adverse market, political, economic or other conditions.
During such a period, the Fund may not achieve its investment objective.
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee......................................... 0.12%
Distribution (12b-1) Fees................................ 0.00%
Other Expenses............................................ 0.58%(a)
Total Annual Fund Operating Expenses............. 0.70%(b)
<FN>
*Other Expenses for the Fund, restated to reflect a partial fee
waiver in effect, would have been 0.43%.
**Total Annual Fund Operating Expenses for the Fund, restated to
reflect a partial fee waiver in effect, would have been 0.55%.
</FN>
</TABLE>
PORTFOLIO MANAGEMENT OF THE FUND
The Portfolio is managed by J.P. Morgan Investment Management.
The portfolio management team is led by Robert R. Johnson, Vice President,
Daniel B. Mulvey, Vice President and John Donohue, Vice President.
A Few words about Risk (See Equity Prospectus)
FINANCIAL INFORMATION FOR THE FUND
The following Financial Highlights tables are intended to
help you understand the Fund's financial performance for the
past five years. Certain information reflects financial
results for a single Fund share. The total returns in each
table represent the rate that an investor would have earned
or lost on an investment in that Fund. It assumes
reinvestment of all dividends and distributions. This
information, extracted from the Fund's Financial Statements,
has been audited by PricewaterhouseCoopers LLP, whose report
is included in the Fund's Annual Report, which is available
upon request.
MANAGERS MONEY MARKET FUND
<TABLE>
<CAPTION>
Eleven Year
Months ended
ended Decemb
Novembe er 31,
For the years ended 1998 1997 1996 r 30, 1994
November 30 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, $1.00 $1.000 $1.000 $1.000
Beginning of Year 0
Income From Investment
Operations
Net Investment 0.052 0.054 0.044 0.035
Income
Net Gains or Losses
on Securities (both --- ---- ---- ----
realized and -
unrealized)
Total From 0.052 0.054 0.044 0.035
Investment Operations
Less Distributions
Dividends (from net
investment income) (0.05 (0.054 (0.044) (0.035
2) ) )
Distributions (from ----- ------ ---- ----
capital gains) -
Returns of Capital ---- ---- ---- ----
Total (0.05 (0.054 (0.044) (0.035
Distributions 2) ) )
Net Asset Value, End of $1.00 $1.000 $1.000 $1.000
Year 0
Total Return (b) 5.35% 5.53% 4.51%(a 3.61%
)
Ratios/Supplemental
Data
Net Assets, End of Year $36,5 $36,09 $11,072 $17,26
(000's omitted) 44 1 9
Ratio of Net Expenses
to Average Net Assets 0.40% 0.12% 1.13%(a 0.73%
)
Ratio of Net Income to
Average Net Assets 5.22% 5.35% 4.85% 3.84%
(a)
Expense
Waiver/Reimbursement(c)
Ratio of Total Expenses
to Average Net Assets 0.74% 0.75% 1.18% 1.03%
(a)
Ratio of Net Income to
Average Net Assets 4.88% 4.71% 4.80% 3.54%
<FN> (a)
(a) Annualized.
(b) Total Returns would have been lower had certain
expenses not been reduced during the periods shown.
(c ) Ratio information assuming no fee waivers or
reimbursements of investment advisory and management fees
and/or administrative fees in effect for the periods
presented, if applicable.
</FN>
</TABLE>
Your Account Section
For more information
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 INTERMEDIATE MORTGAGE FUND
MANAGERS BOND FUND
MANAGERS GLOBAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1 GENERAL INFORMATION
1 INVESTMENT OBJECTIVES AND POLICIES
2 Investment Techniques and Associated Risks
11 Quality and Diversification Requirements for
the Funds
12 Fundamental Investment Restrictions
15 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
</TABLE>
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. 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. 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.
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. 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 Intermediate Mortgage Fund (the "Intermediate
Mortgage Fund") is designed for investors who seek high
current income by investing primarily in a diversified
portfolio of mortgage-related securities. The Intermediate
Mortgage Fund seeks to achieve this objective by investing at
least 65% of its total assets in mortgage-related securities
issued by the government, government-related organizations and
private organizations.
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.
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. The
Global Bond Fund is a nondiversified fund. 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 supranatural organizations with
an average maturity of ten years or less. All securities will
be denominated in U.S. dollars.
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.
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.
Because asset-backed securities are relatively new, the
market experience in these securities is limited, and the
market's ability to sustain liquidity has not been tested.
(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
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
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.
(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 Intermediate Mortgage 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. 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,
adverse market conditions develop, a Fund may obtain a less
favorable price than was available when it had first decided
to sell the security.
(8) Inverse Floating Obligations. The Short and Intermediate
Bond Fund, the Intermediate Mortgage 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.
(9) Mortgage-Related Securities. The Short and Intermediate
Bond Fund, the Intermediate Mortgage 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.
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.
(10) 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.
(11) 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.
(12) 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
Intermediate Mortgage Fund, the Bond Fund and the Global Bond
Fund may write ("sell") covered call options on individual
bonds and on interest rate futures contracts. Except for
those written call options by the Intermediate Mortgage Fund,
all other 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 has 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
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
Intermediate Mortgage 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. The Intermediate
Mortgage Fund 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
Intermediate Mortgage 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.
(13) 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.
(14) 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.
(15) 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.
(16) 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.
(17) U.S. Treasury Securities. The Short and Intermediate
Bond Fund, the Intermediate Mortgage 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 Intermediate Mortgage 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 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.
(18) Variable Rate Securities. The Short and Intermediate
Bond Fund, the Intermediate Mortgage 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.
(19) 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").
If no such ratings are available, the investment must be of
comparable quality in the opinion of The Managers Funds, L.P.
or the Sub-Adviser.
Rating of Debt Instruments. The Short and Intermediate
Bond Fund and the Bond Fund may each invest without limitation
in debt securities that are rated Bb by S&P or Ba by Moody's.
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:
Ratings Short and Bond Fund
Intermediate Bond
Fund
Government and 44% 9%
AAA/Aaa
AA/Aa 5% 5%
BBB/Baa 28% 51%
BB/Ba 4% 0%
Not Rated 8% 14%
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; except that up to 25% of the value of
the Intermediate Mortgage Fund's total assets may be
invested without regard to this limitation. The Global
Bond Fund may invest up to 50% of its assets in bonds
issued by foreign governments which may include up to 25%
of such assets in any single government issuer.
(2) Invest more than 25% of the value of its total assets in
the securities of companies primarily engaged in any one
industry (other than the United States Government, its
agencies and instrumentalities). Such concentration may
occur incidentally as a result of changes in the market
value of portfolio securities, but such concentration may
not result from investment; provided, however, that the
Intermediate Mortgage Fund will invest more than 25% of
its assets in the mortgage and mortgage-finance industry
even during temporary defensive periods. Neither finance
companies as a group nor utility companies as a group are
considered a single industry for purposes of this
restriction.
(3) Acquire more than 10% of the outstanding voting securities
of any one issuer.
(4) Borrow money, except from banks for temporary or
extraordinary or emergency purposes and then only in
amounts up to 10% of the value of the Fund's total assets,
taken at cost, at the time of such borrowing (and provided
such borrowings do not exceed in the aggregate one-third
of the market value of the Fund's total assets less
liabilities other than the obligations represented by the
bank borrowings). It will not mortgage, pledge or in any
other manner transfer any of its assets as security for
any indebtedness, except in connection with any such
borrowing and in amounts up to 10% of the value of the
Fund's net assets at the time of such borrowing.
(5) Invest in securities of an issuer which together with any
predecessor, has been in operation for less than three
years if, as a result, more than 5% of its total assets
would then be invested in such securities.
(6) Invest more than 15%, of the value of its net assets in
illiquid instruments including, but not limited to,
securities for which there are no readily available market
quotations, dealer (OTC) options, assets used to cover
dealer options written by it, repurchase agreements which
mature in more than 7 days, variable rate industrial
development bonds which are not redeemable on 7 days
demand and investments in time deposits which are non-
negotiable and/or which impose a penalty for early
withdrawal.
(7) Invest in companies for the purpose of exercising control
or management.
(8) Purchase or sell real estate; provided, however, that it
may invest in securities secured by real estate or
interests therein or issued by companies which invest in
real estate or interests therein.
(9) Purchase or sell physical commodities, except that each
Fund may purchase or sell options and futures contracts
thereon.
(10) Engage in the business of underwriting securities issued
by others.
(11) Participate on a joint or a joint and several basis in any
trading account in securities. The "bunching" of orders
for the sale or purchase of marketable portfolio
securities with other accounts under the management of The
Managers Funds, L.P. or any portfolio manager in order to
save brokerage costs or to average prices shall not be
considered a joint securities trading account.
(12) Make loans to any person or firm; provided, however, that
the making of a loan shall not be construed to include (i)
the acquisition for investment of bonds, debentures, notes
or other evidences of indebtedness of any corporation or
government entity which are publicly distributed or of a
type customarily purchased by institutional investors
(which are debt securities, generally rated not less than
Baa by Moody's or BBB by Standard & Poor's, privately
issued and purchased by such entities as banks, insurance
companies and investment companies), or (ii) the entry
into "repurchase agreements." It may lend its portfolio
securities to broker-dealers or other institutional
investors if, as a result thereof, the aggregate value of
all securities loaned does not exceed 33-l/3% of its total
assets. See "Other Information -- Loan Transactions."
(13) Purchase the securities of other Funds or investment
companies except (i) in connection with a merger,
consolidation, acquisition of assets or other
reorganization approved by its shareholders, (ii) for
shares in the Money Market Fund in accordance with an
order of exemption issued by the Securities and Exchange
Commission (the "SEC"), and (iii) each Fund, may purchase
securities of investment companies where no underwriter or
dealer's commission or profit, other than customary
broker's commission, is involved and only if immediately
thereafter not more than (a) 3% of such company's total
outstanding voting stock is owned by the Fund, (b) 5% of
the Fund's total assets, taken at market value, would be
invested in any one such company or (c) 10% of the Fund's
total assets, taken at market value, would be invested in
such securities.
(14) Purchase from or sell portfolio securities to its
officers, trustees or other "interested persons" (as
defined in the l940 Act) of the Fund, including its
portfolio managers and their affiliates, except as
permitted by the l940 Act.
(15) Purchase or retain the securities of an issuer if, to the
Trust's knowledge, one or more of the directors, trustees
or officers of the Trust, or the portfolio manager
responsible for the investment of the Trust's assets or
its directors or officers, individually own beneficially
more than l/2 of l% of the securities of such issuer and
together own beneficially more than 5% of such securities.
(16) Issue senior securities.
(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.
(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 50% 64%
International Equity Fund 37% 56%
Emerging Markets Equity Fund ----* 89%
Short and Intermediate Bond 91% 115%
Fund
Intermediate Mortgage Fund 317% 652%
Bond Fund 35% 55%
Global Bond Fund 197% 232%
<FN>
*The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
</FN>
</TABLE>
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.
ROBERT P. WATSON*--Chief Executive Officer, President and
Trustee of The Managers Funds; 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.
MADELINE H. MCWHINNEY-Trustee; President of Dale, Elliott
& Company since 1977. Trustee and Treasurer of the Institute
of International Education since 1975. Member of the Advisory
Committee on Professional Ethics for the New Jersey Supreme
Court since March of 1983. 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 Wadsworth Group since 1986. Vice President,
Secretary and Director of First Fund Distributors, Inc. since
1991. Vice President, Secretary and Director of the
Investment Company Administration Corporation 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.
THOMAS R. SCHNEEWEIS-Trustee; Professor of Finance,
University of Massachusetts since 1985. His address is 10
Cortland Drive, Amherst, Massachusetts 01002. His date of
birth is May 10, 1947.
PETER M. LEBOVITZ-Vice President; Director of Marketing
for The Managers Funds, L.P. since December 1994. From June
1993 to June 1994, he was the Director of Marketing for
Hyperion Capital Management, Inc. His date of birth is
January 18, 1955.
DONALD S. RUMERY-Secretary, Treasurer; Director of
Operations of The Managers Funds, L.P. since December 1994.
From March 1990 to December 1994, he was a Vice President of
Signature Financial Group. His date of birth is May 29, 1958.
GIANCARLO (JOHN) E. ROSATI-Assistant Treasurer; Vice
President of 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, L.P. since August 1995.
From July 1994 to August 1995, he was a Portfolio
Administrator with 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, 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 is an "interested person" (as defined in the 1940
Act) of the Funds.
Trustees' Compensation
Each Trustee is currently paid an annual fee of $10,000
for serving as Trustee of the Trust and the Funds. Each
Trustee also receives an additional fee of $750 for each in-
person meeting attended and $200 for each telephonic meeting.
The Trustees may serve as directors of other corporations that
are unrelated to these Funds.
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 Estimat Total
or ed Compensati
Aggregate Retiremen Annual on from
Compensat t benefit Funds and
Name & Position ion from benefits s upon Fund
Funds accrued Retirem Complex
as part ent Paid to
of Fund Trustees
expenses
<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
<FN>
*Mr. Graulty resigned as Trustee of The Managers Funds on
September 14, 1998.
</FN>
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of January 21, 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 21, 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 January 21, 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, California
21%
Huntington National Bank, Columbus, Ohio 14%
National Financial Services Corp., New York, New York
8%
Huntington Trust Company, Columbus, Ohio 6%
Capital Appreciation Fund
Charles Schwab & Co., Inc., San Francisco, California
12%
National Financial Services Corp., New York, New York
8%
Huntington National Bank, Columbus, Ohio 6%
Special Equity Fund
Charles Schwab & Co., Inc., San Francisco, California
37%
National Financial Services Corp., New York, New York
9%
International Equity Fund
Charles Schwab & Co., Inc., San Francisco, California
27%
National Financial Services Corp., New York, New York
8%
Resource Bank, Minneapolis, Minnesota 5%
Merrill Lynch Trust Company, Somerset, New Jersey 5%
Emerging Markets Equity Fund
Charles Schwab & Co., Inc., San Francisco, California
34%
Resource Bank, Minneapolis, Minnesota 8%
National Financial Services Corp., New York, New York
7%
Short and Intermediate Bond Fund
Crotched Mountain Foundation, Greenfield, New Hampshire
6%
Huntington Trust Company, Columbus, Ohio 5%
Intermediate Mortgage Fund
National Financial Services Corp., New York, New York
20%
Roman Catholic Diocese, Syracuse, New York18%
Huntington Trust Company, Columbus, Ohio 5%
Bond Fund
National Financial Services Corp., New York, New York
13%
Charles Schwab & Co., Inc., San Francisco, California
17%
Global Bond Fund
National Financial Services Corp., New York, New York
30%
Charles Schwab & Co., Inc. 6%
Management Ownership
As of January 21, 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
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. (the "Manager") serves as investment manager and
administrator to each of the Funds. 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
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.
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, 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 $____________. 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 to Roxbury. As of December 31,
1998, Roxbury's assets under management totaled approximately
$6,026.5 billion. Roxbury's address is 100 Wilshire
Boulevard, Suite 600, Santa Monica, CA 90401.
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 Wrona is the lead portfolio manager and Gary L.
Pilgrim, CFA, is the co-portfolio manager of the portion of
the Special Equity Fund which is managed by Pilgrim. 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 14 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.
International 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.
Members include members of Zurich's Corporate Executive
Board, Laurence W. Cheng, Steven M. Gluckstern, Markus
Rohrbasser, and Edmond D. Villani, as well as Cornelia Small,
Director of Global Equity Investments of Scudder and Lynn S.
Birdsong, Director of Scudder's Institutional Group. As of
December 31, 1998, Scudder's assets under management totaled
approximately $____________. Scudder's address is 345 Park
Avenue, New York, NY 10154.
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 New York limited liability company founded in
1848. It is a division of Lazard, Freres LLC. The managing
directors are Eileen D. Alexanderson, Thomas F. Dunn, Norman
Eig, Herbert W. Gullquist, Larry A. Kohn, Robert P.
Morgenthau, John R. Reinsberg, Michael S. Rome, Michael P.
Triguboff, Ira Handler and Alexander E. Zagoreos. As of
December 31, 1998, Lazard's assets under management totaled
approximately $______________. Lazard's address is 30
Rockefeller Plaza, New York, NY 10112.
John R. Reinsberg is the portfolio manager of the portion of
the International Equity Fund managed by Lazard. He is the
Managing Director of Lazard.
Emerging Markets Equity Fund
King Street Advisors, Limited ("King Street")
King Street was founded in 1997 and is 75% owned by State
Street Corporation through two subsidiaries. As of December
31, 1998, King Street's assets under management totaled
approximately $361.64 million. King Street'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 King Street.
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, Chairmanand
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 $46,218.7 billion. Standish's address is One
Financial Center, Suite 26, Boston, MA 02111.
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.
Intermediate Mortgage Fund
Jennison Associates LLC ("Jennison")
Jennison was founded in 1969 and is a wholly-owned subsidiary
of The Prudential Insurance Company of America. As of
December 31, 1998, Jennison's assets under management totaled
approximately $46.4 billion. Jennison's address is 1000
Winter Street, Waltham, MA 02451.
Thomas F. Doyle is the portfolio manager of the Intermediate
Mortgage Fund which is managed by Jennison. He is a Director
and Executive Vice President of Jennison and has been with
the firm since 1987.
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 5-6 St. Andrews Hill, London,
England EC4V 5BY.
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.
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 Equity Fund $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
Intermediate Mortgage Fund $ 143,803$ 101,414 $
72,020 (b)
Bond Fund $ 180,197$ 221,232$ 281,699
Global Bond Fund $ 126,043$ 115,996 $
132,587
<FN>
*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.
(b) The fee paid to the Manager for the Fund, restated to
reflect a partial waiver in effect, would have been $56,907.
</FN>
</TABLE>
During the last three fiscal years ended December 31,
1996, 1997 and 1998, the Sub-Advisers were paid the following
fees by the Manager under the Asset Management Agreement.
<TABLE>
<CAPTION>
Fund 1996 1997 1998
<S> <C> <C> <C>
Income Equity Fund
Scudder Kemper Investments, Inc.$ 86,220$ 120,096
Chartwell Investment Partners, L.P.-----$ 29,408
Capital Appreciation Fund
Essex Investment Mgmt. Co., LLC -----$ 156,464
Roxbury Capital Management, LLC ----- -----
Special Equity Fund
Liberty Investment Management$ 266,030$ 746,314
Pilgrim, Baxter & Associates, Ltd.$ 305,198$ 790,994
Westport Asset Management $ 302,171$ 873,573
Kern Capital Management LLC-----$ 59,856
International Equity Fund
Scudder Kemper Investments, Inc.$ 515,262$ 833,438
Lazard Asset Management $ 516,157$ 838,470
Emerging Markets Equity Fund*
King Street Advisors, Limited
Short and Intermediate Bond Fund
Standish, Ayer & Wood, Inc. $ 58,019$ 44,419
Intermediate Mortgage Fund
Jennison Associates LLC $ 63,913$ 45,073
Bond Fund
Loomis, Sayles & Co., L.P. $ 71,957$ 88,443
Global Bond Fund
Rogge Global Partners plc $ 64,019$ 57,998
</TABLE>
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 partnership. Its
general partner is a corporation that is wholly owned by Robert
P. Watson, President and a Trustee of the Trust.
Under the Fund Management Agreement, the Manager is
required to (i) supervise the general management and investment
of the assets and securities portfolio of each Fund; (ii)
provide overall investment programs and strategies for each
Fund; (iii) select and evaluate the performance of 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 one year 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.
<TABLE>
<CAPTION>
MANAGER'S PORTION
TOTAL MANAGEMENT OF THE TOTAL
NAME OF FUND FEE MANAGEMENT FEE
<S> <C> <C>
Income Equity Fund 0.75% 0.40%
Capital Appreciation 0.80% 0.40%
Fund
Special Equity Fund 0.90% 0.40%
International Equity 0.90% 0.40%
Fund
Emerging Markets 1.15% 0.40%*
Equity Fund
Short and 0.50% 0.25%
Intermediate Bond
Fund
Intermediate 0.45% 0.25%*
Mortgage Fund
Bond Fund 0.625% 0.375%
Global Bond Fund 0.70% 0.30% up to $20
</TABLE> million
0.35% 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. serves as administrator of the
Trust (the "Administrator"). The Managers Funds, L.P. also
serves as distributor (the "Distributor") in connection with
the offering of each Fund's shares on a no-load basis. The
Distributor bears certain expenses associated with the
distribution and sale of shares of the Funds. The Distributor
acts as agent in arranging for the sale of each Fund's shares
without sales commission or other compensation and bears all
advertising and promotion expenses incurred in the sale of
shares.
The Distribution Agreement between the Trust and the
Distributor may be terminated by either party under certain
specified circumstances and will automatically terminate on
assignment in the same manner as the Fund Management Agreement.
The Distribution Agreement may be continued annually if
specifically approved by the Trustees or by a vote of the
Trust's outstanding shares, including a majority of the
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.
Custodian
State Street Bank and Trust Company ("State Street" or the
"Custodian"), 1776 Heritage Drive, North Quincy, Massachusetts,
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 King Street Advisors,
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
PricewterhouseCoopers 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:
<TABLE>
<CAPTION>
Fund 1996 1997 1998
<S> <C> <C> <C>
Income Equity Fund $ 44,936 $ 126,564 $118,253
Capital Appreciation Fund$ 421,852 (a) $ 371,969
$238,292
Special Equity Fund $ 278,627 $ 616,474 $937,439
International Equity Fund$ 555,519$ 657,238$984,751
Emerging Markets Equity Fund*----- ----- $31,571
- -----------------------------------------
<FN>
(a) The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
(a) 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.
</FN>
</TABLE>
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:
<TABLE>
<CAPTION>
Fund 1996 1997 1998
<S> <C> <C> <C>
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 Instiutional Services, Inc. $ 5,400 $
1,188 $ 1,254
</TABLE>
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 prior to 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.
Third party checks which are payable to an existing
shareholder who is a natural person (as opposed to a
corporation or partnership) and endorsed over to a Fund or
State Street Bank and Trust Company will be accepted. To
ensure that checks are collected by the Trust, redemptions of
shares purchased by check, or exchanges from such shares, are
not effected until the clearance of the check which may take
up to 15 days after the date of purchase, unless arrangements
are made with the Administrator.
If the check accompanying any purchase order does not
clear, or if there are insufficient funds in your bank
account, 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.
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. 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 Intermediate Mortgage 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:
<TABLE>
<CAPTION>
Fund 30-Day Yield at 12/31/98
<S> <C>
Income Equity Fund 1.15%
Short and Intermediate Bond 5.19%
Fund
Intermediate Mortgage Fund 6.20%
Bond Fund 6.86%
Global Bond Fund 3.61%
</TABLE>
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
<TABLE>
<CAPTION>
Average Annual Returns
NAME OF FUND 1 5 YEARS 10 SINCE
YEAR YEARS INCEPTION*
<S> <C> <C> <C> <C>
Income Equity Fund 17.68% 14.43%
11.73%
Capital Appreciation 21.51% 18.36%
Fund 57.34%
Special Equity Fund 15.35% 16.64%
0.20%
International Equity 11.16% 11.62%
Fund 14.54%
Emerging Markets --- --- --- -22.60
Equity Fund
Short & Int. Bond 4.23%
Fund 5.31% 7.13%
Intermediate 0.83%
Mortgage Fund 6.01% 6.72%
Bond Fund 7.77%
3.29% 9.75%
Global Bond Fund --- --- 8.24%
19.27%
<FN>
* 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.
</FN>
</TABLE>
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 Intermediate Mortgage Fund, the Bond Fund and
the Global Bond Fund include the Merrill Lynch 1-3 Year
Treasury Index, the Merrill Lynch 1-5 Year Government/Corporate
Index, the Salomon Smith Barney Mortgage Index, the Lehman
Brothers Government/Corporate Index and the Salomon Smith
Barney World Government Index, respectively. These indices are
all published on Bloomberg and some are published in the Wall
Street Journal, as well as in information provided by Merrill
Lynch, Salomon Smith Barney and Lehman Brothers.
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 dollar of net asset value (or a proportionate fractional
vote in respect of a fractional dollar 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.
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.
THE MANAGERS FUNDS
MANAGERS MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1999
You can obtain a free copy of the Prospectus for this Fund by
calling The Managers Funds at (800) 835-3879. The Prospectus
provides the basic information about investing in the Fund.
This Statement of Additional Information is not a Prospectus.
It contains additional information regarding the activities
and operations of the Fund. It should be read in conjunction
with the Fund's Prospectus.
The Financial Statements of the Fund, including the report of
independent accountant, for the fiscal year ended November 30,
1998 are included in the 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1 GENERAL INFORMATION
1 INVESTMENT OBJECTIVES AND POLICIES
1 Money Market Instruments
4 Foreign Investments
4 Additional Investments
6 Quality and Diversification Requirements
7 INVESTMENT RESTRICTIONS
8 Fundamental Investment Restrictions
8 Non-Fudamental Investment Restrictions
9 BOARD OF TRUSTEES AND OFFICERS OF THE FUNDS
10 Trustee Compensation
10 Trustees of the Portfolio
11 Trustee Compensation
12 Officers of the Portfolio
14 MANAGEMENT OF THE FUND AND THE PORTFOLIO
14 Investment Advisor
16 Distributor
16 Portfolio Co-Administrator
17 Fund Administrator
17 Services Agent
18 Custodian and Transfer Agent
18 Financial Professionals
18 Independent Accountants
19 Expenses
19 PURCHASE, REDEMPTION AND PRICING OF SHARES
19 Purchasing Shares
20 Redeeming Shares
21 Exchange of Shares
21 Net Asset Value
22 Dividends and Distributions
23 TAXATION OF THE FUNDS
25 PERFORMANCE DATA
26 Portfolio Tranactions
27 Massachusetts Trust
28 Description of Shares
29 Control Persons
30 Management Ownership
30 Master-Feeder Investment Structure
31 Additional Information
31 FINANCIAL STATEMENTS
Appendix A DESCRIPTION OF SECURITY RATINGS
</TABLE>
GENERAL INFORMATION
This Statement of Additional Information relates only to
Managers Money Market Fund (the "Fund"), 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 the other series of the Trust.
This Statement of Additional Information describes the
financial history, management and operations of the Fund, as
well as the Fund's investment objectives and policies. It
should be read in conjunction with the Fund's current
Prospectus. The Trust's executive office is located at 40
Richards Avenue, Norwalk, Connecticut 06854.
Since December 1, 1995, the Fund has operated through a
two-tiered master-feeder investment fund structure.
Historical information for the Fund contained in this
Statement of Additional Information may include information
prior to December 1, 1995.
The Fund invests all of its investable assets in The
Prime Money Market Portfolio (the "Portfolio"). The
investment advisor of the Portfolio is J.P. Morgan Investment
Management Inc. ("JPMIM" or the "Advisor"). Prior to October
1, 1998, the investment advisor of the Portfolio was Morgan
Guaranty Trust Company of New York ("Morgan").
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 the Fund in an
attempt to achieve the objective stated in its Prospectus.
The Portfolio is an open-end, diversified management
investment company having the same objective as the Fund.
Managers Money Market Fund (the "Money Market Fund") is
designed for investors who seek to maximize of current income
consistent with the preservation of capital and same-day
liquidity. The Money Market Fund seeks to achieve this
objective by investing all of its investable assets in the
Portfolio.
The Portfolio attempts to achieve its investment
objective by maintaining a dollar-weighted average portfolio
maturity of not more than 90 days and by investing in U.S.
dollar-denominated securities described in this Statement of
Additional Information that meet certain rating criteria,
present minimal credit risk and have effective maturities of
not more than thirteen months. See "Quality and
Diversification Requirements."
Money Market Instruments
The following are the various types of money market
instruments that may be purchased by the Portfolio. Also see
"Quality and Diversification Requirements."
U.S. Treasury Securities. The Portfolio 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.
Additional U.S. Government Securities. The Portfolio may
invest in obligations issued or guaranteed 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 Portfolio must look
principally 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 Portfolio 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
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.
Foreign Government Obligations. The Portfolio, subject
to its applicable investment policies, may invest in short-
term obligations of foreign sovereign governments or of their
agencies, instrumentalities, authorities or political
subdivisions. See "Foreign Investments." These securities
must be denominated in U.S. Dollars.
Bank Obligations. The Portfolio, unless otherwise noted
in the Prospectus or below, may invest in negotiable
certificates of deposits, time deposits and bankers'
acceptances of (i) banks, savings and loan associations and
savings banks which have more than $2 billion in total assets
and are organized under laws of the United States or any
state; (ii) foreign branches of these banks or of foreign
banks of equivalent size (Euros); and (iii) U.S. branches of
foreign banks of equivalent size (Yankees). The Portfolio
will not invest in obligations for which the Advisor, or any
of its affiliated persons, is the ultimate obligor or
accepting bank. The Portfolio may also invest in obligations
of international banking institutions designated or supported
by national governments to promote economic reconstruction,
development or trade between nations (e.g., the European
Investment Bank, the Inter-American Development Bank, or the
World Bank).
Commercial Paper. The Portfolio may invest in commercial
paper, including master demand obligations. Master demand
obligations are obligations that provide for a periodic
adjustment in the interest rate paid and permit daily changes
in the amount borrowed. Master demand obligations are
governed by agreements between the issuer and Morgan acting as
agent, for no additional fee. The monies loaned to the
borrower come from accounts managed by Morgan or its
affiliates, pursuant to arrangements with such accounts.
Interest and principal payments are credited to such accounts.
Morgan, an affiliate of the Advisor, has the right to increase
or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty
all or any part of the principal amount then outstanding on an
obligation together with interest to the date of payment.
Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite
rate, the rate on master demand obligations is subject to
change. Repayment of a master demand obligation to
participating accounts depends on the ability of the borrower
to pay the accrued interest and principal of the obligation on
demand which is continuously monitored by Morgan. Since
master demand obligations typically are not rated by credit
rating agencies, the Portfolio may invest in such unrated
obligations only if at the time of an investment the
obligation is determined by the Advisor to have a credit
quality which satisfies the Portfolio's quality restrictions.
See "Quality and Diversification Requirements." Although
there is no secondary market for master demand obligations,
such obligations are considered by the Portfolio to be liquid
because they are payable upon demand. The Portfolio does not
have any specific percentage limitation on investments in
master demand obligations. It is possible that the issuer of
a master demand obligation could be a client of Morgan to whom
Morgan, in its capacity as a commercial bank, has made a loan.
Asset-Backed Securities. The Portfolio may also invest
in securities generally referred to as asset-backed
securities, which directly or indirectly represent a
participation interest in, or are secured by and payable from,
a stream of payments generated by particular assets, such as
motor vehicle or credit card receivables or other asset-backed
securities collateralized by such assets. Asset-backed
securities provide periodic payments that generally consist of
both interest and principal payments. Consequently, the life
of an asset-backed security varies with the prepayment
experience of the underlying obligations. Payments of
principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the entities issuing
the securities. The asset-backed securities in which the
Portfolio may invest are subject to the Portfolio's overall
credit requirements. However, asset-backed securities, in
general, are subject to certain risks. Most of these risks
are related to limited interests in applicable collateral.
For example, credit card debt receivables are generally
unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of
which give such debtors the right to set off certain amounts
on credit card debt thereby reducing the balance due.
Additionally, if the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments
or losses if the full amounts due on underlying sales
contracts are not realized. Because asset-backed securities
are relatively new, the market experience in these securities
is limited and the market's ability to sustain liquidity
through all phases of the market cycle has not been tested.
Repurchase Agreements. The Portfolio may enter into
repurchase agreements with brokers, dealers or banks that meet
the credit guidelines approved by the Portfolio's Trustees.
In a repurchase agreement, the Portfolio buys a security from
a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The resale price
normally is in excess of the purchase price, reflecting an
agreed upon interest rate. This interest rate is effective
for the period of time the Portfolio is invested in the
agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be
viewed as a fully collateralized loan of money by the
Portfolio to the seller. The period of these repurchase
agreements will usually be short, from overnight to one week,
and at no time will the Portfolio invest in repurchase
agreements for more than thirteen months. The securities
which are subject to repurchase agreements, however, may have
maturity dates in excess of thirteen months from the effective
date of the repurchase agreement. The Portfolio will always
receive securities as collateral whose market value is, and
during the entire term of the agreement remains, at least
equal to 100% of the dollar amount invested by the Portfolio
in the agreement plus accrued interest, and the Portfolio will
make payment for such securities only upon the physical
delivery or upon evidence of book entry transfer to the
account of the Custodian. The Portfolio will be fully
collateralized within the meaning of paragraph (a) (4) of Rule
2a-7 under the Investment Company Act of 1940, as amended (the
"1940 Act"). If the seller defaults, the Portfolio might
incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition
costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect
to the seller of the security, realization upon disposal of
the collateral by the Portfolio may be delayed or limited.
The Portfolio may make investments in other debt
securities with remaining effective maturities of not more
than thirteen months, including without limitation corporate
and foreign bonds, asset-backed securities and other
obligations described in the Prospectus or this Statement of
Additional Information.
Foreign Investments
The Portfolio may invest in certain foreign securities.
All investments must be U.S. Dollar-denominated. Investments
in securities of foreign issuers and in obligations of foreign
branches of domestic banks involves somewhat different
investment risks from those affecting securities of U.S.
domestic issuers. There may be limited publicly available
information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting,
auditing and financial standards and requirements comparable
to those applicable to domestic companies. Any foreign
commercial paper must not be subject to foreign withholding
tax at the time of purchase.
Investors should realize that the value of the
Portfolio's investments in foreign securities may be adversely
affected by changes in political or social conditions,
diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets,
or imposition of (or change in) exchange control or tax
regulations in those foreign countries. In addition, changes
in government administrations or economic or monetary policies
in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or
unfavorably affect the Portfolio's operations. Furthermore,
the economies of individual foreign nations may differ from
the U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of
payments position. It may also be more difficult to obtain
and enforce a judgement against a foreign issuer. Any foreign
investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws
restricting the amounts and types of foreign investments.
Additional Investments
Municipal Bonds. The Portfolio may invest in municipal
bonds issued by or on behalf of states, territories or
possessions of the United States and the District of Columbia
and their political subdivisions, agencies, authorities and
instrumentalities. The Portfolio may also invest in municipal
notes of various types, including notes issued in anticipation
of receipt of taxes, the proceeds of the sale of bonds, other
revenues or grant proceeds, as well as municipal commercial
paper and municipal demand obligations. These municipal bonds
and notes will be taxable securities; income generated from
these instruments will be subject to federal, state and local
taxes.
When-Issued and Delayed Delivery Securities. The
Portfolio may purchase securities on a when-issued or delayed
delivery basis. For example, delivery of and payment for
these securities can take place a month or more after the date
of the purchase commitment. The purchase price and interest
rate payable, if any, on the securities are fixed on the
purchase commitment date or at the time the settlement date is
fixed. The value of such securities is subject to market
fluctuation and for money market instruments and other fixed-
income securities, no interest accrues to the Portfolio until
settlement takes place. At the time the Portfolio makes the
commitment to purchase securities on a when-issued or delayed
delivery basis, it will record the transaction, reflect the
value each day of the securities in determining its net asset
value, if applicable, and calculate the maturity for the
purposes of average maturity from that date. At the time of
settlement, a when-issued security may be valued at less than
the purchase price. To facilitate such acquisitions, the
Portfolio will maintain with the Custodian a segregated
account with liquid assets consisting of cash, U.S. Government
securities or other appropriate securities, in an amount at
least equal to such commitments. On delivery dates for such
transactions, the Portfolio will meet its obligations from
maturities or sales of the securities held in the segregated
account and/or from cash flow. If the Portfolio chooses to
dispose of the right to acquire a when-issued security prior
to its acquisition, it could, as with the disposition of any
other portfolio obligation, incur a gain or loss due to market
fluctuation. It is currently the policy of the Portfolio not
to enter into when-issued commitments exceeding in the
aggregate 15% of the market value of the Portfolio's total
assets less liabilities other than the obligations created by
when-issued commitments.
Investment Company Securities. Securities of other
investment companies may be acquired by the Fund and the
Portfolio to the extent permitted under the 1940 Act. These
limits require that, as determined immediately after a
purchase is made, (i) not more than 5% of the value of the
Portfolio's total assets will be invested in the securities of
any one investment company, (ii) not more than 10% of the
value of its total assets will be invested in the aggregate in
securities of investment companies as a group, and (iii) not
more than 3% of the outstanding voting stock of any one
investment company will be owned by the Portfolio, provided
however, that the Fund may invest all of its investable assets
in an open-end investment company that has the same investment
objective as the Fund (e.g., the Portfolio). As a shareholder
of another investment company, the Portfolio would bear, along
with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other
expenses that the Portfolio bears directly in connection with
its operations.
Reverse Repurchase Agreements. The Portfolio may enter
into reverse repurchase agreements. In a reverse repurchase
agreement, the Portfolio sells a security and agrees to
repurchase the same security at a mutually agreed upon date
and price. For purposes of the 1940 Act, a reverse repurchase
agreement is also considered as the borrowing of money by the
Portfolio, and, therefore, a form of leverage. The Portfolio
will invest the proceeds of the borrowings under reverse
repurchase agreements. In addition, the Portfolio will enter
into a reverse repurchase agreement only when the interest
income to be earned from the investment of the proceeds is
greater than the interest expense of the transaction. The
Portfolio will not invest the proceeds of a reverse repurchase
agreement for a period which exceeds the duration of the
reverse repurchase agreement. The Portfolio will establish
and maintain with the Custodian a separate account with a
segregated portfolio of securities in an amount at least equal
to its purchase obligations under its reverse repurchase
agreements. If interest rates rise during the term of a
reverse repurchase agreement, entering into the reverse
repurchase agreement may have a negative impact on the Money
Market Fund's ability to maintain a net asset value of $1.00
per share. See "Investment Restrictions" for the Fund's
limitations on reverse repurchase agreements and bank
borrowings.
Loans of Portfolio Securities. Subject to applicable
investment restrictions, the Portfolio is permitted to lend
its securities in an amount up to 33 1/3% of the value of its
net assets. The Portfolio may lend its securities if such
loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Portfolio
at least equal at all times to 100% of the market value of the
securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio
any income accruing thereon. Loans will be subject to
termination by the Portfolio in the normal settlement time,
generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned
when the loan is terminated. Any gain or loss in the market
price of the borrowed securities which occurs during the term
of the loan inures to the Portfolio and its respective
investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the
Portfolio will consider all facts and circumstances, including
the creditworthiness of the borrowing financial institution,
and the Portfolio will not make any loans in excess of one
year. Loans of Portfolio securities may be considered
extensions of credit by the Portfolio. The risks to the
Portfolio with respect to borrowers of its Portfolio
securities are similar to the risks to the Portfolio with
respect to sellers in repurchase agreement transactions. See
"Repurchase Agreements." The Portfolio will not lend its
securities to any officer, Trustee, Director, employee, or
other affiliate of the Portfolio, the Advisor or Funds
Distributor, Inc. unless otherwise permitted by applicable
law.
Illiquid Investments, Privately Placed and Certain
Unregistered Securities. The Portfolio may invest in
privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus. The Portfolio may
not acquire illiquid holdings if, as a result thereof, more
than 10% of the Portfolio's net assets would be in illiquid
investments. Subject to this fundamental policy limitation,
the Portfolio may acquire investments that are illiquid or
have limited liquidity, such as private placements or
investments that are not registered under the Securities Act
of 1933, 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 illiquid investment is any
investment that cannot be disposed of within 7 days in the
normal course of business at approximately the amount at which
it is valued by the Portfolio. The price the Portfolio 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 valuation of these
securities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold
to institutional investors without registration under the 1933
Act. These securities may be determined to be liquid in
accordance with guidelines established by the Advisor and
approved by the Portfolio's Trustees. The Portfolio's
Trustees will monitor the Advisor's implementation of these
guidelines on a periodic basis.
As to illiquid investments, the Portfolio is subject to a
risk that should the Portfolio decide to sell them when a
ready buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's
net assets could be adversely affected. Where an illiquid
security must be registered under the 1933 Act, before it may
be sold, the Portfolio may be obligated to pay all or part of
the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the
Portfolio may be permitted to sell a security under an
effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might
obtain a less favorable price than prevailed when it decided
to sell.
Synthetic Instruments. The Portfolio may invest in
certain synthetic instruments. Such instruments generally
involve the deposit of asset-backed securities in a trust
arrangement and the issuance of certificates evidencing
interests in the trust. The certificates are generally sold
in private placements in reliance on Rule 144A. The Advisor
will review the structure of Synthetic Instruments to identify
credit and liquidity risks and will monitor those risks. See
"Illiquid Investments, Privately Placed and Certain
Unregistered Securities."
Quality and Diversification Requirements
The Portfolio intends to meet the diversification
requirements of the 1940 Act. Current 1940 Act
diversification requirements require that with respect to 75%
of the assets of the Portfolio are subject to the following
fundamental limitations: (1) the Portfolio may not invest
more than 5% of its total assets in the securities of any one
issuer, except obligations of the U.S. Government, its
agencies and instrumentalities; and (2) the Portfolio may not
own more than 10% of the outstanding voting securities of any
one issuer. As for the other 25% of the Portfolio's assets
not subject to the limitation described above, there is no
limitation on investment of these assets under the 1940 Act.
All of such assets may be invested in the securities of any
one issuer, subject to the limitation of any applicable state
securities laws, or as described below. Investments not
subject to the limitations described above could involve an
increased risk to the Portfolio should an issuer, or a state
or its related entities, be unable to make interest or
principal payments or should the market value of such
securities decline.
At the time the Portfolio invests in any taxable
commercial paper, master demand obligation or repurchase
agreement, the issuer must have outstanding debt rated A or
higher by Moody's or Standard & Poor's. The issuer's parent
corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no
such ratings are available, the investment must be of
comparable quality in Morgan's opinion.
In order to attain the Fund's objective of maintaining a
stable net asset value, the Portfolio will (i) with respect to
75% of the Portfolio's assets, limit its investment in the
securities (other than U.S. Government securities) of any one
issuer to no more than 5% of its assets, measured at the time
of purchase, except for investments held for not more than
three business days; and (ii) limit investments to securities
that present minimal credit risks and securities (other than
U.S. Government securities) that are rated within the highest
short-term rating category by at least two nationally
recognized statistical rating organizations ("NRSROs") or by
the only NRSRO that has rated the security. Securities which
originally had a maturity of over one year are subject to more
complicated, but generally similar rating requirements. A
description of illustrative credit ratings is set forth in
"Appendix A." The Portfolio may also purchase unrated
securities that are of comparable quality to the rated
securities described above. Additionally, if the issuer of a
particular security has issued other securities of comparable
priority and security and which have been rated in accordance
with (ii) above, that security will be deemed to have the same
rating as such other rated securities.
In addition, the Board of Trustees of the Portfolio has
adopted procedures which (i) require the Board of Trustees to
approve or ratify purchases by the Portfolio of securities
(other than U.S. Government securities) that are unrated; (ii)
require the Portfolio to maintain a dollar-weighted average
portfolio maturity of not more than 90 days and to invest only
in securities with a remaining maturity of not more than
thirteen months; and (iii) require the Portfolio, in the event
of certain downgradings of or defaults on portfolio holdings,
to dispose of the holding, subject in certain circumstances to
a finding by the Trustees that disposing of the holding would
not be in the Portfolio's best interest.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by
the Trust with respect to the Fund and by the Portfolio.
Except where otherwise noted, these investment restrictions
are "fundamental" policies which, under the 1940 Act, may not
be changed without the vote of a majority of the outstanding
voting securities of the Fund or Portfolio, as the case may
be. A "majority of the outstanding voting securities" is
defined in the 1940 Act as the lesser of (a) 67% or more of
the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities are present
or represented by proxy; or (b) more than 50% of the
outstanding voting securities. The percentage limitations
contained in the restrictions below apply at the time of the
purchase of securities. If the Fund is requested to vote on a
change in the fundamental investment restrictions of the
Portfolio, the Trust will hold a meeting of Fund shareholders
and cast its votes as instructed by the shareholders.
The investment restrictions of the Fund and the Portfolio
are substantially identical, unless as otherwise specified.
Accordingly, references below to the Fund also include the
Portfolio unless the context requires otherwise; similarly,
references to the Portfolio also include the Fund unless the
context requires otherwise.
Fundamental Investment Restrictions
The Money Market Fund and the Portfolio:
(1) May not make any investment inconsistent with the Fund's
classification as a diversified investment company under the
Investment Company Act of 1940;
(2) May not purchase any security which could cause the Fund
to concentrate its investments in the securities of issuers
primarily engaged in any particular industry except as
permitted by the SEC. This restriction does not apply to
instruments considered to be domestic bank money market
instruments;
(3) May not issue senior securities, except as permitted
under the Investment Company Act of 1940 or any rule, order or
interpretation thereunder;
(4) May not borrow money, except to the extent permitted by
applicable law;
(5) May not underwrite securities of other issuers, except to
the extent that the Portfolio, in disposing of the portfolio
securities, may be deemed an underwriter within the meaning of
the 1933 Act;
(6) May not purchase or sell real estate, except that, to the
extent permitted by applicable law, the Portfolio may (a)
invest in securities or other instruments directly or
indirectly secured by real estate, and (b) invest in
securities or other instruments issued by issuers that invest
in real estate;
(7) May not purchase or sell commodities or commodity
contracts unless acquired as a result of ownership of
securities or other instruments issued by persons that
purchase or sell commodities or commodities contracts; but
this shall not prevent the Portfolio from purchasing, selling
or entering into financial futures contracts (including
futures contracts on indices of securities, interest rates and
currencies), options on financial futures contracts (including
futures contracts on indices of securities, interest rates and
currencies), warrants, swaps, forward contracts, foreign
currency spot and forward contracts or other derivative
instruments that are not related to physical commodities; and
(8) May make loans to other persons, in accordance with the
Portfolio's investment objective and policies and to the
extent permitted by applicable law.
Non-Fundamental Investment Restrictions
The following investment restrictions are not fundamental
policies of the Funds and the Portfolio and may be changed
without shareholder approval.
The Money Market Fund and the Portfolio:
(1) May not acquire any illiquid securities, such as
repurchase agreements with more than seven days to maturity or
fixed time deposits with a duration of over seven calendar
days, if as a result thereof, more than 10% of the market value
of the Portfolio's total assets would be in investments which
are illiquid;
(2) May not purchase securities on margin, make short sales of
securities, or maintain a short position, provided that this
restriction shall not be deemed to be applicable to the
purchase or sale of when-issued or delayed delivery securities;
(3) May not acquire securities of other investment companies,
except as permitted by the 1940 Act or any order pursuant
thereto;
(4) May not borrow money, except from banks for extraordinary
or emergency purposes and then only in amounts not to exceed
10% of the value of the Portfolio's total assets, taken at
cost, at the time of such borrowing. Mortgage, pledge, or
hypothecate any assets except in connection with any such
borrowing and in amounts not to exceed 10% of the value of the
Portfolio's net assets at the time of such borrowing. The
Portfolio will not purchase securities while borrowings exceed
5% of the Portfolio's total assets; provided, however, that the
Portfolio may increase its interest in an open-end management
investment company with the same investment objective and
restrictions as the Portfolio while such borrowings are
outstanding. This borrowing provision is included to
facilitate the orderly sale of portfolio securities, for
example, in the event of abnormally heavy redemption requests,
and is not for investment purposes and shall not apply to
reverse repurchase agreements.
BOARD OF TRUSTEES AND OFFICERS OF THE FUNDS
The Fund and the Portfolio are governed by two separate
Boards of Trustees. The Fund, which is a series of a Trust
consisting of other investment portfolios, is governed by the
Board of Trustees of the Trust. The Board of Trustees of the
Trust provides broad supervision over the affairs of the Trust
and the Fund. 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.
ROBERT P. WATSON*--Chief Executive Officer, President and
Trustee of The Managers Funds; 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.
MADELINE H. MCWHINNEY-Trustee; President of Dale, Elliott
& Company since 1977. Trustee and Treasurer of the Institute
of International Education since 1975. Member of the Advisory
Committee on Professional Ethics for the New Jersey Supreme
Court since March of 1983. 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 Wadsworth Group since 1986. Vice President,
Secretary and Director of First Fund Distributors, Inc. since
1991. Vice President, Secretary and Director of the
Investment Company Administration Corporation 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.
THOMAS R. SCHNEEWEIS-Trustee; Professor of Finance,
University of Massachusetts since 1985. His address is 10
Cortland Drive, Amherst, Massachusetts 01002. His date of
birth is May 10, 1947.
PETER M. LEBOVITZ-Vice President; Director of Marketing
for The Managers Funds, L.P. since December 1994. From June
1993 to June 1994, he was the Director of Marketing for
Hyperion Capital Management, Inc. His date of birth is
January 18, 1955.
DONALD S. RUMERY-Secretary, Treasurer; Director of
Operations of The Managers Funds, L.P. since December 1994.
From March 1990 to December 1994, he was a Vice President of
Signature Financial Group. His date of birth is May 29, 1958.
GIANCARLO (JOHN) E. ROSATI-Assistant Treasurer; Vice
President of 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, L.P. since August 1995.
From July 1994 to August 1995, he was a Portfolio
Administrator with 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, 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 is an "interested person" (as defined in the 1940
Act) of the Funds.
Trustee Compensation
Each Trustee of the Trust is currently paid an annual fee
of $10,000 for serving as Trustee of the Trust and the Fund.
Each Trustee also receives an additional fee of $750 for each
in-person meeting attended and $200 for each telephonic
meeting. The Trustees may serve as directors of other
corporations that are unrelated to the Trust.
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 Compensati
Aggregate t Annual on from
Compensat benefits benefit Funds and
Name & Position ion from accrued s upon Fund
Fund as part Retirem Complex
of Fund ent Paid 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
<FN>
*Mr. Graulty resigned as Trustee of the Trust on September 14,
1998.
</FN>
</TABLE>
Trustees of the Portfolio
The Trustees of the Portfolio, their business addresses,
principal occupations during the past five years and dates of
birth are set forth below.
FREDERICK S. ADDY-Trustee; Retired; Prior to April 1994,
Executive Vice President and Chief Financial Officer, Amoco
Corporation. His address is 5300 Arbutus Cove, Austin, Texas
78746, and his date of birth is January 1, 1932.
WILLIAM G. BURNS-Trustee; Retired; Former Vice Chairman
and Chief Financial Officer, NYNEX. His address is 2200
Alaqua Drive, Longwood, Florida 32779, and his date of birth
is November 2, 1932.
ARTHUR C. ESCHENLAUER-Trustee; Retired; Former Senior
Vice President, Morgan Guaranty Trust Company of New York.
His address is 14 Alta Vista Drive, RD #2, Princeton, New
Jersey 08540, and his date of birth is May 23, 1934.
MATTHEW HEALEY*--Trustee, Chairman and Chief Executive
Officer; Chairman, Pierpont Group, Inc., since prior to 1993.
His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, Florida 33436, and his date of birth is
August 23, 1937.
MICHAEL P. MALLARDI-Trustee; Retired; Prior to April
1996, Senior Vice President, Capital Cities/ABC, Inc. and
President, Broadcast Group. His address is 10 Chanwood Drive,
Suffern, New York 10910, and his date of birth is March 17,
1934.
*Mr. Healey is an "interested person" (as defined in the 1940
Act) of the Portfolio. Mr. Healey is also an "interested
person" (as defined in the 1940 Act) of the Adviser due to his
son's affiliation with JPMIM.
Trustee Compensation
Each Trustee of the Portfolio is currently paid an annual
fee of $75,000 for serving as Trustee of the Portfolio as well
as 18 other investment companies which are affiliated with the
Advisor and is reimbursed for expenses incurred in connection
with service as a Trustee. The Trustees may hold various
other directorships which are unrelated to these funds.
Trustee compensation expenses paid by the Portfolio for
the calendar year ended December 31, 1998 are set forth below.
Total
Trustee
Compensation
Accrued by
the
Aggregate
Master Portfolios*,
Trustee
The J.P. Morgan
Compensation
Funds and J.P.
Paid by the
Morgan Institutional
Portfolio
Funds and J.P. Morgan
Name of Trustee during 1998
Series Trust during 1998.***
- ----------------------- ---------------------
- ----------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Frederick S. Addy, Trustee $13,961.94 $75,000.00
William G. Burns, Trustee 13,961.94 75,000.00
Arthur C. Eschenlauer, Trustee 13,961.94 75,000.00
Matthew Healey, Trustee,
Chairman and Chief Executive
Officer** 13,961.94 75,000.00
Michael P. Mallardi, Trustee 13,961.94 75,000.00
- --------------------------------------------------------------
<FN>-
*Includes the Portfolio and 18 other Portfolios (collectively
the "Master Portfolios") for which JPMIM acts as investment
advisor.
**During 1998, Pierpont Group, Inc. paid Mr. Healey, in his
role as Chairman of Pierpont Group, Inc., compensation in the
amount of $157,400, contributed $23,610 to a defined
contribution plan on his behalf and paid $17,700 in insurance
premiums for his benefit.
***No investment company within the Portfolio's fund complex
has a pension or retirement plan. Currently, there are 17
investment companies (14 investment companies comprising the
Master Portfolios, the J.P. Morgan Funds, the J.P. Morgan
Institutional Funds and J.P. Morgan Series Trust) in the
Portfolio's fund complex.
</FN>
</TABLE>
The Trustees of the Portfolio decide upon general
policies and are responsible for overseeing the Portfolio's
various business affairs. The Portfolio has entered into a
Fund Services Agreement with Pierpont Group, Inc. to assist
the Trustees in exercising their overall supervisory
responsibilities over the affairs of the Portfolio. Pierpont
Group, Inc. was organized in July 1989 to provide services for
The Pierpont Family of Funds (now the J.P. Morgan Family of
Funds), and the Trustees of the Portfolio are the equal and
sole shareholders of Pierpont Group, Inc. The Portfolio has
agreed to pay Pierpont Group, Inc. a fee in an amount
approximating its reasonable costs in performing these
services to the Portfolio and certain other registered
investment companies subject to similar agreements with
Pierpont Group, Inc. These costs are periodically reviewed by
the Trustees. The principal offices of Pierpont Group, Inc.
are located at 461 Fifth Avenue, New York, New York 10017.
The aggregate fees paid to Pierpont Group, Inc. by the
Portfolio during the fiscal year ended November 30, 1996,
November 30, 1997 and November 30, 1998 were $157,428,
$143,027 and $173,032, respectively.
Officers of the Portfolio
The Portfolio's executive officers (listed below), other
than the Chief Executive Officer and the officers who are
employees of the Advisor, are provided and compensated by
Funds Distributor, Inc. ("FDI"), a wholly-owned indirect
subsidiary of Boston Institutional Group, Inc. The
Portfolio's officers conduct and supervise the business
operations of the Portfolio. The Portfolio has no employees.
The officers of the Portfolio, their principal
occupations during the past five years and dates of birth are
set forth below. The business address of each of the officers
unless otherwise noted is Funds Distributor, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman,
Pierpont Group, since prior to 1993. His address is Pine Tree
Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL
33436. His date of birth is August 23, 1937.
MARGARET W. CHAMBERS; Vice President and Secretary.
Senior Vice President and General Counsel of FDI since April,
1998. From August 1996 to March 1998, Ms. Chambers was Vice
President and Assistant General Counsel for Loomis, Sayles &
Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Her date of
birth is October 12, 1959.
MARIE E. CONNOLLY; Vice President and Assistant
Treasurer. President, Chief Executive Officer, Chief
Compliance Officer and Director of FDI and Premier Mutual Fund
Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies distributed or
administered by FDI. Prior to July 1994, she was President
and Chief Compliance Officer of FDI. Her date of birth is
August 1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant
Treasurer. Assistant Vice President and Assistant Department
Manager of Treasury Services and Administration of FDI and an
officer of certain investment companies distributed or
administered by FDI. Prior to April 1997, Mr. Conroy was
Supervisor of Treasury Services and Administration of FDI.
From April 1993 to January 1995, Mr. Conroy was a Senior Fund
Accountant for Investors Bank & Trust Company. His date of
birth is March 31, 1969.
JACQUELINE HENNING; Assistant Secretary and Assistant
Treasurer of the Portfolio only. Managing Director, State
Street Cayman Trust Company, Ltd. since October 1994. Prior
to October 1994, Mrs. Henning was head of mutual funds at
Morgan Grenfell in Cayman and was Managing Director of Bank of
Nova Scotia Trust Company (Cayman) Limited prior to September
1993. Her address is P.O. Box 2508 GT, Elizabethan Square,
2nd Floor, Shedden Road, George Town, Grand Cayman, Cayman
Islands, BWI. Her date of birth is March 27, 1942.
KAREN JACOPPO-WOOD; Vice President and Assistant
Secretary. Vice President and Senior Counsel of FDI and an
officer of certain investment companies distributed or
administered by FDI. From June 1994 to January 1996, Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder,
Stevens & Clark, Inc. Prior to May 1994, Ms. Jacoppo-Wood was
a senior paralegal at The Boston Company Advisors, Inc.
("TBCA"). Her date of birth is December 29, 1966.
CHRISTOPHER J. KELLEY; Vice President and Assistant
Secretary. Vice President and Senior Associate General
Counsel of FDI and Premier Mutual and an officer of certain
investment companies distributed or administered by FDI. From
April 1994 to July 1996, Mr. Kelley was Assistant Counsel at
Forum Financial Group. Prior to April 1994, Mr. Kelley was
employed by Putnam Investments in legal and compliance
capacities. His date of birth is December 24, 1964.
KATHLEEN K. MORRISEY; Vice President and Assistant
Secretary. Vice President and Assistant Secretary of FDI.
Manager of Treasury Services Administration and an officer of
certain investment companies advised or administered by
Montgomery Asset Management, L.P. and Dresdner RCM Global
Investors, Inc., and their respective affiliates. From July
1994 to November 1995, Ms. Morrisey was a Fund Accountant II
for Investors Bank & Trust Company. Prior to July 1994 she
was a finance student at Stonehill College. Her date of birth
is July 5, 1972.
MARY A. NELSON; Vice President and Assistant Treasurer.
Vice President and Manager of Treasury Services and
Administration of FDI and Premier Mutual and an officer of
certain investment companies distributed or administered by
FDI. Prior to August 1994, Ms. Nelson was an Assistant Vice
President and client manager for The Boston Company, Inc. Her
date of birth is April 22, 1964.
MARY JO PACE; Assistant Treasurer. Vice President,
Morgan Guaranty Trust Company of New York. Ms. Pace serves in
the Funds Administration group as a Manager for the Budgeting
and Expense Processing Group. Prior to September 1995, Ms.
Pace served as a Fund Administrator for Morgan Guaranty Trust
Company of New York. Her address is 60 Wall Street, New York,
New York 10260. Her date of birth is March 13, 1966.
MICHAEL S. PETRUCELLI; Vice President and Assistant
Secretary. Senior Vice President and Director of Strategic
Client Initiatives for FDI since December 1996. From December
1989 through November 1996, Mr. Petrucelli was employed with
GE Investments where he held various financial, business
development and compliance positions. He also served as
Treasurer of the GE Funds and as Director of GE Investment
Services. His address is 200 Park Avenue, New York, New York,
10166. His date of birth is May 18, 1961.
STEPHANIE D. PIERCE; Vice President and Assistant
Secretary. Vice President and Client Development Manager for
FDI since April 1998. From April 1997 to March 1998, Ms.
Pierce was employed by Citibank, NA as an officer of Citibank
and Relationship Manager on the Business and Professional
Banking team handling over 22,000 clients. Address: 200 Park
Avenue, New York, New York 10166. Her date of birth is August
18, 1968.
GEORGE A. RIO; President and Treasurer. Executive Vice
President and Client Service Director of FDI since April 1998.
From June 1995 to March 1998, Mr. Rio was Senior Vice
President and Senior Key Account Manager for Putnam Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of
Business Development for First Data Corporation. From
September 1983 to May 1994, Mr. Rio was Senior Vice President
& Manager of Client Services and Director of Internal Audit at
The Boston Company. His date of birth is January 2, 1955.
CHRISTINE ROTUNDO; Assistant Treasurer. Vice President,
Morgan Guaranty Trust Company of New York. Ms. Rotundo serves
in the Funds Administration group as a Manager of the Tax
Group and is responsible for U.S. mutual fund tax matters.
Prior to September 1995, Ms. Rotundo served as a Senior Tax
Manager in the Investment Company Services Group of Deloitte &
Touche LLP. Her address is 60 Wall Street, New York, New York
10260. Her date of birth is September 26, 1965.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
Investment Advisor
Subject to the supervision of the Portfolio's Trustees,
the Advisor makes the Portfolio's day-to-day investment
decisions, arranges for the execution of Portfolio
transactions and generally manages the Portfolio's
investments. Effective October 1, 1998, the Portfolio's
investment advisor is JPMIM. Prior to that date, Morgan was
the investment advisor. JPMIM, a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan"), is a
registered investment advisor under the Investment Advisers
Act of 1940, as amended, which manages employee benefit funds
of corporations, labor unions and state and local governments
and the accounts of other institutional investors, including
governments and the accounts of other institutional investors,
including investment companies. Certain of the assets of
employee benefit accounts under its management are invested in
commingled pension trust funds for which Morgan serves as a
Trustee.
J. P. Morgan, through the Advisor and other subsidiaries,
acts as investment advisor to individuals, governments,
corporations, employee benefit plans, mutual funds and other
institutional investors with combined assets under management
of approximately $308 billion.
J.P. Morgan has a long history of service as advisor,
underwriter and lender to an extensive roster of major
companies and as financial advisor to national governments.
The firm, through its predecessor firms, has been in business
for over a century and has been managing investments since
1913.
The investment advisory services the Advisor provides to
the Portfolio are not exclusive under the terms of the
Advisory Agreement. The Advisor is free to and does render
similar investment advisory services to others. The Advisor
serves as investment advisor to personal investors and other
investment companies and acts as fiduciary for trusts, estates
and employee benefit plans. Certain of the assets of trusts
and estates under management are invested in common trust
funds for which the Advisor serves as trustee. The accounts
which are managed or advised by the Advisor have varying
investment objectives and the Advisor invests assets of
certain of such accounts in investments substantially similar
to, or the same as, those which are expected to constitute the
principal investments of the Portfolio. Such accounts are
supervised by officers and employees of the Advisor who may
also be acting in similar capacities for the Portfolio. See
"Portfolio Transactions."
Sector weightings are generally similar to a benchmark
with the emphasis on security selection as the method to
achieve investment performance superior to the benchmark. The
benchmark for the Portfolio in which the Fund invests is
currently IBC's First Tier Money Fund Average.
Morgan, also a wholly-owned subsidiary of J. P. Morgan,
is a bank holding company organized under the laws of the Sate
of Delaware. Morgan, whose principal offices are at 60 Wall
Street, New York, New York 10260, is a New York trust company
which conducts a general banking and trust business. Morgan
is subject to regulation by the New York State Banking
Department and is a member bank of the Federal Reserve System.
Through offices in New York City and abroad, Morgan offers a
wide range of services, primarily to governmental,
institutional, corporate and high net worth individual
customers in the United States and throughout the world.
The Portfolio is managed by officers of the Advisor who,
in acting for their customers, including the Portfolio, do not
discuss their investment decisions with any personnel of J. P.
Morgan or any personnel of other divisions of the Advisor or
with any of its affiliated persons, with the exception of
certain other investment management affiliates of J.P. Morgan.
As compensation for the services rendered and related
expenses such as salaries of advisory personnel borne by the
Advisor under the Investment Advisory Agreement, the Portfolio
has agreed to pay the Advisor a fee, which is computed daily
and may be paid monthly, equal to the annual rate of 0.20% of
the Portfolio's average daily net assets up to $1 billion and
0.10% of average daily net assets in excess of $1 billion.
The advisory fees paid by the Portfolio to the Advisor
are as follows: For the fiscal year ended November 30, 1996:
$4,503,793. For the fiscal year ended November 30, 1997:
$5,063,662. For the fiscal year ended November 30, 1998:
$7,199,733.
The Investment Advisory Agreement provides that it will
continue in effect for a period of two years after execution
only if specifically approved thereafter annually. The
Investment Advisory Agreement will terminate automatically if
assigned and is terminable at any time without penalty by a
vote of a majority of the Portfolio's Trustees, or by a vote
of the holders of a majority of the Portfolio's outstanding
voting securities, on 60 days' written notice to the Advisor
and by the Advisor on 90 days' written notice to the
Portfolio. See "Additional Information."
Prior to December 1, 1995, the Money Market Fund invested
directly in portfolio securities and paid advisory fees to its
own investment adviser. For the eleven months ended November
30, 1995 and for the fiscal years ended December 31, 1994 and
1993, net fees after waivers paid to such adviser were
$42,050, $15,126 and $6,297, respectively.
The Glass-Steagall Act and other applicable laws
generally prohibit banks such as the Advisor from engaging in
the business of underwriting or distributing securities, and
the Board of Governors of the Federal Reserve System has
issued an interpretation to the effect that under these laws a
bank holding company registered under the federal Bank Holding
Company Act or certain subsidiaries thereof may not sponsor,
organize, or control a registered open-end investment company
continuously engaged in the issuance of its shares. The
interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment advisor and
custodian to such an investment company. The Advisor believes
that it may perform the services for the Portfolio
contemplated by the Advisory Agreement without violation of
the Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the
interpretation of relevant federal law, and banks and
financial institutions may be required to register as dealers
pursuant to state securities laws. However, it is possible
that future changes in either federal or state statutes and
regulations concerning the permissible activities of banks or
trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes
and regulations, might prevent the Advisor from continuing to
perform such services for the Portfolio.
If the Advisor were prohibited from acting as investment
advisor to the Portfolio, it is expected that the Trustees of
the Portfolio would recommend to investors that they approve
the Portfolio entering into a new investment advisory
agreement with another qualified investment advisor selected
by the Trustees.
Under separate agreements, Morgan provides certain
financial, fund accounting and administrative services to the
Portfolio. See "Services Agent" below.
Distributor
The Managers Funds, L.P. also serves as distributor (the
"Distributor") in connection with the offering of the Money
Market Fund's shares on a no-load basis. The Distributor
bears certain expenses associated with the distribution and
sale of shares of the Fund. The Distributor acts as agent in
arranging for the sale of the Fund's shares without sales
commission or other compensation and bears all advertising and
promotion expenses incurred in the sale of shares.
The Distribution Agreement between the Trust, on behalf
of the Fund, and the Distributor may be terminated by either
party under certain specified circumstances and will
automatically terminate on assignment. The Distribution
Agreement may be continued annually if specifically approved
by the Trust's Trustees or by a vote of the Fund's outstanding
shares, including a majority of the Trustees who are not
"interested persons" of the Trust or the Distributor, as such
term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting such approval.
Portfolio Co-Administrator
FDI serves as the Portfolio's exclusive placement agent.
Under a Co-Administration Agreement dated August 1, 1996, FDI
also serves as the Portfolio's Co-Administrator. The Co-
Administration Agreement may be renewed or amended by the
Portfolio's Trustees without a shareholder vote. The Co-
Administration Agreement is terminable at any time without
penalty by a vote of a majority of the Portfolio's Trustees on
not more than 60 days' written notice nor less than 30 days'
written notice to the other party. The Co-Administrator may
subcontract for the performance of its obligations, provided,
however, that unless the Portfolio expressly agrees in
writing, the Co-Administrator shall be fully responsible for
the acts and omissions of any subcontractor as it would for
its own acts or omissions. See "Services Agent" below.
FDI (i) provides office space, equipment and clerical
personnel for maintaining the organization and books and
records of the Portfolio; (ii) provides officers for the
Portfolio; (iii) prepares and files documents required for
notification of state securities administrators; (iv) reviews
and files marketing and sales literature; (v) files Portfolio
regulatory documents and mails Portfolio communications to
Trustees and investors; and (vi) maintains related books and
records.
For its services under the Co-Administration Agreement,
the Portfolio has agreed to pay FDI fees equal to its
allocable share of an annual complex-wide charge of $425,000
plus FDI's out-of-pocket expenses. The amount allocable to
the Portfolio is based on the ratio of its net assets to the
aggregate net assets of the Master Portfolios and certain
other investment companies subject to similar agreements with
FDI.
The administrative fees paid to FDI by the Portfolio for
the fiscal periods indicated are as follows: For the period
August 1, 1996 through November 30, 1996: $33,012. For the
fiscal year ended November 30, 1997: $96,662. For the fiscal
year ended November 30, 1998: $115,137.
The administrative fees paid to Signature Broker-Dealer
Services, Inc. (which provided placement agent and
administrative services to the Portfolio prior to August 1,
1996) are as follows: For the Period December 1, 1995
through July 31, 1996: $272,989.
Fund Administrator
The Trust has separately retained the services of The
Managers Funds, L.P. as administrator (the "Fund
Administrator"). The Fund has agreed to pay the Fund
Administrator and shareholder servicing agent for the Fund a
fee of 0.25% of the Fund's average daily net assets for these
services. The Fund Administrator waived all of this fee
through November 30, 1997. See "Management of the Fund and
the Portfolio-Fund Administrator" in the Prospectus and
"Expenses" below.
Services Agent
The Portfolio has entered into Administrative Services
Agreement (the "Services Agreement") with Morgan, pursuant to
which Morgan is responsible for certain administrative and
related services provided to the Portfolio. The Services
Agreement may be terminated at any time, without penalty, by
the Portfolio's Trustees or Morgan, in each case on not more
than 60 days' nor less than 30 days' written notice to the
other party.
Under the Services Agreement, the Portfolio has agreed to
pay Morgan fees equal to the Portfolio's allocable share of an
annual complex-wide charge. This charge is calculated daily
based on the aggregate net assets of the Master Portfolios and
J.P. Morgan Series Trust in accordance with the following
annual schedule: 0.09% of the first $7 billion of their
aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion,
less the complex-wide fees payable to FDI. The portion of
this charge payable the Portfolio is determined by the
proportionate share that its net assets bear to the total net
assets of the J.P. Morgan Funds, the J.P. Morgan Institutional
Funds, the Master Portfolios, the other investors in the
Master Portfolios for which Morgan provides similar services
and J.P. Morgan Series Trust.
Under prior administrative services agreements in effect
from December 29, 1995 through July 31, 1996, with Morgan, the
Portfolio paid Morgan a fee equal to its proportionate share
of an annual complex-wide charge. This charge was calculated
daily based on the aggregate net assets of the Master
Portfolios in accordance with the following schedule: 0.06%
of the first $7 billion of the Master Portfolios' aggregate
average daily net assets, and 0.03% of the Master Portfolios'
average daily net assets in excess of $7 billion.
Prior to December 29, 1995, the Portfolio had entered
into a Financial and Fund Accounting Services Agreement with
Morgan, the provisions of which included certain of the
activities described above and, prior to September 1, 1995,
also included reimbursement of the Portfolio's usual and
customary expenses. The services fees paid by the Portfolio
to Morgan are as follows: For the fiscal year ended November
30, 1995: $373,077. For the fiscal year ended November 30,
1996: $891,730. For the fiscal year ended November 30, 1997:
$1,256,131.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02110, serves as the
Trust's and the Portfolio's custodian and fund accounting
agent and the Trust's dividend disbursing agent. Pursuant to
the Custodian Contract with the Portfolio, State Street is
responsible for maintaining the books of account and records
of portfolio transactions and holding portfolio securities and
cash. State Street maintains Portfolio transaction records.
As transfer agent and dividend disbursing agent, State Street
is responsible for maintaining account records detailing the
ownership of the shares of the Portfolio and for crediting
income, capital gains and other changes in share ownership to
shareholder accounts.
Boston Financial Data Services, Inc. serves as the
Transfer Agent for the Fund.
Financial Professionals
The services provided by financial professionals may
include establishing and maintaining shareholder accounts,
processing purchase and redemption transactions, arranging for
bank wires, performing shareholder subaccounting, answering
client inquiries regarding the Portfolio, assisting clients in
changing dividend options, account designations and addresses,
providing periodic statements showing the client's account
balance and integrating these statements with those of other
transactions and balances in the client's other accounts
services by the financial professional, transmitting proxy
statements, periodic reports, updated prospectuses and other
communications to shareholders and, with respect to meetings
of shareholders, collecting, tabulating and forwarding
executed proxies and obtaining such other services as Morgan
or the financial professional clients may reasonably request
and agree upon with the financial professional.
Although there is no sales charge levied directly by the
Portfolio, financial professionals may establish their own
terms and conditions for providing their services and may
charge investors a transaction-based or other fee for their
services. Such charges may vary among financial professionals
but in all cases will be retained by the financial
professional and will not be remitted to the Portfolio or J.P.
Morgan.
Independent Accountants
The Independent Accountants of the Portfolio are
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New
York, New York 10036. The Independent Accountants of the Fund
are also PricewaterhouseCoopers LLP, One Post Office Square,
Boston, Massachusetts 02109. PricewaterhouseCoopers LLP
conducts an annual audit of the financial statements of the
Fund and the Portfolio, assists in the preparation and/or
review of the Fund's and the Portfolio's federal and state
income tax returns and consults with the Fund and the
Portfolio as to matters of accounting and federal and state
income taxation.
Expenses
From time to time, the Fund Administrator may agree
voluntarily to waive all or a portion of the fee it would
otherwise be entitled to receive from the Fund. The Fund
Administrator may decide to waive all or a portion of its fees
from the Fund for such reasons as attempting to make the
Fund's performance more competitive as compared to similar
funds. The effect of the fee waivers in effect at the date of
this Statement of Additional Information on the fees payable
by the Fund is reflected in the Fees and Expense Information
located in the front of the Fund's Prospectus. Existing
voluntary fee waivers by the Fund Administrator may be
terminated or reduced in amount at any time, and solely at the
discretion of the Fund Administrator. Shareholders will be
notified of any change at the time that it becomes effective.
In addition to the fees payable to Pierpont Group, Inc.,
Morgan and FDI under the various agreements discussed above,
the Portfolio is responsible for usual and customary expenses
associated with its operations. Such expenses include
organization expenses, legal fees, accounting expenses,
insurance costs, the compensation and expenses of the
Portfolio's Trustees, registration fees under federal and
foreign securities laws, extraordinary expenses, custodian
fees and brokerage expenses. Under fee arrangements prior to
September 1, 1995, Morgan was responsible for reimbursements
to the Portfolio for the fee of the Portfolio's Administrator
and the Portfolio's usual and customary expenses described
above (excluding organization and extraordinary expenses,
custodian fees and brokerage expenses).
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchasing Shares
Investors may open accounts with the Fund through their
financial planners or investment professionals, or through 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 and 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 prior to 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 accepted by 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.
Third party checks which are payable to an existing
shareholder who is a natural person (as opposed to a
corporation or partnership) and endorsed over to a Fund or
State Street Bank and Trust Company will be accepted. To
ensure that checks are collected by the Trust, redemptions of
shares purchased by check, or exchanges from such shares, are
not effected until the clearance of the check which may take
up to 15 days after the date of purchase, unless arrangements
are made with the Administrator.
If the check accompanying any purchase order does not
clear, or if there are insufficient funds in your bank
account, 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.
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. Shareholder redeeming shares of the Fund should be
aware that the Fund attempts to maintain a stable net asset
value of $1.00 per share. However, there can be no assurance
that the Fund will be able to continue to do so, and in the
case the net asset value of the Fund's shares might deviate
from $1.00 per share. Accordingly, a redemption request might
result in payment of a dollar amount which differs from the
number of shares redeemed.
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 or the Portfolio determines that it would be
detrimental to the best interest of the remaining shareholders
of the Fund or Portfolio 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
Portfolio, in lieu of cash, in conformity with the applicable
rules 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. In addition, if a shareholder sends a check
for the purchase of fund shares and shares are purchased never
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 and the Portfolio reserve
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
Portfolio 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 are 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
The Money Market Fund 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. In the event that trading
in the money markets is scheduled to end earlier than the
close of trading on the New York Stock Exchange in observance
of these holidays, the Fund and the Portfolio may close for
purchases and redemptions in advance of the end of trading of
the money markets. The Fund and the Portfolio may also close
for purchases and redemptions at such other times as may be
determined by the 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.
The Portfolio's portfolio securities are valued by the
amortized cost method. The purpose of this method of
calculation is to attempt to maintain a stable net asset value
per share of the Fund of $1.00. No assurances can be given
that this goal can be attained. The amortized cost method of
valuation values a security at its cost at the time of
purchase and thereafter assumes a constant amortization of
maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the
instrument. If a difference of more than 1/2 of 1% occurs
between valuation based on the amortized cost method and
valuation based on market value, the Trustees of the Portfolio
will take steps necessary to reduce such deviation, such as
changing a Fund's dividend policy, shortening the average
portfolio maturity, realizing gains or losses, or reducing the
number of outstanding Fund shares. Any reduction of
outstanding shares will be effected by having each shareholder
contribute to the Fund's capital the necessary shares on a pro
rata basis. Each shareholder will be deemed to have agreed to
such contribution in these circumstances by the investor's
investment in the Funds. See "Taxation of the Funds" below.
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.
To maintain a constant $1.00 per share net asset value,
the Trustees of the Portfolio may direct that the number of
outstanding shares be reduced pro rata. If this adjustment is
made, it will reflect the lower market value of portfolio
securities and not realized losses. The adjustment may result
in a shareholder having more dividend income than net income in
his account for a period. When the number of outstanding
shares of the Fund is reduced, the shareholder's basis in the
shares of the Fund may be adjusted to reflect the difference
between taxable income and net dividends actually distributed.
Thew difference may be realized as a capital loss when the
shares are liquidated. Subject to certain limited exceptions,
capital losses cannot be used to offset ordinary income. See
"Net Asset Value."
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 Portfolio lapses or is terminated through a closing
transaction, such as a repurchase by the Portfolio of the
option from its holder, the Portfolio 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 Portfolio in the
closing transaction. If securities are purchased by the
Portfolio pursuant to the exercise of a put option written by
the Portfolio, the Portfolio 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.
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.
State and Local Taxes. The Fund may also be subject to
state and/or local taxes in jurisdictions in which the Fund is
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 Fund.
Other Taxation. The Fund is a 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. The Portfolio is
organized as a New York trust. The Portfolio is not subject to
federal income taxation or income or franchise tax in the State
of New York of The Commonwealth of Massachusetts. The
investment by the Fund in the Portfolio does not cause the Fund
to be liable for any income or franchise tax in the State of
New York.
PERFORMANCE DATA
From time to time, the Fund may quote performance in
terms of yield, actual distributions, total return or capital
appreciation in reports, sales literature, and advertisements
published by the Fund. Current performance information for
the Fund may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See
the Prospectus.
Yield Quotations. As required by the regulations of the
SEC, current yield for the Money Market Fund is computed by
determining the net change exclusive of capital changes in the
value of a hypothetical pre-existing account having a balance
of one share at the beginning of a seven day calendar period,
dividing the net change in account value of the account at the
beginning of the period, and multiplying the return over the
seven-day period by 365/7. For purposes of the calculation,
net change in account value reflects the value of additional
shares purchased with dividends from the original share and
dividends declared on both the original share and any such
additional shares, but does not reflect realized gains or
losses or unrealized appreciation or depreciation. Effective
yield for the Money Market Fund is computed by annualizing the
seven-day return with all dividends reinvested in additional
Fund shares.
For the seven calendar days ended November 30, 1998, the
current yield and effective yield of the Money Market Fund
were 5.09% and 5.22%, respectively. These figures reflect a
fee waiver in effect during the relevant time period. In the
absence of such waiver, these figures would have been 4.89%
and 5.01%, respectively.
Total Return Quotations. As required by the regulations
of the SEC, the annualized total return of the Fund for a
period is computed by assuming a hypothetical initial payment
of $1,000. It is then assumed that all of the dividends and
distributions by the Fund over the period are reinvested. It
is then assumed that at the end of the period, the entire
amount is redeemed. The annualized total return is then
calculated by determining the annual rate required for the
initial payment to grow to the amount that would have been
received upon redemption. As of November 30, 1998, the Money
Market Fund's annualized one-, five- and ten-year total
returns were 4.82%, 4.89% and 5.21%, respectively.
Aggregate total returns, reflecting the cumulative
percentage change over a measuring period, may also be
calculated.
General. The Fund's performance will vary from time to
time depending upon market conditions, the composition of the
Portfolio, and its total operating expenses. Consequently,
any given performance quotation should not be considered
representative of the Fund's performance for any specified
period in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an
investment in the Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated
period of time.
Comparative performance information may be used from time
to time in advertising the Fund's shares, including
appropriate market indices including the benchmarks indicated
under "Investment Advisor" above or data from Lipper, Inc.,
Micropal, Inc., Ibbotson Associates, Morningstar Inc., the Dow
Jones Industrial Average and other industry publications.
From time to time, the Fund may, in addition to any other
permissible information, include the following types of
information in advertisements, supplemental sales literature
and reports to shareholders: (1) discussions of general
economic or financial principles (such as the effects of
compounding and the benefits of dollar-cost averaging); (2)
discussions of general economic trends, (3) presentations of
statistical data to supplement such discussions; (4)
descriptions of past or anticipated portfolio holdings for the
Fund, (5) descriptions of investment strategies for the Fund,
(6) descriptions or comparisons of various savings and
investment products (including, but not limited to, qualified
retirement plans and individual stocks and bonds), which may or
may not include the Fund; (7) comparisons of investment
products (including the Fund) with relevant markets or industry
indices or other appropriate benchmarks; (8) discussions of
Fund rankings or ratings br recognized rating organizations;
(9) discussions of various statistical methods quantifying the
Fund's volatility relative to its benchmark or to past
performance, including risk adjusted measures. The Fund may
also include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in
such communications. Such performance examples will be based
on an express set of assumptions and are not indicative of the
performance of the Fund.
Portfolio Transactions
The Advisor places orders for the Portfolio for all
purchases and sales of portfolio securities, enters into
repurchase agreements and may enter into reverse repurchase
agreements and execute loans of portfolio securities on behalf
of the Portfolio. See "Investment Objective and Policies."
Fixed income and debt securities and municipal bonds and
notes are generally traded at a net price with dealers acting
as principal for their own accounts without a stated
commission. The price of the security usually includes profit
to the dealers. In underwritten offerings, securities are
purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain
securities may be purchased directly from an issuer, in which
case no commissions or discounts are paid.
Portfolio transactions will be undertaken principally to
accomplish the Portfolio's objective in relation to expected
movements in the general level of interest rates. The
Portfolio may engage in short-term trading consistent with its
objective. See "Investment Objectives and Policies."
In connection with portfolio transactions for the
Portfolio, Morgan intends to seek best execution on a
competitive basis for both purchases and sales of securities.
The Portfolio has a policy of investing only in
securities with maturities of less than thirteen months, which
policy will result in high portfolio turnovers. Since
brokerage commissions are not normally paid on investments
which the Portfolio makes, turnover resulting from such
investments should not adversely affect the net asset value or
net income of the Portfolio.
Subject to the overriding objective of obtaining best
execution of orders, the Advisor may allocate a portion of the
Portfolio's brokerage transactions to affiliates of the
Advisor. In order for affiliates of the Advisor to effect any
portfolio transactions for the Portfolio, the commissions,
fees or other renumeration received by such affiliates must be
reasonable and fair compared to the commissions, fees or other
renumeration paid to other brokers in connection with
comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable
period of time. Furthermore, the Trustees of the Portfolio,
including a majority of the Trustees who are not "interested
persons," have adopted procedures which are reasonably
designed to provide that any commissions, fees or other
renumeration paid to such affiliates are consistent with the
foregoing standard.
Portfolio securities will not be purchased from or
through or sold to or through the Portfolio's Co-
Administrator, the Advisor, the Fund's Administrator or the
Distributor or any other "affiliated person" as defined in the
1940 Act, of the Co-Administrator, Advisor, Fund Administrator
or Distributor when such entities are acting as principals,
except to the extent permitted by law. In addition, the
Portfolio will not purchase securities during the existence of
any underwriting group relating thereto of which the Advisor
or an affiliate of the Advisor is a member, except to the
extent permitted by law.
On those occasions when the Advisor deems the purchase or
sale of a security to be in the best interests of the
Portfolio as well as other customers including other customers
including other Portfolios, the Advisor, to the extent
permitted by applicable laws and regulations, may, but is not
obligated to, aggregate the securities to be sold or purchased
for the Portfolio with those to be sold or purchased for other
customers in order to obtain best execution, including lower
brokerage commissions if appropriate. In such event,
allocation of the securities so purchased or sold, as well as
any expense incurred in the transaction, will be made by the
Advisor in the manner it considers to be most equitable and
consistent with the Advisor's fiduciary obligations to the
Portfolio. In some instances, this procedure might adversely
affect the Portfolio.
Massachusetts Trust
The Fund 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.
Effective May 12, 1997, the name of The Money Market
Portfolio was changed to The Prime Money Market Portfolio.
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 the 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 the
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 Fund 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 dollar of net asset value (or a proportionate fractional
vote in respect of a fractional dollar 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.
Control Persons
As of January 21, 1999, the following persons or entities
owned more than 5% of the outstanding share of the Fund.
Certain of these shareholders are omnibus organizations.
Sanwa Bank, San Francisco, California 14%
Bear Stearns, Brroklyn, New York 7%
Benefits Resources, Inc., Shelton, Connecticut 6%
DCIP, Las Vegas, Nevada 6%
Management Ownership
As of January 21, 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
the Fund, except for Robert P. Watson who owns 72,704 of the
outstanding shares of the Fund.
Master-Feeder Investment Structure
Unlike other mutual funds which directly acquire and
manage their own portfolio of securities, the Fund is an open-
end investment management company which seeks to achieve its
investment objective by investing all of its investable assets
in the Portfolio, also called the "Master Portfolio." The
Portfolio is a separate registered investment company with the
same investment objective as the Fund, also called the "Feeder
Fund." Generally, when a Master Portfolio seeks a vote to
change any of its fundamental restrictions or policies, the
Feeder Fund will hold a shareholder meeting and cast its vote
proportionally, as instructed by its shareholders. Fund
shareholders are entitled to one vote for each dollar of net
asset value (or a proportionate fractional vote in respect of a
fractional dollar amount), on matters on which the shares of
the Fund shall be entitled to vote.
In additional to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and
will bear a proportionate share of the Portfolio's exposure.
However, the other investors investing in the Portfolio may
sell shares of their own fund using a different pricing
structure than the Fund. Such different pricing structures may
result in differences in returns experienced by investors in
other funds that invest in the Portfolio. Such differences in
returns are not uncommon and are present in other mutual fund
structures. Information concerning other holders of interests
in the Portfolio is available from Morgan at (800) 521-5411.
The Trust may withdraw the investment of the Fund from the
Portfolio at any time if the Board of Trustees of the Trust
determines that it is in the best interests of the Trust to do
so. Upon any such withdrawal, the Board of Trustees of the
Trust would consider what action might be taken, including the
investment of all the assets of the Fund into another pooled
investment entity having the same investment objective and
restrictions and policies as the Fund.
Certain changes in the Portfolio's fundamental investment
policies or restrictions, or a failure by the Fund's
shareholders to approve such change in the Portfolio's
investment restrictions, may require additional withdrawal of
the Fund's interest in the Portfolio. Any such withdrawal
could result in a distribution in kind of the Portfolio's
portfolio securities, as opposed to a cash distribution, which
may or may not be readily marketable. The distribution in kind
may result in the Fund having a less diversified portfolio of
investments or may adversely affect the Fund's liquidity, and
the Fund could incur brokerage, tax or other changes in
converting the securities to cash. Notwithstanding the above,
there are other means for meeting shareholder redemption
requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially
affected by the actions of larger funds investing in the
Portfolio. For example, if a large fund withdraws from the
Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower
returns.
Additionally, because the Portfolio would become smaller, it
may become less diversified, resulting in potentially increased
portfolio risk (however these possibilities also exist for
traditionally structured funds which have large or
institutional investors who may withdraw from a Fund). Also,
funds with greater pro rata ownership in the Portfolio could
have effective voting control over the operations of the
Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to
continue the operation of the Portfolio upon the withdrawal of
another investor in the Portfolio), the Trust will hold a
meeting of shareholders of the Fund and will cast all of its
votes proportionately as instructed by the Fund's shareholders.
The Trust will vote the shares held by the Fund's shareholders
who do not give voting instructions in the same proportion as
the shares of Fund shareholders who do not give voting
instructions. Shareholders of the Fund who do not vote will
have no affect on the outcome of such matters.
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 the Fund, and the Report of Independent Accountant of
PricewaterhouseCoopers LLP are incorporated by reference to
this SAI from their respective annual report filing made with
the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-
1 thereunder. The following 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.
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.
THE MANAGERS FUNDS
PART C. OTHER INFORMATION
-----------------
Item 23. Exhibits
--------
1. (a) -Declaration of Trust dated November 23, 1987
Previously filed with Post-Effective Amendment No. 20
of the Registrant with the Securities and Exchange
Commission on 9/28/90; Refiled electronically with
Post-Effective Amendment No. 41 of the Registrant with
the Securities and Exchange Commission on 10/16/97.
-Amendment to Declaration of Trust dated May 12, 1993.
Previously filed with Post-Effective Amendment
No. 32 of the Registrant with the Securities and
Exchange Commission on 11/5/93; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
-Amendment to Declaration of Trust dated June 30, 1993.
Previously filed with Post-Effective Amendment
No. 32 of the Registrant with the Securities and
Exchange Commission on 11/5/93; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
-Amendment to Declaration of Trust dated December 8, 1997.
Previously filed with Post-Effective Amendment
No. 43 of the Registrant with the Securities and
Exchange Commission on 4/29/98.
(b) By-Laws of the Trust.
Previously filed with Post-Effective Amendment
No. 20 of the Registant with the Securities and
Exchange Commission on 9/28/90; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
(c) Instruments Defining Rights of Security Holders.
Previously filed with Post-Effective Amendment
No. 34 of the Registrant with the Securities and
Exchange Commission 3/7/95; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
(d) Investment Advisory Contracts.
-Fund Management Agreement dated August 17, 1990
between EAIMC Partners, L.P. (now "The Managers Funds,
L.P.") and the Trust.
Previously filed with Post-Effective Amendment
No. 32 of the Registrant with the Securities and
Exchange Commission on 11/5/93; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
-Asset Management Agreements between The Managers
Funds, L.P. and each of the Asset Managers identified
in the Registration Statement.
Previously filed with Post-Effective Amendment
No. 32 of the Registrant with the Securities and
Exchange Commission on 11/5/93; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
(e) Underwriting Contracts.
-Form of Distribution Agreement between The
Managers Funds and The Managers Funds, L.P.
Previously filed with Post-Effective Amendment
No. 28 of the Registrant with the Securities and
Exchange Commission on 11/9/92; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
(f) Bonus or Profit Sharing Contracts.
Not Applicable.
(g) Custodian Agreements.
-Form of the Custodian Agreement with State
Street Bank and Trust Company.
Previously filed with Post-Effective Amendment
No. 28 of the Registrant with the Securities and
Exchange Commission on 11/9/92; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
(h) Other Material Contracts.
-Transfer Agency Agreement between The Managers
Funds and State Street Bank and Trust Company.
Previously filed with Post-Effective Amendment
No. 33 of the Registrant with the Securities and
Exchange Commission on 4/24/94; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
-Form of Administration and Shareholder Servicing
Agreement between the Trust and The Managers Funds, L.P.
Previously filed with Post-Effective Amendment
No. 28 of the Registrant with the Securities and
Exchange Commission on 11/9/92; Refiled electronically
with Post-Effective Amendment No. 41 of the Registrant
with the Securities and Exchange Commission on
10/16/97.
-Form of License Agreement Relating to the Use of Name
between The Managers Funds and The Managers Funds, L.P.
Previously filed with Post-Effective Amendment No. 28
of the Registrant with the Securities and Exchange
Commission on 11/9/92; Refiled electronically with Post-
Effective Amendment No. 41 of the Registrant with the
Securities and Exchange Commission on 10/16/97.
(i) Opinion and Consent of Swidler Berlin Shereff Friedman, LLP
Refiled electronically in and incorporated by
reference to PEA 41 on 10/16/97; initially filed in
PEA 20 on 9/28/90.
(j) Other Opinions.
-Consent of Independent Accountants
PricewaterhouseCoopers LLP
-Consent of Independent Accountants
PricewaterhouseCoopers LLP
(k) Omitted Financial Statements.
Not Applicable.
(l) Initial Capital Agreements.
Not Applicable.
(m) Rule 12b-1 Plan.
Not Applicable.
(n) Financial Data Schedules.
-Income Equity Fund
-Capital Appreciation Fund
-Special Equity Fund
-International Equity Fund
-Emerging Markets Equity Fund
-Bond Fund
-Short and Intermediate Bond Fund
-Intermediate Mortgage Fund
-Global Bond Fund
-Money Market Fund
(o) Rule 18f-3 Plan.
Not Applicable.
2. (a) Powers of Attorney for William H. Graulty,
Madeline H. McWhinney, Steven J. Paggioli, Thomas R.
Schneeweis, Robert P. Watson and Donald S. Rumery
Previously filed with Post-Effective Amendment
No. 42 of the Registrant with the Securities and
Exchange Commission on 12/31/97.
(b) Powers of Attorney for the Trustees and President
and Treasurer of The Prime Money Market Portfolio:
Michael P. Mallardi, Frederick S. Addy, William G.
Burns, Matthew Healey, Arthur C. Eschenlauer and
Richard W. Ingram
Previously filed with Post-Effective Amendment
No. 41 of the Registrant with the Securities and
Exchange Commission on 10/16/97.
- -----------------------------------------
* Included as an exhibit to this filing.
Item 24. Persons Controlled by or Under Common
Control with the Funds.
---------------------------------------
------
None.
Item 25. Indemnification.
----------------
The following sections of the Registrant's Declaration of Trust,
dated November 23, 1987, which relate to indemnification of
Trustees, officers and others by the Trust and to exemption from
personal liability of Trustees, officers and others, also relate
to indemnification: Section 2.9 (d), (f); Sections 4.1 - 4.3;
and Section 8.3 (b).
These Sections are reproduced below.
Section 2.9. Miscellaneous Powers. The Trustee shall have
the power to: (d) purchase, and pay for out of the Trust
Property, insurance policies insuring the Shareholders,
Trustees, Officers, employees, agents, Investment Advisers,
Distributors, selected dealers or independent contractors of the
Trust against all claims arising by reason of holding any such
position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence,
or whether or not the Trust would have the power to indemnify
such Person against such liability; (f) to the extent permitted
by law, indemnify any person with whom the Trust has dealings,
including the Investment Adviser, Distributor, Transfer Agent
and selected dealers, to such extent as the Trustees shall
determine;
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders,
Trustees, Etc. No Shareholder shall be subject to any
personal liability whatsoever to any Person in connection
with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the
Trust shall be subject to any personal liability whatsoever
to any person, other than to the Trust or its Shareholders,
in connection with the Trust Property or the affairs of the
Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard of his
duties with respect to such Person, and all such Persons
shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs
of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party
to any or proceeding to enforce any such liability of the
Trust or any Series, he shall not, on account thereof, be
held to any personal liability. The Trust or Series shall
indemnify and hold each Shareholder harmless from and
against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or
having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably
incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this
Section 4.1 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
Section 4.2. Non-liability of Trustees, Etc. No
Trustee, officer, employee or agent of the Trust shall be
liable to the Trust or to any Shareholder, Trustee, officer,
employee, or agent thereof for any action or failure to act
(including without limitation the failure to compel in any
way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties
involved in the conduct of his office or for his failure to
act in good faith in the reasonable belief that his action
was in the best interests of the Trust. Notwithstanding
anything in this Article IV or elsewhere in this Declaration
to the contrary and without in any way increasing the
liability of the Trustees beyond that otherwise provided in
this Declaration, no Trustee shall be liable to the Trust or
to any Shareholder, Trustee, officer, employee or agent for
monetary damages for breach of fiduciary duty as a Trustee;
provided that such provision shall not eliminate or limit
the liability of a Trustee (i) for any breach of the
Trustee's duty of loyalty to the Trust or its Shareholders,
(ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of law,
or (iii) for any transaction from which the Trustee derived
an improper personal benefit.
Section 4.3. Mandatory Indemnification. (a) Subject to
the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is, or has been, a
Trustee or officer of the Trust shall be
indemnified by the Trust or any Series to the
fullest extent permitted by law against all
liability and against all expenses reasonably
incurred or aid by him in connection with any
claim, action, suit or proceeding in which he
became involved as a party or otherwise by virtue
of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the
settlement thereof;
(ii) the words "claim," "action," "suit," or
proceeding" shall apply to all claims, actions,
suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; the
words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to
a Trustee or officer:
(i) against any liability to the Trust or the
Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which
he shall have been finally adjudicated not to have
acted in good faith in the reasonable belief that his
action was in the best interest of the Trust;
(iii) in the event of a settlement involving
a final adjudication as provided in paragraph
(b)(i) resulting in a payment by a Trustee or
officer, unless there has been a determination
that such Trustee or officer did not engage in
willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in
the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by
(x) vote of a majority of the Disinterested
Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in
office act on the matter) or (y) written opinion
of independent legal counsel.
(C) The rights of indemnification herein
provided may be insured against by policies
maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee
or officer may now or hereafter by entitled, shall
continue as to a person who has ceased to be such
Trustee or officer and shall inure to the benefit
of the heirs, executors, administrators and
assigns of such a person. Nothing contained
herein shall affect any rights to indemnification
to which personnel of the Trust other than
Trustees and officers may be entitled by contract
or otherwise under law.
(d) Expenses of preparation and presentation
of a defense to any claim, action, suit or
proceeding of the character described in paragraph
(a) of this Section 4.3 may be advanced by the
Trust or any Series prior to final disposition
thereof upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled
to indemnification under this Section 4.3,
provided that either
(i) such undertaking is secured by a surety bond
or some other appropriate security provided
by the recipient, or the Trust shall be insured
against losses arising out of any such advances;
or
(ii) a majority of the Disinterested Trustees
acting on the matter (provided that a
majority of the Disinterested Trustees act on
the matter), or an independent legal counsel
in a written opinion, shall determine, based
upon a review of readily available facts (as
opposed to a full trial-type inquiry), that
there is reason to believe that the recipient
ultimately will be found entitled to
indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is
one who is not (i) an "Interested Person" of the Trust
(including anyone who has been exempted from being an
"Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or
proceeding.
Section 8.3. Amendment Procedure. (b) No amendment may be
made under this Section 8.3 which would change any rights with
respect to any Shares of the Trust or of any Series by reducing
the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto,
except with the vote or consent of the holders of two-thirds of
the Shares outstanding and entitled to vote, or by such other
vote as may be established by the Trustees with respect to any
Series of Shares. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption
from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon
Shareholders.
Item 26. Business and Other Connections of the
Investment Adviser.
---------------------------------------
----------
The business and other connections of the officers and directors
of The Managers Funds, L.P. (the Registrant's Manager), and the
asset managers of the Registrant are listed in Schedules A and D
of their respective ADV Forms as currently on file with the
Commission, the texts of which Schedules are hereby incorporated
herein by reference.
The file numbers of said ADV Forms are as follows:
The Managers Funds, L.P. 801-19215
Scudder Kemper Investments, Inc. 801-252
Chartwell Investment Partners, L.P. 801-54124
Roxbury Capital Management, LLC 801-55521
Essex Investment Management Co., LLC 801-12548
Kern Capital Management LLC 801-54766
Liberty Investment Management, a
Division of Goldman Sachs Asset
Management 801-21343
Pilgrim, Baxter & Associates, Ltd. 801-19165RC
Westport Asset Management, Inc. 801-21854
Lazard Asset Management 801-6568
King Street Advisors, Limited 801-55470
Loomis, Sayles & Company, L.P. 801-17000
Standish, Ayer & Wood, Inc. 801-584
Jennison Associates LLC 801-5608
Rogge Global Partners, plc. 801-25482
Item 27. Principal Underwriters.
-----------------------
(a) The Managers Funds, L.P. ("TMF") acts as principal
underwriter for the Registrant. TMF does not
currently act as principal underwriter for any
other investment company. TMF's address is 40
Richards Avenue, Norwalk, Connecticut 06854.
(b) The business and other connections of the officers
and directors of The Managers Funds, L.P.
(formerly EAIMC Partners, L.P.) (the Registrant's
Manager), are listed in Schedules A and D of its
ADV Form as currently on file with the Commission,
the text of which Schedules are hereby
incorporated herein by reference. The file number
of said ADV Form is 801-19215.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
All accounts and records required to be maintained
by Section 31 (a) of the Investment Company Act of
1940 and Rules 31a-1 and 31a-3 promulgated
thereunder are maintained in the following
locations:
Rule 31a-1
(a) Records forming the basis for financial statements of
Registrant are kept at the principal offices of SSB,
Managers, Adviser & AM (see legend below).
Legend: Managers: The Managers Funds
40 Richards Avenue
Norwalk, Connecticut 06854
SSB: State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110
Adviser: The Managers Funds, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854
AM: Asset Managers (see Statement of
Additional Information section
entitled "Management of the
Funds" for the name, address
and a description of the asset
managers of each Fund)
(b) Managers Records:
(1) SSB -- Journals containing daily
record of securities transactions,
receipts and deliveries of securities and
receipts and disbursements of cash.
(2) SSB -- General and auxiliary
ledgers
(3) Not Applicable
(4) Managers -- Corporate Documents
(5) AM -- Brokerage orders
(6) AM -- Other portfolio purchase
orders
(7) SSB -- Contractual commitments
(8) SSB and Managers -- Trial balances
(9) AM -- Reasons for brokerage
allocations
(10) AM -- Persons authorizing
purchases and sales
(11) Managers and AM -- Files of
advisory material
(c) Not applicable
(d) Adviser -- Broker/dealer records, to the
extent applicable
(e) Not applicable
(f) Adviser and AM -- Investment adviser records
Item 31. Management Services.
--------------------
Not Applicable.
Item 32. Undertakings.
-------------
(a) Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to Trustees,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
Trustee, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The Registrant shall furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
(c) If requested to do so by the holders of at least 10%
of the Registrant's outstanding shares, the Registrant will
call a meeting of shareholders for the purpose of voting
upon the removal of a trustee or trustees and the Registrant
will assist communications with other shareholders as
required by Section 16(c) of the Investment Company Act of
1940.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933, as amended, and has duly caused this
Amendment to its Registration Statement on Form N-1A to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of Norwalk, and the State of Connecticut on this 29th day of January,
1999.
THE MANAGERS FUNDS
By:/s/Robert P. Watson
Robert P. Watson
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registrant's Registration Statement has
been signed below by the following persons in the capacities and on
the dates indicated.
Robert P. Watson*
- --------------------
Robert P. Watson
Trustee and President
Principal Executive
Officer
Donald S. Rumery*
- --------------------
Donald S. Rumery
Principal Financial
and Accounting Officer
William W. Graulty*
- --------------------
William W. Graulty
Trustee
Madeline H. McWhinney*
- ---------------------
Madeline H. McWhinney
Trustee
Steven J. Paggioli*
- ---------------------
Steven J. Paggioli
Trustee
Thomas R. Schneeweis*
- ---------------------
Thomas R. Schneeweis
Trustee
By: /s/Robert P. Watson
Robert P. Watson, as attorney-in-fact pursuant to a
power of attorney previously filed.
SIGNATURES
The Prime Money Market Portfolio (the "Portfolio") has duly
caused this registration statement on Form N-1A ("Registration
Statement") of The Managers Funds (the "Trust") (File No. 2-84012) to
be signed on its behalf by the undersigned, thereto duly authorized,
in the City of George Town, Grand Cayman, on the 29th day of January,
1999.
THE PRIME MONEY MARKET PORTFOLIO
By: /s/ Jacqueline Henning
Jacqueline Henning
Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, the
Trust's Registration Statement has been signed below by the following
persons in the capacities indicated on January 29, 1999.
Richard W. Ingram*
- -------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting
Officer) of the Portfolio
Matthew Healey*
- -------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal
Executive Officer) of the Portfolio
Frederick S. Addy*
- -------------------------
Frederick S. Addy
Trustee of the Portfolio
William G. Burns*
- -------------------------
William G. Burns
Trustee of the Portfolio
Arthur C. Eschenlauer*
- ------------------------
Arthur C. Eschenlauer
Trustee of the Portfolio
Michael P. Mallardi*
- ------------------------
Michael P. Mallardi
Trustee of the Portfolio
*By /s/ Jacqueline Henning
- -------------------------
Jacqueline Henning, as attorney-in-fact pursuant to a
power of attorney previously filed.
The Managers Funds
40 Richards Avenue
Norwalk, CT 06854
(203)857-5321
January 29, 1999
VIA EDGAR
- ---------
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: The Managers Funds Post-Effective Amendment 44
to Registration Statement on Form N-1A
File Nos. 2-84012; 811-3752
-----------------------------------------------
Commissioners:
We are hereby filing Post Effective Amendment No. 44 to The
Managers Funds' (the "Trust") Registration Statement on Form
N-1A (the "Amendment") under the Securities Act of 1933 (the
"1933 Act") and the Investment Company Act of 1940 (the
"1940 Act"), as amended.
The Amendment is filed pursuant to paragraph (a) of Rule 485
under the 1933 Act and is being filed as the Trust's annual
update to its Registration Statement and in response to the
Commission's Plain English Initiative.
It is proposed that this Amendment become effective on April
1, 1999.
It is anticipated that a filing pursuant to paragraph (b) of
Rule 485 under the 1933 Act will be made to update the
Financial Statements with audited 1998 numbers and to
include the Financial Data Schedules of such Financial
Statements.
Should you have any questions on this filing, please feel
free to call the undersigned at (203)857-5321, or Judith L.
Shandling of Swidler Berlin Shereff Friedman, LLP at
(212)891-9459.
Sincerely,
/s/Donald S. Rumery
Donald S. Rumery
Secretary
cc: Judith L. Shandling, Esquire
