THE MANAGERS FUNDS
PROSPECTUS
Dated May 1, 2000, as supplemented December 1, 2000
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SMALL COMPANY FUND
SPECIAL EQUITY FUND
We pick the talent. You reap the results.
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.
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TABLE OF CONTENTS
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RISK/RETURN SUMMARY
Key Information 1
Performance Summary 4
Fees and Expenses 5
SUMMARY OF THE FUNDS
The Managers Funds 7
Small Company Fund 8
Special Equity Fund 11
ADDITIONAL PRACTICES/RISKS
Other Securities and Investment Practices 15
A Few Words about Risk 17
ABOUT YOUR INVESTMENT
Financial Highlights 20
Your Account 22
How to Purchase Shares 24
How to Redeem Shares 25
Investor Services 26
The Funds and their Policies 27
Accounts Statements 28
Dividends and Distributions 28
Tax Information 28
FOR MORE INFORMATION
For More Information Back Cover
FOUNDED IN 1983, THE MANAGERS FUNDS OFFERS INDIVIDUAL AND
INSTITUTIONAL INVESTORS THE EXPERIENCE AND DISCIPLINE OF SOME OF
THE WORLD'S MOST HIGHLY REGARDED INVESTMENT PROFESSIONALS.
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RISK/RETURN SUMMARY
KEY INFORMATION
This Prospectus contains important information for anyone
interested in investing in Managers Small Company Fund and/or
Managers Special Equity Fund (each a "Fund" and collectively the
"Funds"), each a series of The Managers Funds no-load mutual fund
family. Please read this document carefully before you invest
and keep it for future reference. You should base your purchase
of shares of these Funds on your own goals, risk preferences and
investment time horizons.
Summary of the Goals, Principal Strategies and Principal Risk
Factors of the Funds
The following is a summary of the goals, principal strategies and
principal risk factors of the Funds.
Fund Goal Principal Strategies Principal Risk
Factors
------------ --------- --------------------- ---------------
Small Long-term Invests principally Liquidity Risk
Company Fund capital in the equity Market Risk
appreciati securities of small Price Risk
on from companies Small-
equity Capitalization
securities Seeks investments Stock Risk
of small with the potential
companies for capital
appreciation as a
result of earnings
growth and/or
improvements in
equity valuation
Special Long-term Invests principally Liquidity Risk
Equity Fund capital in equity securities Market Risk
appreciati of small to medium Price Risk
on from companies Small-
equity Capitalization
securities Seeks investments Stock Risk
of small- with the potential
and medium- for capital
capitaliza appreciation as a
tion result of earnings
companies growth and/or
improvements in
equity valuation
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Principal Risk Factors
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 the Funds. Before you invest, please make
sure that you have read, and understand, the risk factors that
apply to the Fund .
The following is a discussion of the principal risk factors of
the Funds.
Liquidity Risk
This is the risk that the Fund cannot sell a security at a
reasonable price within a reasonable time frame when it wants or
needs to due to a lack of buyers for the security. This risk
applies to all assets. However, it is higher for small-
capitalization stocks and stocks of foreign companies than it
typically is for large-capitalization domestic stocks. 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
it 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.
Market Risk
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, the value of each Fund's portfolio of investments is also
likely to decrease in value. The decrease in the value of a
Fund's investments, in percentage terms, may be more or less than
the decrease in the value of the market.
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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 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.
Small- Capitalization Stock Risk
Small- capitalization companies often have greater price
volatility, lower trading volume, and less liquidity than larger,
more established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and
experience, smaller shares of their product or service markets,
fewer financial resources and less competitive strength than
larger companies. For these and other reasons, a Fund with
investments in small-capitalization companies carries more risk
than a Fund with investments in large-capitalization companies.
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PERFORMANCE SUMMARY
The following bar chart illustrates the risks of investing in the
Special Equity Fund by showing the Fund's year-by-year total
returns and how the performance of the Fund has varied over the
past ten years. The chart assumes that all dividend and capital
gain distributions have been reinvested. Past performance does
not guarantee future results. Because the Small Company Fund
did not commence operations until after December 31, 1999,
there is no "Performance Summary" for the Fund.
Annual Total Returns - Last Ten Calendar Years
Managers Special Equity Fund
1990 -15.8%
1991 49.8%
1992 16.1%
1993 17.4%
1994 -2.0%
1995 33.9%
1996 24.8%
1997 24.5%
1998 0.2%
1999 54.1%
Best Quarter: 35.9% (4th Quarter 1999)
Worst Quarter: -21.0% (3rd Quarter 1998)
The following table compares the Special Equity Fund's
performance to that of a broadly based securities market index.
Again, the table assumes that dividends and capital gain
distributions have been reinvested for both the Fund and the
applicable Index. As always, the past performance of a Fund is
not an indication of how the Fund will perform in the future.
Because the Small Company Fund did not commence operations until
after December 31, 1999,
there are no "Average Annual Total Returns" presented for the
Fund.
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Average Annual Total Returns
(as a percentage) as of 12/31/99
1 Year 5 Years 10 Years
Special Equity 54.11% 26.28% 18.39%
Fund 21.26% 16.69% 13.40%
Russell 2000
Index
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Funds.
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price) None (0%)
Maximum Deferred Sales Charge (Load) None (0%)
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends and Other Distributions None (0%)
Redemption Fee None (0%)
Exchange Fee None (0%)
Maximum Account Fee None (0%)
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Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
Small Company Special Equity
Fund Fund
Management Fee 0.90%
0.90%
Distribution (12b-1) 0.00%
Fees 0.00%
Other Expenses 0.40% (a) 0.41%
Total Annual Fund 1.31%
Operating Expenses 1.30% (b)
(a) Because the Fund did not commence operations
until after December 31, 1999 , the
"Other Expenses" of the Fund are based on annualized projected
expenses and average net assets for the fiscal year ending
Dcember 31, 2000.
(b) The Managers Funds LLC has contractually agreed,
through at least December 31, 2000, to limit "Total Annual Fund
Operating Expenses" to 1.30% subject to later reimbursement by
the Fund in certain circumstances. See "The Managers Funds."
Example*
This Example will help you compare the costs of investing in the
Funds to the cost of investing in other mutual funds. The
Example makes certain assumptions. 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:
1 Year 3 Years 5 Years 10 Years
Small Company $132 $412 $713 $1,568
Fund
Special Equity $133 $415 $718 $1579
Fund
*The Example should not be considered a representation of past or
future expenses, as actual expenses may be greater or lower than
those shown.
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SUMMARY OF THE FUNDS
THE MANAGERS FUNDS
The Managers Funds is a no-load mutual fund family comprised of
different Funds, each having distinct investment management
objectives, strategies, risks and policies. Many of the Funds
employ a multi-manager investment approach which can provide
added diversification within each portfolio.
The Managers Funds LLC (the "Investment Manager"), a subsidiary
of Affiliated Managers Group, Inc., serves as the investment
manager to the Funds and is responsible for the Funds' overall
administration and distribution. It selects and recommends,
subject to the approval of the Board of Trustees, one or more
asset managers to manage each Fund's investment portfolio. It
also allocates assets to the asset managers based on certain
evolving targets, monitors the performance, security holdings and
investment strategies of these external asset managers and, when
appropriate, researches any potential new asset managers for the
Fund family. The Securities and Exchange Commission has given
the Funds an exemptive order permitting them to change asset
managers without the need for shareholder approval.
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FUND FACTS
Objective: Long-term capital appreciation
Investment Focus: Equity securities of small companies
Benchmark: Russell 2000 Index
Ticker: Not issued
SMALL COMPANY FUND
Objective
The Fund's objective is to achieve long-term capital appreciation
by investing in the equity securities of small companies.
Principal Investment Strategies
Under normal market conditions, the Fund invests at least 65% of
its total assets in equity securities of companies with the
potential for long-term capital appreciation, such as common and
preferred stocks. The Fund generally invests in small companies,
that is, companies with capitalizations similar to companies
which are represented in the Russell 2000
Index. The Fund may retain securities that it already has
purchased even if the specific company outgrows the Fund's
capitalization limits.
The Fund's assets currently are allocated between two asset
managers, each of which acts independently of the other and uses
its own methodology in selecting portfolio investments. Both
asset managers focus exclusively on stocks of small companies
whose businesses are expanding. One asset manager seeks to
identify companies expected to exhibit rapid earnings growth in
the near to medium term while the other asset manager seeks to
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invest in healthy, growing businesses whose stocks are selling at
valuations less than should be expected. Both asset managers
examine the underlying businesses, financial statements,
competitive environment and company managements in order to
assess the future profitability of each company. The asset
managers, thus, expect to generate returns from capital
appreciation due to earnings growth along with improvements in
the valuations of the stocks. A stock is typically sold if the
asset manager believes that the future profitability of a company
does not support its current stock price.
For temporary and defensive purposes, the Fund may invest,
without limit, in cash or quality short-term debt securities
including repurchase agreements. To the extent that the Fund is
invested in these instruments, the Fund will not be pursuing its
investment objective.
Should I Invest in this Fund?
This Fund may be suitable if you:
* Are seeking an opportunity for additional returns
through small company equities 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 stock market risk
* Are seeking current income
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More information on each Fund's investment strategies and
holdings can be found in the current Semi-Annual and Annual
Reports, in the Statement of Additional Information, or on our
website at www.managersfunds.com.
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 variety of
companies, industries and markets. Each Fund is not a complete
investment program, and there is no guarantee that a Fund will
reach its stated goals.
PORTFOLIO MANAGEMENT OF THE FUND
HLM Management Co., Inc. ("HLM") and Kalmar Investment Advisers
("Kalmar") each manage a portion of the Fund.
HLM has managed a portion of the Fund since its inception in
since May 2000. HLM, located at 222 Berkeley Street, 21st Floor,
Boston, Massachusetts, was founded in 1983. As of December 31,
1999, HLM had assets under management of approximately $955
million. HLM
utilizes a team approach to manage theirits portion of the Fund.
The portfolio management team is comprised of Buck Haberkorn,
Judy Lawrie, Peter Grua and Ann Hutchins, all Principals of HLM
with 17, 17, 8 and 3 years at the firm, respectively.
Kalmar has managed a portion of the Fund since its inception in
May 2000. Kalmar, located at Barley Mill House, 3701 Kennett
Pike, Greenville, Delaware, is a Delaware Business Trust formed
in 1996 as a sister asset management organization to Kalmar
Investments, Inc. which was founded in 1982. As of December 31,
1999, the two Kalmar organizations had assets under management
totaling approximately $800 million in small company stocks.
Ford B. Draper, Jr. leads the portfolio management team for the
portion of the Fund managed by Kalmar. Mr. Draper is the
President and Chief Investment Officer of Kalmar, a position he
has held since 1982.
The Fund is obligated by its investment management contract to
pay an annual management fee to The Managers Funds LLC of 0.90%
of the average daily net assets of the Fund. The Managers Funds
LLC, in turn, pays a portion of this fee to HLM and Kalmar.
The Investment Manager has contractually agreed, through at least
December 31, 2000, to waive fees and pay or reimburse the Fund to
the extent total expenses of the Fund exceed 1.30% of the Fund's
average daily net assets. The Fund is obligated to repay the
Investment Manager such amounts waived, paid or reimbursed in
future years provided that the repayment occurs within three (3)
years after the waiver or reimbursement and that such repayment
would not cause the Fund's expenses in any such future year to
exceed 1.30% of the Fund's average daily net assets. In addition
to any other waiver or reimbursement agreed to by the Investment
Manager, an asset manager from time to time may waive all or a
portion of its fee. In such an event, the Investment Manager
will, subject to certain conditions, waive an equal amount of the
Management Fee.
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FUND FACTS
Objective: Long-term capital appreciation
Investment Focus: Equity securities of small- and medium-
capitalization U.S. companies
Benchmark: Russell 2000 Index
Ticker: MGSEX
SPECIAL EQUITY FUND
Objective
The Fund's objective is to achieve long-term capital appreciation
through a diversified portfolio of equity securities of small-
and medium-capitalization companies.
Principal Investment Strategies
Under normal market conditions, the Fund invests at least 65% of
its total assets in equity securities of U.S. companies, such as
common and preferred stocks. Although the Fund is permitted to
purchase securities of both small- and medium-capitalization
companies, the Fund has historically invested substantially all
of its assets in the securities of small-capitalization
companies, that is, companies with
capitalizations similar to companies which are represented in the
Russell 2000 Index. The Fund may retain securities that it
already has purchased even if the company outgrows the Fund's
capitalization limits.
The Fund's assets are currently allocated among five asset
managers, each of which acts independently of the other and uses
its own methodology to select portfolio investments. Three
asset managers utilize a value approach to investing whereby they
seek to identify companies whose improving businesses are for
some reason not being fully recognized by others and which are
thus selling at valuations less than should be expected. The
other two asset managers utilize a growth approach to investing
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whereby they seek to identify companies which are exhibiting
rapid growth in their businesses. Both asset managers examine
the underlying businesses, financial statements, competitive
environment and company managements in order to assess the future
profitability of each company. The asset managers, thus, expect
to generate returns from capital appreciation due to earnings
growth along with improvements in the valuations of the stocks.
A stock is typically sold if the asset managers believe future
profitability of a company does not support its current stock price.
For temporary and defensive purposes, the Fund may invest,
without limit, in cash or quality short-term debt securities
including repurchase agreements. To the extent that the Fund is
invested in these instruments, the Fund will not be pursuing its
investment objective.
Should I Invest in this Fund?
This Fund may be suitable if you:
* Are seeking an opportunity for additional returns
through small- and medium-capitalization equities 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 stock market risk
* Are seeking current income
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More information on each Fund's investment strategies and
holdings can be found in the current Semi-Annual and Annual
Reports, in the Statement of Additional Information, or on our
website at www.managersfunds.com.
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 variety of
companies, industries and markets. Each Fund is not a complete
investment program, and there is no guarantee that a Fund will
reach its stated goals.
-----------------------------------------------------------
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PORTFOLIO MANAGEMENT OF THE FUND
Goldman Sachs Asset Management ("GSAM"), Kern Capital Management
LLC ("Kern"), Pilgrim, Baxter & Associates, Ltd. ("Pilgrim,
Baxter"), Skyline Asset Management, L.P. ("Skyline") and Westport
Asset Management, Inc. ("Westport") each manage a portion of the
Fund.
GSAM has managed a portion of the Fund since December 1985. GSAM
is located at 2502 Rocky Point Drive, Suite 500, Tampa, Florida.
As of September 1, 1999, the Investment Management Division
("IMD") was established as a new operating division of Goldman
Sachs & Co. ("Goldman Sachs"). This newly created entity
includes GSAM. As of December 31, 1999, GSAM, along with other
units of IMD, had assets under management of approximately $258.5
billion. Timothy J. Ebright is the Senior portfolio manager for
the portion of the Fund managed by GSAM. Mr. Ebright is a Vice
President of Goldman Sachs, a position he has held since 1988.
Kern has managed a portion of the Fund since September 1997.
Kern, located at 114 West 47th Street, Suite 1926, New York, New
York, was formed in 1997. As of December 31, 1999, Kern had
assets under management of approximately $1.6 billion. Robert E.
Kern, Jr. is the portfolio manager for the portion of the Fund
managed by Kern. Mr. Kern is the Managing Member, Chairman and
CEO of Kern, a position he has held since the firm's formation.
Prior to that time, he was Senior Vice President of Freemont
Investment Advisers in 1997 and a Director of Morgan Grenfell
Capital Management from 1986 to 1997.
Pilgrim, Baxter has managed a portion of the Fund since October
1994. Pilgrim, Baxter, located at 825 Duportail Road, Wayne,
Pennsylvania, was formed in 1982. As of December 31, 1999,
Pilgrim, Baxter had assets under management of approximately $18
billion. Gary L. Pilgrim and Jeffrey A. Wrona are the portfolio
managers for the portion of the Fund managed by Pilgrim, Baxter.
Mr. Pilgrim is Director, President and CIO of Pilgrim, Baxter and
has been with the firm since its formation. Mr. Wrona is Vice
President-Portfolio Managers of Pilgrim, Baxter, a position he
has held since 1997. Prior to that, he was a Senior Portfolio
Manager with Munder Capital Management for seven years.
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Skyline has managed a portion of the Fund since December 2000.
Skyline, located at 311 South Wacker Drive, Suite 4500, Chicago,
Illinois, was formed in 1995 and is organized as a limited
partnership. The general partner of Skyline is Affiliated
managers Group, Inc. As of December 31, 1999, Skyline had assets
under management of approximately $742 million. William M.
Dutton and a team of analysts are the portfolio managers for the
portion of the Fund managed by Skyline. Mr. Dutton is the
managing partner and chief investment officer of Skyline and has
been with the firm since the firm's formation.
Westport has managed a portion of the Fund since December 1985.
Westport, located at 253 Riverside Avenue, Westport, Connecticut,
was formed in 1983. As of December 31, 1999, Westport had assets
under management of approximately $2.7 billion. Andrew J. Knuth
is the portfolio manager for the portion of the Fund managed by
Westport. Mr. Knuth is the Chairman of Westport and has been
with the firm since its formation.
The Fund is obligated by its investment management contract to
pay an annual management fee to The Managers Funds LLC of 0.90%
of the average daily net assets of the Fund. The Managers Funds
LLC, in turn, pays a portion of this fee to GSAM, Kern, Pilgrim
Baxter, Skyline and Westport.
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ADDITIONAL PRACTICES/RISKS
OTHER SECURITIES AND INVESTMENT PRACTICES
The following is a description of some of the other securities
and investment practices of the Funds.
Restricted and Illiquid Securities- Each Fund may purchase
restricted or illiquid securities. Any securities that are
thinly traded or whose resale is restricted can be difficult to
sell at a desired time and price. Some of these securities are
new and complex and trade only among institutions; the markets
for these securities are still developing, and may not function
as efficiently as established markets. Owning a large percentage
of restricted or illiquid securities could hamper a Fund's
ability to raise cash to meet redemptions. Also, because there
may not be an established market price for these securities, a
Fund may have to estimate their value. This means that their
valuation (and, to a much smaller extent, the valuation of the
Fund) may have a subjective element.
Repurchase Agreements- Each Fund may buy securities with the
understanding that the seller will buy them back with interest at
a later date. If the seller is unable to honor its commitment to
repurchase the securities, the Fund could lose money.
Foreign Securities- Each Fund may purchase foreign securities.
Foreign securities generally are more volatile than their U.S.
counterparts, in part because of higher political and economic
risks, lack of reliable information and fluctuations in currency
exchange rates. These risks are usually higher in less developed
countries.
In addition, foreign securities may be more difficult to resell
and the markets for them less efficient than for comparable U.S.
securities. Even where a foreign security increases in price in
its local currency, the appreciation may be diluted by the
negative effect of exchange rates when the security's value is
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converted to U.S. dollars. Foreign withholding taxes also may
apply, and errors and delays may occur in the settlement process
for foreign securities.
Initial Public Offerings - Each Fund may invest in initial public
offerings. To the extent that it does so, the performance of the
Fund may be significantly affected by such investments.
Defensive Investing - During unusual market conditions, each Fund
may place up to 100% of its total assets in cash or quality short-
term debt securities. To the extent that a Fund does this, it is
not pursuing its objective.
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A FEW WORDS ABOUT RISK
In the normal course of everyday 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.
The consequences of something going wrong can 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, most people do not need to quantitatively
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, here 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
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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.
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.
In Principal Risk Factors, the principal risks of investing in
the Funds are detailed. The following are descriptions of some
of the additional risks that the asset managers of the Funds may
take to earn investment returns. This is not a comprehensive list
and the risks discussed below are only certain of the risks to
which your investments are exposed.
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.
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Intelligence Risk
Intelligence risk is a term created by The Managers Funds LLC to
describe the risks taken by mutual fund investors in hiring
professional investment managers to manage assets. Investment
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 are 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.
Sector (Industry) Risk
Companies that are in similar businesses may be similarly
affected by particular economic or market events, which may in
certain circumstances cause the value of securities in all
companies in that sector or industry to decrease. To the extent
a Fund has substantial holdings within a particular sector or
industry, the risks associated with that sector or industry
increase. Diversification among groups may reduce sector
(industry) risk but may also dilute potential returns.
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ABOUT YOUR INVESTMENT
FINANCIAL HIGHLIGHTS
The following Financial Highlights table is intended to help you
understand the Special Equity Fund's financial performance for
the past five fiscal 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 the Fund. It assumes reinvestment of
all dividends and distributions. This information, derived from
the Fund's Financial Statements, has been audited by
PricewaterhouseCoopers LLP, whose report is included in the
Fund's Annual Reports, which are available upon request. Because
the Small Company Fund had not commenced operations as of the
date of this Prospectus, there are no "Financial Highlights" for
the Fund.
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YOUR ACCOUNT
As an investor, you pay no sales charges to invest in the Funds.
Furthermore, you pay no charges to transfer within the Fund
family or even to redeem out of the Funds. The price at which
you purchase and redeem your shares is equal to the net asset
value per share (NAV) next determined after your purchase or
redemption order is received on each day the New York Stock
Exchange (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. The Fund's NAV is calculated at the close
of regular business of the 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 be impacted on days when investors may not be able
to purchase or redeem Fund shares.
The Fund's investments are valued based on market values. If
market quotations are not readily available for any security, the
value of the security will be based on an evaluation of its fair
value, pursuant to procedures established by the Board of
Trustees.
Minimum Investments in the Funds
Cash investments in the Funds must be in U.S. Ddollars.
Third-party checks which are payable to an existing shareholder
who is a natural person (as opposed to a corporation or
partnership) and endorsed over to the Fund or State Street Bank
and Trust Company will be accepted.
22
<PAGE>
The following table provides the minimum initial and additional
investments in the Funds:
Initial InvestmentAdditional Investment
Regular accounts $2,000 $ 100
Traditional IRA 500 100
Roth IRA 500 100
Education IRA 500 100
SEP IRA 500 100
SIMPLE IRA 500 100
The Fund(s) or the underwriter may, in itsits discretion,
waive the minimum initial and additional investment amounts at
any time.
It is important to keep in mind that if you invest through a
third party such as a bank, broker-dealer or other fund
distribution organization, rather than directly with us, the
policies, fees and minimum investment amounts may be different
than those described in this material. The Funds also
participate in No-Transaction Fee programs with many national
brokerage firms and may pay fees to these firms for participating
in such programs.
A Traditional IRA is an individual retirement account.
Contributions may be deductible at certain income levels and
earnings are tax-deferred while your withdrawals and
distributions are taxable in the year that they are made.
A Roth IRA is an IRA with non-deductible contributions and
tax-free growth of assets and distributions. The account must
be held for five years and certain other conditions must be met
in order to qualify.
You should consult your tax professional for more information
on IRA accounts.
23
<PAGE>
HOW TO PURCHASE SHARES
By Mail
To open your account, complete and sign the
account application and make your check payable to The
Managers Funds. Mail the check and account application to
The Managers Funds, c/o Boston
Financial Data Services, Inc., P.O. Box 8517, Boston, MA 02266-
8517.
To purchase additional shares, write a letter of
instruction (or complete your investment stub). Send a check and
investment stub or written instructions to the address above.
Please include your account number and Fund name on
the check.
By Telephone
After establishing this option on your account, call
the Fund at (800) 252-0682. The
minimum additional investment is $100.
By Internet
After establishing this option on your account, see our
website at http://www.managersfunds.com. The minimum additional
investment is $100.
*A redemption made within 15 days of a purchase made by check may
be delayed if such check has not cleared.
For Bank Wires: Please call and notify the Fund at (800) 252-
0682. Then instruct your bank to wire the money to State Street
Bank and Trust Company, Boston, MA 02101; ABA #011000028; BFN -
The Managers Funds A/C 9905-001-5, FBO shareholder name, account
number and Fund name. Please be aware that your bank may charge
you a fee for this service.
24
<PAGE>
HOW TO REDEEM SHARES
You may sell your shares at any time. Your shares will be sold
at the NAV next calculated after the Funds' Transfer Agent
receives your order. Orders received after the close of regular
business of the NYSE (usually 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.
By Mail
Write a letter of instruction containing:
- the name of the Fund(s)
- theyour account number(s)
- dollar amount or number of shares to be redeemed
- theyour name(s) on the account
- the signature(s) of all account owners
- your daytime telephone number
and mail the written instructions to The Managers Funds,
c/o Boston Financial Data Services, Inc., P.O. Box 8517,
Boston, MA 02266-8517.
By Telephone
After establishing this option on your account, call a
client service representative during normal business hours, 8
a.m. to 6 p.m. New York Time, the Fund at (800) 252-0682.
Telephone Redemptions are available only for
redemptions which are below $25,000.
By Internet
After establishing this option on your account, see our
website at http://www.managersfunds.com.
Redemptions of $25,000 and over require a signature guarantee. A
signature guarantee helps to protect against fraud. You can
obtain one from most banks and securities dealers. A notary
public cannot provide a signature guarantee. In joint accounts,
both signatures must be guaranteed.
25
<PAGE>
INVESTOR SERVICES
Automatic Investments allows you to make automatic deductions
from a designated bank account.
Automatic Reinvestment Plan allows your dividends and capital
gain distributions to be reinvested in additional shares of the
Funds or another Fund in the Fund family. You can elect to
receive dividends in cash.
Exchange Privilege allows you to exchange your shares of the
Funds for shares of another of our Funds. There is no fee
associated with this privilege. Be sure to read the Prospectus
for any Fund that you are exchanging into. You can request your
exchange in writing, by telephone (if elected on the application)
or through your investment advisor, bank or investment
professional.
Individual Retirement Accounts are available to you at no
additional cost. Call us at (800) 835-3879 for more information
and an IRA kit.
Systematic Withdrawals allows you to make automatic monthly
withdrawals of $100 or more per Fund. Withdrawals by check are
normally completed on the 25th day of each month. If the 25th
day of any month is a weekend or a holiday, the withdrawal will
be completed on the next business day.
26
<PAGE>
THE FUNDS AND THEIR POLICIES
The Funds are series of a "Massachusetts business trust." The
Board of Trustees may, without the approval of the shareholders,
create additional series at any time. Also at any time, the
Board of Trustees may, without shareholder approval, divide this
series or any other series into two or more classes of shares
with different preferences, privileges and expenses.
<?R>
The Funds reserve the right to:
* redeem an account 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
Securities and Exchange Commission;
* change the 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);
* after prior warning and notification, close an account
due to excessive trading;
* terminate or change the Exchange Privilege or impose
exchange or redemption fees in connection with exchanges
or redemptions.
27
<PAGE>
A Fund will not be responsible for any losses resulting from
unauthorized transactions (such as purchases, sales or exchanges)
if it follows reasonable security procedures designed to verify
the identity of the investor. You should verify the accuracy of
your confirmation statements immediately after you receive them.
If you do not want the ability to sell and exchange by telephone
or Internet, call the Fund for information on how to disable this
privilege.
ACCOUNT STATEMENTS
You will receive quarterly and yearly statements detailing your
account activity. All investors (other than IRA accounts) will
also receive a Form 1099-DIV in January, detailing the tax
characteristics of any dividends and distributions that areyou
have received on theiryour account, whether taken in cash or
additional shares. You will also receive a confirmations after
each trade executed in your account.
DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gain distributions, if any, for the
Funds aare normally declared and paid annually in 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 the following tax information is general and
refers only 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 consultant about the status
of your distributions from the Funds.
All dividends and short-term capital gain 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 a Fund's shares for shares of another Fund will be
treated as a sale of a Fund's shares and any gain on the
transaction may be subject to federal income tax.
28
<PAGE>
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 and 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 certain tax-deferred accounts,
such as 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; or
* fail to certify that they are exempt from withholding.
29
<PAGE>
FOR MORE INFORMATION
Additional information for the Funds, including the Statement of
Additional Information and the Semi-Annual and Annual Reports,
are available to you without charge and may be requested as
follows:
By Telephone: Call 1-800-835-3879
By Mail: The Managers Funds
40 Richards Avenue
Norwalk, CT 06854
On the Internet: Electronic copies are available
on our website at
http://www.managersfunds.com
Current Fund documents are on file with the Securities and
Exchange Commission and are incorporated by reference (i.e.,
legally part of this Prospectus). Text-only copies are also
available on the EDGAR database of the SEC's website at
http://www.sec.gov, orand copies may be obtained upon payment of
a duplication fee and an email request to [email protected] or
by writing to the SEC's Public Reference Section, Washington,
D.C. 20549-60090102. (Call 1-202-942-8090 for hours of
operation.).
Investment Company Act Registration Number 811-3752
<PAGE>
THE MANAGERS FUNDS
INCOME EQUITY FUND
CAPITAL APPRECIATION FUND
SPECIAL EQUITY FUND
INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
SHORT AND INTERMEDIATE BOND FUND
BOND FUND
GLOBAL BOND FUND
____________________________
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2000,
as supplemented December 1, 2000
________________________________________________________________
You can obtain a free copy of the Prospectus of any of these
Funds by calling The Managers Funds LLC 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
the Funds' Prospectus.
The Financial Statements of the Funds, including the Reports
of Independent Accountant, for the fiscal year ended December 31,
1999 are included in each Fund's Annual Report and are available
without charge by calling The Managers Funds LLC at (800) 835-
3879. They are incorporated by reference into this document.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
GENERAL INFORMATION 3
INVESTMENT OBJECTIVES AND POLICIES 3
Investment Techniques and Associated Risks 4
Quality and Diversification Requirements for the Funds 12
Fundamental Investment Restrictions 13
Non-Fundamental Investment Restrictions 15
Temporary Defensive Position 15
Portfolio Turnover 15
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 16
Trustees' Compensation 18
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 18
Control Persons 18
Management Ownership 19
MANAGEMENT OF THE FUNDS 19
Investment Manager and Sub-Advisers 19
Compensation of Investment Adviser and Sub-Advisers 23
Fee Waivers and Expense Limitations 24
Fund Management and Sub-Advisory Agreements 25
Code of Ethics 26
Administrative Services; Distribution Arrangements 26
Custodian 27
Transfer Agent 27
Independent Public Accountants 27
BROKERAGE ALLOCATION AND OTHER PRACTICES 27
PURCHASE, REDEMPTION AND PRICING OF SHARES 29
Purchasing Shares 29
Redeeming Shares 29
Exchange of Shares 30
Net Asset Value 30
Dividends and Distributions 31
CERTAIN TAX MATTERS 31
Federal Income Taxation of Funds-in General 31
Taxation of the Funds' Investments 31
Federal Income Taxation of Shareholders 32
Foreign Shareholders 32
State and Local Taxes 33
Other Taxation 33
PERFORMANCE DATA 33
Total Return 34
Performance Comparisons 35
Massachusetts Business Trust 35
Description of Shares 36
Additional Information 37
FINANCIAL STATEMENTS 37
</TABLE>
<PAGE>
GENERAL INFORMATION
This Statement of Additional Information relates 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 a
"Fund", and collectively the "Funds"). 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").
This Statement of Additional Information describes the
financial history, management and operation of each Fund, 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, CT 06854.
Unlike other mutual funds which employ a single manager to
manage their portfolios, several of the Funds employ a multi-
manager investment approach which achieves added diversification
within a Fund's portfolio.
The Managers Funds LLC, a subsidiary of Affiliated Managers
Group, Inc., serves as investment manager to the Funds and is
responsible for the Funds' overall administration and
distribution. It selects and recommends, subject to the approval
of the Board of Trustees (the "Trustees"), an independent asset
manager, or a team of independent asset managers (the "Sub-
Adviser" or "Sub-Advisers") to manage each Fund's investment
portfolio. The Managers Funds LLC (the "Investment Manager") also
monitors the performance, security holdings and investment
strategies of these independent, external Sub-Advisers and
researches any potential new Sub-Advisers for the Fund family.
See "Management of the Funds."
Investments in the Funds 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 current
Prospectus. Each Fund is a diversified open-end management
investment company, with the exception of Managers Global Bond
Fund which is a non-diversified open-end management investment
company.
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 Fund seeks to achieve this objective by principally investing
its assets in the equity securities of medium and large 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 Fund
seeks to achieve this objective by principally investing its
assets in equity securities of medium and large U.S. companies.
MANAGERS SPECIAL EQUITY FUND (the "Special Equity Fund") is
designed for investors who seek long-term capital appreciation by
investing in a diversified portfolio of equity securities of
small- and medium-capitalization companies. The Fund seeks to
achieve this objective by principally investing its assets in the
equity securities of small to medium U.S. companies.
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 foreign
equity securities. Income is the Fund's secondary objective.
<PAGE>
The Fund seeks to achieve this objective by principally investing
its assets in the equity securities of medium and large non-U.S.
companies.
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
emerging market equity securities. The Fund seeks to achieve
this objective by principally investing its assets in the equity
securities of companies located in countries 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 between one to five
years. The Fund seeks to achieve this objective by principally
investing its assets in investment grade debt instruments.
MANAGERS BOND FUND (the "Bond Fund") is designed for
investors who seek high current income by investing in a
diversified portfolio of fixed-income securities. The Fund seeks
to achieve this objective by principally investing its assets in
investment grade debt securities of any maturity. Compared to
the benchmark, the Fund typically maintains a longer average
duration. As a result, the Fund may tend to be more interest
rate sensitive than the benchmark or other mutual funds whose
average durations are similar to the benchmark.
MANAGERS GLOBAL BOND FUND (the "Global Bond Fund") is
designed for investors who seek high total return, through both
income and capital appreciation, by investing in primarily
domestic and foreign fixed-income securities. The Fund seeks to
achieve this objective by primarily investing its assets in a
portfolio of high quality debt securities of government,
corporate and supranational organizations. The Fund is non-
diversified.
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 credit
card debts and thereby reducing the amounts due. In general,
these types of loans have a shorter life than mortgage loans and
are less likely to have substantial prepayments.
(2) Cash Equivalents. Each Fund may invest in cash
equivalents. Cash equivalents include, but are not limited to,
certificates of deposit, bankers acceptances, commercial paper,
short-term corporate debt securities and repurchase agreements.
BANKERS ACCEPTANCES. Each Fund 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.
<PAGE>
CERTIFICATES OF DEPOSIT. Each Fund 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 Fund 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 nine (9) months. Eurodollar commercial
paper refers to promissory notes payable in U.S. dollars by
European issuers.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase
agreements with brokers, dealers or banks that meet the credit
guidelines which have been approved by the Investment Manager.
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 a 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, and at no time will any Fund
enter into repurchase agreements for more than seven (7) 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.
(3) Reverse Repurchase Agreements. Each Fund 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.
A Fund 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. A 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.
(4) Eurodollar Bonds. Each Fund may invest in Eurodollar bonds.
Eurodollar bonds are bonds issued outside the U.S., which are
denominated in U.S. dollars.
EUROPEAN CURRENCY UNIT BONDS. Each Fund may invest in
European Currency Unit Bonds. European Currency Unit Bonds are
bonds denominated in European Currency Units ("ECU"s). 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.
(5) Emerging Market Securities. The International Equity Fund,
the Emerging Markets Equity Fund, the Bond Fund and the Global
Bond Fund may invest in emerging market securities. Furthermore,
the nature of the Emerging Markets Equity Fund is to invest most
of its total 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
<PAGE>
may be more severe than those experiences 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 a Fund's operations and the ability to obtain a
judgment against an issuer in an emerging market country.
(6) Foreign Securities. Each Fund may invest in foreign
securities either directly or indirectly in the form of American
Depositary Receipts or similar instruments. 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 judgment 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, the
Bond Fund, the Short and Intermediate Bond Fund and the Global
Bond Fund may purchase or sell equity securities of foreign
countries. Therefore, substantially all of a 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 price and date. 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 Funds' custodian will segregate cash
or marketable securities in an amount not less than the value of
a Fund's total assets committed to these contracts. Generally, a
Fund will not enter into contracts that are greater than ninety
(90) days.
Forward foreign currency contracts have additional risks. It
may be difficult to determine the market movements of the
currency. The value of a Fund's assets may be adversely affected
by changes in foreign currency exchange rates and regulations and
controls on currency exchange. Therefore, a Fund may incur costs
in converting foreign currency.
If a Fund engages in an offsetting transaction, a Fund will
experience a gain or a loss determined by the movement in the
contract prices. An "offsetting transaction" is one where a Fund
enters into a transaction with the bank upon maturity of the
original contract. A 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 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. dollar, 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-Adviser of the Emerging Markets Equity Fund will not
routinely hedge the Fund's foreign currency exposure unless the
Fund has to be protected from currency risk.
<PAGE>
(7) Futures Contracts. Each Fund may, but is not required
to, buy and sell futures contracts to protect the value of a
Fund's portfolio against changes in the prices of the securities
in which it invests. When a Fund buys or sells a futures
contact, a Fund must segregate cash and/or liquid securities
equivalent to 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 a 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 a 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 a
Fund enters into this type of contract, a Fund makes a deposit
called an "initial margin." This initial margin must be equal to
a specified percentage of the value of the contract. The rest of
the payment is made when the contract expires.
INTEREST RATE FUTURES CONTRACTS. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may enter into
interest rate futures contracts. An interest rate futures
contract is an agreement for a Fund to buy or sell fixed-income
securities at a mutually agreed upon date and price. Interest
rate futures contracts are often used to hedge against
anticipated changes in the level of interest rates. When a 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 Fund may invest in privately
placed, restricted, Rule 144A or other unregistered securities.
A Fund may not acquire illiquid holdings if, as a result, more
than 15% of a Fund's total assets would be in illiquid
investments. Subject to this limitation, a 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 at which it was valued in a Fund's portfolio. The
price a 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.
A Fund 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 Investment Manager and approved by the
Trustees. The Trustees will monitor compliance with these
guidelines on a periodic basis.
Investors should be aware that a Fund may be subject to a
risk if a Fund should decide to sell these securities when a
buyer is not readily available and at a price which a 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 a 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.
(9) Inverse Floating Obligations. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may invest up
to 25% of each Fund's total assets in inverse floating
obligations. Inverse floating obligations, also referred to as
residual interest bonds, are variable rate securities which have
interest rates that decline when market rates increase and vice
versa. They are typically purchased directly from the issuing
agency.
There are additional risks associated with these obligations.
They may be more volatile than fixed-rate securities, especially
in periods where interest rates are fluctuating. In order to
limit this risk, the Sub-Adviser(s) may purchase inverse floaters
that have a shorter maturity or contain limitations on their
interest rate movements.
(10) Mortgage-Related Securities. The Short and Intermediate
Bond Fund, the Bond Fund and the Global Bond Fund may invest in
mortgage-related securities. Mortgage-related securities, also
<PAGE>
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. 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. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may invest in collateralized mortgage obligations ("CMO"s). 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. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may invest in 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 CERTIFICATE. The
Short and Intermediate Bond Fund, the Bond Fund and the Global
Bond Fund may invest in GNMA Mortgage Pass-Through Certificates
("Fannie Maes"). Fannie Maes are undivided interests in a pool
of conventional mortgages. They are secured by the first
mortgages or deeds of trust on residential properties. There is
no obligation to distribute monthly payments of principal and
interest on the mortgages in the pool. They are guaranteed only
by FNMA and do not receive the full faith and credit of the
United States.
(11) Municipal Bonds. Each Fund may invest in three types
of municipal bonds: General obligation bonds, Revenue bonds and
Industrial development bonds. General obligation bonds are bonds
issued by states, counties, cities towns and regional districts.
The proceeds from these bonds are used to fund municipal
projects. Revenue bonds are bonds that receive net revenues from
a particular facility or other specific source. Industrial
development bonds are considered to be municipal bonds if the
interest paid on these bonds is exempt from federal taxes. They
are issued by public authorities and are used to raise money to
finance public and privately owned facilities for business,
manufacturing and housing.
(12) Obligations of Domestic and Foreign Banks. Each Fund
may enter into 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.
<PAGE>
(13) Option Contracts.
COVERED CALL OPTIONS. The Income Equity Fund, the
Capital Appreciation Fund and the Special Equity Fund may write
("sell") covered call options on individual stocks, equity
indices and futures contracts, including equity index futures
contracts. 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 (9) 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 a Fund that is writing
the option owns or has a right to immediately acquire the
underlying security or contract.
A Fund may terminate its obligation under an outstanding
call 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, a 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 a Fund may increase due to a Fund writing a
covered call option. If the value of the underlying securities
increases above the option price, the Fund will not benefit from
the appreciation.
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.
A put option is a short-term contract that is generally
for no more than nine (9) 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 a Fund which is
writing the option is short or has a right to immediately resell
the underlying security or contract at a price equal to or
greater than the put price. The seller of a put option assumes
the risk of the decrease of the value of the underlying security.
If the underlying security decreases in value, 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 its obligation under 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, a 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 sales of the
underlying securities or contracts. The portfolio turnover rate
of a Fund may increase due to a Fund writing a covered put
option.
DEALER OPTIONS. Each Fund may use 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 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.
<PAGE>
PUTS AND CALLS. The Income Equity Fund, the Capital
Appreciation Fund and the Special Equity Fund may buy options on
individual stocks, equity indices and equity futures contracts.
The Short and Intermediate Bond Fund, the Bond Fund and the
Global Bond Fund may buy puts and calls on individual bonds and
on interest rate futures contracts. A Fund's purpose in buying
these puts and calls is to protect itself against an adverse
affect in changes of the general level of market prices in which
the Fund operates. A put option gives the buyer the right upon
payment to deliver a security or contract at an agreed upon date
and price. A call option gives the buyer the right upon payment
to ask the seller of the option to deliver the security or
contract at an agreed upon date and price.
(14) Rights and Warrants. Each Fund may purchase rights
and warrants. Rights are short-term obligations issued in
conjunction with new stock issues. Warrants give the holder the
right to buy an issuer's securities at a stated price for a
stated time.
(15) Securities Lending. Each Fund may lend its portfolio
securities in order to realize additional income. This lending
is subject to a Fund's investment policies and restrictions. Any
loan of portfolio securities must be secured at all times by
collateral that is equal to or greater than the value of the
loan. If a seller defaults, a Fund may use the collateral to
satisfy the loan. However, if the buyer defaults, the buyer may
lose some rights to the collateral securing the loans of
portfolio securities.
(16) Segregated Accounts. Each Fund will establish a
segregated account with its custodian after it has entered into
either a repurchase agreement or certain options, futures and
forward contracts. The segregated account will maintain cash
and/or liquid securities that are equal in value to the
obligations in the agreement.
(17) Short Sales. Each Fund may enter into short sales.
A Fund enters into a short sale when it sells a security that it
does not own. A broker retains the proceeds of the sales until a
Fund replaces the sold security. A Fund arranges with the broker
to borrow the security. A Fund must replace the security at its
market price at the time of the replacement. As a result, a Fund
may have to pay a premium to borrow the security and a Fund may,
but will not necessarily, receive any interest on the proceeds of
the sale. A 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 a 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
a Fund replaces the security, a Fund will incur a loss. If the
price declines during that period, a Fund will realize a capital
gain. The capital gain will be decreased by the amount of
transaction costs and any premiums, dividends or interest a 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 a Fund will have to pay in
connection with the short sale. For tax planning reasons, a Fund
may also engage in short sales with respect to a security that a
Fund currently holds or has a right to acquire, commonly referred
to as a "short against the box."
(18) U.S. Treasury Securities. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may invest in direct obligations of the U.S. Treasury. These
obligations include Treasury bills, notes and bonds, all of which
have their principal and interest payments backed by the full
faith and credit of the U.S. Government.
ADDITIONAL U.S. GOVERNMENT SECURITIES. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may invest in obligations issued by the agencies or
instrumentalities of the United States Government. These
obligations may or may not be backed by the "full faith and
credit" of the United States. Securities which are backed by the
full faith and credit of the United States include obligations of
the Government National Mortgage Association, the Farmers Home
Administration and the Export-Import Bank. For those securities
which are not backed by the full faith and credit of the United
States, the Fund must principally look to the federal agency
guaranteeing or issuing the obligation for ultimate repayment and
therefore may not be able to assert a claim against the United
States itself for repayment in the event that the issuer does not
meet its commitments. The securities which the Funds may invest
that are not backed by the full faith and credit of the United
States include, but are not limited to: (a) obligations of the
Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation, the Federal Home Loan Banks and the U.S. Postal
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.
<PAGE>
(19) Variable Rate Securities. The Short and
Intermediate Bond Fund, the Bond Fund and the Global Bond Fund
may invest in variable rate securities. Variable rate securities
are debt securities which do not have a fixed coupon rate. The
amount of interest to be paid to the holder is typically
contingent on another rate ("contingent security") such as the
yield on 90-day Treasury bills. Variable rate securities may
also include debt securities which have an interest rate which
resets in the opposite direction of the rate of the contingent
security.
(20) When-Issued Securities. Each Fund 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, a
Fund will record the transaction, reflect the daily value of the
securities when determining the net asset value of a 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, a 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, a
Fund will meet its obligations from maturities or sales of the
securities held in the segregated account and/or from cash flow.
If a 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, a Fund
may be at a disadvantage if the other party to the transaction
defaults. When-issued transactions may allow a 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 the 1940 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.
At the time any of the Funds invest in taxable commercial
paper, the issuer must have an outstanding debt rated A-1 or
higher by Standard & Poor's Ratings Group ("S&P") or the issuer's
parent corporation, if any, must have outstanding commercial
paper rated Prime-1 by Moody's Investors Services, Inc.
("Moody's") (or a similar rating by any nationally recognized
statistical rating organization). If no such ratings are
available, the investment must be of comparable quality in the
opinion of The Managers Funds, L.P.the Investment Manager or the
Sub-Adviser(s).
The Short and Intermediate Bond Fund and the Bond Fund may
each invest in debt securities that are rated Bb by S&P or Ba by
Moody's (or a similar rating by any nationally recognized
statistical rating organization). Such securities are frequently
referred to as "junk bonds." Junk bonds are more likely to react
to market developments affecting market and credit risk than more
highly rated debt securities.
For the last fiscal year ended December 31, 1999, the ratings
of the debt obligations held by the Short and Intermediate Bond
Fund and the Bond Fund, expressed as a percentage of each Fund's
total investments, were as follows:
<PAGE>
RATINGS SHORT AND INTERMEDIATE BOND FUND BOND FUND
Government and AAA/Aaa 41.7% 5.3%
AA/Aa 10.2% 4.8%
A/A 12.2% 30.6%
BBB/Baa 22.0% 43.8%
BB/Ba 3.7% 3.2%
Not Rated 10.2% 12.3%
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted by
the Trust with respect to the Funds. Except as otherwise stated,
these investment restrictions are "fundamental" policies. A
"fundamental" policy is defined in the 1940 Act to mean that the
restriction cannot be changed without the vote of a "majority of
the outstanding voting securities" of the 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 Fund may NOT:
(1) Invest in securities of any one issuer (other than securities
issued by the U.S. Government, its agencies and
instrumentalities), if immediately after and as a result of
such investment the current market value of the holdings of
its securities of such issuer exceeds 5% of its total assets.
The Global Bond Fund may invest up to 50% of its assets in
bonds issued by foreign governments which may include up to
25% of such assets in any single government issuer.
(2) Invest more than 25% of the value of its total assets in the
securities of companies primarily engaged in any one industry
(other than the United States Government, its agencies and
instrumentalities). Such concentration may occur
incidentally as a result of changes in the market value of
portfolio securities, but such concentration may not result
from investment. Neither finance companies as a group nor
utility companies as a group are considered a single industry
for purposes of this restriction.
(3) Acquire more than 10% of the outstanding voting securities of
any one issuer.
(4) Borrow money, except from banks for temporary or
extraordinary or emergency purposes and then only in amounts
up to 10% of the value of the Fund's total assets, taken at
cost, at the time of such borrowing (and provided such
borrowings do not exceed in the aggregate one-third of the
market value of the Fund's total assets less liabilities
other than the obligations represented by the 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.
<PAGE>
(9) Purchase or sell physical commodities, except that each Fund
may purchase or sell options and futures contracts thereon.
(10) Engage in the business of underwriting securities issued by
others.
(11) Participate on a joint or a joint and several basis in any
trading account in securities. The "bunching" of orders for
the sale or purchase of marketable portfolio securities with
other accounts under the management of The Managers Funds,
L.P.The Managers Funds LLC or any portfolio manager in order
to save brokerage costs or to average prices shall not be
considered a joint securities trading account.
(12) Make loans to any person or firm; provided, however, that the
making of a loan shall not be construed to include (i) the
acquisition for investment of bonds, debentures, notes or
other evidences of indebtedness of any corporation or
government entity which are publicly distributed or of a type
customarily purchased by institutional investors (which are
debt securities, generally rated not less than Baa by Moody's
or BBB by Standard & Poor's, privately issued and purchased
by such entities as banks, insurance companies and investment
companies), or (ii) the entry into "repurchase agreements."
It may lend its portfolio securities to broker-dealers or
other institutional investors if, as a result thereof, the
aggregate value of all securities loaned does not exceed 33-
l/3% of its total assets.
(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
<PAGE>
securities of a single foreign government.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment restrictions are not "fundamental"
policies of the Trust 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 Fund may, at the discretion of its Sub-Adviser(s),
invest up to 100% of its assets in cash for temporary defensive
purposes. This strategy may be inconsistent with each 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 Fund purchases 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
a 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.
<PAGE>
For the last two fiscal years, the portfolio turnover rates
for each of the Funds were as follows:
Fund 1998 1999
Income Equity Fund 84% 94%
Capital Appreciation Fund 252% 200%
Special Equity Fund 64% 89%
International Equity Fund 56% 43%
Emerging Markets Equity Fund 89%* 119%
Short and Intermediate Bond Fund 115% 92%
Bond Fund 55% 39%
Global Bond Fund 232% 171%
*Since the Fund commenced operations on February 9, 1998, the
portfolio turnover rate for the Fund is not annualized.
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and Officers of the Trust, their business
addresses, principal occupations and dates of birth are listed
below. The Trustees provide broad supervision over the affairs
of the Trust and the Fund. Unless otherwise noted, the address
of the Trustees and Officers is the address of the Trust: 40
Richards Avenue, Norwalk, CT 06854.
JACK W. ABER - Trustee; Professor of Finance, Boston University
School of Management since 1972. He has served as a Trustee of
the Trust since March 1999. He also serves as a Trustee of
Managers AMG Funds, Managers Trust I and Managers Trust II. His
date of birth is September 9, 1937.
WILLIAM E. CHAPMAN, II - Trustee; President and Owner, Longboat
Retirement Planning Solutions since 1998. From 1990 to 1998, he
served in a variety of roles with Kemper Funds, the last of which
was President of the Retirement Plans Group. Prior to joining
Kemper, he spent 24 years with CIGNA in investment sales,
marketing and general management roles. He has served as a
Trustee of the Trust since March 1999. He also serves as a
Trustee of Managers AMG Funds, Managers Trust I and Managers
Trust II. His date of birth is September 23, 1941.
SEAN M. HEALEY1 - Trustee; President and Chief Operating Officer
of Affiliated Managers Group, Inc. since October 1999. From
April 1995 to October 1999, he was Executive Vice President of
Affiliated Managers Group, Inc. From August 1987 through March
1995, he served in a variety of roles in the Mergers and
Acquisitions Department of Goldman, Sachs & Co., the last of
which was as Vice President. He has served as a Trustee of the
Trust since March 1999. He also serves as a Trustee of Managers
AMG Funds, Managers Trust I and Managers Trust II. His date of
birth is May 9, 1961.
EDWARD J. KAIER - Trustee; Partner, Hepburn Willcox Hamilton &
Putnam since 1977. He has served as a Trustee of the Trust since
March 1999. He also serves as a Trustee of Managers AMG Funds,
Managers Trust I and Managers Trust II. His date of birth is
September 23, 1945.
MADELINE H. MCWHINNEY- Trustee; Member of the Investment
Committee, New Jersey Supreme Court since 1990. From 1977 to
1994, she was the President of Dale, Elliott & Company, Inc.,
Management Consultants. From 1983 to 1998, she was a Member of
the Advisory Board on Professional Ethics, New Jersey Supreme
Court. She has served as a Trustee of the Trust since 1987. Her
date of birth is March 11, 1922.
STEVEN J. PAGGIOLI- Trustee; Executive Vice President and
Director, The Wadsworth Group since 1986. Vice President,
Secretary and Director of First Fund Distributors, Inc. since
1991. Executive Vice President, Secretary and Director of
Investment Company Administration, LLC since 1990. Trustee of
Professionally Managed Portfolios since 1991. He has served as a
Trustee of the Trust since 1993. His date of birth is April 3,
1950.
ERIC RAKOWSKI - Trustee; Professor, University of California at
Berkeley School of Law since 1990. Visiting Professor, Harvard
Law School 1998-1999. He has served as a Trustee of The Managers
Funds since March 1999. He also serves as a Trustee of Managers
[FN]
Mr. Healey is an "interested person" (as defined in the 1940 Act)
of the Trust.
</FN>
<PAGE>
AMG Funds, Managers Trust I and Managers Trust II. His date of
birth is June 5, 1958.
THOMAS R. SCHNEEWEIS- Trustee; Professor of Finance, University
of Massachusetts since 1985. Managing Director, CISDM at the
University of Massachusetts since 1994. He has served as a
Trustee of The Managers Funds since 1987. His date of birth is
May 10, 1947.
PETER M. LEBOVITZ - President; President of The Managers Funds
LLC. From September 1994 to April 1999, he was Managing Director
of The Managers Funds, L.P. (the predecessor to The Managers
Funds LLC). From June 1993 to June 1994, he was the Director of
Marketing for Hyperion Capital Management, Inc. From April 1989
to June 1993, he was Senior Vice President for Greenwich Asset
Management, Inc. His date of birth is January 18, 1955.
DONALD S. RUMERY - Treasurer and Secretary; Chief Financial
Officer, Secretary and Treasurer of The Managers Funds LLC
(formerly The Managers Funds, L.P.) since December 1994. From
March 1990 to December 1994, he was a Vice President of Signature
Financial Group. From August 1980 to March 1990, he held various
positions with The Putnam Companies, the last of which was Vice
President. His date of birth is May 29, 1958.
GIANCARLO (JOHN) E. ROSATI- Assistant Treasurer; Vice President
and Assistant Treasurer of The Managers Funds LLC (formerly The
Managers Funds, L.P.) since July 1992. From July 1986 to June
1992, he was an Assistant Vice President at The Managers Funds,
L.P. His date of birth is March 31, 1956.
PETER M. MCCABE - Assistant Treasurer; Portfolio Administrator
and Assistant Treasurer of The Managers Funds LLC (formerly The
Managers Funds, L.P.) since August 1995. From July 1994 to
August 1995, he was a Portfolio Administrator at Oppenheimer
Capital, L.P. His date of birth is September 8, 1972.
LAURA A. DESALVO - Assistant Secretary; Legal/Compliance Officer
and Assistant Secretary of The Managers Funds LLC (formerly The
Managers Funds, L.P.) since September 1997. From August 1994 to
June 1997, she was a law student. Her date of birth is November
10, 1970.
<PAGE>
Trustees' Compensation
For their services as Trustees of The Managers Funds and one
other Fund in The Managers Funds LLC complex for the calendar
year ended December 31, 1999, the Trustees are compensated as
follows:
Compensation Table:
Total Compensation
from the
Aggregate Aggregate Compensation Funds and the
Name of Compensation From Other Funds Fund Complex
Trustee from the Trust(a) in Complex(b) Paid to Trustees(c)
Jack W. Aber $15,000 $500 $15,500
William E. Chapman,II $15,000 $500 $15,500
Sean M. Healey none none none
Edward K. Kaier $15,000 $500 $15,500
Madeline H. McWhinney $19,000 $ 0 $19,000
Steven J. Paggioli $19,000 $ 0 $19,000
Eric Rakowski $15,000 $500 $15,500
Thomas R. Schneeweis $18,250 $ 0 $18,250
____________________
(a) Compensation is calculated for the Fund's fiscal year ending
December 31, 1999. The Trust does not provide any pension or
retirement benefits for the Trustees.
(b) Compensation is calculated for the Fund's calendar year
ending December 31, 1999.
(c) Total compensation includes compensation paid during the 12-
month period ending December 31, 1999 for services as
Trustees of The Managers Funds and one other Fund in The
Managers Funds LLC complex.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of April 18, 2000, Charles Schwab & Co., Inc.
"controlled" (within the meaning of the 1940 Act) the following
Funds: Managers Capital Appreciation Fund, Managers Special
Equity Fund, Managers International Equity Fund, Managers
Emerging Markets Equity Fund and Managers Bond Fund. National
Financial Services Corp. "controlled" Managers Global Bond Fund.
An entity or person which "controls" the Fund could have
effective voting control over a Fund. Certain of these
shareholders are omnibus processing organizations.
As of April 18, 2000, the following persons or entities
owned more than 5% of the outstanding shares of the Funds:
Managers Income Equity Fund
Charles Schwab & Co., Inc. 21%
Managers Capital Appreciation Fund
Charles Schwab & Co., Inc. 32%
National Financial Services Corp. 7%
Managers Special Equity Fund
Charles Schwab & Co., Inc. 39%
National Financial Services Corp. 8%
<PAGE>
Managers International Equity Fund
Charles Schwab & Co., Inc. 27%
National Financial Services Corp. 13%
Merrill Lynch. 8%
Managers Emerging Markets Equity Fund
Charles Schwab & Co., Inc. 26%
National Financial Services Corp. 7%
Managers Short and Intermediate Bond Fund
Crotched Mountain Foundation Profit Sharing Plan 8%
Managers Bond Fund
Charles Schwab & Co., Inc. 26%
National Financial Services Corp. 9%
Managers Global Bond Fund
Charles Schwab & Co., Inc. 27%
National Financial Services Corp. 5%
Management Ownership
As of April 18, 2000, all management personnel (i.e.,
Trustees and Officers) as a group owned beneficially less than 1%
of the outstanding shares of any Fund.
MANAGEMENT OF THE FUNDS
Investment Manager and Sub-Advisers
The Trustees provide broad supervision over the operations
and affairs of the Trust and the Funds. The Managers Funds LLC
serves as investment manager to and distributor of the Funds.
The Managers Funds LLC is a subsidiary of Affiliated Managers
Group, Inc. ("AMG"), and AMG serves as the Managing Member of The
Managers Funds LLC. AMG is located at Two International Place,
23rd Floor, Boston, Massachusetts 02110.
The assets of the Funds are managed by a Sub-Adviser or a
team of Sub-Advisers which are selected by the Investment
Manager, subject to the review and approval of the Trustees.
The Investment Manager also serves as administrator of the Funds
and carries out the daily administration of the Trust and the
Funds. The Investment Manager and its corporate predecessors
have over 20 years of experience in evaluating Sub-Advisers for
individuals and institutional investors.
The Investment Manager recommends Sub-Advisers for the Trust
to the Trustees based upon continuing quantative and qualitative
evaluation of the Sub-Adviser's skills in managing assets subject
to specific investment styles and strategies. Unlike many other
mutual funds, the Funds benefit from independent asset manager
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 Investment Manager does not expect to make frequent changes
of Sub-Advisers.
The Investment Manager allocates the assets of each Fund of
the Trust among the Sub-Adviser(s) selected for that Fund. The
Sub-Adviser has discretion, subject to oversight by the Trustees
and the Investment Manager, to purchase and sell portfolio
assets, consistent with a Fund's investment objectives, policies
and restrictions. Generally, the services which the Sub-Adviser
provides to a Fund are limited to asset management and related
recordkeeping services. However, a Sub-Adviser or its affiliated
broker-dealer may execute portfolio transactions for a Fund and
<PAGE>
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 Investment
Manager or its affiliates. The Investment Manager enters into an
advisory agreement with each Sub-Adviser known as a "Sub-Advisory
Agreement."
The Sub-Adviser(s) to the Funds are set forth below. The
information has been supplied by the respective Sub-Adviser.
Income Equity Fund
* Armstrong Shaw Associates Inc. ("Armstrong Shaw")
Armstrong Shaw is a corporation founded in 1984 by Jeffrey M. Shaw
and Raymond J. Armstrong. As of December 31, 1999, Armstrong
Shaw's assets under management totaled over $750 million.
Armstrong Shaw's address is 32 Threadneedle Lane, Stamford, CT
06902.
Jeffrey M. Shaw, Chairman and President, is the lead portfolio
manager of the portion of the Fund managed by Armstrong Shaw.
* 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, 1999,
Chartwell's assets under management totaled approximately $3.5
billion. Chartwell's address is 1235 Westlakes Drive, Suite 330,
Berwyn, PA 19312.
Harold Ofstie, Partner, leads a team of portfolio managers for the
portion of the Fund managed by Chartwell.
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, 1999, Essex's assets under management
totaled approximately $13.8 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 Fund which is managed by Essex.
* Roxbury Capital Management, LLC ("Roxbury")
Roxbury Capital Management is a California corporation which was
founded in 1986. In order to facilitate a strategic partnership
with WT Investments, Inc., a subsidiary of Wilmington Trust
Company and a wholly-owned subsidiary of Wilmington Trust
Corporation, Roxbury Capital Management transferred all of its
assets in 1998 to Roxbury which is jointly owned by employees and
WT Investments, Inc., a subsidiary of Wilmington Trust Company.
As of December 31, 1999, Roxbury's assets under management totaled
approximately $6,026.512 billion. Roxbury's address is 100
Wilshire Boulevard, Suite 600, Santa Monica, CA 90401.
Kevin P. Riley, Senior Managing Director, Senior Portfolio Manager
and Chief Investment Officer, is the portfolio manager of the
portion of the Fund which is managed by Roxbury.
<PAGE>
Special Equity Fund
* Goldman Sachs Asset Management ("GSAM")
As of September 1, 1999, the Investment Management Division
("IMD") was established as a new operating division of Goldman
Sachs & Co. ("Goldman Sachs"). This newly created entity includes
GSAM. . 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
GSGLPAs of December 31, 1999, GSAM, along with other units of IMD,
had assets under management of $258.5 billion. GSAM's address is
2502 Rocky Point Drive, Suite 500, Tampa, FL 33607.
Timothy G. Ebright is the Senior portfolio manager for the portion
of the Fund managed by GSAM. Mr. Ebright is a Vice President of
Goldman Sachs, a position he has held since 1988.
* Kern Capital Management LLC ("Kern")
Kern is a Delaware limited liability company founded in 1997 by
Robert E. Kern, Jr. and David G. Kern. As of December 31, 1999,
Kern's assets under management totaled approximately $1.6 billion.
Kern's address is 114 West 47th Street, Suite 1926, New York, NY
10036.
Robert E. Kern, Jr., Managing Member, Chairman and Chief Executive
Officer, is the portfolio manager of the portion of the Fund which
is managed by Kern.
* Pilgrim Baxter & Associates, Ltd. ("Pilgrim")
Pilgrim was formed in 1982 and is owned by United Asset
Management, a public company. As of December 31, 1999, Pilgrim's
assets under management totaled approximately $18 billion.
Pilgrim's address is 825 Duportail Road, Wayne, PA 19087.
Jeffrey WronaGary L. Pilgrim, Director, President and Chief
Investment Officer, and Gary L. Pilgrim, CFA,Jeffrey A. Wrona,
Vice President-Portfolio Managers, are the portfolio managers of
the portion of the Fund which is managed by Pilgrim.
* Skyline Asset Management, L.P. ("Skyline")
Skyline was formed in 1995 and is a limited partnership. The
general partner of Skyline is Affiliated Managers Group, Inc.As of
December 31, 1999, Skyline's assets under management totaled
approximately $742 million. Skyline's address is 311 South Wacker
Drive, Suite 4500, Chicago, Illinois 60606.
William M. Dutton, Managing Partner and Chief
Investment Officer, and a team of analysts manage the portion of
the Fund which is managed by Skyline.
* 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. As of December 31, 1999,
Westport's assets under management totaled approximately $2.7
billion. Westport's address is 253 Riverside Avenue, Westport, CT
06880.
Andrew J. Knuth, Chairman, and Edward Nicklin are the portfolio
managers of the portion of the Fund managed by Westport. Mr. Knuth
is one of the founders of the firm.
International Equity Fund
* Lazard Asset Management ("Lazard")
Lazard is a division of Lazard Freres & Co. LLC, a New York
limited liability company founded in 1848. It is a division of
Lazard, Freres LLC. The Managing Directors assigned to Lazard
are Eileen D. Alexanderson, Thomas F. Dunn, Norman Eig, Herbert W.
Gullquist, Ina O. Handler, Larry A. Kohn, Robert P. Morgenthau,
John R. Reinsberg, Michael S. Rome, Michael P. Triguboff,
<PAGE>
and Alexander E. Zagoreos. As of December 31, 1999,
Lazard's assets under management including its global affiliates
totaled approximately $74 billion______________. Lazard's address
is 30 Rockefeller Plaza, New York, NY 10112.
Herbert W. Gullquist, General Member, Vice President and Chief
Investment Officer, and John R. Reinsberg, Managing Director, are
is the portfolio managers of the portion of the Fund managed by
Lazard.
* Mastholm Asset Management, L.L.C. ("Mastholm")
Mastholm is a limited liability company founded in 1997. As of
December 31, 1999, Mastholm's assets under management totaled
approximately $829 million. Mastholm's address is 10500 NE 8th
Street, Bellevue, WA 98004.
Theodore J. Tyson, Managing Director, along with Joseph Jordan,
Director and Portfolio Manager, and Douglas Allen, Director and
Portfolio Manager, leads a portfolio management team which manages
the portion of the Fund for Mastholm.
* 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, William H. Bolinder, Gunther Gose, and Edmond
D. Villani, as well as Cornelia Small, Director of Global Equity
Investments of Scudder and Lynn S. Birdsong, Director of Scudder's
Institutional Group. As of December 31, 1999, Scudder's assets
under management totaled in excess of $295 billion. Scudder's
address is 345 Park Avenue, New York, NY 10154.
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, Managing Director, is the portfolio manager of
the portion of the Fund which is managed by Scudder.
He is the Managing Director of Lazard.
Emerging Markets Equity Fund
* Rexiter Capital Management Limited ("Rexiter")
Rexiter was founded in 1997 and is 75% owned by State Street
Corporation through two subsidiaries. As of December 31, 1999,
Rexiter's assets under management totaled approximately $4805
million. Rexiter's address is 21 St. James's Square, London,
England SW1Y 4SS.
Murray Davey, Senior Portfolio Manager, and Kenneth King, Chief
Investment Officer, are the portfolio managers the Fund managed by
Rexiter.
Short and Intermediate Bond Fund
* Standish, Ayer & Wood, Inc. ("Standish")
Standish was founded in 1933 and is a privately owned corporation
with 24 directors. Edward H. Ladd, Chairman and Managing
Director, and George W. Noyes, CEO, President and Managing
Directort, each own more than 10% of the outstanding voting
securities of Standish. Caleb F. Aldrich, Managing Director and
Vice President, Davis B. Clayson, Director and Vice President,
Dolores S. Driscoll, Managing Director and Vice President, Richard
C. Doll, Director and Vice President, Maria D. Furman, Managing
Director and Vice President, and Richard S. Wood, Managing
Director, Vice President and Secretary, each own more than 5% of
the outstanding voting securities of Standish. Nicholas S.
Battelle, David H. Cameron, Karen K. Chandor, James E. Hollis,
III, Laurence A. Manchester, Arthur H. Parker, Howard B. Rubin,
Austin C. Smith, W. Charles Cook, Joseph M. Corrado, Mark A.
Flaherty, Raymond J. Kubiak, Thomas P. Sorbo, David C. Stuehr and
Michael W. Thompson are each a Director and Vice President of
Standish. Ralph S. Tate is Managing Director and Vice President
of Standish. Each owns less than 5% of the outstanding voting
securities of Standish. As of December 31, 1999, Standish's
assets under management totaled approximately $44.7 ,218.7
billion. Standish's address is One Financial Center, Suite 26,
Boston, MA 02111.
Howard B. Rubin, Director, is the portfolio manager for the Fund
which is managed by Standish.
<PAGE>
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, 1999, Loomis' assets under
management totaled approximately $67.6 billion. Loomis' address
is One Financial Center, Boston, MA 02111.
Daniel J. Fuss, CFA and Managing Director, is the portfolio
manager of the Fund which is managed by Loomis.
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, 1999, Rogge's assets under
management totaled approximately $6.1 billion. Rogge's address is
Sion Hill, 56 Victoria Embankment, London, England EC4Y-0DZ.
Olaf Rogge, Managing Director, is the portfolio manager of the
Fund which is managed by Rogge. He is one of the founders of the
firm.
Compensation of Investment Manager and Sub-Advisers
As compensation for the investment management services
rendered and related expenses under the Fund Management
Agreement, each Fund has agreed to pay the Investment Manager an
investment management fee, which is computed daily as a
percentage of the average of the value of the net assets of the
Fund and may be paid monthly. As compensation for the investment
management services rendered and related expenses under the Sub-
Advisory Agreement, the Investment Manager has agreed to pay each
Sub-Adviser a fee (net of all mutually agreed upon fee waivers
and reimbursements required by applicable law) for managing the
portfolio, which is also computed daily and paid quarterly based
on the average daily net assets that the Sub-Adviser manages.
The fee paid to the Sub-Adviser is paid out of the fee the
Investment Manager receives from a Fund and does not increase the
expenses of a Fund.
During the last three fiscal years ended December 31, 1997,
1998 and 1999, the Investment Manager was paid the following fees
by the Funds under the Fund Management Agreement.
Fund 1997 1998 1999
Income Equity Fund $ 465,345 $ 513,862 $ 428,149
Capital Appreciation Fund 797,9305 590,610 1,025,351
Special Equity Fund 4,477,844 7,575,757 9,364,371
International Equity Fund 3,010,430 4,490,305 5,431,401
EmergingMarkets Equity Fund(a) ----- 40,849(b) 82,718(b)
ShortandIntermediate Bond Fund 88,839 84,177 92,398
Bond Fund 221,232 281,699 208,465
Global Bond Fund 115,996 132,587 145,706
<en>
(a) The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
(b) The fee paid to the Investment Manager for the Fund has been
restated to reflect a waiver of a portion of the fee in effect.
<PAGE>
During the last three fiscal years ended December 31, 1997,
1998 and 1999, the Sub-Advisers were paid the following fees by
the Investment Manager under the Sub-Advisory Agreements in
effect.
</en>
<PAGE>
Fund 1997 1998 1999
Income Equity Fund
Chartwell Investment Partners, L.P.$ 29,408$ 125,429
$ 94,946
Scudder Kemper Investments, Inc. 120,096 114,374
104,858
Capital Appreciation Fund
Essex Investment Mgmt. Co., LLC 156,464 143,597
274,854
Roxbury Capital Management, LLC ----- 29,210
237,822
Special Equity Fund
Goldman Sachs Asset Management 746,314 945,730
817,339
(formerly Liberty Investment Management)
Pilgrim, Baxter & Associates, Ltd. 790,9941,337,508
1,764,389
Westport Asset Management 873,573 1,422,275
1,620,782
Kern Capital Management LLC 59,856 441,940941,203
International Equity Fund
Scudder Kemper Investments, Inc. 833,4381,237,987
1,472,525
Lazard Asset Management 838,470 1,254,650
1,490,352
Emerging Markets Equity Fund**
Rexiter Capital Management Limited ----- 18,312 53,062
(formerly King Street Advisors, Limited)
Short and Intermediate Bond Fund
Standish, Ayer & Wood, Inc. 44,419 42,08946,198
Bond Fund
Loomis, Sayles & Co., L.P. 88,443 112,67983,386
Global Bond Fund
Rogge Global Partners plc 57,998 65,556 72,014
*The Fund commenced operations on February 9, 1998.
Fee Waivers and Expense Limitations
From time to time, the Investment Manager may agree to waive
all or a portion of the fee it would otherwise be entitled to
receive from a Fund. The Investment 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 a waiver by a Sub-Adviser of all or
a portion of the fees it would otherwise be entitled to receive
from the Investment Manager with respect to a Fund. The Investment
Manager may also 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
(including footnotes thereto) located in the front of each of the
Fund's Prospectuses. Voluntary fee waivers by the Investment
Manager or by any Sub-Adviser may be terminated or reduced in
amount at any time and solely in the discretion of the Investment
Manager or Sub-Adviser concerned. Shareholders will be notified
of any change on or about the time that it becomes effective.
Contractual fee waivers/expense limitations can only be terminated
at the end of a term, which usually coincides with the end of a
fiscal year.
Fund Management and Sub-Advisory Agreements
The Managers Funds LLC serves as investment manager to each
Fund under a Fund Management Agreement. The Fund Management
Agreement permits the Investment Manager to, from time to time,
engage one or more Sub-Advisers to assist in the performance of
its services. Pursuant to the Fund Management Agreement, the
Investment Manager has entered into Sub-Advisory Agreements with
each Sub-Adviser selected for the Funds of the Trust.
The Fund Management Agreement and the Sub-Advisory
Agreements provide for an initial term of two years and
thereafter shall continue in effect from year to year so long as
such continuation is specifically approved at least annually by
the Trustees of the Trust who are not parties to the agreements
or "interested persons" (as defined in the 1940 Act) of any such
party. The Fund Management Agreement and the Sub-Advisory
Agreements may be terminated, without penalty, by the Board of
Trustees, by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) by the Investment Manager
or (in the case of the Sub-Advisory Agreement) by the Sub-Adviser
on not more than 60 days' written notice to the other party and
to the Fund. The Fund Management Agreement and the Sub-Advisory
Agreements terminate automatically in the event of assignment, as
defined under the 1940 Act and regulations thereunder.
The Fund Management Agreement provides that the Investment
Manager is specifically responsible for:
* supervising the general management and investment of
the assets and securities portfolio of each Fund;
* providing overall investment programs and strategies
for each Fund;
* selecting and evaluating the performance of Sub-
Advisers for each Fund and allocating the Fund's assets
among these Sub-Advisers;
* providing financial, accounting and statistical
information required for registration statements and
reports with the Securities and Exchange Commission;
and
* providing 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 recordkeeping.
The Funds pay all expenses not borne by its Investment
Manager or Sub-Adviser including, but not limited to, the charges
and expenses of the Funds' custodian and transfer agent,
independent auditors and legal counsel for the Funds, all
brokerage commissions and transfer taxes in connection with
portfolio transactions, all taxes and filing fees, the fees and
expenses for registration or qualification of its shares under
federal and state securities laws, all expenses of shareholders'
and Trustees' meetings and of preparing, printing and mailing
reports to shareholders and the compensation of Trustees who are
not directors, officers or employees of the Investment Manager,
Sub-Adviser or their affiliates, other than affiliated registered
investment companies.
The Sub-Advisory Agreement requires each Sub-Adviser to
provide fair and equitable treatment to a Fund in the selection
of portfolio investments and the allocation of investment
opportunities. However, it does not obligate a Sub-Adviser to
acquire for a Fund a position in any investment which any of a
Sub-Adviser's other clients may acquire. The Funds shall have no
first refusal, co-investment or other rights in respect of any
such investment, either for the Funds or otherwise.
Although the Sub-Adviser(s) makes investment decisions for
a Fund independent of those for its 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 a Fund and the other client(s) pursuant to a methodology
considered equitable by a 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 a Fund. However, the
Trustees believe, over time, that coordination and the ability to
participate in volume transactions should benefit a Fund.
The Trust has obtained from the Securities and Exchange
Commission an exemptive order which permits the Investment
Manager, subject to certain conditions, to enter into Sub-
Advisory Agreements with Sub-Advisers approved by the Trustees
but without the requirement of shareholder approval. Under the
terms of this exemptive order, the Investment Manager is 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 a particular Sub-Advisory Agreement or
continue the employment of existing Sub-Advisers after events
that under the 1940 Act and the Sub-Advisory Agreement would be
an automatic termination of the Sub-Advisory 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 Sub-Advisory Agreements for the
Fund at any time by a vote of a majority of the outstanding
voting securities of 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.
MANAGER'S PORTION
TOTAL MANAGEMENT OF THE TOTAL
NAME OF FUND FEE MANAGEMENT FEE
Income Equity Fund 0.75% 0.40%
Capital Appreciation 0.80% 0.40%
Fund
Special Equity Fund 0.90% 0.40%
International Equity 0.90% 0.40%
Fund
Emerging Markets 1.15% 0.40%*
Equity Fund
Short and 0.50% 0.25%
Intermediate Bond
Fund
Bond Fund 0.625% 0.375%
Global Bond Fund 0.70% 0.35% up to $20
million
0.455% over $20
million
*Manager is waiving its entire fee as of the date of this
Statement of Additional Information.
Code of Ethics
The Trustees have adopted a Code of Ethics under Rule 17j-1
of the 1940 Act on behalf of the Trust. The Code of Ethics of
the Trust incorporates the code of ethics of the Investment
Manager (applicable to "access persons" of the Trust that are
also employees of the Investment Manager). In combination, these
codes of ethics generally require access persons 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 also include a ban on trading securities based
on information about the trading within a Fund.
Administrative Services; Distribution Arrangements
Under an Administration and Shareholder Servicing Agreement
between the Trust and the Investment Manager, the Investment
Manager also serves as Administrator (the "Administrator") of the
Trust. Under a Distribution Agreement between the Trust and the
Investment Manager, the Investment Manager also serves as
distributor (the "Distributor") in connection with the offering
of Fund 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 promotional expenses
incurred in the sale of such 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 so long as
such continuation is specifically approved at least annually by
either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the
Trust 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 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.
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 (the "Transfer
Agent") for the Funds.
Independent Public Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts 02110, is the independent public accountant for the
Funds. PricewaterhouseCoopers LLP conducts an annual audit of
the financial statements of the Funds, assists in the preparation
and/or review 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 Sub-Advisory Agreements provide 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. A Sub-Adviser shall consider
all factors that it deems relevant when assessing best price and
execution for a 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, a
Sub-Adviser is 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, as
amended), provided by the broker. Each Sub-Advisers is 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. A Sub-Adviser 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 a 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. Each Fund may
purchase and sell portfolio securities through brokers who
provide a Fund with research services.
The Trustees will periodically review the total amount of
commissions paid by the Funds 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 the Funds of using particular brokers or dealers. It
is possible that certain of the services received by a
Sub-Adviser attributable to a particular transaction will
primarily benefit one or more other accounts for which investment
discretion is exercised by a Sub-Adviser.
The fees of each Sub-Adviser are not reduced by reason of
their receipt of such brokerage and research services.
Generally, a Sub-Adviser does not provide any services to a Fund
except portfolio investment management and related recordkeeping
services. The Investment Manager has directed the Sub-Advisers
to employ certain specific brokers who have agreed to pay certain
Fund expenses. The use of such brokers is subject to best price
and execution, and there is no specific amount of brokerage that
is required to be placed through such brokers.
Brokerage Commissions
During the last three fiscal years, the Funds paid the
following brokerage fees:
Fund 1997 1997 1999
Income Equity Fund $ 126,564 $118,253$ 143,783
Capital Appreciation Fund$ 371,969 $238,292 $
234,639
Special Equity Fund $ 616,474 $937,439$1,192,496
International Equity Fund$ 657,238$984,751$ 840,866
Emerging Markets Equity Fund(a) ----- $31,571 $
35,035
-----------------------------------------
(a) The Emerging Markets Equity Fund commenced operations on
February 9, 1998.
Brokerage Recapture Arrangements
During the last three fiscal years, the Funds paid the
following fees to the following list of brokers with which the
Funds have entered into brokerage recapture arrangements:
Fund 1997 1998 1999
Income Equity Fund
* Capital Institutional Services, Inc. $ 19,771 $
6,809 ---
* Salomon Smith Barney $ 53,306 --- $
73,114
Capital Appreciation Fund
* Capital Institutional Services, Inc. --- $
8,016 $ 17,874
* Salomon Smith Barney $ 55,771 $ 6,858 $ 11,337
* Donaldson & Co., Inc. --- $ 4,794 $ 11,513
* Westminster Research Assoc. Inc. $ 9,408
$117,362 $ 24,360
* LJB Associates $ 11,057 --- ---
Special Equity Fund
* Capital Institutional Services, Inc. $ 33,840 $
16,680 $ 44,778
International Equity Fund
* Capital Institutional Services, Inc. $ 1,188 $
1,254 $ 90,952
Pursuant to these arrangements, subject to best price and
execution, a Sub-Adviser may use a particular broker to execute
trades for a Fund and the broker then pays certain of that Fund's
expenses.
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 circumstances as described in the current Prospectus. Shares
may also be purchased through bank trust departments on behalf of
their clients and tax-exempt employee welfare, pension and
profit-sharing plans. 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 that 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. The
Funds may from time to time make payments to such broker-dealers
or processing organizations for certain recordkeeping services.
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 Transfer Agent. Certain processing organizations and
others may receive compensation from the Investment Manager out
of its legitimate profits in exchange for selling shares or for
recordkeeping or other shareholder related services.
Purchase orders received by the Trust before the close of
business of the New York Stock Exchange (usually 4:00 p.m. New
York Time), c/o Boston Financial Data Services, Inc. at the
address listed in the current Prospectus on any Business Day will
receive the net asset value computed that day. Orders received
after that time from certain processing organizations, which have
entered into special arrangements with the Investment 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 current Prospectus will
be promptly forwarded to the Transfer Agent.
Federal Funds or Bank Wires used to pay for purchase orders
must be in U.S. dollars and received in advance, except for
certain processing organizations which have entered into special
arrangements with the Trust. Purchases made by check are
effected when the check is received, but are accepted subject to
collection at full face value in U.S. funds and must be drawn in
U.S. dollars on a U.S. bank.
To ensure that checks are collected by the Trust,
redemptions of shares which were purchased by check are not
effected until the clearance of the check, which may take up to
15 days after the date of purchase unless arrangements are made
with the Investment Manager. However, during this 15-day period,
such shareholder may exchange such shares into any series of the
Trust. The 15-day holding period for redemptions would still
apply to shares received through such exchanges.
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, the Trust can
redeem shares from any identically registered account in the
Trust as reimbursement for any loss incurred. The Trust has the
right to prohibit or restrict all future purchases in the Trust
in the event of any nonpayment for shares. Third party checks
which are payable to an existing shareholder who is a natural
person (as opposed to a corporation or partnership) and endorsed
over to the Trust or the Custodian will be accepted.
In the interest of economy and convenience, share
certificates will not be issued. All share purchases are
confirmed to the record holder and credited to such holder's
account on the Trust's books maintained by the Transfer Agent.
Redeeming Shares
Any redemption orders received by the Trust before the close
of regular trading on the New York Stock Exchange (usually 4:00
p.m. New York Time) on any Business Day will receive the net
asset value determined at the close of regular trading on that
Business 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 current 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 Trust reserves the right to redeem
shareholder accounts (after 60 days notice) when the value of the
Fund shares in the account falls below $500 due to redemptions.
Whether the Trust will exercise its right to redeem shareholder
accounts will be determined by the Investment Manager on a
case-by-case basis.
If the Trust determines that it would be detrimental to the
best interest of the remaining shareholders of a 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 a Fund, in lieu of cash, in conformity with the
applicable rule of the Securities and Exchange Commission. 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 the Funds
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, account number,
Fund number and signatures of all account holders. All
redemptions will be mailed to the address of record on the
shareholder's account. In addition, if a shareholder sends a
check for the purchase of shares of the Funds 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 Trust 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 NYSE is closed for other than weekends
and holidays or when trading on the NYSE 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 Funds 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 of a Fund into shares of any
other series of the Trust without any charge. An investor may
make such an exchange if following such exchange the investor
would continue to meet the Trust's minimum investment amount.
Shareholders should read the current Prospectus of the series of
the Trust 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. Since
exchanges are purchases of a series of the Trust and redemptions
of the Funds, the usual purchase and redemption 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. Settlement on the
shares of any series of the Trust will occur 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 Fund computes its Net Asset Value once daily on Monday
through Friday on each day on which the 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, Thanksgiving Day and Christmas Day.
The Trust may close for purchases and redemptions at such other
times as may be determined by the 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 per share of a Fund is equal to the
value of a 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 Fund declares and pays dividends and distributions as
described in the current 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.
CERTAIN TAX MATTERS
Federal Income Taxation of Funds-in General
Each Fund intends to qualify and elect to be treated each
taxable year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), although it cannot give complete assurance that it
will qualify to do so. Accordingly, a Fund must, among other
things, (a) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90%
test"); and (b) satisfy certain diversification requirements on a
quarterly basis.
If a Fund should fail to qualify as a regulated investment
company in any year, it would lose the beneficial tax treatment
accorded regulated investment companies under Subchapter M of the
Code and all of its taxable income would be subject to tax at
regular corporate rates without any deduction for distributions
to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of a Fund's current
or accumulated earnings and profits. Also, the shareholders, if
they received a distribution in excess of current or accumulated
earnings and profits, would receive a return of capital that
would reduce the basis of their shares of a Fund to the extent
thereof. Any distribution in excess of a shareholder's basis in
the shareholder's shares would be taxable as gain realized from
the sale of such shares.
Each Fund will be liable for a nondeductible 4% excise tax
on amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement. To avoid the tax, during
each calendar year a Fund must distribute an amount equal to at
least 98% of the sum of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, and
its net capital gain income for the 12-month period ending on
October 31, in addition to any undistributed portion of the
respective balances from the prior year. For that purpose, any
income or gain retained by a Fund that is subject to corporate
tax will be considered to have been distributed by year end.
Each Fund intends to make sufficient distributions to avoid this
4% excise tax.
Taxation of the Funds' Investments
Original Issue Discount; Market Discount. For federal
income tax purposes, debt securities purchased by the Funds may
be treated as having original issue discount. Original issue
discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price.
Original issue discount is treated for federal income tax
purposes as income earned by the Funds, whether or not any income
is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of
original issue discount is determined on the basis of a constant
yield to maturity which takes into account the compounding of
accrued interest. Under Section 1286 of the Code, an investment
in a stripped bond or stripped coupon may result in original
issue discount.
Debt securities may be purchased by the Funds at a discount
that exceeds the original issue discount plus previously accrued
original issue discount remaining on the securities, if any, at
the time the Funds purchase the securities. This additional
discount represents market discount for federal income tax
purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the
date of issue and having market discount, the gain realized on
disposition will be treated as interest to the extent it does not
exceed the accrued market discount on the security (unless the
Funds elect to include such accrued market discount in income in
the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Funds may be required
to capitalize, rather than deduct currently, part or all of any
direct interest expense incurred or continued to purchase or
carry any debt security having market discount, unless the Funds
make the election to include market discount currently. Because
a Fund must include original issue discount in income, it will be
more difficult for a Fund to make the distributions required for
a Fund to maintain its status as a regulated investment company
under Subchapter M of the Code or to avoid the 4% excise tax
described above.
Options and Futures Transactions. Certain of a Fund's
investments may be subject to provisions of the Code that (i)
require inclusion of unrealized gains or losses in a Fund's
income for purposes of the 90% test, and require inclusion of
unrealized gains in a Fund's income for purposes of the excise
tax and the distribution requirements applicable to regulated
investment companies; (ii) defer recognition of realized losses;
and (iii) characterize both realized and unrealized gain or loss
as short-term and long-term gain, irrespective of the holding
period of the investment. Such provisions generally apply to,
among other investments, options on debt securities, indices on
securities and futures contracts. Each Fund will monitor its
transactions and may make certain tax elections available to it
in order to mitigate the impact of these rules and prevent
disqualification of a Fund as a regulated investment company.
Federal Income Taxation of Shareholders
Dividends paid by the Funds may be eligible for the 70%
dividends-received deduction for corporations. The percentage of
a Fund's dividends eligible for such tax treatment may be less
than 100% to the extent that less than 100% of a Fund's gross
income may be from qualifying dividends of domestic corporations.
Any dividend declared in October, November or December and made
payable to shareholders of record in any such month is treated as
received by such shareholder on December 31, provided that a Fund
pays the dividend during January of the following calendar year.
Distributions by a Fund can result in a reduction in the
fair market value of such Fund's shares. Should a distribution
reduce the fair market value below a shareholder's cost basis,
such distribution nevertheless may be taxable to the shareholder
as ordinary income or capital gain, even though, from an
investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider
the tax implications of buying shares just prior to a taxable
distribution. The price of shares purchased at that time
includes the amount of any forthcoming distribution. Those
investors purchasing shares just prior to a taxable distribution
will then receive a return of investment upon distribution which
will nevertheless be taxable to them.
Foreign Shareholders
Dividends of net investment income and distributions of net
realized short-term gain in excess of net long-term loss to a
shareholder who 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 or
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 or 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, a 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 that Fund's shares unless IRS Form W-8 is
provided. Transfers by gift of shares of a 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 a
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 Fund, the Emerging Markets Equity
Fund, the Short and Intermediate Bond Fund, the Bond Fund and the
Global Bond Fund 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 U.S. 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
stocks 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 a Fund for at least 16 days
during the 30-day period beginning on the date that is 15 days
before the ex-dividend date. As of 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
Each 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 a 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
Each Fund is a series of a Massachusetts business trust.
Under current law, neither the Trust nor a Fund is liable for any
income or franchise tax in the Commonwealth of Massachusetts,
provided that each Fund continues to qualify as a regulated
investment company under Subchapter M of the Code.
Shareholders should consult their tax advisers about the
application of the provisions of tax law described in this
Statement of Additional Information in light of their particular
tax situations.
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 and in
each Fund's current Prospectus.
Yield
The Income Equity Fund, the Short and Intermediate Bond
Fund, the Bond Fund and the Global Bond Fund may advertise
performance 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)/(c-d) + 1)6 - 1]
In the above formula
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = average daily number of shares outstanding during the period
that were entitled to receive dividends
d = 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. A Fund's 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, 1999
were as follows:
Fund 30-Day Yield at 12/31/99
Income Equity Fund 0.56%
Short and Intermediate Bond Fund 5.71%
Bond Fund 7.31%
Global Bond Fund 3.99%
Total Return
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 the Funds has been in existence. Average
annual total 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 Funds are reinvested
at the price stated in the current Prospectus on the reinvestment
dates during the period.
The Average Annual Total Returns for the period ended
December 31, 1999 were as follows:
Fund 1 Year 5 Years 10 Years Since
Inception
Income Equity Fund 4.15% 18.41% 12.61%
Capital Appreciation Fund 103.02% 40.43% 24.65%
Special Equity Fund54.11% 26.28% 18.39%
International Equity Fund 25.28% 15.83% 12.57%
Emerging Markets Equity Fund(a)90.06% ----- -----
22.60%
Short and Intermediate Bond Fund2.21% 6.53% 6.28%
Bond Fund 3.66% 10.19% 8.79%
Global Bond Fund (b)-9.97% 5.97% ----- 4.89%
(a) The Emerging Markets Equity Fund commenced operations on
February 8, 1998.
(b) The Global Bond Fund commenced operations on March 25, 1994.
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"). Lipper 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, a widely used independent
research firm, also ranks mutual funds by overall performance,
investment objectives and assets. The Funds' performance may
also be compared to the performance of various unmanaged indices
such as the Russell 2000 Index, Standard & Poor's 500 Composite
Stock Price Index, the Standard & Poor's 400 Composite Stock
Price Index or the Dow Jones Industrial Average.
Massachusetts Business Trust
Each Fund is a series of 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 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 Trust and that every written agreement,
obligation, instrument or undertaking made on behalf of the Trust
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 jurisdictions,
(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 Trust. However, upon
payment of such liability, the shareholder will be entitled to
reimbursement from the general assets of the Trust. 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 Trust.
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 Trust 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 Trust, 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 Trust for any satisfaction of
claims arising in connection with the affairs of the Trust. 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 Trust.
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 Fund
represents a separate series of shares of beneficial interest.
See "Massachusetts Business 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 any Fund or assets of
another series, if applicable. Each share of each Fund
represents an equal proportional interest in a Fund with each
other share. Upon liquidation of a Fund, shareholders are
entitled to share pro rata in the net assets of a Fund available
for distribution to such shareholders. See "Massachusetts
Business 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 current
Prospectus and in this Statement of Additional Information.
The shareholders of each Fund are entitled to one vote for
each share (or a proportionate fractional vote in respect of a
fractional share held), 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 Funds 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 accompanied
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 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
Funds, to the extent required by the 1940 Act.
Additional Information
This Statement of Additional Information and the current
Prospectus do not contain all of the information included in the
Trust's Registration Statement filed with the SEC under the 1933
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 current 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 current Prospectus or this Statement
of Additional Information, in connection with the offer of shares
of the Funds and, if given or made, such other representations or
information must not be relied upon as having been authorized by
the Trust, the Funds or the Distributor. The current 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 Funds or the Distributor to make such offer in
such jurisdictions.
FINANCIAL STATEMENTS
The following audited Financial Statements and the related
Notes for each of the Funds, as well as the Report of Independent
Accountants of PricewaterhouseCoopers LLP, are incorporated by
reference to this Statement of Additional Information from their
respective annual report filings made with the Securities and
Exchange Commission 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 LLC (800) 835-3879 or by visiting our website at
www.managersfunds.com or on the SEC's website at www.sec.gov.
Date of Annual Report; Date
Fund of Filing of Annual Report; Accession
Number
Income Equity Fund 12/31/99; 3/13/00; 0000720309-00-
000023
Capital Appreciation Fund 12/31/99; 3/13/00;
0000720309-00-000023
Special Equity Fund 12/31/99; 3/13/00; 0000720309-00-
000023
International Equity Fund 12/31/99; 3/13/00;
0000720309-00-000026
Emerging Markets Equity Fund 12/31/99; 3/13/00; 0000720309-
00-000026
Short and Intermediate Bond Fund 12/31/99; 3/13/00;
0000720309-00-000025
Bond Fund 12/31/99; 3/13/00; 0000720309-00-000025
Global Bond Fund 12/31/99; 3/13/00; 0000720309-00-
000025
