REGISTRATION NOS. 333-84639
811-9521
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 X
PRE-EFFECTIVE AMENDMENT NO. 2 X
POST-EFFECTIVE AMENDMENT NO. ________ ___
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
AMENDMENT NO. 2 X
(Check appropriate box or boxes)
MANAGERS AMG FUNDS
- -----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
40 Richards Avenue, Norwalk, Connecticut 06854
- ------------------------------------------------------------------------
(Address of Principal Executive Offices)
Philip H. Newman, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
- -----------------------------------------------------------------------
(Name and Address of Agent for Service)
As soon as practicable after the effective date of this
Registration Statement
- -----------------------------------------------------------------------
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective (check
appropriate box):
__ Immediately upon filing pursuant to __ On (date) pursuant to paragraph (b)
paragraph (b)
__ 60 days after filing pursuant to __ On (date) pursuant to paragraph
paragraph (a)(1) (a)(1)
__ 75 days after filing pursuant to __ On (date) pursuant to paragraph
(a)(2) of Rule 485 (a)(2) of Rule 485
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the registration statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
MANAGERS AMG FUNDS
ESSEX AGGRESSIVE GROWTH FUND
_____________________
PROSPECTUS
DATED OCTOBER 21, 1999
_________________________________________________________________
The Securities and Exchange Commission has not approved or
disapproved these securities or determined if this Prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
KEY INFORMATION ABOUT THE ESSEX AGGRESSIVE GROWTH FUND 1
Summary of the Goals, Principal Strategies and Principal Risk
Factors of the Fund 1
FEES AND EXPENSES OF THE FUND 2
Fees and Expenses 3
ESSEX AGGRESSIVE GROWTH FUND 3
Objective 3
Principal Investment Strategies 3
Should You Invest in this Fund? 4
MANAGERS AMG FUNDS 4
PAST PERFORMANCE OF ESSEX 5
YOUR ACCOUNT 7
Minimum Investments in the Fund 7
HOW TO PURCHASE SHARES 8
DISTRIBUTION PLANS 8
HOW TO SELL SHARES 9
INVESTOR SERVICES 9
THE FUND AND ITS POLICIES 10
ACCOUNT STATEMENTS 10
DIVIDENDS AND DISTRIBUTIONS 11
TAX INFORMATION 11
</TABLE>
<PAGE>
KEY INFORMATION ABOUT THE ESSEX AGGRESSIVE GROWTH FUND
This Prospectus contains important information for anyone
interested in investing in the ESSEX AGGRESSIVE GROWTH FUND (the
"Fund"), a series of MANAGERS AMG FUNDS. Please read this
document carefully before you invest and keep it for future
reference. You should base your purchase of shares of the Fund
on your own goals, risk preferences and investment time horizons.
SUMMARY OF THE GOALS, PRINCIPAL STRATEGIES AND PRINCIPAL RISK
FACTORS OF THE FUND
The following is a summary of the goals, principal strategies
and principal risk factors of the Fund.
<TABLE>
<CAPTION>
GOALS PRINCIPAL STRATEGIES PRINCIPAL RISK FACTORS
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<S> <C> <C>
Long-term capital Invests primarily in the Market Risk
appreciation equity securities of U.S. Growth Stock Risk
companies with the Small and Mid-Cap Stock
potential for long-term Risk
growth Sector Risk
Year 2000 Risk
Invests primarily in
companies with market
capitalizations of
between $500 million and
$20 billion, although it
may invest in companies
of any size
Ordinarily invests in 50
to 60 companies from pre-
selected sectors of the
market; initially, the
focus will be on the
specialty retail,
technology, health care,
financial services,
energy services, and
basic industries sectors
</TABLE>
____________________________________________________________________________
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 Fund. 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 Fund.
MARKET RISK
The Fund is subject to the risks generally of investing in
stocks, commonly referred to as "market risk." Market risk
includes the risk of sudden and unpredictable drops in value of
the market as a whole and periods of lackluster performance. The
success of the Fund's investment strategy depends significantly
on the skill of Essex in assessing the potential of the
securities in which the Fund invests. 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 the Fund's portfolio of
investments are also likely to decrease in value. The increase
or decrease in the value of the Fund's investments, in percentage
terms, may be more or less than the increase or decrease in the
value of the market.
GROWTH STOCK RISK
Growth stocks may be more sensitive to market movements
because their prices tend to reflect future investor expectations
rather than just current profits. As investors perceive and
forecast good business prospects, they are willing to pay higher
prices for securities. Higher prices therefore reflect higher
expectations. If such expectations are not met, or if
expectations are lowered, the prices of the securities will drop.
In addition, growth stocks tend to be more sensitive than other
stocks to increases in interest rates, which will generally cause
the prices of growth stocks to fall. To the extent that the Fund
invests in those kinds of stocks, it will be exposed to the risks
<PAGE>
associated with those kinds of investments. For these and other
reasons, the Fund may underperform other stock funds (such as
value funds) when stocks of growth companies are out of favor.
SMALL AND MID-CAP STOCK RISK
Small and Mid-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, the Fund may
underperform other stock funds (such as large-company stock
funds) when stocks of small and medium-sized companies are out of favor.
SECTOR 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 of a particular sector of the market to decrease. To
the extent the Fund has substantial holdings within a particular
sector, the risks associated with that sector increase.
Diversification among groups of companies in different businesses
may reduce sector risk but may also dilute potential returns.
YEAR 2000 RISK
The "Year 2000 problem," a date-related computer issue, could
have an adverse impact on the nature and quality of the services
provided to the Fund and its shareholders. In addition to
verifying that all internal systems are able to handle dates past
1999 (otherwise known as "Year 2000 compliant"), the Fund is
taking steps to address the problem by working with the
sub-adviser and outside vendors. The Fund has obtained
assurances from each of our key service providers that they are
taking steps within their organizations to make their systems and
products Year 2000 compliant, but cannot be completely certain
that all service providers will be fully Year 2000 compliant. The
Fund may be adversely impacted if the issuers of the Fund's
portfolio securities have Year 2000 problems. The Fund will
continue to monitor developments relating to the Year 2000
problem.
FEES AND EXPENSES OF THE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY
IF YOU BUY AND HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price).............. None
Maximum Deferred Sales Charge (Load).................. None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions.............................. None
Maximum Account Fee................................... None
</TABLE>
2
<PAGE>
FEES AND EXPENSES
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (expenses that are deducted
from Fund assets)
<S> <C>
Management Fee........................................ 1.00%
Distribution (12b-1) Fees1............................ 0.00%
Other Expenses2....................................... 0.42% -----
Total Annual Fund Operating Expenses.................. 1.42%
Fee Waiver and Reimbursement3......................... (0.32%)
-------
Net Annual Fund Operating Expenses.................... 1.10%
-----
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</TABLE>
[FN]
1 Although the Fund is subject to a Rule 12b-1 Plan of
Distribution that permits payments of up to 0.25% of the Fund's
average daily net assets, no payments have been authorized under
the plan to date and no payments are expected to be authorized
during the first year of operation.
2 Because the Fund has not commenced operations as of the
date of this prospectus, the "Other Expenses" of the Fund are
based on annualized projected expenses and average net assets for
the fiscal year ending October 31, 2000.
3 The Managers Funds LLC and Essex Investment Management
Company, LLC have contractually agreed, for a period of not less
than eighteen (18) months, to limit Net Annual Fund Operating
Expenses to 1.10% subject to later reimbursement by the Fund in
certain circumstances. See "Managers AMG Funds."
</FN>
EXAMPLE
The following Example will help you compare the cost of
investing in the Fund 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
------ -------
$112 $403
+The Example reflects the impact of the Fund's contractual
expense limitation for the initial eighteen (18) month period
covered by the Example.
The Example should not be considered a representation of
past or future expenses, as actual expenses may be greater or
lower than those shown.
ESSEX AGGRESSIVE GROWTH FUND
OBJECTIVE
The Fund's objective is to achieve long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
3
<PAGE>
The Fund invests primarily in the equity securities of U.S.
companies with the potential for long-term growth. Although the
Fund may invest in companies of any size, the Fund will invest
primarily in companies with market capitalizations of between
$500 million and $20 billion. Ordinarily, the Fund invests in 50
to 60 companies from pre-selected sectors of the market.
Initially, the Fund will focus on the specialty retail,
technology, health care, financial services, energy services and
basic industries sectors. Generally, the Fund limits its
investments in any specific company to 5% of its assets.
Essex Investment Management Company, LLC ("Essex") serves as
sub-adviser to the Fund. Essex uses fundamental investment
research techniques to determine what stocks to buy and sell. In
selecting stocks, Essex first attempts to identify the industries
within various sectors that over the long term will grow faster
than the economy as a whole. Essex then looks for companies
within those industries that it believes can generate and
maintain strong revenue and/or earnings growth. Essex looks for
companies with established market positions, quality management
and strong finances. Ordinarily, Essex will sell all or a
portion of the Fund's position in a company's stock if it
believes the current price is not supported by expectations
regarding the company's future growth potential or if, as a
result of appreciation, the value of the stock exceeds 5% of the
Fund's assets.
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 YOU INVEST IN THIS FUND?
This Fund MAY be suitable if you:
* Are seeking an opportunity for some equity returns in
your investment portfolio
* Are willing to accept a higher degree of risk for the
opportunity of higher potential returns
* Have an investment time horizon of five years or more
This Fund MAY NOT be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with stock market risk
* Are seeking current income
_____________________________________________________________
WHAT ARE YOU INVESTING IN? You are buying shares of a pooled
investment known as a mutual fund. It is professionally
managed and gives you the opportunity to invest in a wide
variety of companies, industries and markets. This Fund is not
a complete investment program and there is no guarantee that
the Fund will reach its stated goals.
_______________________________________________________________
MANAGERS AMG FUNDS
Managers AMG Funds is intended to be a no-load mutual fund
family comprised of different funds, each having distinct
investment management objectives, strategies, risks and policies.
Essex Aggressive Growth Fund is the first fund available in the
fund family.
4
<PAGE>
The Managers Funds LLC (the "Investment Manager"), a
subsidiary of Affiliated Managers Group, Inc., serves as
investment manager to the Fund and is responsible for the Fund's
overall administration and distribution. The Investment Manager
also monitors the performance, security holdings and investment
strategies of Essex Investment Management Company, LLC, the sub-
adviser of the Fund and, when appropriate, evaluates any
potential new asset managers for the fund family.
Essex has day-to-day responsibility for managing the Fund's
portfolio. Essex, located at 125 High Street, Boston,
Massachusetts 02110, is the successor firm to Essex Investment
Management Company, Inc., which was formed in 1976. Affiliated
Managers Group, Inc. indirectly owns a majority interest in
Essex. As of December 31, 1998, Essex had assets under
management of $5.6 billion. Stephen D. Cutler, Joseph C. McNay
and Daniel Beckham are the portfolio managers for the Fund. Mr.
Cutler is the President of Essex, a position he has held with
Essex or its predecessor firm since 1989. Mr. McNay is the
Chairman and Chief Investment Officer of Essex, a position he has
held with Essex or its predecessor firm since 1976. Mr. Beckham
is the Principal and Vice President of Essex, a position he has
held with Essex or its predecessor firm since 1995. From 1994 to
1995, Mr. Beckham was a member of the Duncan-Hurst Capital
Management investment team and from 1989 to 1994, Mr. Beckham was
a member of the Nicholas-Applegate Capital Management investment
team.
The Fund is obligated by its investment management agreement
to pay an annual management fee to the Investment Manager of
1.00% of the average daily net assets of the Fund. The
Investment Manager, in turn, pays Essex 1.00% of the average
daily net assets of the Fund for its services as sub-adviser.
Under its investment management agreement with the Fund, the
Investment Manager provides a variety of administrative services
to the Fund and, under its distribution agreement with the Fund,
the Investment Manager provides a variety of shareholder and
marketing services to the Fund. The Investment Manager receives
no additional compensation from the Fund for these services.
Pursuant to a Reimbursement Agreement between the Investment
Manager and Essex, Essex reimburses the Investment Manager for
the costs the Investment Manager bears in providing such services
to the Fund.
The Investment Manager has contractually agreed, for a period
of not less than eighteen (18) months, to waive fees and pay or
reimburse the Fund to the extent total expenses of the Fund
exceed 1.10% 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 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 1.10% of the Fund's average daily net
assets. In addition to any other waiver or reimbursement agreed
to by the Investment Manager, Essex 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.
5
<PAGE>
PAST PERFORMANCE OF ESSEX
The table below sets forth the investment performance for the
period from October 1, 1989 to September 30, 1999 of discretionary, fee-
paying accounts managed by Essex with investment objectives,
policies and strategies substantially similar to that of the
Essex Aggressive Growth Fund (the "Essex Composite"). For periods
after December 31, 1992, the Essex Composite includes only those
accounts with at least $1.0 million in net assets, and has been
attested to by Deloitte & Touche LLP for use in connection
with this Prospectus. The Essex Composite represents an
asset-weighted composite of the compounded internal rates
of return for all such accounts during each period indicated.
The performance of the Essex Composite for each period has been
adjusted to give effect on a quarterly basis to fees and expenses in
the amount of 1.10%, which is the expense ratio of the Fund, net of
contractual waivers and reimbursements. Investment performance is shown
on an annual return basis, with returns for periods of less than one
year not annualized. Average annual returns and cumulative
returns are provided for the 5-year and 10-year periods ended
September 30, 1999.
The method used for calculating the performance of the Essex
Composite differs from the method prescribed by the Securities and
Exchange Commission for calculating the total return for mutual
funds. Essex uses a time-weighted rate of return formula to
calculate investment performance returns of its accounts,
commonly referred to as the Bank Administration Institute (or
"BAI") formula. The BAI formula determines an internal rate of
return by measuring the change in the market value of individual
accounts over a month. The Essex performance calculation
methodology also takes into consideration any account level cash flows
during a month which are equal to or greater than 10% of the beginning
market value of that account.
The investment performance of the Essex Composite is compared to the
Russell 3000 Growth Index (the "Russell 3000 Growth Index") and the
Standard & Poor's 500 Composite Stock Index (the "S&P 500 Index"), giving
effect to the reinvestment of all dividends. The Russell 3000 Growth
Index measures the performance of those companies in the Russell 3000
Index (representing the 3000 largest U.S. companies based on total market
capitalization) with higher price-to-book ratios and higher forecasted
growth values. The S&P 500 Index is made up of larger capitalization
companies that represent a broad spectrum of the U.S. economy and about
70% of the U.S. stock market's total capitalization. Although used as
benchmarks, the performance of each of the Russell 3000 Growth Index
and the S&P 500 Index may not be comparable to the Essex Composite
because, unlike the performance of the Essex Composite, the performance of
the Russell 3000 Growth Index and the S&P 500 Index has not been
adjusted for any fees or expenses. The performance of each of the
Russell 3000 Growth Index and the S&P 500 Index has not been attested
to by Deloitte & Touche LLP. The information provided does not represent
the performance of the Essex Aggressive Growth Fund, which commenced
operations on November 1, 1999 and has a limited performance record of
its own. The following information should not be considered a
prediction of future performance of the Essex Aggressive Growth Fund.
The Essex Aggressive Growth Fund's performance may be higher or
lower than that shown below.
<TABLE>
<CAPTION>
ESSEX RUSSELL 3000 GROWTH S&P 500
COMPOSITE RETURN INDEX RETURN INDEX RETURN
---------------- ------------- -------------
<S> <C> <C> <C>
1989 (three months only) -1.53% 2.22% 2.05
1990 0.18 -1.31 -3.05
1991 68.20 41.65 30.47
1992 3.15 5.22 7.62
1993 13.15 3.69 10.08
1994 1.77 2.20 1.32
1995 46.05 36.51 37.58
1996 16.51 21.88 22.96
1997 12.62 28.74 33.36
1998 50.56 35.03 28.58
1999 (nine months only) 30.86 6.46 5.36
1-year (ended 9-30-99) 79.44 34.67 27.80
5-year average annual 30.86 25.37 25.03
10-year average annual 22.23 17.24 16.82
6
<PAGE>
5-year cumulative 283.84 209.77 205.57
10-year cumulative 644.13 390.63 373.51
</TABLE>
The accounts represented by the composite are not subject to
the same types of expenses to which the Fund is subject, nor to
the diversification requirements, specific tax restrictions and
investment limitations imposed on the Fund by the Investment
Company Act of 1940, as amended (the "1940 Act") or the Internal
Revenue Code of 1986, as amended (the "Code"). The performance of
the Essex Composite shown above might have been less favorable had
the accounts been subject to these requirements, restrictions and
limitations.
YOUR ACCOUNT
As an investor, you pay no sales charges to invest in the
Fund and you pay no charges to redeem out of the Fund. 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.
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 FUND
Cash investments in the Fund must be in U.S. Dollars.
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.
Subject to approval by the Investment Manager and Essex, you
may be permitted to purchase shares of the Fund by means of an in-
kind contribution of securities, which will be valued in
accordance with the Fund's pricing procedures. As with a cash
purchase of shares, an in-kind contribution will also be subject
to the Fund's minimum investment requirements.
The following provides the minimum initial and additional
investments in the Fund:
<TABLE>
<CAPTION>
INITIAL INVESTMENT ADDITIONAL INVESTMENT
------------------ ---------------------
<S> <C> <C>
Regular accounts $25,000 $1,000
Traditional IRA 25,000 1,000
Roth IRA 25,000 1,000
</TABLE>
The Fund or the Underwriter may, in their discretion, waive
the minimum and initial investment amounts at any time.
______________________________________________________________________
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.
_____________________________________________________________________
7
<PAGE>
You should consult your tax professional for more information on
IRA accounts.
8
<PAGE>
HOW TO PURCHASE SHARES
<TABLE>
<CAPTION>
____________________________________________________________________________
INITIAL PURCHASE ADDITIONAL PURCHASES
____________________________________________________________________________
<S> <C> <C>
THROUGH YOUR Contact your Send any additional
INVESTMENT ADVISOR investment advisor monies to your
or other investment investment professional
professional. at the address
appearing on
your account
statement.
_____________________________________________________________________________
INVESTMENT Call (800) 358-7668 Call (800)
ADVISORS, BANK for further 358-7668 for
TRUST AND 401(k) instructions. further
AGENTS ONLY instructions.
______________________________________________________________________________
DIRECT Complete the account Write a letter of
SHAREHOLDERS: application. instruction and a
check payable to
*BY MAIL Mail the application Managers AMG Funds
and a check payable to:
to Managers AMG
Funds to: Managers AMG Funds
c/o Boston Financial
Managers AMG Funds Data Services, Inc.
c/o Boston Financial P.O. Box 8517
Data Services, Inc. Boston, MA 02266-
P.O. Box 8517 8517
Boston, MA 02266-
8517 Include your account
# on your check.
*BY TELEPHONE If your account has
already been
established, call
the Transfer Agent
at (800) 252-0682. The
minimum additional
investment is
$1,000.
____________________________________________________________________________
</TABLE>
FOR BANK WIRES: Please call and notify the Fund at (800)
358-7668. Then instruct your bank to wire the money to
State Street Bank and Trust Company, Boston, MA 02101; ABA
#011000028; BFN Managers AMG Funds A/C 9905-472-8, FBO
Shareholder name, account number and fund name. Please be
aware that your bank may charge you a fee for this service.
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 organizations rather than directly with us, the
policies and fees may be different than those described in this
material.
DISTRIBUTION PLANS
The Fund has adopted a distribution plan to pay for the
marketing of shares of the Fund. Under the plan, the Board of
Trustees may authorize payments at an annual rate of up to 0.25%
of the Fund's average daily net assets. The Trustees have not
authorized the payment of any fees to date.
9
<PAGE>
HOW TO SELL SHARES
You may sell your shares at any time. Your shares will be
sold at the NAV calculated after the Fund's Transfer Agent
receives your order. Orders received after 4:00 p.m. New York
Time will receive the NAV per share determined at the close of
trading on the next NYSE trading day.
<TABLE>
<CAPTION>
INSTRUCTIONS
_________________________________________________________________________
<S> <C>
THROUGH YOUR INVESTMENT Contact your investment
ADVISOR advisor or other investment
professional.
_________________________________________________________________________
INVESTMENT ADVISORS, BANK Call (800) 358-7668 for
TRUST AND 401(k) AGENTS ONLY further instructions.
_________________________________________________________________________
DIRECT SHAREHOLDERS: Write a letter of instruction
containing:
*BY MAIL
*the name of the Fund
*dollar amount or number of
shares to be sold
*your name
*your account number
*signatures of all owners on
account
Mail letter to:
Managers AMG Funds
c/o Boston Financial Data
Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
*BY TELEPHONE If you elected telephone
redemption privileges on your
account application, call us
at (800) 252-0682.
__________________________________________________________________________
</TABLE>
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.
Telephone redemptions are available only for redemptions
which are below $25,000.
INVESTOR SERVICES
Automatic Reinvestment Plan allows your dividends and capital
gain distributions to be reinvested in additional shares of the
Fund. You can elect to receive cash.
Automatic Investments allows you to make automatic deductions
from a designated bank account.
Systematic Withdrawals allows you to make automatic monthly
withdrawals of $100 or more. Withdrawals 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.
10
<PAGE>
Individual Retirement Accounts are available to you at no
additional cost. Call us at (800) 835-3879 for more
information and an IRA kit.
The Fund has an Exchange Privilege which allows you to
exchange your shares of the Fund for shares of any of the nine
series of The Managers Funds. There is no fee associated with
the Exchange Privilege. Be sure to read the Prospectus of any
series of The Managers Funds that you wish to exchange into. You
can request your exchange in writing, by telephone (if elected on
the application) or through your investment advisor, bank or
investment professional.
THE FUND AND ITS POLICIES
The Fund is a 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.
The Fund reserves the right to:
* redeem an account if the value of the account falls below
$25,000 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 our minimum investment amounts;
* delay sending out redemption proceeds for up to seven
days (this usually applies to very large redemptions
without notice, excessive trading or during unusual
market conditions);
* make a redemption-in-kind (a payment in portfolio
securities instead of in cash) if we determine that a
redemption is too large and/or may cause harm to the Fund
and its shareholders;
* refuse any purchase or exchange request if we determine
that such request could adversely affect the Fund's NAV,
including if such person or group has engaged in
excessive trading (to be determined in our discretion);
and
* after prior warning and notification, close an account
due to excessive trading.
ACCOUNT STATEMENTS
You will receive quarterly statements detailing your account
activity. All investors (other than IRA accounts) will also
receive a yearly statement, including a Form 1099-DIV, detailing
the tax characteristics of any dividends and distributions that
you have received in your account. You will also receive
confirmations after each trade executed in your account.
11
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Income dividends and net capital gain distributions, if any,
are 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 to the provisions of the Internal Revenue Code of
1986, as amended, which are in effect as of the date of this
Prospectus. You should consult a tax adviser about the status of
your distributions from the Fund.
All dividends and short-term capital gains distributions are
generally taxable to you as ordinary income, whether you receive
the distribution in cash or reinvest it for additional shares.
An exchange of the Fund's shares for shares of another Fund will
be treated as a sale of the Fund's shares and any gain on the
transaction may be subject to federal income tax.
Keep in mind that distributions may be taxable to you at
different rates depending on the length of time the Fund held the
applicable investment 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 the 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.
The initial investors in the Fund are expected to include
clients of Essex, some of whom may invest by means of a
contribution of securities in exchange for shares of the Fund in
which no current tax will be incurred. In connection with these
transactions, each investor's tax basis in the contributed securities
will carry over to the Fund, which basis may be lower than the current
market value of the securities. When the Fund subsequently sells
these contributed securities, the Fund may realize a larger gain
(or smaller loss) for tax purposes than would have been the case
if the same securities had been purchased directly by the Fund
with cash. The larger gain (or smaller loss) may result in shareholders
accelerating (or deferring) the federal income tax liability
they otherwise would have incurred in the absence of the tax-free
contribution of securities.
12
<PAGE>
MANAGERS AMG FUNDS
ESSEX AGGRESSIVE GROWTH FUND
FUND DISTRIBUTOR
The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203) 857-5321 or (800) 835-3879
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
TRANSFER AGENT
Boston Financial Data Services, Inc.
Attn: Managers AMG Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) 252-0682
TRUSTEES
Jack W. Aber
William E. Chapman, II
Sean M. Healey
Edward J. Kaier
Eric Rakowski
13
<PAGE>
For More Information
Additional information for the Fund, including the Statement
of Additional Information, is available to you without charge and
may be requested as follows:
By Telephone: Call 1-800-835-3879
By Mail: Write to: Managers AMG Funds
40 Richards Avenue
Norwalk, CT 06854
On the Internet:Electronic copies are available
on our website at http://www.managersamg.com
A current Statement of Additional Information is on file with
the Securities and Exchange Commission and is incorporated by
reference (is legally part of this prospectus). Text-only copies
are also available on the SEC's website at http://www.sec.gov, by
sending a request and a duplication fee to the SEC's Public
Reference Section, Washington, D.C. 20549-6009, or by visiting
the SEC's Public Reference Room in Washington, DC
(1-800-SEC-0330).
INVESTMENT COMPANY ACT REGISTRATION NUMBER 811-9521
14
<PAGE>
MANAGERS AMG FUNDS
ESSEX AGGRESSIVE GROWTH FUND
____________________________
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 21, 1999
________________________________________________________________
You can obtain a free copy of the Prospectus of the Essex
Aggressive Growth Fund (the "Fund") by calling Managers AMG Funds
at (800) 835-3879. The Prospectus provides the basic
information about investing in the Fund.
This Statement of Additional Information is not a Prospectus.
It contains additional information regarding the activities and
operations of the Fund. It should be read in conjunction with
the Fund's Prospectus.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
-----
<S> <C>
GENERAL INFORMATION 3
INVESTMENT OBJECTIVES AND POLICIES 3
Investment Techniques and Associated Risks 3
Diversification Requirements for the Fund 8
Fundamental Investment Restrictions 8
Temporary Defensive Position 10
Portfolio Turnover 10
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 10
Trustees' Compensation 11
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 12
Control Persons 12
Management Ownership 12
MANAGEMENT OF THE FUND 12
Investment Manager 12
Compensation of Investment Manager and Sub-Adviser 13
Fee Waivers and Expense Limitations 13
Investment Management and Sub-Advisory Agreements 14
Custodian 16
Transfer Agent 16
Independent Public Accountants 16
BROKERAGE ALLOCATION AND OTHER PRACTICES 16
PURCHASE, REDEMPTION AND PRICING OF SHARES 17
Purchasing Shares 17
Redeeming Shares 18
Exchange of Shares 19
Net Asset Value 19
Dividends and Distributions 19
Distribution Plan 19
CERTAIN TAX MATTERS 20
Federal Income Taxation of Fund-in General 20
Taxation of the Fund's Investments 20
Federal Income Taxation of Shareholders 21
Foreign Shareholders 21
State and Local Taxes 22
Other Taxation 22
PERFORMANCE DATA 22
Total Return 22
Performance Comparisons 23
Massachusetts Business Trust 23
Description of Shares 24
Additional Information 25
REPORT OF INDEPENDENT ACCOUNTANTS 26
(i)
<PAGE>
FINANCIAL STATEMENT 27
</TABLE>
(ii)
<PAGE>
(iii)
<PAGE>
GENERAL INFORMATION
This Statement of Additional Information relates only to the
Essex Aggressive Growth Fund (the "Fund"). The Fund is a series
of shares of beneficial interest of Managers AMG Funds, a no-load
mutual fund family, formed as a Massachusetts business trust (the
"Trust"). The Trust was organized on June 18, 1999.
This Statement of Additional Information describes the
financial history, management and operation of the Fund, as well
as the Fund's investment objectives and policies. It should be
read in conjunction with the Fund's current Prospectus. The
Trust's executive office is located at 40 Richards Avenue,
Norwalk, CT 06854.
The Managers Funds LLC, a subsidiary of Affiliated Managers
Group, Inc., serves as investment manager to the Fund and is
responsible for the Fund's overall administration and
distribution. See "Management of the Fund."
INVESTMENT OBJECTIVES AND POLICIES
The following is additional information regarding the
investment objectives and policies used by the Fund in an attempt
to achieve its objective as stated in its Prospectus. The Fund
is a diversified open-end management investment company.
The Fund invests primarily in equity securities of U.S.
companies with the potential for long-term growth. Although the
Fund may invest in companies of any size, the Fund will invest
primarily in companies with market capitalizations of between
$500 million and $20 billion. Ordinarily, the Fund invests in 50
to 60 companies from pre-selected sectors of the market.
Initially, the Fund will focus on the specialty retail,
technology, health care, financial services, energy services and
basic industries sectors. Generally, the Fund limits its
investments in any specific company to 5% of its assets.
Investment Techniques and Associated Risks
The following are descriptions of the types of securities
that may be purchased by the Fund. Also see "Quality and
Diversification Requirements of the Fund."
(1) Cash Equivalents. The Fund may invest in cash
equivalents. Cash equivalents include certificates of deposit,
bankers acceptances, commercial paper, short-term corporate debt
securities and repurchase agreements.
Bankers Acceptances. The 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.
Certificates of Deposit. The 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. The 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 9 months. Eurodollar commercial paper
refers to promissory notes payable in U.S. Dollars by European
issuers.
Repurchase Agreements. The Fund may enter into repurchase
agreements with brokers, dealers or banks that meet the credit
guidelines which have been approved by the Fund's Board of
Trustees. In a repurchase agreement, the Fund buys a security
from a bank or a broker-dealer that has agreed to repurchase the
same security at a mutually agreed upon date and price. The
resale price normally is the purchase price plus a mutually
agreed upon interest rate. This interest rate is effective for
<PAGE>
the period of time the Fund is invested in the agreement and is
not related to the coupon rate on the underlying security. The
period of these repurchase agreements will be short, and at no
time will the Fund enter into repurchase agreements for more than
seven days.
Repurchase agreements could have certain risks that may
adversely affect the Fund. If a seller defaults, the 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 the
Fund may be delayed or limited.
(2) Reverse Repurchase Agreements. The Fund may enter into
reverse repurchase agreements. In a reverse repurchase
agreement, the 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 the Fund and,
therefore, a form of leverage which may cause any gains or losses
for the Fund to become magnified.
The Fund will invest the proceeds of borrowings under reverse
repurchase agreements. In addition, the 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. The Fund will not invest
the proceeds of a reverse repurchase agreement for a period that
is longer than the reverse repurchase agreement itself. The Fund
will establish and maintain a separate account with the Custodian
that contains a segregated portfolio of securities in an amount
which is at least equal to the amount of its purchase obligations
under the reverse repurchase agreement.
(3) Emerging Market Securities. The Fund may invest some of
its assets in the securities of emerging market countries.
Investments in securities in emerging market countries may be
considered to be speculative and may have additional risks from
those associated with investing in the securities of U.S.
issuers. There may be limited information available to investors
which is publicly available, and generally emerging market
issuers are not subject to uniform accounting, auditing and
financial standards and requirements like those required by U.S.
issuers.
Investors should be aware that the value of the Fund's
investments in emerging markets securities may be adversely
affected by changes in the political, economic or social
conditions, expropriation, nationalization, limitation on the
removal of funds or assets, controls, tax regulations and other
foreign restrictions in emerging market countries. These risks
may be more severe than those experienced in foreign countries.
Emerging market securities trade with less frequency and volume
than domestic securities and therefore may have greater price
volatility and lack liquidity. Furthermore, there is often no
legal structure governing private or foreign investment or
private property in some emerging market countries. This may
adversely affect the Fund's operations and the ability to obtain
a judgement against an issuer in an emerging market country.
(4) Foreign Securities. The Fund may invest in foreign
securities either directly or indirectly in the form of American
Depository 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 the 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 the Fund's operations. It may also be
difficult to obtain a judgement against a foreign creditor.
Foreign securities trade with less frequency and volume than
domestic securities and therefore may have greater price
5
<PAGE>
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 Fund may
purchase or sell equity securities of foreign countries.
Therefore, substantially all of the Fund's income may be derived
from foreign currency. A forward foreign currency exchange
contract is an obligation to purchase or sell a specific currency
at a mutually agreed upon date and price. The contract is
usually between a bank and its customers. The contract may be
denominated in U.S. Dollars or may be referred to as a
"cross-currency" contract. A cross-currency contract is a
contract which is denominated in another currency other than in
U.S. Dollars.
In such a contract, the Fund's custodian will segregate cash
or marketable securities in an amount not less than the value of
the Fund's total assets committed to these contracts. Generally,
the Fund will not enter into contracts that are greater than
ninety days.
Forward foreign currency contracts have additional risks. It
may be difficult to determine the market movements of the
currency. The value of the Fund's assets may be adversely
affected by changes in foreign currency exchange rates and
regulations and controls on currency exchange. Therefore, the
Fund may incur costs in converting foreign currency.
If the Fund engages in an offsetting transaction, the Fund
will experience a gain or a loss determined by the movement in
the contract prices. An "offsetting transaction" is one where
the Fund enters into a transaction with the bank upon maturity of
the original contract. The Fund must sell or purchase on the
same maturity date as the original contract the same amount of
foreign currency as the original contract.
Foreign Currency Considerations. The Fund may invest some 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. Dollars, the Fund may be
required to sell its securities in order to make its
distributions in U.S. Dollars. As a result, the liquidity of the
Fund's securities may have an adverse affect on the Fund's
performance.
(5) Futures Contracts. The Fund may buy and sell futures
contracts to protect the value of the Fund's portfolio against
changes in the prices of the securities in which it invests.
When the Fund buys or sells a futures contact, the 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 the Fund desires to do so.
Equity Index Futures Contracts. The Fund may enter into
equity index futures contracts. An equity index future contract
is an agreement for the Fund to buy or sell an index relating to
equity securities at a mutually agreed upon date and price.
Equity index futures contracts are often used to hedge against
anticipated changes in the level of stock prices. When the Fund
enters into this type of contract, the Fund makes a deposit
called an "initial margin." This initial margin must be equal to
a specified percentage of the value of the contract. The rest of
the payment is made when the contract expires.
(6) Illiquid Securities, Private Placements and Certain
Unregistered Securities. The Fund may invest in privately
placed, restricted, Rule 144A or other unregistered securities.
The Fund may not acquire illiquid holdings if, as a result, more
than 15% of the Fund's total assets would be in illiquid
investments. Subject to this Fundamental policy limitation, the
Fund may acquire investments that are illiquid or have limited
liquidity, such as private placements or investments that are not
registered under the Securities Act of 1933, as amended (the
"1933 Act") and cannot be offered for public sale in the United
States without first being registered under the 1933 Act. An
investment is considered "illiquid" if it cannot be disposed of
within seven (7) days in the normal course of business at
approximately the same amount at which it was valued in the
Fund's portfolio. The price the Fund's portfolio may pay for
illiquid securities or receives upon resale may be lower than the
6
<PAGE>
price paid or received for similar securities with a more liquid
market. Accordingly, the valuations of these securities will
reflect any limitations on their liquidity.
The 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 Managers Funds LLC and approved by the
Trustees. The Trustees will monitor these guidelines on a
periodic basis.
Investors should be aware that the Fund may be subject to a
risk if the Fund should decide to sell these securities when a
buyer is not readily available and at a price which the Fund
believes represents the security's value. In the case where an
illiquid security must be registered under the 1933 Act before it
may be sold, the Fund may be obligated to pay all or part of the
registration expenses. Therefore, a considerable time may elapse
between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market
conditions develop, the Fund may obtain a less favorable price
than was available when it had first decided to sell the
security.
(7) 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.
(8) Option Contracts.
Covered Call Options. The 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 months. This contract gives a buyer of the
option, in return for a paid premium, the right to buy the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can purchase the
underlying security or contract regardless of its market price.
A call option is considered "covered" if the Fund that is writing
the option owns or has a right to immediately acquire the
underlying security or contract.
The Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Fund makes
a closing purchase transaction when it buys a call option on the
same security or contract with has the same price and expiration
date. As a result, the Fund will realize a loss if the amount
paid is less than the amount received from the sale. A closing
purchase transaction may only be made on an exchange that has a
secondary market for the option with the same price and
expiration date. There is no guarantee that the secondary market
will have liquidity for the option.
There are risks associated with writing covered call options.
The Fund is required to pay brokerage fees in order to write
covered call options as well as fees for the purchases and sales
of the underlying securities or contracts. The portfolio
turnover rate of the Fund may increase due to the Fund writing a
covered call option.
Covered Put Options. The 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 months. This contract gives a buyer of the
option, in return for a paid premium, the right to sell the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can sell the underlying
security or contract at the option price regardless of its market
price. A put option is considered "covered" if the Fund which is
writing the option owns or has a right to immediately acquire the
underlying security or contract. The seller of a put option
assumes the risk of the decrease of the value of the underlying
security. If the underlying security decreases, the buyer could
7
<PAGE>
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.
The Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Fund makes
a closing purchase transaction when it buys a put option on the
same security or contract with the same price and expiration
date. As a result, the Fund will realize a loss if the amount
paid is less than the amount received from the sale. A closing
purchase transaction may only be made on an exchange that has a
secondary market for the option with the same price and
expiration date. There is no guarantee that the secondary market
will have liquidity for the option.
There are risks associated with writing covered put options.
The Fund is required to pay brokerage fees in order to write
covered put options as well as fees for the purchases and sales
of the underlying securities or contracts. The portfolio
turnover rate of the Fund may increase due to the Fund writing a
covered put option.
Dealer Options. Dealer Options are also known as
Over-the-Counter options ("OTC"). Dealer options are puts and
calls where the strike price, the expiration date and the premium
payment are privately negotiated. The bank's creditworthiness
and financial strength are judged by the Sub- Adviser and must be
determined to be as good as the creditworthiness and strength of
the banks to whom the Fund lends its portfolio securities.
Puts and Calls. The Fund may buy options on individual
stocks, equity indices and equity futures contracts. The Fund's
purpose in buying these puts and calls is to protect itself
against an adverse affect in changes of the general level of
market prices in which the Fund operates. A put option gives the
buyer the right upon payment to deliver a security or contract at
an agreed upon date and price. A call option gives the buyer the
right upon payment to ask the seller of the option to deliver the
security or contract at an agreed upon date and price.
(9) Rights and Warrants. The 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.
(10) Securities Lending. The Fund may lend its portfolio
securities in order to realize additional income. This lending
is subject to the Fund's investment policies and restrictions.
Any loan of portfolio securities must be secured at all times by
collateral that is equal to or greater than the value of the
loan. If a seller defaults, the 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.
(11) Segregated Accounts. The 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.
(12) Short Sales. The Fund may enter into short sales.
The 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 the Fund replaces the sold security. The Fund arranges
with the broker to borrow the security. The Fund must replace
the security at its market price at the time of the replacement.
As a result, the Fund may have to pay a premium to borrow the
security and the Fund may, but will not necessarily, receive any
interest on the proceeds of the sale. The Fund must pay to the
broker any dividends or interest payable on the security until
the security is replaced. Collateral, consisting of cash, or
marketable securities, is used to secure the Fund's obligation to
replace the security. The collateral is deposited with the
broker. If the price of the security sold increases between the
time of the sale and the time the Fund replaces the security, the
Fund will incur a loss. If the price declines during that
period, the Fund will realize a capital gain. The capital gain
will be decreased by the amount of transaction costs and any
premiums, dividends or interest the Fund will have to pay in
connection with the short sale. The loss will be increased by
the amount of transaction costs and any premiums, dividends or
interest the Fund will have to pay in connection with the short
sale. For tax planning reasons, the Fund may also engage in
short sales with respect to a security that the Fund currently
holds or has a right to acquire, commonly referred to as a "short
against the box."
8
<PAGE>
(13) When-Issued Securities. The 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
the Fund until a settlement takes place. At the time the Fund
makes a commitment to purchase securities on a when-issued basis,
the Fund will record the transaction, reflect the daily value of
the securities when determining the net asset value of the Fund,
and if applicable, calculate the maturity for the purposes of
determining the average maturity from the date of the
Transaction. At the time of settlement, a when-issued security
may be valued below the amount of the purchase price.
To facilitate these transactions, the Fund will maintain a
segregated account with the Custodian that will include cash, or
marketable securities, in an amount which is at least equal to
the commitments. On the delivery dates of the transactions, the
Fund will meet its obligations from maturities or sales of the
securities held in the segregated account and/or from cash flow.
If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could incur a
loss or a gain due to market fluctuation. Furthermore, the Fund
may be at a disadvantage if the other party to the transaction
defaults. When-issued transactions may allow the Fund to hedge
against unanticipated changes in interest rates.
Diversification Requirements for the Fund
The 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.
Fundamental Investment Restrictions
The following investment restrictions have been adopted by
the Trust with respect to the Fund. 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.
The Fund may not:
(1) Issue senior securities. For purposes of this
restriction, borrowing money, making loans, the issuance of
shares of beneficial interest in multiple classes or series, the
deferral of Trustees' fees, the purchase or sale of options,
futures contracts, forward commitments and repurchase agreements
entered into in accordance with the Fund's investment policies,
are not deemed to be senior securities.
(2) Borrow money, except (i) in amounts not to exceed 33 1/3%
of the value of the Fund's total assets (including the amount
borrowed) taken at market value from banks or through reverse
repurchase agreements or forward roll transactions, (ii) up to an
additional 5% of its total assets for temporary purposes, (iii)
in connection with short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv)
the Fund may purchase securities on margin to the extent
permitted by applicable law. For purposes of this investment
restriction, investments in short sales, roll transactions,
futures contracts, options on futures contracts, securities or
indices and forward commitments, entered into in accordance with
the Fund's investment policies, shall not constitute borrowing.
(3) Underwrite the securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter under the
Securities Act of 1933.
(4) Purchase or sell real estate, except that the Fund may
(i) acquire or lease office space for its own use, (ii) invest in
securities of issuers that invest in real estate or interests
therein, (iii) invest in securities that are secured by real
9
<PAGE>
estate or interests therein, (iv) purchase and sell mortgage-
related securities and (v) hold and sell real estate acquired by
the Fund as a result of the ownership of securities.
(5) Purchase or sell commodities or commodity contracts,
except the Fund may purchase and sell options on securities,
securities indices and currency, futures contracts on securities,
securities indices and currency and options on such futures,
forward foreign currency exchange contracts, forward commitments,
securities index put or call warrants and repurchase agreements
entered into in accordance with the Fund's investment policies.
(6) Make loans, except that the Fund may (i) lend portfolio
securities in accordance with the Fund's investment policies up
to 33 1/3% of the Fund's total assets taken at market value, (ii)
enter into repurchase agreements, (iii) purchase all or a portion
of an issue of debt securities, bank loan participation
interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is
made upon the original issuance of the securities and (iv) lend
portfolio securities and participate in an interfund lending
program with other series of the Trust provided that no such loan
may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of the Fund's total assets.
(7) With respect to 75% of its total assets, purchase
securities of an issuer (other than the U.S. Government, its
agencies, instrumentalities or authorities or repurchase
agreements collateralized by U.S. Government securities and other
investment companies), if: (a) such purchase would cause more
than 5% of the Fund's total assets taken at market value to be
invested in the securities of such issuer; or (b) such purchase
would at the time result in more than 10% of the outstanding
voting securities of such issuer being held by the Fund.
(8) Invest more than 25% of its total assets in the
securities of one or more issuers conducting their principal
business activities in the same industry (excluding the U.S.
Government or its agencies or instrumentalities).
If any percentage restriction described above for the Fund is
adhered to at the time of investment, a subsequent increase or
decrease in the percentage resulting from a change in the value
of the Fund's assets will not constitute a violation of the
restriction.
Unless otherwise provided, for purposes of investment
restriction (8) above, 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.
Temporary Defensive Position
The Fund may invest up to 100% of its assets in cash for
temporary defensive purposes. This strategy may be inconsistent
with the Fund's principal investment strategies and may be used
in an attempt to respond to adverse market, economic, political
or other conditions. During such a period, the Fund may not
achieve its investment objective.
Portfolio Turnover
Generally, the Fund purchases securities for investment
purposes and not for short-term trading profits. However, the
Fund may sell securities without regard to the length of time
that the security is held in the portfolio if such sale is
consistent with the Fund's investment objectives. A higher
degree of portfolio activity may increase brokerage costs to the
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.
10
<PAGE>
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST
The Board of Trustees and Officers of the Trust, their
business addresses, principal occupations and dates of birth are
listed below. The Board of Trustees provides broad supervision
over the affairs of the Trust and the 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 Managers Funds since March 1999. His address is 595
Commonwealth Avenue, Boston, Massachusetts 02215. His date of
birth is September 9, 1937.
WILLIAM E. CHAPMAN, II - Trustee; President and Owner, Longboat
Retirement Planning Solutions. From 1990 to 1998, he served in a
variety of roles with Kemper Funds, the last of which was
President of the Retirement Plans Group. Prior to joining
Kemper, he spent 24 years with CIGNA in investment sales,
marketing and general management roles. He has served as a
Trustee of The Managers Funds since March 1999. His address is
380 Gulf of Mexico Drive, Longboat Key, Florida 34228. His date
of birth is September 23, 1941.
SEAN M. HEALEY* - Trustee; President 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. His
address is Two International Place, 23rd Floor, Boston,
Massachusetts 02110. He has served as a Trustee of The
Managers Funds since March 1999. 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 Managers
Funds since March 1999. His address is 1100 One Penn Center,
Philadelphia, Pennsylvania 19103. His date of birth is September
23, 1945.
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. His address is 1535 Delaware Street,
Berkeley, California 94703-1281. His date of birth is June 5,
1958.
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 Principal Accounting Officer;
Chief Financial Officer of The Managers Funds LLC (formerly The
Managers Funds, L.P.) since December 1994. From March 1990 to
December 1994, he was a Vice President of Signature Financial
Group. From August 1980 to March 1990, he held various positions
with The Putnam Companies, the last of which was Vice President.
His date of birth is May 29, 1958.
JOHN KINGSTON, III - Secretary; Vice President of Affiliated
Managers Group, Inc. since March 1999. From June 1998 to
February 1999, he served in a general counseling capacity with
Morgan Stanley Dean Witter Investment Management Inc. From
September 1994 to May 1998 he was an Associate with Ropes and
Gray. His date of birth is October 23, 1965.
PETER M. MCCABE - Assistant Treasurer; Portfolio Administrator 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.
11
<PAGE>
LAURA A. DESALVO - Assistant Secretary; Legal/Compliance Officer
of The Managers Funds LLC (formerly The Managers Funds, L.P.)
since September 1997. From August 1994 to June 1997, she was a
law student. Her date of birth is November 10, 1970.
_______________________________________
1 Mr. Healey is an "interested person" (as defined in the 1940 Act) of the
Trust.
Trustees' Compensation
<TABLE>
<CAPTION>
Compensation Table:
Total Compensation
From the
Aggregate Fund and the
Name of Compensation Fund Complex
Trustee From the Fund(a) Paid to Trustees(b)
- ----------- ---------------- --------------------
<S> <C> <C>
Jack W. Aber $4,000 $24,000
William E. Chapman, II $4,000 $24,000
Sean M. Healey none none
Edward K. Kaier $4,000 $24,000
Eric Rakowski $4,000 $24,000
- ----------------------------
</TABLE>
[FN]
(a) Compensation is estimated for the Fund's fiscal year ending
October 31, 2000. The Fund does not provide any pension or
retirement benefits for the Trustees.
(b) Total compensation includes estimated compensation to be
paid during the 12-month period ending October 31, 2000 for
services as Trustees of The Managers Funds.
</FN>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of October 19, 1999, through its ownership of 100% of the
shares of the Fund Affiliated Managers Group, Inc. ("AMG")
"controlled" (within the meaning of the 1940 Act) the Fund. An
entity or person which "controls" a particular Fund could have
effective voting control over that Fund.
No other person or entity owned shares of the Fund.
Management Ownership
As of October 19, 1999, all management personnel (i.e.,
Trustees and Officers) as a group owned beneficially less than 1%
of the outstanding shares of the Fund.
MANAGEMENT OF THE FUND
Investment Manager and Sub-Adviser
The Trustees provide broad supervision over the operations
and affairs of the Trust and the Fund. The Managers Funds LLC
(the "Investment Manager") serves as investment manager to and
distributor of the Fund. The Managers Funds LLC is a subsidiary
of AMG, and AMG serves as the Managing Member of the LLC. AMG is
located at Two International Place, 23rd Floor, Boston,
Massachusetts 02110.
12
<PAGE>
The Investment Manager and its corporate predecessors have
had over 20 years of experience in evaluating sub-advisers for
individuals and institutional investors. As part of its services
to the Fund under an investment management agreement with the
Trust dated October 19, 1999 (the "Investment Management
Agreement"), the Investment Manager also carries out the daily
administration of the Trust and Fund. For its investment
management services, the Investment Manager receives an
investment management fee from the Fund. All or a portion of
the investment management fee paid by the Fund to the Investment
Manager is used to pay the advisory fees of Essex Investment
Management Company, LLC, the sub-adviser which manages the assets
of the Fund (the "Sub-Adviser" or "Essex"). The Investment
Manager receives no additional compensation from the Fund for its
administration services. Essex was selected by the Investment
Manager, subject to the review and approval of the Trustees.
Essex is the successor firm to Essex Investment Management
Company, Inc. which was formed in 1976. AMG indirectly owns a
majority interest in Essex. As of December 31, 1998, Essex's
assets under management totaled approximately $5.6 billion.
Essex's address is 125 High Street, Boston, MA 02110. Stephen D.
Cutler, President, Joseph C. McNay, Chairman and Chief Investment
Officer, and Daniel Beckham, Principal and Vice President, are
the portfolio managers for the Fund.
The Sub-Adviser has discretion, subject to oversight by the
Trustees and the Investment Manager, to purchase and sell
portfolio assets, consistent with the Fund's investment
objectives, policies and restrictions. Generally, the services
which the Sub-Adviser provides to the Fund are limited to asset
management and related recordkeeping services. The 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.
Compensation of Investment Manager and Sub-Adviser by the Fund
As compensation for the investment management services
rendered and related expenses under the Investment Management
Agreement, the Fund has agreed to pay the Investment Manager an
investment management fee, which is computed daily as percentages
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 the
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 monthly. The
fee paid to the Sub-Adviser is paid out of the fee the Investment
Manager receives from the Fund and does not increase the expenses
of the Fund.
Fee Waivers and Expense Limitations
The Investment Manager has contractually agreed, for a
period of no less than eighteen (18) months, to limit total
annual fund operating expenses to 1.10%, subject to later
reimbursement by the Fund in certain circumstances. The waiver
may, at the discretion of the Investment Manager, be continued
beyond such point. See "Managers AMG Funds" in the Prospectus
for further information.
The Investment Manager has decided to waive all or a portion
of its fees from the Fund or reimburse expenses to the Fund for a
variety of reasons, including attempting to make the Fund's
performance more competitive as compared to similar funds. The
effect of the expense limitation in effect at the date of this
Statement of Additional Information on the management fees which
are expected to be payable by the Fund is reflected in the
Expense Information located at the front of the Fund's
Prospectus. In addition to any other waiver and/or reimbursement
agreed to by the Investment Manager, Essex 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. Shareholders will be
notified of any change in the management fees of the Fund on or
about the time that such fees or expenses become effective.
13
<PAGE>
Investment Management and Sub-Advisory Agreements
The Managers Funds LLC serves as investment manager to the
Fund under the Investment Management Agreement. The Investment
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 Investment
Management Agreement, the Investment Manager has entered into a
sub-advisory agreement with Essex Investment Management Company,
LLC, dated October 19, 1999 (the "Sub-Advisory Agreement").
The Investment Management Agreement and the Sub-Advisory
Agreement 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 (i) 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
Fund, and (ii) in either event by the vote of a majority of 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, cast in person at a meeting called for the purpose of
voting on such continuance. The Investment Management Agreement
and the Sub-Advisory Agreement 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 Investment Management
Agreement and the Sub-Advisory Agreement terminate automatically
in the event of assignment, as defined under the 1940 Act and
regulations thereunder.
The Investment Management Agreement provides that the
Investment Manager is specifically responsible for:
* developing and furnishing continuously an investment
program and strategy for the Fund in compliance with the Fund's
investment objective and policies as set forth in the Trust's
current Registration Statement;
* providing research and analysis relative to the
investment program and investments of the Fund;
* determining (subject to the overall supervision and
review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by the Fund and what
portion, if any, of the assets of the Fund shall be held in cash
or cash equivalents; and
* making changes on behalf of the Trust in the
investments of the Fund.
Under the Sub-Advisory Agreement, Essex is responsible for
performing substantially these same advisory services for the
Investment Manager and the Fund.
The Investment Management Agreement also provides that the
Investment Manager shall furnish the Fund with office space and
facilities, services of executives and administrative personnel
and certain other administrative services. The Investment
Manager compensates all executive and clerical personnel and
Trustees of the Trust if such persons are employees of the
Investment Manager or its affiliates.
The Fund pays all expenses not borne by its Investment
Manager or Sub-Adviser including, but not limited to, the charges
and expenses of the Fund's custodian and transfer agent,
independent auditors and legal counsel for the Fund and the
Trust's independent Trustees, 12b-1 fees, if any, 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 the Sub-Adviser to
provide fair and equitable treatment to the Fund in the selection
of portfolio investments and the allocation of investment
opportunities. However, it does not obligate the Sub-Adviser to
acquire for the Fund a position in any investment which any of
the Sub-Adviser's other clients may acquire. The Fund shall have
14
<PAGE>
no first refusal, co-investment or other rights in respect of any
such investment, either for the Fund or otherwise.
Although the Sub-Adviser makes investment decisions for the
Fund independent of those for its other clients, it is likely
that similar investment decisions will be made from time to time.
When the Fund and another client of a Sub-Adviser are
simultaneously engaged in the purchase or sale of the same
security, the transactions are, to the extent feasible and
practicable, averaged as to price and the amount is allocated
between the Fund and the other client(s) pursuant to a formula
considered equitable by the Sub-Adviser. In specific cases, this
system could have an adverse affect on the price or volume of the
security to be purchased or sold by the Fund. However, the
Trustees believe, over time, that coordination and the ability to
participate in volume transactions should benefit the Fund.
Reimbursement Agreement
Under the Investment Management Agreement, the Investment
Manager provides a variety of administrative services to the Fund
and, under its distribution agreement with the Fund, the
Investment Manager provides a variety of shareholder and
marketing services to the Fund. The Investment Manager receives
no additional compensation from the Fund for these services.
Pursuant to a Reimbursement Agreement between the Investment
Manager and Essex, Essex reimburses the Investment Manager for
the costs the Investment Manager bears in providing such services
to the Fund.
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) and the code of ethics
of the Sub-Adviser (applicable to "access persons" of the Trust
that are also employees of the Sub-Adviser). 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.
Distribution Arrangements
Under a distribution agreement between the Fund and The
Managers Funds LLC dated October 19, 1999 (the "Distribution
Agreement"), The Managers Funds LLC serves as distributor (the
"Distributor") in connection with the offering of the Fund's
shares on a no-load basis. The Distributor bears certain
expenses associated with the distribution and sale of shares of
the Fund. The Distributor acts as agent in arranging for the
sale of the Fund's shares without sales commission or other
compensation.
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 Investment Management
Agreement. The Distribution Agreement may be continued annually
so long as such continuation is specifically approved at least
annually (i) 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 Fund, and (ii) in either event by the vote of a
majority of the Trustees of the Trust who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the
purpose of voting on such continuance.
15
<PAGE>
Custodian
State Street Bank and Trust Company ("State Street" or the
"Custodian"), 1776 Heritage Drive, North Quincy, Massachusetts,
is the Custodian for the Fund. It is responsible for holding all
cash assets and all portfolio securities of the Fund, releasing
and delivering such securities as directed by the Fund,
maintaining bank accounts in the names of the Fund, receiving for
deposit into such accounts payments for shares of the Fund,
collecting income and other payments due the Fund with respect to
portfolio securities and paying out monies of the Fund. In
addition, when the Fund trades in futures contracts and those
trades would require the deposit of initial margin with a futures
commission merchant ("FCM"), the Fund will enter into a separate
special custodian agreement with a custodian in the name of the
FCM which agreement will provide that the FCM will be permitted
access to the account only upon the Fund's default under the
contract.
The Custodian is 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 Fund.
Independent Public Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts 02110, is the independent public accountant for the
Fund. PricewaterhouseCoopers LLP conducts an annual audit of the
financial statements of the Fund, assists in the preparation
and/or review of each of the Fund's federal and state income tax
returns and consults with the Fund as to matters of accounting
and federal and state income taxation.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Sub-Advisory Agreement provides that the Sub-Adviser
place all orders for the purchase and sale of securities which
are held in the Fund's portfolio. In executing portfolio
transactions and selecting brokers or dealers, it is the policy
and principal objective of the Sub-Adviser to seek best price and
execution. It is expected that securities will ordinarily be
purchased in the primary markets. The Sub-Adviser shall consider
all factors that it deems relevant when assessing best price and
execution for the Fund, including the breadth of the market in
the security, the price of the security, the financial condition
and execution capability of the broker or dealer and the
reasonableness of the commission, if any (for the specific
transaction and on a continuing basis).
In addition, when selecting brokers to execute transactions
and in evaluating the best available net price and execution, the
Sub-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. The Sub-Adviser is also
authorized to cause the Fund to pay a commission to a broker who
provides such brokerage and research services for executing a
portfolio transaction which is in excess of the amount of
commission another broker would have charged for effecting that
transaction. The Sub-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 the Sub-Adviser exercises investment
discretion. Brokerage and research services received from such
brokers will be in addition to, and not in lieu of, the services
required to be performed by each Sub-Adviser. The Fund may
purchase and sell portfolio securities through brokers who
provide the Fund with research services.
The Trustees will periodically review the total amount of
commissions paid by the Fund to determine if the commissions paid
over representative periods of time were reasonable in relation
to commissions being charged by other brokers and the benefits to
the Fund of using particular brokers or dealers. It is possible
that certain of the services received by the Sub-Adviser
16
<PAGE>
attributable to a particular transaction will primarily benefit
one or more other accounts for which investment discretion is
exercised by the Sub-Adviser.
The fees of the Sub-Adviser are not reduced by reason of
their receipt of such brokerage and research services.
Generally, the Sub-Adviser does not provide any services to the
Fund except portfolio investment management and related record-
keeping services.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchasing Shares
Investors may open accounts with the Fund through their
financial planners or investment professionals, or by the Trust
in limited circumstances as described in the Prospectus. Shares
may also be purchased through bank trust departments on behalf of
their clients, other investors such as corporations, endowment
funds and charitable foundations, and tax-exempt employee
welfare, pension and profit-sharing plans. There are no charges
by the Trust for being a customer for this purpose. The Trust
reserves the right to determine which customers and which
purchase orders the Trust will accept.
Certain investors may purchase or sell Fund shares through
broker-dealers or through other processing organizations who may
impose transaction fees or other charges in connection with this
service. Shares purchased in this way may be treated as a single
account for purposes of the minimum initial investment. The Fund
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 may
receive compensation from the Trust's Investment Manager and/or
the Sub-Adviser.
Purchase orders received by the Fund before 4:00 p.m. New
York Time, c/o Boston Financial Data Services, Inc. at the
address listed in the Prospectus on any Business Day will receive
the net asset value computed that day. Orders received after
4:00 p.m. by certain processing organizations which have entered
into special arrangements with the 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 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
Managers Funds. The 15 day holding period for redemptions would
still apply to 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 Fund can
redeem shares from any identically registered account in the Fund
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
Fund or State Street Bank and Trust Company will be accepted.
17
<PAGE>
In the interest of economy and convenience, share
certificates will not be issued. All share purchases are
confirmed to the record holder and credited to such holder's
account on the Trust's books maintained by the Transfer Agent.
Redeeming Shares
Any redemption orders received by the Trust before 4:00 p.m.
New York Time on any Business Day will receive the net asset
value determined at the close of trading on the New York Stock
Exchange (the "NYSE") on that day.
Redemption orders received after 4:00 p.m. will be redeemed
at the net asset value determined at the close of trading on the
next Business Day. Redemption orders transmitted to the Trust at
the address indicated in the Prospectus will be promptly
forwarded to the Transfer Agent. If you are trading through a
broker-dealer or investment adviser, such investment professional
is responsible for promptly transmitting orders. There is no
redemption charge. The Fund reserves the right to redeem
shareholder accounts (after 60 days notice) when the value of the
Fund shares in the account falls below $500 due to redemptions.
Whether the Fund will exercise its right to redeem shareholder
accounts will be determined by the Investment Manager on a
case-by-case basis.
If the Fund determines that it would be detrimental to the
best interest of the remaining shareholders of the Fund to make
payment wholly or partly in cash, payment of the redemption price
may be made in whole or in part by a distribution in kind of
securities from the Fund, in lieu of cash, in conformity with the
applicable rule of the SEC. If shares are redeemed in kind, the
redeeming shareholder might incur transaction costs in converting
the assets to cash. The method of valuing portfolio securities
is described under the "Net Asset Value," and such valuation will
be made as of the same time the redemption price is determined.
Investors should be aware that redemptions from the Fund may
not be processed if a redemption request is not submitted in
proper form. To be in proper form, the request must include the
shareholder's taxpayer identification number, 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 Fund and shares are
purchased before the check has cleared, the transmittal of
redemption proceeds from the shares will occur upon clearance of
the check which may take up to 15 days. The Fund reserves the
right to suspend the right of redemption and to postpone the date
of payment upon redemption beyond seven days as follows: (i)
during periods when the 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 Fund of, or evaluation of the net asset
value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the SEC may
permit.
Exchange of Shares
An investor may exchange shares from the Fund into shares of
any series of The Managers Funds without any charge. An investor
may make such an exchange if following such exchange the investor
would continue to meet the Fund's minimum investment amount.
Shareholders should read the Prospectus of the series of The
Managers Funds 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 Managers Funds
and redemptions of the Fund, 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 Managers Funds 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.
18
<PAGE>
Net Asset Value
The 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 Fund may close for purchases and redemptions at such other
times as may be determined by the Board of Trustees to the extent
permitted by applicable law. The time at which orders are
accepted and shares are redeemed may be changed in case of an
emergency or if the NYSE closes at a time other than 4:00 p.m.
New York Time.
The net asset value of the Fund is equal to the value of the
Fund (assets minus liabilities) divided by the number of shares
outstanding. Fund securities listed on an exchange are valued at
the last quoted sale price on the exchange where such securities
are principally traded on the valuation date, prior to the close
of trading on the NYSE, or, lacking any sales, at the last quoted
bid price on such principal exchange prior to the close of
trading on the NYSE. Over-the-counter securities for which
market quotations are readily available are valued at the last
sale price or, lacking any sales, at the last quoted bid price on
that date prior to the close of trading on the NYSE. Securities
and other instruments for which market quotations are not readily
available are valued at fair value, as determined in good faith
and pursuant to procedures established by the Trustees.
Dividends and Distributions
The Fund declares and pays dividends and distributions as
described in the Prospectus.
If a shareholder has elected to receive dividends and/or
their distributions in cash and the postal or other delivery
service is unable to deliver the checks to the shareholder's
address of record, the dividends and/or distribution will
automatically be converted to having the dividends and/or
distributions reinvested in additional shares. No interest will
accrue on amounts represented by uncashed dividend or redemption
checks.
Distribution Plan
The Trust has adopted a "Plan of Distribution Pursuant to
Rule 12b-1" (the "Distribution Plan") under which the Trust may
engage, directly or indirectly, in financing any activities
primarily intended to result in the sale of shares, including,
but not limited to, (1) making payments to underwriters,
securities dealers and others engaged in the sale of shares,
including payments to the Distributor to compensate or reimburse
other persons for engaging in such activities and (2) paying
expenses or providing reimbursement of expenditures incurred by
the Distributor or other persons in connection with the offer or
sale of shares, including expenses relating to the formulation
and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, the
preparation, printing and distribution of sales literature and
reports for recipients other than existing shareholders of the
Trust, and obtaining such information, analyses and reports with
respect to marketing and promotional activities and investor
accounts as the Trust may, from time to time, deem advisable.
The Trust and the Fund are authorized to engage in the activities
listed above, and in other activities primarily intended to
result in the sale of shares, either directly or through other
persons with which the Trust has entered into greements pursuant
to the Distribution Plan. Under the Distribution Plan, the Board
of Trustees may authorize payments which may not exceed on an
annual basis 0.25% of the average annual net assets of the Fund.
The Trustees have not authorized the payment of any fees to date.
19
<PAGE>
CERTAIN TAX MATTERS
Federal Income Taxation of Fund-in General
The 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, the 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 the 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 the 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
the 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.
The 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 the 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 the Fund that is subject to corporate
tax will be considered to have been distributed by year end. The
Fund intends to make sufficient distributions to avoid this 4%
excise tax.
Taxation of the Fund's Investments
Original Issue Discount; Market Discount. For federal
income tax purposes, debt securities purchased by the Fund 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 Fund, 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 Fund 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 Fund purchases 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
Fund elects 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 Fund 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 Fund
makes the election to include market discount currently. Because
the Fund must include original issue discount in income, it will
20
<PAGE>
be more difficult for the Fund to make the distributions required
for the 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 the Fund's
investments may be subject to provisions of the Code that (i)
require inclusion of unrealized gains or losses in the Fund's
income for purposes of the 90% test, and require inclusion of
unrealized gains in the 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. The 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 the Fund as a regulated investment company.
Federal Income Taxation of Shareholders
General. Dividends paid by the Fund may be eligible for the
70% dividends-received deduction for corporations. The
percentage of the Fund's dividends eligible for such tax
treatment may be less than 100% to the extent that less than 100%
of the 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 the Fund pays the dividend during
January of the following calendar year.
Distributions by the Fund can result in a reduction in the
fair market value of the 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 distribution of
realized net 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, the Fund may be required to
withhold U.S. federal income tax as "backup withholding" at the
rate of 31% from distributions treated as long-term capital gains
and from the proceeds of redemptions, exchanges or other
dispositions of the Fund's shares unless IRS Form W-8 is
provided. Transfers by gift of shares of the Fund by a foreign
shareholder who is a non-resident alien individual will not be
subject to U.S. federal gift tax, but the value of shares of the
Fund held by such shareholder at his or her death will be
includible in his or her gross estate for U.S. federal estate tax
purposes.
21
<PAGE>
State and Local Taxes
The Fund may also be subject to state and/or local taxes in
jurisdictions in which the Fund is deemed to be doing business.
In addition, the treatment of the Fund and its shareholders in
those states which have income tax laws might differ from
treatment under the federal income tax laws. Shareholders should
consult with their own tax advisers concerning the foregoing
state and local tax consequences of investing in the Fund.
Other Taxation
The Fund is a series of a Massachusetts business trust.
Under current law, neither the Trust nor the Fund is liable for
any income or franchise tax in The Commonwealth of Massachusetts,
provided that the 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 Fund may quote performance in terms
of yield, actual distributions, total return or capital
appreciation in reports, sales literature, and advertisements
published by the Fund. Since the Fund commenced operations on
November 1, 1999, there is no current performance information for
the Fund.
Total Return
The Fund may advertise performance in terms of average
annual total return for 1-, 5- and 10-year periods, or for such
lesser periods that the Fund 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 Fund are reinvested
at the price stated in the Prospectus on the reinvestment dates
during the period
22
<PAGE>
Performance Comparisons
The Fund 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") and Morningstar, Inc.,
("Morningstar") . 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 Fund's performance may
also be compared to the performance of various unmanaged indices
such as the 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
The 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 Fund and that every written agreement,
obligation, instrument or undertaking made on behalf of the Fund
shall contain a provision to the effect that the shareholders are
not personally liable thereunder.
No personal liability will attach to the shareholders under
any undertaking containing such provision when adequate notice of
such provision is given, except possibly in a few jurisdictions.
With respect to all types of claims in the latter 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 Fund. However, upon
payment of such liability, the shareholder will be entitled to
reimbursement from the general assets of the Fund. The Trustees
of the Trust intend to conduct the operations of the Trust in a
way as to avoid, as far as possible, ultimate liability of the
shareholders of the Fund.
The Declaration of Trust further provides that the name of
the Trust refers to the Trustees collectively as Trustees, not as
individuals or personally, that no Trustee, officer, employee or
agent of the Fund or to a shareholder, and that no Trustee,
officer, employee or agent is liable to any third persons in
connection with the affairs of the Fund, except if the liability
arises from his or its own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall
look solely to the property of the Fund for any satisfaction of
claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs
of the Fund.
The Trust shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning
termination by action of the shareholders or by action of the
Trustees upon notice to the shareholders.
23
<PAGE>
Description of Shares
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which the 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 the Fund or assets of
another series, if applicable. Each share of the Fund represents
an equal proportional interest in the Fund with each other share.
Upon liquidation of the Fund, shareholders are entitled to share
pro rata in the net assets of the Fund available for distribution
to such shareholders. See "Massachusetts Business Trust" above.
Shares of the Fund have no preemptive or conversion rights and
are fully paid and nonassessable. The rights of redemption and
exchange are described in the Prospectus and in this Statement of
Additional Information.
The shareholders of the Trust are entitled to one vote for
each dollar of net asset value (or a proportionate fractional
vote in respect of a fractional dollar amount), on matters on
which shares of the Fund shall be entitled to vote. Subject to
the 1940 Act, the Trustees themselves have the power to alter the
number and the terms of office of the Trustees, to lengthen their
own terms, or to make their terms of unlimited duration subject
to certain removal procedures, and appoint their own successors,
provided however, that immediately after such appointment the
requisite majority of the Trustees have been elected by the
shareholders of the Trust. The voting rights of shareholders are
not cumulative so that holders of more than 50% of the shares
voting can, if they choose, elect all Trustees being selected
while the shareholders of the remaining shares would be unable to
elect any Trustees. It is the intention of the Trust not to hold
meetings of shareholders annually. The Trustees may call
meetings of shareholders for action by shareholder vote as may be
required by either the 1940 Act or by the Declaration of Trust of
the Trust.
Shareholders of the Trust have the right, upon the
declaration in writing or vote of more than two-thirds of its
outstanding shares, to remove a Trustee from office. The
Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of
10% of the shares of the Trust. In addition, whenever ten or
more shareholders of record who have been shareholders of record
for at least six months prior to the date of the application, and
who hold in the aggregate either shares of the Fund having a net
asset value of at least $25,000 or at least 1% of the Trust's
outstanding shares, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with
other shareholders with a view to obtaining signatures to request
a meeting for the purpose of voting upon the question of removal
of any of the Trustees and accompanies by a form of communication
and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books
of the Trust; or (2) inform such applicants as to the approximate
number of shareholders of record, and the approximate cost of
mailing to them the proposed shareholder communication and form
of request. If the Trustees elect to follow the latter, the
Trustees, upon the written request of such applicants 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
24
<PAGE>
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 one series of the Trust. The Trustees may
authorize the issuance of additional series of the Trust. The
proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with
distinct investment objectives, policies and restrictions, and
share purchase, redemption and net asset value procedures. All
consideration received by the Trust for shares of any additional
series, and all assets in which such consideration is invested,
would belong to that series, subject only to the rights of
creditors of the Trust and would be subject to the liabilities
related thereto. Shareholders of the additional series will
approve the adoption of any management contract, distribution
agreement and any changes in the investment policies of the Fund,
to the extent required by the 1940 Act.
Additional Information
This Statement of Additional Information and the Prospectus
do not contain all of the information included in the Trust's
Registration Statement filed with the SEC under the 1933 Act.
Pursuant to the rules and regulations of the SEC, certain
portions have been omitted. The Registration Statements,
including the Exhibits filed therewith, may be examined at the
office of the SEC in Washington DC.
Statements contained in the Statement of Additional
Information and the Prospectus concerning the contents or any
contract or other document are not necessarily complete, and in
each instance, reference is made to the copy of such contract or
other document filed as an Exhibit to the applicable Registration
Statement. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized
to give any information or to make any representations, other
than those contained in the Prospectus or this Statement of
Additional Information, in connection with the offer of shares of
the Fund and, if given or made, such other representations or
information must not be relied upon as having been authorized by
the Trust, the Fund or the Distributor. The Prospectus and this
Statement of Additional Information do not constitute an offer to
sell or solicit an offer to buy any of the securities offered
thereby in any jurisdiction to any person to whom it is unlawful
for the Fund or the Distributor to make such offer in such
jurisdictions.
25
<PAGE>
Report of Independent Accountants
To the Board of Trustees of Managers AMG Funds and the
Shareholder of Essex Aggressive Growth Fund:
In our opinion, the accompanying statement of assets and
liabilities presents fairly, in all material respects, the
financial position of Managers AMG Funds -- Essex Aggressive
Growth Fund (the "Fund") at October 15, 1999, in conformity with
generally accepted accounting principles. This financial
statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this
statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 19, 1999
26
<PAGE>
MANAGERS AMG FUNDS
STATEMENT OF ASSETS AND LIABILITIES ESSEX AGGRESSIVE
OCTOBER 15, 1999 GROWTH FUND
Assets:
Cash $ 100,000
Total assets 100,000
Paid-in Capital (Applicable to 10,000 shares issued and 100,000
outstanding with $0.001 par value; unlimited shares authorized)
Net Assets $ 100,000
MANAGERS AMG FUNDS - ESSEX AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENT
(1) ORGANIZATION
The Essex Aggressive Growth Fund ( the "Fund") is the initial
series of Managers AMG Funds (the "Trust"), a Massachusetts
business trust organized on June 18, 1999. The Fund is
registered under the Investment Company Act of 1940, as amended
(the "1940 Act") as an open-end, diversified management
investment company. The Fund has had no operations to date,
other than the sale to Affiliated Managers Group, Inc. ("AMG") of
10,000 shares of the Fund on October 15, 1999.
The costs incurred and to be incurred in connection with the
organization of the Trust and the registration and initial
offering of shares of the Fund, including legal expenses, will be
borne by AMG. These costs will not be subject to reimbursement
by the Fund.
(2) INVESTMENT ADVISORY AND DISTRIBUTION SERVICES
Under the terms of an Investment Management Agreement (the
"Agreement"), the Fund is obligated to pay The Managers Funds LLC
(the "Manager") an annualized management fee of 1.00% of the
average daily net assets of the Fund. Pursuant to the Agreement,
the Manager has agreed, for a period of no less than eighteen
(18) months, to waive fees and pay or reimburse the Fund to the
extent total expenses of the Fund exceed 1.10%. The Fund is
obligated to repay the Manager such amounts waived, paid or
reimbursed in future years, if any, when the Fund's expenses fall
below such rate, provided that this occurs within 3 years after
the waiver or reimbursement. The repayment to the Manager is
subject to the further obligation that such repayment would not
cause the Fund's expenses in any such future year to exceed
1.10%.
The Trust, on behalf of the Fund, has adopted a distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under
the Plan, the Board of Trustees may authorize payments at an
annual rate of up to 0.25% of the Fund's average daily net
assets. The Plan provides that such payments will be used to pay
for the marketing of shares of the Fund. The Board of Trustees
has not authorized the payment of any fees to date under the
Plan.
27
<PAGE>
PART C
To the Registration Statement of
Managers AMG Funds (the "Trust")
ITEM 23. EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ------------ -----------
a.1 Master Trust Agreement dated June 18, 1999.(i)
a.2 Amendment No. 1 to Master Trust Agreement changing the name of
the "Essex Growth Fund" to "Essex Aggressive Growth Fund," filed
via EDGAR herewith.
a.3 Amendment No. 2 to Master Trust Agreement changing the name of
the Trust to "Managers AMG Funds," filed via EDGAR herewith.
b. By-Laws of the Trust dated June 18, 1999.(i)
c. Sections 4.2(d), 4.2(e), 4.2(f), 4.2(i), 4.2(j), 4.2(k), 4.2(m),
4.6, 6.3, 6.5, 6.6, 7.1, 7.2 and 7.3 and Article V of the Master
Trust Agreement are included in Exhibit a.(i)
d.1 Investment Management Agreement between the Registrant
and The Managers Funds LLC with respect to the Essex Aggressive
Growth Fund, dated as of October 19, 1999, filed via EDGAR herewith.
d.2 Sub-Advisory Agreement between The Managers Funds LLC and
Essex Investment Management Company, LLC with respect to the
Essex Aggressive Growth Fund, dated as of October 19, 1999, filed
via EDGAR herewith.
e. Distribution Agreement between the Registrant and The Managers
Funds LLC, dated as of October 19, 1999, filed via EDGAR
herewith.
f. Not applicable.
g. Form of Custodian Agreement between the Registrant and State
Street Bank and Trust Company, filed via EDGAR herewith.
h. Form of Transfer Agency Agreement between the Registrant and
Boston Financial Data Services, Inc., filed via EDGAR herewith.
C-1
<PAGE>
i. Opinion and Consent of Goodwin, Procter & Hoar LLP with respect
to the Essex Aggressive Growth Fund, filed via EDGAR herewith.
j.1 Consent of PricewaterhouseCoopers LLP, filed via EDGAR herewith.
j.2 Opinion and Consent of Deloitte & Touche LLP, filed via
EDGAR herewith.
k. Not Applicable.
l. Not Applicable.
m. Plan of Distribution Pursuant to Rule 12b-1, dated as of
October 15, 1999, filed via EDGAR herewith.
n. Not applicable.
o. Not applicable.
p. Power of Attorney dated September 9, 1999.(ii)
- ----------------------------
(i) Filed as an exhibit to the Registrant's Registration Statement on Form
N-1A, Registration No. 333-84639 (filed August 6, 1999), under the
same exhibit number.
(ii) Filed as an exhibit to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A, Registration No.
333-84639 (filed September 23, 1999), under the same exhibit number.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
C-2
<PAGE>
Under Article VI of the Registrant's Master Trust Agreement, any
present or former Trustee, Officer, agent or employee or person serving in
such capacity with another entity at the request of the Registrant
("Covered Person") shall be indemnified against all liabilities, including
but not limited to amounts paid in satisfaction of judgments, in
compromises or as fines or penalties and expenses, including reasonable
legal and accounting fees, in connection with the defense or disposition of
any proceeding by or in the name of the Registrant or any shareholder in
his capacity as such if: (i) a favorable final decision on the merits is
made by a court or administrative body; or (ii) a reasonable determination
is made by a vote of the majority of a quorum of disinterested Trustees or
by independent legal counsel that the Covered Person was not liable by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in his office ("Disabling Conduct"); or
(iii) a determination is made to indemnify the Covered Person under
procedures approved by the Board of Trustees which in the opinion of
independent legal counsel are not inconsistent with the Investment Company
Act of 1940, as amended (the "1940 Act"). Said Article VI further provides
that the Registrant shall indemnify any Covered Person against any such
liabilities and expenses incurred in connection with the defense or
disposition of any other type of proceeding except with respect to any
matter as to which the Covered Person shall have engaged in Disabling
Conduct or shall have been finally adjudicated not to have acted in good
faith and in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Registrant.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The Managers Funds LLC, a registered investment adviser, serves
as investment adviser to the Essex Aggressive Growth Fund. The Managers
Funds LLC is a subsidiary of Affiliated Managers Group, Inc. ("AMG") and
AMG serves as its Managing Member. The Managers Funds LLC serves
exclusively as an investment adviser to investment companies registered
under the 1940 Act. The business and other connections of the officers and
directors of The Managers Funds LLC, are listed in Schedules A and D of its
ADV Form as currently on file with the Commission, the text of which
Schedules are hereby incorporated herein by reference. The file number of
said ADV Form is 801-56365.
Essex Investment Management Company, LLC ("Essex') serves as sub-
adviser to the Essex Aggressive Growth Fund. AMG owns a majority interest
in Essex. Essex is the successor firm to Essex Investment Management
Company, Inc., which was formed in 1976. The business and other
connections of the officers and directors of Essex are listed in Schedules
A and D of its ADV Form as currently on file with the Commission, the text
of which Schedules are hereby incorporated herein by reference. The file
number of said ADV Form is 801-12548.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The Managers Funds LLC acts as principal underwriter for the
Registrant. The Managers Funds LLC also acts as principal underwriter for
The Managers Funds.
(b) The following information relates to the directors, officers
and partners of The Managers Funds LLC:
C-3
<PAGE>
The business and other connections of the officers and directors of
The Managers Funds LLC are listed in Schedules A and D of its ADV Form as
currently on file with the Commission, the text of which Schedules are
hereby incorporated herein by reference. The file number of said ADV Form
is 801-56365.
(c) Not applicable.
C-4
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant are maintained at the
offices of the Registrant at 40 Richards Avenue, Norwalk,
Connecticut 06854 and at the offices of the Custodian, State Street Bank
and Trust Company, 225 Franklin Street, Boston, Massachusetts 02106 and
1776 Heritage Drive, North Quincy, Massachusetts 01171 and at the offices
of the Transfer Agent, Boston Financial Data Services, Inc. 1776 Heritage
Drive, North Quincy, Massachusetts 01171.
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts other than the
Investment Management Agreement relating to management services described
in Parts A and B.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in this City of Boston and
Commonwealth of Massachusetts on the 21st day of October, 1999.
MANAGERS AMG FUNDS
By:/s/John Kingston, III
---------------------
John Kingston, III
Secretary
Signature Capacity Date
--------- --------- -----
Jack W. Aber* Trustee October 21, 1999
- ------------
Jack W. Aber
William E. Chapman, II* Trustee October 21, 1999
- ----------------------
William E. Chapman, II
Sean M. Healey* Trustee October 21, 1999
- --------------
Sean M. Healey
Edward J. Kaier* Trustee October 21, 1999
- ---------------
Edward J. Kaier
Eric Rakowski* Trustee October 21, 1999
- -------------
Eric Rakowski
Peter Lebovitz* President and
- -------------- Principal October 21, 1999
Peter Lebovitz Executive Officer
/s/Donald Rumery Treasurer, Principal
- ---------------- Financial Officer October 21, 1999
Donald Rumery and Principal
Accounting Officer
By:/s/John Kingston, III
- ------------------------
*John Kingston, III pursuant to power of attorney filed herewith.
C-6
<PAGE>
Exhibit a.2
- ------------
THE MANAGERS AMG FUNDS
AMENDMENT NO. 1 TO MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to the Master Trust Agreement of
THE MANAGERS AMG FUNDS, dated June 18, 1999, made at Boston,
Massachusetts this 9th day of September, 1999 by the sole Trustee
hereunder.
WHEREAS, Section 7.3 of the Master Trust Agreement dated
June 18, 1999 (the "Agreement") of THE MANAGERS AMG FUNDS (the
"Trust") provides that the Agreement may be amended at any time,
so long as such amendment does not materially adversely affect
the rights of any shareholder of the Trust and so long as such
amendment is not in contravention of applicable law, including
the Investment Company Act of 1940, as amended, by an instrument
in writing signed by a majority of the Trustees of the Trust; and
WHEREAS, the sole Trustee desires to amend the Agreement to
change the name of the "Essex Growth Fund" to "Essex Aggressive
Growth Fund".
NOW, THEREFORE, the undersigned, being the sole Trustee of
the Trust, does hereby state:
1. The first sentence of the first paragraph of Section 4.2 of
the Agreement is hereby amended in its entirety to read as
follows:
Section 4.2 Establishment and Designation of
Sub-Trusts and Classes. Without limiting the authority
of the Trustees set forth in Section 4.1 to establish
and designate any further Sub-Trusts, the Trustees
hereby establish and designate one (1) Sub-Trust: Essex
Aggressive Growth Fund, which shall have a single class
of shares.
IN WITNESS WHEREOF, the undersigned hereunto has set his
hand in the City of Boston, Commonwealth of Massachusetts, for
himself and his assigns, as of the 9th day of September, 1999.
/s/ Sean M. Healey
------------------
Sean M. Healey, as Trustee
<PAGE>
Exhibit a.3
- ------------
THE MANAGERS AMG FUNDS
Amendment No. 2 to Master Trust Agreement
CERTIFICATE AND INSTRUMENT OF AMENDMENT
The undersigned, Secretary of The Managers AMG Funds (the
"Trust"), does hereby certify that pursuant to Article VII, Section
7.3 of the Master Trust Agreement of the Trust dated June 18, 1999,
the following resolutions were duly adopted by written consent
dated October 14, 1999 of a majority of the Trustees of the Trust.
RESOLVED: That Section 1.1 of the Master Trust Agreement of
the Trust dated June 18, 1999 be and hereby is
amended to change the name of the Trust by deleting
the first sentence of said Section 1.1 in its
entirety and substituting therefor the following:
"Section 1.1 Name and Principal Office.
This Trust shall be known as "Managers AMG
Funds" and the Trustees shall conduct the
business of the Trust under that name or any
other name or names as they may from time to
time determine."
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 18th day of October, 1999.
/s/ John Kingston, III
-----------------------
John Kingston, III
Secretary
COMMONWEALTH OF MASSACHUSETTS )
) ss
COUNTY OF SUFFOLK )
Then personally appeared the above-named John Kingston, III
and acknowledged this instrument to be his free act and deed this
18th day of October, 1999.
/s/ Ellen Lindsey
-------------------
Notary Public
My Commission Expires: 8/02/02
<PAGE>
Exhibit d.1
- -------------
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 19th day of October, 1999 between
THE MANAGERS FUNDS LLC, a limited liability company organized
under the laws of the State of Delaware and having its principal
place of business in Norwalk, Connecticut (the "Adviser"), and
MANAGERS AMG FUNDS, a Massachusetts business trust having its
principal place of business in Norwalk, Connecticut (the
"Trust").
WHEREAS, the Adviser is engaged principally in the business
of rendering investment management services and is registered as
an investment adviser under the Investment Advisers Act of 1940,
as amended; and
WHEREAS, the Trust proposes to engage in business as an
open-end management investment company and is so registered under
the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust is authorized to issue shares of
beneficial interest in separate series with each such series
representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Trust intends to initially offer shares in one
series, the Essex Aggressive Growth Fund, such series (the
"Initial Fund"), together with all other series subsequently
established by the Trust with respect to which the Adviser
renders management and investment advisory services pursuant to
the terms of this Agreement, being herein collectively referred
to as the "Funds" and individually as a "Fund".
NOW THEREFORE, WITNESSETH: That it is hereby agreed between
the parties hereto as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Fund. The Trust hereby appoints the
Adviser to act as manager and investment adviser to the Initial
Fund for the period and on the terms herein set forth. The
Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust
establishes one or more series of shares other than the Initial
Fund with respect to which it desires to retain the Adviser to
render management and investment advisory services hereunder, it
shall so notify the Adviser in writing, indicating the advisory
fee to be payable with respect to the additional series of
shares. If the Adviser is willing to render such services on the
terms provided for herein, it shall so notify the Trust in
<PAGE>
writing, whereupon such series of shares shall become a Fund
hereunder.
2. DUTIES OF ADVISER. The Adviser, at its own expense,
shall furnish the following services and facilities to the Trust:
(a) Investment Program. The Adviser shall, subject to
the provisions of paragraph 11 hereof, (i) develop and furnish
continuously an investment program and strategy for each Fund in
compliance with that Fund's investment objective and policies as
set forth in the Trust's current Registration Statement, (ii)
provide research and analysis relative to the investment program
and investments of each Fund, (iii) determine (subject to the
overall supervision and review of the Board of Trustees of the
Trust) what investments shall be purchased, held, sold or
exchanged by each Fund and what portion, if any, of the assets of
each Fund shall be held in cash or cash equivalents, and (iv)
make changes on behalf of the Trust in the investments of each
Fund.
(b) Administration. The Adviser shall also manage,
supervise and conduct the other affairs and business of the Trust
and each Fund thereof and all matters incidental thereto, subject
always to the control of the Board of Trustees of the Trust and
to the provisions of the Trust's Master Trust Agreement and
By-laws, as amended, and the 1940 Act.
In connection therewith, the Adviser shall:
(i) furnish to the Trust necessary assistance in:
(A) the preparation of all reports now or
hereafter required by federal or other laws; and
(B) the preparation of prospectuses,
registration statements and amendments thereto that may be
required by federal or other laws or by the rules or regulations
of any duly authorized commission or administrative body.
(ii) furnish to the Trust office space in the
offices of the Adviser, or in such other place or places as may
be agreed upon from time to time, and all necessary office
facilities, simple business equipment, supplies, utilities and
telephone service.
(iii) furnish to the Trust all executive and
administrative personnel necessary for managing the affairs of
the Trust, including personnel to perform clerical, bookkeeping,
accounting and other office functions. These services are
exclusive of the necessary records or services, including
shareholder services and fund accounting services, of any
dividend disbursing agent, transfer agent, registrar or
custodian. The Adviser shall compensate all personnel, officers,
and directors of the Trust if such persons are also employees of
the Adviser or its affiliates.
2
<PAGE>
(iv) arrange for providing and maintaining a bond
issued by a reputable insurance company authorized to do business
in the place where the bond is issued against larceny and
embezzlement covering each officer and employee of the Trust, the
Adviser and/or any sub-adviser who may singly or jointly with
others have access to funds or securities of the Trust, with
direct or indirect authority to draw upon such funds or to direct
generally the disposition of such funds. The bond shall be in
such reasonable amount as a majority of the Trustees who are not
"interested persons" of the Trust, as defined in the 1940 Act,
shall determine, with due consideration to the aggregate assets
of the Trust to which any such officer or employee may have
access. The premium, or portion thereof pursuant to an agreement
among the insured parties in the case of a joint insured bond,
for the bond shall be payable by the Trust in accordance with
paragraph 3(17).
3. ALLOCATION OF EXPENSES. Except for the services or
facilities to be provided by the Adviser set forth in Paragraph 2
above, the Trust assumes and shall pay all expenses for all other
Trust operations and activities and shall reimburse the Adviser
for any such expense incurred by the Adviser (it being understood
that the Trust shall allocate such expenses between or among the
Funds to the extent contemplated by its Master Trust Agreement).
The expenses to be borne by the Trust shall include, without
limitation:
(1) all expenses of organizing the Trust or forming
any series thereof, to the extent now or hereafter permitted
under generally accepted accounting principles applicable to
registered investment companies;
(2) all expenses (including information, materials and
services other than services of the Adviser) of preparing,
printing and mailing all annual, semiannual and periodic reports,
proxy materials and other communications (including registration
statements, prospectuses and amendments and revisions thereto)
furnished to existing shareholders of the Trust and/or regulatory
authorities;
(3) fees involved in registering and maintaining
registration of the Trust and its shares with the Securities and
Exchange Commission and state regulatory authorities;
(4) any other registration, filing or other fees in
connection with requirements of regulatory authorities;
(5) expenses, including the cost of printing of
certificates, relating to the issuance of shares of the Trust;
(6) to the extent not paid by the Trust's distributor,
the expenses of maintaining a shareholder account and furnishing,
or causing to be furnished, to each shareholder a statement of
his account, including the expense of mailing;
(7) taxes and fees payable by the Trust to federal,
state or other governmental agencies;
3
<PAGE>
(8) expenses related to the redemption of its shares,
including expenses attributable to any program of periodic
redemption;
(9) all issue and transfer taxes, brokers' commissions
and other costs chargeable to the Trust in connection with
securities transactions to which the Trust is a party, including
any portion of such commissions attributable to research and
brokerage services as defined by Section 28(e) of the Securities
Exchange Act of 1934, as amended from time to time (the "1934
Act");
(10) the charges and expenses of the custodian
appointed by the Trust, or any depository utilized by such
custodian, for the safekeeping of its property;
(11) charges and expenses of any shareholder servicing
agents, transfer agents and registrars appointed by the Trust,
including costs of servicing shareholder investment accounts;
(12) charges and expenses of independent accountants
retained by the Trust;
(13) fees and expenses for legal services in connection
with the affairs of the Trust, including reasonable fees charged
and expenses incurred by the Adviser, if any, for performing such
legal services for the Trust;
(14) compensation and expenses of Trustees of the Trust
who are not "interested persons" of the Trust (as defined in the
1940 Act);
(15) expenses of shareholders' and Trustees' meetings;
(16) membership dues in, and assessments of, the
Investment Company Institute or similar organizations;
(17) insurance premiums on fidelity, errors and
omissions and other coverages;
(18) expenses incurred in connection with any
distribution plan adopted by the Trust in compliance with Rule
12b-1 of the 1940 Act;
(19) such other non-recurring expenses of the Trust as
may arise, including expenses of actions, suits, or proceedings
to which the Trust is a party and the legal obligation which the
Trust may have to indemnify its Trustees or shareholders with
respect thereto;
(20) fees and expenses incurred in connection with
registering and qualifying the Trust's shares with federal and
state regulatory authorities, including reasonable fees charged
and expenses incurred by the Adviser, if any, for performing such
services for the Trust; and
4
<PAGE>
(21) fees and expenses for fund accounting services,
including reasonable fees charged and expenses incurred by the
Adviser, if any, for performing such fund accounting services for
the Trust.
4. FEES. For the services and facilities to be provided
by the Adviser as set forth in Paragraph 2 hereof, the Trust
shall pay to the Adviser an annual fee as set forth on Schedule A
to this Agreement.
In the case of commencement or termination of this Agreement
with respect to any Fund during any calendar month, the fee with
respect to such Fund for that month shall be reduced
proportionately based upon the number of calendar days during
which it is in effect, and the fee shall be computed upon the
average daily net assets of such Fund for the days during which
it is in effect.
5. EXPENSE LIMITATION. The Adviser agrees that if the
total expenses of any Fund (exclusive of interest, taxes,
brokerage expenses, distribution expenses, extraordinary items
and any other items allowed to be excluded by applicable state
law) for any fiscal year of the Trust exceed the lowest expense
limitation imposed in any jurisdiction in which that Fund is then
making sales of its shares or in which its shares are then
qualified for sale, the Adviser will pay or reimburse such Fund
for that excess up to the amount of its advisory fee payable with
respect to that Fund during that fiscal year. The amount of the
monthly advisory fee payable under Paragraph 4 hereof shall be
reduced to the extent that the monthly expenses of that Fund, on
an annualized basis, would exceed the foregoing limitation. At
the end of each fiscal year of the Trust, if the aggregate annual
expenses chargeable to any Fund for that year exceed the
foregoing limitation based upon the average of the monthly
average net asset value of that Fund for the year, the Adviser
will promptly reimburse that Fund for the amount of such excess
to the extent not already reimbursed by reduction of the monthly
advisory fee. In the event that such expenses are within the
foregoing limitation, the Trust shall be obligated to pay the
Adviser excess amounts previously withheld from the advisory fee
during that fiscal year, provided that the amount of such payment
would not exceed the foregoing limitation.
In the event that this Agreement (i) is terminated with
respect to any one or more Funds as of a date other than the last
day of the fiscal year of the Trust or (ii) commences with
respect to one or more Funds as of a date other than the first
day of the fiscal year of the Trust, then the expenses of such
Fund or Funds shall be annualized and the Adviser shall pay to,
or receive from, the applicable Fund or Funds a pro rata portion
of the amount that the Adviser would have been required to pay or
would have received, if any, had this Agreement remained in
effect with respect to such Fund or Funds for the full fiscal
year.
6. PORTFOLIO TRANSACTIONS. In connection with the
management of the investment and reinvestment of the assets of
the Trust, the Adviser, acting by its own officers, directors or
employees or by a duly authorized subcontractor, is authorized to
select the brokers or dealers that will execute purchase and sale
transactions for the Trust. In executing portfolio transactions
and selecting brokers or dealers, if any, the Adviser will use
its best efforts to seek on behalf of a Fund the best overall
5
<PAGE>
terms available. In assessing the best overall terms available
for any transaction, the Adviser shall consider all factors it
deems relevant, including the breadth of the market in and the
price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, with respect to the specific transaction and
on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker or dealer, if any, to
execute a particular transaction, the Adviser may also consider
the brokerage and research services (as those terms are defined
in Section 28(e) of the 1934 Act) provided to any Fund of the
Trust and/or other accounts over which the Adviser or an
affiliate of the Adviser exercises investment discretion. With
the prior approval of the Trustees, the Adviser may pay to a
broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction which
is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the Adviser
determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services
provided. Such prior approval may be obtained from the Trustees
with respect to the Adviser's investment program and need not be
obtained on a transaction-by-transaction basis.
7. RELATIONS WITH TRUST. Subject to and in accordance
with the Master Trust Agreement and By-laws of the Trust and the
Limited Liability Company Agreement and By-laws of the Adviser,
it is understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the Adviser (or any
successor thereof) as directors, officers, or otherwise, that
directors, officers, agents and shareholders of the Adviser (or
any successor) are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise, that the Adviser (or any
such successor thereof) is or may be interested in the Trust as a
shareholder or otherwise and that the effect of any such adverse
interests shall be governed by said Master Trust Agreement,
Limited Liability Company Agreement and By-laws.
8. LIABILITY OF ADVISER. Neither the Adviser nor its
officers, directors, employees, agents or controlling persons or
assigns shall be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust or its shareholders in
connection with the matters to which this Agreement relates;
provided that no provision of this Agreement shall be deemed to
protect the Adviser against any liability to the Trust or its
shareholders to which it might otherwise be subject by reason of
any willful misfeasance, bad faith or negligence in the
performance of its duties or the reckless disregard of its
obligations and duties under this Agreement. Nor shall any
provision hereof be deemed to protect any Trustee or officer of
the Trust against any such liability to which he might otherwise
be subject by reason of any willful misfeasance, bad faith or
[gross negligence] in the performance of his duties or the
reckless disregard of his obligations and duties.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
6
<PAGE>
(a) Duration. This Agreement shall become effective
with respect to the Initial Fund on the date hereof and, with
respect to any additional Fund, on the date of receipt by the
Trust of notice from the Adviser in accordance with paragraph
1(b) hereof that the Adviser is willing to serve as Adviser with
respect to such Fund. Unless terminated as herein provided, this
Agreement shall remain in full force and effect for two years
from the date hereof with respect to the Initial Fund and, with
respect to each additional Fund, for two years from the date on
which such Fund becomes a Fund hereunder. Subsequent to such
initial periods of effectiveness, this Agreement shall continue
in full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to
such Fund is approved at least annually (a) 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 such Fund, and
(b) in either event, by the vote of a majority of the Trustees of
the Trust who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such
approval. Notwithstanding the foregoing provisions of this
Section 9(a), the continuance of this Agreement with respect to
the Initial Fund or any additional Fund is subject to the
approval of this Agreement by a majority of the outstanding
voting securities of that Fund at the first meeting of
shareholders after this Agreement becomes effective with respect
to that Fund.
(b) Amendment. Any amendment to this Agreement shall
become effective with respect to a Fund upon approval of the
Adviser and a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Fund.
(c) Termination. This Agreement may be terminated with
respect to any Fund at any time, without payment of any penalty,
by vote of the Trustees or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of
that Fund, or by the Adviser, in each case on sixty (60) days'
prior written notice to the other party.
(d) Automatic Termination. This Agreement shall
automatically and immediately terminate in the event of its
assignment (as defined in the 1940 Act).
(e) Approval, Amendment or Termination by Individual
Fund. Any approval, amendment or termination of this Agreement
by the holders of a majority of the outstanding voting securities
(as defined in the 1940 Act) of any Fund shall be effective to
continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been
approved by the holders of a majority of the outstanding voting
securities of any other Fund affected thereby, and (ii) that such
action has not been approved by the vote of a majority of the
outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
10. SERVICES NOT EXCLUSIVE. The services of the Adviser to
the Trust hereunder are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
7
<PAGE>
11. SUBCONTRACTORS. The Trust hereby agrees that the
Adviser may subcontract for the performance of any of the
services contemplated to be rendered by the Adviser to any Fund
hereunder.
12. LIMITATION OF LIABILITY. The term "Managers AMG Funds"
means and refers to the Trustees from time to time serving under
the Master Trust Agreement of the Trust dated June 18, 1999 as
the same may subsequently thereto have been, or subsequently
hereto may be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but shall bind only the trust
property of the Trust, as provided in the Master Trust Agreement.
The execution and delivery of this Agreement has been authorized
by the Trustees and the initial shareholder of the Trust and
signed by the President of the Trust, acting as such, and neither
such authorization by such Trustees and shareholder nor such
execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property
of the Trust as provided in its Master Trust Agreement.
13. RESERVATION OF NAME. The parties hereby acknowledge
that The Managers Funds LLC has reserved the right to grant the
nonexclusive use of the name "Managers" or any derivative thereof
to any other investment company, investment adviser, distributor
or other business enterprise, and to withdraw from the Trust the
use of the name "Managers". The name "Managers" will continue to
be used by the Trust so long as such use is mutually agreeable to
The Managers Funds LLC and the Trust.
14. MISCELLANEOUS.
(a) Notice. Any notice under this Agreement shall be
in writing, addressed and delivered or mailed, postage prepaid,
to the other party at such address as such other party may
designate in writing for the receipt of such notices.
(b) Severability. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed
in accordance with and governed by the laws of the Commonwealth
of Massachusetts.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
MANAGERS AMG FUNDS
By:/s/Peter M. Lebovitz
---------------------
Name:Peter M. Lebovitz
Title:President
THE MANAGERS FUNDS LLC
By:/s/Donald S. Rumery
-------------------
Name: Donald S. Rumery
Title:Chief Financial Officer
9
<PAGE>
SCHEDULE A
ESSEX AGGRESSIVE GROWTH FUND
- --------------------------------
Advisory Fees pursuant to Section 2(a)
- ---------------------------------------
The Trust shall pay to the Adviser an annual gross
investment advisory fee equal to 1.00% of the average daily net
assets of the Essex Aggressive Growth Fund; provided, however,
that the Adviser agrees, for a period of not less than eighteen
(18) months, to waive its advisory fee and pay or reimburse the
Trust for expenses of the Fund to the extent total expenses of
the Fund would otherwise exceed 1.10% of the Fund's average daily
net assets. Such fee shall be accrued daily and paid as soon as
practical after the last day of each calendar month.
In addition to the foregoing waiver, payment or
reimbursement (if any), the Adviser may from time to time
voluntarily waive all or a portion of the advisory fee payable
with respect to the Essex Aggressive Growth Fund and/or pay or
reimburse the Trust for expenses of the Fund. In addition to any
amounts otherwise payable to the Adviser as an advisory fee for
current services under the Investment Management Agreement, the
Trust shall be obligated to pay the Adviser all amounts
previously waived, paid or reimbursed by the Adviser with respect
to the Essex Aggressive Growth Fund, provided that the amount of
such additional payment in any year, together with all other
expenses of the Essex Aggressive Growth Fund, in the aggregate,
would not cause the Essex Aggressive Growth Fund's expense ratio
in such year to exceed 1.10% of the average daily net assets of
the Essex Aggressive Growth Fund and provided further that no
additional payments shall be made with respect to amounts waived,
paid or reimbursed more than three (3) years prior to the date
the Fund accrues a liability with respect to such additional
payment.
Administration Fees Pursuant to Section 2(b)
- --------------------------------------------
None.
10
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Exhibit d.2
- -------------
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 19th day of October, 1999, between
THE MANAGERS FUNDS LLC, a limited liability company organized
under the laws of the state of Delaware and having its principal
place of business in Norwalk, Connecticut (the "Adviser") and
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC, a limited liability
company organized under the laws of the state of Delaware and
having its principal place of business at 125 High Street,
Boston, MA 02110 (the "Sub-Adviser").
WHEREAS, the Adviser is engaged principally in the business
of rendering investment management services and is registered as
an investment adviser under the Investment Advisers Act of 1940,
as amended (the "Advisers Act"); and
WHEREAS, the Sub-Adviser is engaged principally in the
business of rendering investment management services and is
registered as an investment adviser under the Advisers Act; and
WHEREAS, MANAGERS AMG FUNDS, a Massachusetts business trust
(the "Trust"), proposes to engage in business as an open-end
management investment company and is so registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of
beneficial interest in separate series, with each such series
representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Trust currently intends to offer shares in one
series, the Essex Aggressive Growth Fund, such series together
with all other series subsequently established by the Trust with
respect to which the Sub-Adviser renders management and
investment advisory services pursuant to the terms of this
Agreement, being herein collectively referred to as the "Funds"
and individually as a "Fund"; and
WHEREAS, pursuant to the Investment Management Agreement, as
of even date herewith, between the Trust and the Adviser (the
"Advisory Agreement"), the Adviser is required to perform
investment advisory services for the Funds.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed
between the parties hereto as follows:
<PAGE>
1. APPOINTMENT OF SUB-ADVISER.
(a) Essex Aggressive Growth Fund. The Adviser
hereby employs the Sub-Adviser to provide investment
advisory services to the Essex Aggressive Growth Fund for
the period and on the terms herein set forth. The
Sub-Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein
provided.
(b) Additional Funds. In the event that the
Trust establishes one or more series of shares other than
the Essex Aggressive Growth Fund with respect to which the
Adviser desires to retain the Sub-Adviser to render
investment advisory services hereunder, the Adviser shall so
notify the Sub-Adviser in writing, indicating the advisory
fee to be payable with respect to the additional series of
shares. If the Sub-Adviser is willing to render such
services on the terms provided for herein, it shall so
notify the Adviser in writing, whereupon such series shall
become a Fund hereunder.
2. DUTIES OF ADVISER AND SUB-ADVISER.
(i) Delivery of Documents. The Adviser has furnished
the Sub-Adviser with true copies of each of the following:
(a) The Trust's Master Trust Agreement, as filed
with the Secretary of State of the Commonwealth of
Massachusetts and all amendments and supplements
thereto (such Master Trust Agreement, as presently in
effect and as it shall from time to time be amended or
supplemented, is herein called the "Declaration");
(b) The Trust's By-Laws and amendments and
supplements thereto (such By-Laws, as presently in
effect and as it shall from time to time be amended and
supplemented, is herein called the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees
authorizing the appointment of the Adviser and
Sub-Adviser and approving the Advisory Agreement and
this Agreement and copies of the minutes of the initial
meeting of shareholders of each Fund;
(d) The Trust's Notification of Registration on
Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission on August 6, 1999
and all amendments thereto;
(e) The Trust's Registration Statement on Form
N-1A under the Securities Act of 1933 as amended (the
"1933 Act") and the 1940 Act (File Nos. 333-84639 and
811-9521) as filed with the Securities and Exchange
Commission on August 6, 1999, and all amendments
thereto (the "Registration Statement");
2
<PAGE>
(f) The most recent prospectus (such prospectus,
as in effect from time to time and all amendments and
supplements thereto are herein called the "Prospectus")
of each Fund;
(g) All resolutions of the Board of Trustees of
the Trust pertaining to the objectives, investment
policies and investment restrictions of the each Fund;
and
(h) Copies of the executed Advisory Agreement
between the Trust and the Adviser relating to each
Fund.
The Adviser will furnish the Sub-Adviser from time
to time with copies of all amendments of or supplements
to items (a), (b), (c), (e), (f), (g) and (h) to the
extent such amendments or supplements relate to or
affect the obligations of the Sub-Adviser hereunder
with respect to the Essex Aggressive Growth Fund or any
other series of the Trust that hereafter becomes a Fund
hereunder.
(ii) The Sub-Adviser, at its own expense, shall furnish
the following services to the Trust:
(a) Investment Program. The Sub-Adviser is
hereby authorized and directed and hereby agrees,
subject to the stated investment objective and policies
of the Funds as set forth in the Trust's current
Registration Statement and subject to the supervision
of the Adviser and the Board of Trustees of the Trust,
to (i) develop and furnish continuously an investment
program and strategy for each Fund in compliance with
that Fund's investment objective and policies as set
forth in the Trust's current Registration Statement,
(ii) provide research and analysis relative to the
investment program and investments of each Fund, (iii)
determine (subject to the overall supervision of the
Board of Trustees of the Trust) what investments shall
be purchased, held, sold or exchanged by each Fund and
what portion, if any, of the assets of each Fund shall
be held in cash or cash equivalents, and (iv) make
changes on behalf of the Trust in the investments of
each Fund. In accordance with paragraph 2(ii)(b), the
Sub-Adviser shall arrange for the placing of all orders
for the purchase and sale of securities and other
investments for each Fund's account and will exercise
full discretion and act for the Trust in the same
manner and with the same force and effect as the Trust
might or could do with respect to such purchases, sales
or other transactions, as well as with respect to all
other things necessary or incidental to the furtherance
or conduct of such purchases, sales or transactions.
The Sub-Adviser will make its officers and employees
available to meet with the Adviser's officers and
directors on due notice at reasonable times to review
3
<PAGE>
the investments and investment program of each Fund in
the light of current and prospective economic and
market conditions.
In the performance of its duties hereunder, the
Sub-Adviser is and shall be an independent contractor
and except as expressly provided for herein or
otherwise expressly provided or authorized shall have
no authority to act for or represent any Fund or the
Trust in any way or otherwise be deemed to be an agent
of any Fund, the Trust or of the Adviser. If any
occasion should arise in which the Sub-Adviser gives
any advice to its clients concerning the shares of a
Fund, the Sub-Adviser will act solely as investment
counsel for such clients and not in any way on behalf
of the Trust or any Fund.
(b) Portfolio Transactions. In connection with
the management of the investment and reinvestment of
each Fund, the Sub-Adviser, acting by its own officers,
directors or employees or by a duly authorized
subcontractor, is authorized to select the broker or
dealers that will execute purchase and sale
transactions for the Trust.
In executing portfolio transactions and selecting
brokers or dealers, if any, the Sub-Adviser will use
its best efforts to seek on behalf of a Fund the best
overall terms available. In assessing the best overall
terms available for any transaction, the Sub-Adviser
shall consider all factors it deems relevant, including
the breadth of the market in and the price of the
security, the financial condition and execution
capability of the broker or dealer, and the
reasonableness of the commission, if any, with respect
to the specific transaction and on a continuing basis.
In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a
particular transaction, the Sub-Adviser may also
consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Sub-Adviser with
respect to the Essex Aggressive Growth Fund and/or
other accounts over which the Sub-Adviser exercises
investment discretion. The Sub-Adviser may pay to a
broker or dealer who provides such brokerage and
research services a commission for executing a
portfolio transaction which is in excess of the amount
of commission another broker or dealer would have
charged for effecting that transaction if, but only if,
the Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of
the brokerage and research services provided.
The Sub-Adviser may buy securities for a Fund at
the same time it is selling such securities for another
client account and may sell securities for a Fund at
the time it is buying such securities for another
client account. In such cases, subject to applicable
legal and regulatory requirements, and in compliance
with such procedures of the Trust as may be in effect
from time to time, the Sub-Adviser may effectuate cross
transactions between a Fund and such other account if
4
<PAGE>
it deems this to be advantageous. The Sub-Adviser also
may cause a Fund to enter into other types of
investment transactions (e.g., a long position on a
particular securities index) at the same time it is
causing other client accounts to take opposite economic
positions (e.g., a short position on the same index).
On occasions when the Sub-Adviser deems the
purchase or sale of a security to be in the best
interest of a Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws
and regulations, and in compliance with such procedures
of the Trust as may be in effect from time to time, may
aggregate the securities to be sold or purchased in
order to obtain the best execution and lower brokerage
commissions, if any. In such event, allocation of the
securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by
the Sub-Adviser in the manner it considers to be the
most equitable and consistent with its fiduciary
obligations to the subject Fund and to such clients.
The Sub-Adviser will advise the Funds' custodian
or such depository or agents as may be designated by
the custodian and the Adviser promptly of each purchase
and sale of a portfolio security, specifying the name
of the issuer, the description and amount or number of
shares of the security purchased, the market price, the
commission and gross or net price, the trade date and
settlement date and the identity of the effecting
broker or dealer. The Sub-Adviser shall not have
possession or custody of any Fund investments. The
Trust shall be responsible for all custodial agreements
and the payment of all custodial charges and fees and,
upon the Sub-Adviser giving proper instructions to the
custodian, the Sub-Adviser shall have no responsibility
or liability for the acts, omissions or other conduct
of the custodian.
The Sub-Adviser shall, upon due notice from the
Adviser, provide such periodic and special reports
describing any such research, advice or other services
received and the incremental commissions, net price or
other consideration to which they relate.
Notwithstanding the foregoing, the Sub-Adviser
agrees that the Adviser shall have the right by written
notice to identify securities that may not be purchased
on behalf of any Fund and/or brokers and dealers
through which portfolio transaction on behalf of the
Funds may not be effected, including, without
limitation, brokers or dealers affiliated with the
Adviser. The Sub-Adviser shall refrain from purchasing
such securities for the Fund or directing any portfolio
transaction to any such broker or dealer on behalf of
5
<PAGE>
the Fund, unless and until the written approval of the
Adviser to do so is obtained, but the Sub-Adviser shall
not be liable to the Essex Aggressive Growth Fund for
so acting. In addition, the Sub-Adviser agrees that it
shall not direct portfolio transactions for the Fund
through any broker or dealer that is an "affiliated
person" of the Sub-Adviser (as that term is defined in
the Act or interpreted under applicable rules and
regulations of the Securities and Exchange Commission)
without the prior written approval of the Adviser and
in no event shall the Sub-Adviser direct portfolio
transactions on behalf of the Fund to any broker/dealer
in recognition of sales of shares of any investment
company or receipt of research or other service without
prior written approval of the Adviser. The Adviser
agrees that it will provide the Sub-Adviser with a list
of brokers and dealers that are "affiliated persons" of
the Funds.
(c) Reports. The Sub-Adviser shall render to the
Board of Trustees of the Trust such periodic and
special reports as the Board of Trustees may request
with respect to matters relating to the duties of the
Sub-Adviser set forth herein.
3. SUB-ADVISORY FEE.
For the services to be provided by the Sub-Adviser as
provided in Paragraph 2 hereof, the Adviser shall pay to the
Sub-Adviser an annual fee as set forth on Schedule A to this
Agreement.
In the case of commencement or termination of this Agreement
with respect to any Fund during any calendar month, the fee with
respect to such Fund for that month shall be reduced
proportionately based upon the number of calendar days during
which it is in effect, and the fee shall be computed during the
average daily net assets of such Fund for the days during which
it is in effect.
4. EXPENSES.
During the term of this Agreement, the Sub-Adviser will bear
all expenses incurred by it in the performance of its duties
hereunder, other than those expenses specifically assumed by the
Trust hereunder. The Trust shall assume and shall pay (i) issue
and transfer taxes chargeable to the Trust in connection with
securities transactions to which any Fund is a party, and (ii)
interest on borrowed money, if any. In addition to these
expenses, the Trust shall pay all brokers' and underwriting
commissions chargeable to the Trust in connection with the
securities transactions to which any Fund is a party.
5. COMPLIANCE WITH APPLICABLE REGULATIONS.
In performing its duties hereunder, the Sub-Adviser
6
<PAGE>
(i) shall establish compliance procedures (copies of
which shall be provided to the Adviser, and shall be
subject to review and approval by the Adviser)
reasonably calculated to ensure compliance at all times
with: all applicable provisions of the 1940 Act and
the Advisers Act, and any rules and regulations adopted
thereunder; Subchapter M of the Internal Revenue Code
of 1986, as amended; the provisions of the Registration
Statement; the provisions of the Declaration and the By-
Laws of the Trust, as the same may be amended from time
to time; and any other applicable provisions of state,
federal or foreign law.
(ii) acknowledges that the Trust has adopted a written
code of ethics complying with the requirements of Rule
17j-1 under the Act and that the Sub-Adviser and
certain of its employees, officers and directors may be
subject to reporting requirements thereunder and,
accordingly, agrees that it shall, on a timely basis,
furnish, and shall cause its employees, officers and
directors to furnish, to the Adviser and/or to the
Trust, all reports and information required to be
provided under such code of ethics with respect to such
persons.
(iii) agrees that it will maintain for the Trust
all and only such records as required under Rules 31a-1
and 31a-2 under the 1940 Act in respect to its services
hereunder and that such records are the property of the
Trust and further agrees to surrender promptly to the
Trust any such records upon the Trust's request all in
accordance with Rule 31a-3 under the 1940 Act.
6. LIABILITY OF SUB-ADVISER; INDEMNIFICATION.
Neither the Sub-Adviser nor the officers, directors,
employees, agents, or legal representatives (collectively,
"Related Persons") of the Sub-Adviser shall be liable for any
error of judgment or mistake of law, or for any loss suffered by
any Fund or its shareholders in connection with the matters to
which this Agreement relates; provided that, except as set forth
in the succeeding paragraph, no provision of this Agreement shall
be deemed to protect the Sub-Adviser or its Related Persons
against any liability to which it might otherwise be subject by
reason of any willful misfeasance, bad faith or negligence or the
reckless disregard of the Sub-Adviser's obligations and duties
(each of which is hereby referred to as a "Culpable Act") under
this Agreement.
Neither the Sub-Adviser nor its Related Persons shall be
liable for any error of judgment or mistake of law, or for any
loss suffered by the Adviser or its Related Persons in connection
with the matters to which this Agreement relates; provided that
this provision shall not be deemed to protect the Sub-Adviser or
its Related Persons against any liability to which it might
otherwise be subject by reason of any Culpable Act by the
Sub-Adviser or its Related Persons.
7
<PAGE>
The Adviser shall indemnify the Sub-Adviser and its Related
Persons and hold them harmless from and against any and all
actions, suits or claims whether groundless or meritorious and
from and against any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liabilities
(collectively, "Damages") arising directly or indirectly out of
or in connection with the performance of services by the
Sub-Adviser or its Related Persons hereunder to the extent such
Damages result from any Culpable Act of the Adviser or any
Related Person of the Adviser.
The Sub-Adviser shall indemnify the Adviser and its Related
Persons from and against any Damages arising directly or
indirectly out of or in connection with the performance of
services by the Adviser or its Related Persons under this
Agreement or the Advisory Agreement, in each case, to the extent
such Damages result from any Culpable Act of the Sub-Adviser or
any of its Related Persons.
7. REPRESENTATIONS AND WARRANTIES.
(a) Adviser. The Adviser represents and warrants to
the Sub-Adviser that (i) the retention of the Sub-Adviser by the
Adviser as contemplated by this Agreement is authorized by the
respective governing documents of the Trust and the Adviser; (ii)
the execution, delivery and performance of each of this Agreement
and the Advisory Agreement does not violate any obligation by
which the Trust or the Adviser or their respective property is
bound, whether arising by contract, operation of law or
otherwise; and (iii) each of this Agreement and the Advisory
Agreement has been duly authorized by appropriate action of the
Trust and the Adviser and when executed and delivered by the
Adviser will be the legal, valid and binding obligation of the
Trust and the Adviser, enforceable against the Trust and Adviser
in accordance with its terms hereof subject, as to enforcement,
to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in
equity or law).
(b) Sub-Adviser. The Sub-Adviser represents and
warrants to the Adviser that (i) the retention of the Sub-Adviser
by the Adviser as contemplated by this Agreement is authorized by
the Sub-Adviser's governing documents; (ii) the execution,
delivery and performance of this Agreement does not violate any
obligation by which the Sub-Adviser or its property is bound,
whether arising by contract, operation of law or otherwise; and
(iii) this Agreement has been duly authorized by appropriate
action of the Sub-Adviser and when executed and delivered by the
Sub-Adviser will be the legal, valid and binding obligation of
the Sub-Adviser, enforceable against the Sub-Adviser in
accordance with its terms hereof, subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in
equity or law).
8. DURATION AND TERMINATION OF THIS AGREEMENT.
8
<PAGE>
(a) Duration. This Agreement shall become effective
with respect to the Essex Aggressive Growth Fund on the date
hereof and, with respect to any additional Fund, on the date of
receipt by the Adviser of notice from the Sub-Adviser in
accordance with Paragraph 1(b) hereof that the Sub-Adviser is
willing to serve as Sub-Adviser with respect to such Fund.
Unless terminated as herein provided, this Agreement shall remain
in full force and effect for two years from the date hereof with
respect to the Essex Aggressive Growth Fund and, with respect to
each additional Fund, for two years from the date on which such
Fund becomes a Fund hereunder. Subsequent to such initial periods
of effectiveness, this Agreement shall continue in full force and
effect for periods of one year thereafter with respect to each
Fund so long as such continuance with respect to any such Fund is
approved at least annually (a) 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 such Fund, and (b) in
either event, by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such
approval.
(b) Amendment. This Agreement may be amended by
agreement of the parties, provided that the amendment shall be
approved both by the vote of a majority of the Trustees of the
Trust, including a majority of the Trustees who are not parties
to this Agreement or interested persons of any such party to this
Agreement cast in person at a meeting called for that purpose,
and by the holders of a majority of the outstanding voting
securities of the Trust.
(c) Termination. This Agreement may be terminated
with respect to any Fund at any time, without payment of any
penalty, (i) by vote of the Trustees of the Trust or by vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of that Fund, (ii) by the Adviser, or (iii) by the
Sub-Adviser, in each case on sixty (60) days' prior written
notice to the other party. Upon the effective date of termination
of this Agreement, the Sub-Adviser shall deliver all books and
records of the Trust or any Fund held by it (i) to such entity as
the Trust may designate as a successor sub-adviser, or (ii) to
the Adviser.
(d) Automatic Termination. This Agreement shall
automatically and immediately terminate in the event of its
assignment (as defined in the 1940 Act).
(e) Approval, Amendment or Termination by Individual
Fund. Any approval, amendment or termination of this Agreement
by the holders of a majority of the outstanding voting securities
(as defined in the 1940 Act) of any Fund shall be effective to
continue, amend or terminate this Agreement with respect to any
such Fund notwithstanding (i) that such action has not been
approved by the holders of a majority of the outstanding voting
securities of any other Fund affected thereby, and (ii) that such
action has not been approved by the vote of a majority of the
outstanding voting securities of the Trust, unless such action
shall be required by any applicable law or otherwise.
9
<PAGE>
9. SERVICES NOT EXCLUSIVE.
The services of the Sub-Adviser to the Adviser in connection
with the Funds hereunder are not to be deemed exclusive, and the
Sub-Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby. It is
understood that the persons employed by the Sub-Adviser to assist
in the performance of its duties hereunder will not devote their
full time to such services and nothing hereunder contained shall
be deemed to limit or restrict the right of the Sub-Adviser to
engage in or devote time and attention to other businesses or to
render services of whatever kind or nature.
10. RESERVATION OF NAME.
(a) The parties hereby acknowledge that Essex
Investment Management Company, LLC has reserved the right to
grant the nonexclusive use of the name "Essex" or any derivative
thereof to any other investment company, investment adviser,
distributor or other business enterprise, and to withdraw from
the Trust the use of the name "Essex." The name "Essex" will
continue to be used by the Trust so long as such use is mutually
agreeable to Essex Investment Management Company, LLC and the
Trust. The Adviser and the Trust acknowledge that the Trust
shall cease using the name "Essex" as a part of the Fund's name
and that the Adviser, the Trust or any Fund, or any of their
affiliates, shall not promote the Trust or any Fund or conduct
the business of the Trust or any Fund in any way in such name if
this Agreement is terminated for any reason and the Sub-Adviser
does not expressly consent in writing to such use of the name
"Essex." Future names adopted by the Trust for itself or any
Fund, insofar as such names include identifying words requiring
the consent of the Sub-Adviser, shall be the property of the
Sub-Adviser and shall be subject to the same terms and
conditions.
(b) The parties hereby acknowledge that The Managers
Funds LLC has reserved the right to grant the nonexclusive use of
the name "Managers" or any derivative thereof to any other
investment company, investment adviser, distributor or other
business enterprise, and to withdraw from the Trust the use of
the name "Managers." The name "Managers" will continue to be used
by the Trust so long as such use is mutually agreeable to The
Managers Funds LLC and the Trust. Essex and the Trust
acknowledge that the Trust shall cease using the name "Managers"
as a part of the Trust's name and that Essex, the Trust or any
Fund, or any of their affiliates, shall not promote the Trust or
any Fund or conduct the business of the Trust or any Fund in any
way in such name if this Agreement is terminated for any reason
and the Adviser does not expressly consent in writing to such use
of the name "Managers." Future names adopted by the Trust for
itself or any Fund, insofar as such names include identifying
words requiring the consent of the Adviser, shall be the property
of the Adviser and shall be subject to the same terms and
conditions.
10
<PAGE>
11. MISCELLANEOUS.
(a) Notices. All notices or other communications
given under this Agreement shall be made by guaranteed overnight
delivery, telecopy or certified mail; notice is effective when
received. Notice shall be given to the parties at the following
addresses:
The Adviser: The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854
Facsimile No.: 203-857-5316
Attention: Peter Lebovitz
Sub-Adviser: Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
Facsimile No.: 617-342-3392
Attention: Christopher McConnell
(b) Severability. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed
in accordance with and governed by the laws of the Commonwealth
of Massachusetts.
(d) Counterparties. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
(e) Entire Agreement. This Agreement states the
entire agreement of the parties hereto, and is intended to be the
complete and exclusive statement of the terms hereof. It may not
be added to or changed orally, and may not be modified or
rescinded except by a writing signed by the parties hereto and in
accordance with the Investment Company Act of 1940, as amended,
when applicable.
11
<PAGE>
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have
caused this Agreement to be executed as of the date first set
forth above.
THE MANAGERS FUNDS LLC
By:/s/Donald S. Rumery
--------------------
Name: Donald S. Rumery
Title:Chief Financial Officer
ESSEX INVESTMENT MANAGEMENT
COMPANY, LLC
By:/s/Christopher P. McConnell
---------------------------
Name: Christopher P. McConnell
Title:Chief Financial Officer
Acknowledged and agreed to as of the date first set forth
above with respect to the Trust's obligations under Paragraph 10
of this Agreement.
MANAGERS AMG FUNDS
By:/s/Peter M. Lebovitz
--------------------
Name: Peter M. Lebovitz
Title:President
12
<PAGE>
SCHEDULE A
Essex Aggressive Growth Fund
- ------------------------------
The Adviser shall pay to the Sub-Adviser an annual gross
investment sub-advisory fee equal to 1.00% of the average daily
net assets of the Essex Aggressive Growth Fund. Such fee shall
be accrued daily and paid as soon as practical after the last day
of each calendar month.
The Sub-Adviser may voluntarily waive all or a portion of
the sub-advisory fee payable from time to time hereunder. The
Adviser agrees that, during any period in which the Sub-Adviser
has voluntarily waived all or a portion of the sub-advisory fee
hereunder, if requested by the Sub-Adviser, the Adviser will
waive an equal amount (or such lesser amount as the Sub-Adviser
may request) of the advisory fee payable by the Trust to the
Adviser with respect to the Fund under the Advisory Agreement.
The Sub-Adviser agrees that, during any period in which the
Adviser has waived all or a portion of the advisory fee payable
by the Trust to the Adviser under the Advisory Agreement with
respect to the Fund, if requested by the Adviser, the Sub-Adviser
will waive a pro rata share (or such lesser share as the Adviser
may request) of the sub-advisory fee payable hereunder with
respect to the Fund, such that the amount waived by the
Sub-Adviser shall bear the same ratio to the total amount of the
sub-advisory fees payable hereunder with respect to the Fund as
the amount waived by the Adviser bears to all fees payable to the
Adviser under the Advisory Agreement with respect to the Fund.
The Adviser agrees that, in addition to any amounts otherwise
payable to the Sub-Adviser with respect to the Fund hereunder,
the Adviser shall pay the Sub-Adviser all amounts previously
waived by the Sub-Adviser to the extent that such amounts are
subsequently paid by the Trust to the Adviser under the Advisory
Agreement, it being further agreed that, with respect to any such
amounts subsequently paid by the Trust to the Adviser, the amount
to be paid by the Adviser to the Sub-Adviser shall bear the same
ratio to the total amount paid by the Trust as the total amount
previously waived by the Sub-Adviser bears to the total amount of
the fees previously waived by the Adviser under the Advisory
Agreement with respect to the Fund.
The Sub-Adviser agrees that, during any period in which the
Adviser has agreed to pay or reimburse the Trust for expenses of
the Fund, if requested by the Adviser, the Sub-Adviser shall pay
or reimburse the Trust for the entire amount of all such expenses
of the Fund (or such lesser amount as the Adviser may request).
The Adviser agrees that, in addition to any amounts otherwise
payable to the Sub-Adviser with respect to the Fund hereunder,
the Adviser shall pay the Sub-Adviser all amounts previously paid
or reimbursed by the Sub-Adviser to the extent that such amounts
are subsequently paid by the Trust to the Adviser under the
Advisory Agreement.
13
<PAGE>
Exhibit e
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DISTRIBUTION AGREEMENT
MANAGERS AMG FUNDS
AGREEMENT made this 19th day of October, 1999 by and between
MANAGERS AMG FUNDS, a Massachusetts business trust (the "Trust"),
and THE MANAGERS FUNDS LLC (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company and it is in the interest of the
Trust to offer shares of the sole portfolio series of the Trust,
and such other series as may be created from time to time (each a
"Fund," and collectively, the "Funds") for sale as described in
the Prospectus and Statement of Additional Information of the
Trust; and
WHEREAS, the Distributor is registered as a broker-dealer
under the Securities Act of 1934, and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and the Distributor wish to enter into an
agreement with each other with respect to the offering of the
Trust's shares in order to promote the growth of the Trust and
facilitate distribution of its shares;
NOW, THEREFORE, it is hereby mutually agreed as follows:
1. The Trust hereby appoints the Distributor as an
underwriter of the shares of beneficial interest of the Trust
(the "Shares"), as an independent contractor upon the terms and
conditions hereinafter set forth. Except as the Trust may from
time to time agree, the Distributor will act as agent for the
Trust and not as principal. The Distributor shall be a
representative of the Trust to act as the principal underwriter
and distributor of Shares of the Trust.
2. The Distributor will use its best efforts to find
purchasers for the Shares, to promote the distribution of the
Shares, and may obtain orders from brokers, dealers, or other
persons for sales of Shares to them for the account of
purchasers. The Distributor may enter into agreements, in form
and substance satisfactory to the Trust, with dealers and other
persons selected by the Distributor ("Selected Dealers"),
providing for the sale to such Selected Dealers and resale by
them to purchasers of Shares at the applicable public offering
price. No dealer, broker, or other person shall have any
authority to act as agent for the Trust; such dealer, broker, or
other person shall act only as dealers for their own accounts or
as agents for their customers. Nothing herein contained shall
prevent the Distributor from serving as principal underwriter
with other investment companies.
<PAGE>
3. Sales of Shares by the Distributor shall be made at the
applicable public offering price determined in the manner set
forth in the current Prospectus and/or Statement of Additional
Information of the Trust, as amended or supplemented, at the time
of the Trust's acceptance of the order for Shares of a Fund. It
is understood and agreed that the applicable public offering
price of Shares is currently net asset value. All orders shall
be subject to acceptance by the Trust, and the Trust reserves the
right in its sole discretion to reject any order received. The
Trust shall not be liable to the Distributor or any other person
for failure to accept any order.
4. On all sales of Shares, the Trust shall receive the
current net asset value. If sales charges are described in the
then-current Prospectus and Statement of Additional Information
of the Trust, as amended or supplemented, the Distributor shall
be entitled to receive such sales charges. The Distributor may
reallow all or a part of any such sales charges to such brokers,
dealers, or other persons as Distributor may determine. In the
event that a sales charge is in effect and Shares of a Fund are
redeemed or repurchased by the Trust or the Distributor as agent
for the Trust, within seven business days after confirmation by
the Distributor of the original purchase order, the Distributor
shall pay to the Trust, for the account of that Fund, the
Distributor's portion of the sales load paid on such Shares. In
such case, the Distributor shall require the dealer or other
person that sold the Shares so redeemed or repurchased to refund
to the Distributor the full discount allowed to the dealer or
other person on the sale and, upon the receipt of such discount,
the Distributor shall pay the same to the Trust, for the account
of the appropriate Fund.
5. The Trust agrees to supply to the Distributor, either
directly or indirectly, promptly after the time or times at which
net asset value is determined, on each day on which the New York
Stock Exchange is open for business and on such other days as the
Trustees of the Trust may from time to time determine (each such
day being hereinafter called a "business day"), a statement of
the net asset value of each Fund of the Trust having been
determined in the manner set forth in the then-current Prospectus
and Statement of Additional Information of the Trust, as amended
or supplemented. Each determination of net asset value shall
take effect as of the time or times on each business day as set
forth in the then-current Prospectus of the Trust, as amended or
supplemented, and shall prevail until the time as of which the
next determination is made. The Distributor may reject any order
for Shares. The Trust, or any agent of the Trust designated in
writing by the trust shall be promptly advised of all purchase
orders for Shares received by the Distributor. Any order may be
rejected by the Trust (or its agent). The Trust (or its agent)
will confirm orders upon their receipt and will make appropriate
book entries. The Distributor agrees to cause payment to be
delivered promptly to the Trust (or its agent).
6. (a) All sales literature and advertisements used by
the Distributor in connection with sales of Shares shall be
subject to approval by the Trust. The Trust authorizes the
Distributor, in connection with the sale or arranging for the
sale of Shares, to provide only such information and to make only
such statements or representations as are contained in the
Trust's then-current Prospectus and Statement of Additional
Information, as amended or supplemented, or in such financial and
2
<PAGE>
other statements which are furnished to the Distributor pursuant
to the next paragraph or as may properly be included in sales
literature or advertisements in accordance with the provisions of
the Securities Act of 1933 (the "1933 Act"), the 1940 Act and
applicable rules of the NASD. The Trust shall not be responsible
in any way for any information provided or statements or
representations made by the Distributor or its representatives or
agents other than the information, statements and representations
described in the preceding sentence.
(b) The Trust shall keep the Distributor fully
informed with regard to its affairs, shall furnish the
Distributor with a copy of all financial statements of the Trust
and a signed copy of each report prepared for the Trust by its
independent auditors, and shall cooperate fully in the efforts of
the Distributor to sell the Shares and in the performance by the
Distributor of all its duties under this Agreement. Copies of
the then-current Prospectus and Statement of Additional
Information and all amendments or supplements thereto will be
supplied by the Trust to the Distributor in reasonable quantities
upon request. The costs of printing Prospectuses and Statements
of Additional Information for prospective investors shall be
borne by the Distributor.
7. Distributor agrees to comply with the NASD Conduct
Rules.
8. (a) Any of the outstanding shares may be tendered for
redemption at any time, and the Trust agrees to redeem shares so
tendered in accordance with its Declaration of Trust as amended
from time to time, and in accordance with the applicable
provisions of the Prospectus. The price to be paid to redeem or
repurchase shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the
Trust hereunder shall be made in the manner set forth in
Paragraph (b) below.
(b) The Trust shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to
the instructions of the Distributor on or before the seventh day
subsequent to its having received the notice of redemption in
proper form.
(c) Redemption of shares or payment may be suspended
at times when the New York Stock Exchange is closed for other
than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Trust fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
9. The Trust has delivered to the Distributor a copy of
the Trust's Master Trust Agreement as currently in effect and
agrees to deliver to the Distributor any amendments thereto
promptly upon the filing thereof with the Office of the Secretary
of State of The Commonwealth of Massachusetts.
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<PAGE>
10. The Trust represents and warrants that its Registration
Statement, post-effective amendments, Prospectus and Statement of
Additional Information (excluding statements relating to the
Distributor and the services it provides that are based upon
information furnished by the Distributor expressly for inclusion
therein) shall not contain any untrue statement of material fact
or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and
that all statements or information furnished to the Distributor,
pursuant to Section 6(b) hereof, shall be true and correct in all
material respects.
11. The Trust agrees to indemnify and hold harmless the
Distributor, its officers, and each person, if any, who controls
the Distributor within the meaning of Section 15 of the 1933 Act,
against any losses, claims, damages, liabilities and expenses
(including the cost of any legal fees incurred in connection
therewith) which the Distributor, its officers, or any such
controlling person may incur under the 1933 Act, under any other
statute, at common law or otherwise, arising out of or based upon
(a) any untrue statement or alleged untrue statement
of a material fact contained in the Trust's Registration
Statement, Prospectus or Statement of Additional Information
(including amendments and supplements thereto), or
(b) any omission or alleged omission to state a
material fact required to be stated in the Trust's Registration
Statement, Prospectus or Statement of Additional Information
necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages,
liabilities, or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information
furnished to the Trust by the Distributor for use in the Trust's
Registration Statement, Prospectus or Statement of Additional
Information (including amendments and supplements thereto), such
indemnification is not applicable. In no case shall the Trust
indemnify the Distributor, its officers or its controlling person
as to any amounts incurred for any liability arising out of or
based upon any actions for which the Distributor, its officers,
or any controlling person would otherwise be subject to liability
by reason of willful misfeasance, bad faith, or gross negligence
in the performance of its duties or by reason of the reckless
disregard of its obligations and duties under this Agreement.
12. The Distributor agrees to indemnify and hold harmless
the Trust, its officers and Trustees and each person, if any, who
controls the Trust within the meaning of Section 15 of the 1933
Act against any losses, claims, damages, liabilities, and
expenses (including the cost of any legal fees incurred in
connection therewith) which the Trust, its officers, Trustees or
any such controlling person may incur under the 1933 Act, under
any other statute, at common law or otherwise arising out of the
acquisition of any Shares by any person which may be based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Trust's Registration Statement, Prospectus
or Statement of Additional Information (including amendments and
supplements thereto), or any omission or alleged omission to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, if such statement
4
<PAGE>
or omission was made in reliance upon information furnished, or
confirmed in writing, to the Trust by the Distributor for use
therein.
13. The Distributor shall bear the expense of preparing,
printing and distributing advertising and sales literature for
purchasers, and of distributing Prospectuses and Statements of
Additional Information in connection with the sale or offering of
Shares to purchasers. The Trust shall bear the expense of
registering Shares under the 1933 Act and the Trust under the
1940 Act, qualifying shares for sale under the so-called "blue
sky" laws of any state, the preparation and printing of
Prospectuses, Statements of Additional Information and reports
required to be filed with the SEC and other authorities, the
preparation, printing and mailing of Prospectuses and Statements
of Additional Information to shareholders of the Trust, and the
direct expenses of the issue of Shares.
14. (a) This Agreement shall become effective on the date
hereof and shall remain in full force and effect until October
19, 2001, and may be continued from year to year thereafter;
provided, that such continuance shall be specifically approved no
less frequently than annually by the Trustees of the Trust or by
a majority of the outstanding voting securities of the Trust, and
in either case, also by a majority of the Trustees who are not
interested persons of the Trust or the Distributor
("Disinterested Trustees"). If such continuance is not approved,
the Agreement shall terminate upon the date specified by the
Trustees in written notice to the Distributor, which shall be no
more than 60 days after the date upon which such notice of
non-renewal is delivered personally or mailed registered mail,
postage prepaid, to the Distributor. This Agreement may be
amended with the approval of the Trustees or a majority of the
outstanding voting securities of the Trust, provided that in
either case, such amendment shall also be approved by a majority
of the Disinterested Trustees.
(b) If the Trustees determine in good faith that there
is reasonable cause to believe that the Distributor is violating
applicable federal or state law in connection with the
distribution of shares of the Trust and, after written notice to
Distributor of such violation which Distributor fails to cure to
the satisfaction of the Trustees within 10 days of receipt of
such notice, the Trustees determine that the continuation in
effect of this Agreement will result in further such violations,
to the detriment of the Trust or its shareholders, then this
Agreement may be terminated by the Trust without payment of any
penalty. Such termination may be effected by written notice
delivered personally or mailed registered mail, postage prepaid,
to the Distributor.
(c) This Agreement shall automatically terminate if it
is assigned by the Distributor.
(d) Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act
and to interpretations thereof, if any, by the United States
courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC validly issued
5
<PAGE>
pursuant to the 1940 Act. Specifically, the terms "interested
persons," "assignment" and "vote of a majority of the outstanding
voting securities," as used in this Agreement, shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In
addition, when the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is modified,
interpreted or relaxed by a rule, regulation or order of the SEC,
whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order. The Trust and the Distributor may from time
to time agree on such provisions interpreting or clarifying the
provisions of this Agreement as, in their joint opinion, are
consistent with the general tenor of this Agreement and with the
specific provisions of this Paragraph 14(d). Any such
interpretations or clarifications shall be in writing signed by
the parties and annexed hereto, but no such interpretation or
clarification shall be effective in contravention of any
applicable federal or state law regulations, and no such
interpretation or clarification shall be deemed to be an
amendment of this Agreement.
(e) This Agreement is made in the State of Connecticut
and except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed
by, and construed and enforced in accordance with, the internal
laws of the State of Connecticut.
(f) This Agreement is made by the Trust pursuant to
authority granted by the Trustees and the obligations created
hereby are not binding on any of the Trustees or shareholders of
the Trust, individually, but bind only assets belonging to the
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their respective officers thereunto
duly authorized at Norwalk, Connecticut, on the day and year
first written above.
MANAGERS AMG FUNDS
By:/s/Peter M. Lebovitz
--------------------
Name:Peter M. Lebovitz
Title:President
THE MANAGERS FUNDS LLC
By:/s/Donald S. Rumery
--------------------
Name:Donald S. Rumery
Title:Chief Financial Officer
6
<PAGE>
Exhibit g
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CUSTODIAN CONTRACT
This Contract between Managers AMG Funds, a business
trust organized and existing under the laws of The Commonwealth
of Massachusetts, hereinafter called the "Fund," and State Street
Bank and Trust Company, a Massachusetts trust company,
hereinafter called the "Custodian".
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in one
series, the Essex Aggressive Growth Fund (such series together
with all other series subsequently established by the Fund and
made subject to this Contract in accordance with Article 18,
being herein referred to as the "Portfolio(s)").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as
follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of
the assets of the Portfolios of the Fund, including securities
which the Fund, on behalf of the applicable Portfolio desires to
be held in places within the United States ("domestic
securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions
of the Declaration of Trust. The Fund on behalf of the
Portfolio(s) agrees to deliver to the Custodian all securities
and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect
to all securities owned by the Portfolio(s) from time to time,
and the cash consideration received by it for such new or
treasury shares of beneficial interest of the Fund representing
interests in the Portfolios, ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Article 5), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians,
located in the United States but only in accordance with an
applicable vote by the Board of Trustees of the Fund on behalf of
the applicable Portfolio(s), and provided that the Custodian
shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian
so employed than any such sub-custodian has to the Custodian.
The Custodian may employ as sub-custodian for the Fund's foreign
securities on behalf of the applicable Portfolio(s) the foreign
banking institutions and foreign securities depositories
designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian in the United States
<PAGE>
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash
property, to be held by it in the United States including
all domestic securities owned by such Portfolio, other than
(a) securities which are maintained pursuant to Section 2.8
in a clearing agency registered with the Securities and
Exchange Commission (the "SEC") under Section 17A of the
Securities Exchange Act of 1934 (the "Exchange Act") which
acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies (each, a "U.S. Securities System")
and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.9.
2.2 Delivery of Securities. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the
Custodian or in a U.S. Securities System account of the
Custodian ("U.S. Securities System Account") or in the
Custodian's Direct Paper book entry system account ("Direct
Paper System Account") only upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of
the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
3) In the case of a sale effected through a U.S.
Securities System, in accordance with the provisions of
Section 2.8 hereof;
4) To the depository agent in connection with tender
or other similar offers for securities of the
Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Portfolio or into the name of any
nominee or nominees of the Custodian or into the name
or nominee name of any agent appointed pursuant to
Section 2.7 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates
or other evidence representing the same aggregate face
amount or number of units; provided that, in any such
case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account
of the Portfolio, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
2
<PAGE>
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the
new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only against
receipt of adequate collateral as agreed upon from time
to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or
obligations issued by the United States government, its
agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the
Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of
the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the
Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of The National
Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements
in connection with transactions by the Portfolio of the
Fund;
13) For delivery in accordance with the provisions of
any agreement among the Fund on behalf of the
Portfolio, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding
account deposits in connection with transactions by the
Portfolio of the Fund;
3
<PAGE>
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for delivery to
such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the currently effective
prospectus and statement of additional information of
the Fund, related to the Portfolio ("Prospectus"), in
satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, but only
upon receipt of Proper Instructions from the Fund on
behalf of the applicable Portfolio specifying the
securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered
in the name of the Portfolio or in the name of any nominee
of the Fund on behalf of the Portfolio or of any nominee of
the Custodian which nominee shall be assigned exclusively to
the Portfolio, unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name
or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its
best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts
basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the United States in
the name of each Portfolio of the Fund, subject only to
draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio,
other than cash maintained by the Portfolio in a bank
account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund.
Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Collection of Income. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all
income and other payments with respect to registered
domestic securities held hereunder to which each Portfolio
4
<PAGE>
shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all
income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent and shall
credit such income, as collected, to such Portfolio's
custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due
each Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility
of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to
provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the
Portfolio is properly entitled.
2.6 Payment of Fund Monies. Upon receipt of Proper Instructions
from the Fund on behalf of the applicable Portfolio, which
may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to
such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or
abroad which is qualified under the Investment Company
Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Portfolio or in
the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b)
in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions
set forth in Section 2.8 hereof; (c) in the case of a
purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section
2.9; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and
the Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an
entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along
with written evidence of the agreement by the Custodian
to repurchase such securities from the Portfolio; or
(e) for transfer to a time deposit account of the Fund
in any bank, whether domestic or foreign; such transfer
may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or
surrender of securities owned by the Portfolio as set
forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued
by the Portfolio as set forth in Article 4 hereof;
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4) For the payment of any expense or liability
incurred by the Portfolio, including but not limited to
the following payments for the account of the
Portfolio: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents
of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short; and
7) For any other proper corporate purpose, but only
upon receipt of Proper Instructions from the Fund on
behalf of the Portfolio specifying the amount of such
payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
2.7 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove)
any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time
to time direct; provided, however, that the appointment of
any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.8 Deposit of Fund Assets in U.S. Securities Systems. The
Custodian may deposit and/or maintain securities owned by a
Portfolio in a U.S. Securities System in accordance with
applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio
in a U.S. Securities System provided that such
securities are represented in a U.S. Securities System
Account which shall not include any assets of the
Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are maintained in a
U.S. Securities System shall identify by book-entry
those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased
for the account of the Portfolio upon (i) receipt of
advice from the U.S. Securities System that such
securities have been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon
(i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred
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<PAGE>
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. Copies of
all advices from the U.S. Securities System of
transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of
the Portfolio in the form of a written advice or notice
and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting
each day's transactions in the U.S. Securities System
for the account of the Portfolio;
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the Custodian on
the U.S. Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the U.S.
Securities System; and
5) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the U.S.
Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Portfolio has not
been made whole for any such loss or damage.
2.9 Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned
by a Portfolio in the Direct Paper System of the Custodian
subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the absence of
Proper Instructions from the Fund on behalf of the
Portfolio;
2) The Custodian may keep securities of the Portfolio
in the Direct Paper System only if such securities are
represented in a Direct Paper System Account which
shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are maintained in the
Direct Paper System shall identify by book-entry those
securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased
for the account of the Portfolio upon the making of an
entry on the records of the Custodian to reflect such
payment and transfer of securities to the account of
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<PAGE>
the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of
the Portfolio;
5) The Custodian shall furnish the Fund on behalf of
the Portfolio confirmation of each transfer to or from
the account of the Portfolio, in the form of a written
advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the
Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in
the U.S. Securities System for the account of the
Portfolio; and
6) The Custodian shall provide the Fund on behalf of
the Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request
from time to time.
2.10 Segregated Account. The Custodian shall upon receipt of
Proper Instructions from the Fund on behalf of each
applicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.8 hereof,
(i) in accordance with the provisions of any agreement among
the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member
of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio, (ii) for
purposes of segregating cash or government securities in
connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes
of compliance by the Portfolio with the procedures required
by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and
(iv) for other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of Proper Instructions
from the Fund on behalf of the applicable Portfolio setting
forth the purpose or purposes of such segregated account and
declaring such purposes to be a proper corporate purpose.
2.11 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it
and in connection with transfers of securities.
2.12 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities
are registered otherwise than in the name of the Portfolio
or a nominee of the Portfolio, all proxies, without
8
<PAGE>
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund on behalf of
the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
2.13 Communications Relating to Portfolio Securities. Subject to
the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund for each Portfolio all written
information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations
of rights in connection therewith and notices of exercise of
call and put options written by the Fund on behalf of the
Portfolio and the maturity of futures contracts purchased or
sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Fund on behalf
of the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund on
behalf of the Portfolio all written information received by
the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or his agents) making
the tender or exchange offer. If the Fund on behalf of the
Portfolio desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business days
prior to the date on which the Custodian is to take such
action.
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other
assets maintained outside the United States the foreign
banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians").
Upon receipt of "Proper Instructions", as defined in Article
5 of this Contract, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon
receipt of Proper Instructions, the Fund may instruct the
Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's
assets.
3.2 Assets to be Held. The Custodian shall limit the securities
and other assets maintained in the custody of the foreign
sub-custodians to: (a) "foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company
Act of 1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Fund may determine to be
reasonably necessary to effect the Portfolio's foreign
securities transactions. The Custodian shall identify on
its books as belonging to the Fund, the foreign securities
of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund, assets
of the Portfolios shall be maintained in a clearing agency
which acts as a securities depository or in a book-entry
system for the central handling of securities located
outside the United States (each a "Foreign Securities
System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians
pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein
as the "Securities Systems"). Where possible, such
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<PAGE>
arrangements shall include entry into agreements containing
the provisions set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and
other non-cash property for all of its customers, including
the Fund, with a foreign sub-custodian in a single account
that is identified as belonging to the Custodian for the
benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and
other non-cash property of the Fund which are maintained in
such account shall identify by book-entry those securities
and other non-cash property belonging to the Fund and (ii)
the Custodian shall require that securities and other non-
cash property so held by the foreign sub-custodian be held
separately from any assets of the foreign sub-custodian or
of others.
3.5 Agreements with Foreign Banking Institutions. Each
agreement with a foreign banking institution shall provide
that: (a) the assets of each Portfolio will not be subject
to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without
the payment of money or value other than for custody or
administration; (c) adequate records will be maintained
identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent
permitted under applicable law the independent public
accountants for the Fund, will be given access to the books
and records of the foreign banking institution relating to
its actions under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-custodian
will be subject only to the instructions of the Custodian or
its agents.
3.6 Access of Independent Accountants of the Fund. Upon request
of the Fund, the Custodian will use its best efforts to
arrange for the independent accountants of the Fund to be
afforded access to the books and records of any foreign
banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance
of such foreign banking institution under its agreement with
the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund
from time to time, as mutually agreed upon, statements in
respect of the securities and other assets of the
Portfolio(s) held by foreign sub-custodians, including but
not limited to an identification of entities having
possession of the Portfolio(s) securities and other assets
and advices or notifications of any transfers of securities
to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired
for a Portfolio, the identity of the entity having physical
possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as
otherwise provided in paragraph (b) of this Section 3.8, the
provision of Sections 2.2 and 2.6 of this Contract shall
apply, mutatis mutandis to the foreign securities of the
Fund held outside the United States by foreign
sub-custodians.
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(b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for
the account of each applicable Portfolio and delivery of
securities maintained for the account of each applicable
Portfolio may be effected in accordance with the customary
established securities trading or securities processing
practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of
this Contract, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a foreign banking
institution as a foreign sub-custodian shall require the
institution to exercise reasonable care in the performance
of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage,
cost, expense, liability or claim arising out of or in
connection with the institution's performance of such
obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian
with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for
the acts or omissions of a foreign banking institution to
the same extent as set forth with respect to sub-custodians
generally in this Contract and, regardless of whether assets
are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of
a U.S. bank as contemplated by Section 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the
Custodian to advance cash or securities for any purpose for
the benefit of a Portfolio including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or
be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of
this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the
account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
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<PAGE>
3.12 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June, information
concerning the foreign sub-custodians employed by the
Custodian. Such information shall be similar in kind and
scope to that furnished to the Fund in connection with the
initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that
the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian.
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth
in this Contract, the provisions hereof shall not apply
where the custody of the Portfolios assets are maintained in
a foreign branch of a banking institution which is a "bank"
as defined by Section 2(a)(5) of the Investment Company Act
of 1940 meeting the qualification set forth in Section 26(a)
of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this
Contract.
(b) Cash held for each Portfolio of the Fund in the United
Kingdom shall be maintained in an interest bearing account
established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the
Custodian, State Street London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on
the Fund or the Custodian as custodian of the Fund by the
tax law of the United States of America or any state or
political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of jurisdictions other
than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and
governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of
jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares
of the Fund
The Custodian shall receive from the distributor for the
Shares or from the Transfer Agent of the Fund and deposit into
the account of the appropriate Portfolio such payments as are
received for Shares of that Portfolio issued or sold from time to
time by the Fund. The Custodian will provide timely notification
to the Fund on behalf of each such Portfolio and the Transfer
Agent of any receipt by it of payments for Shares of such
Portfolio.
From such funds as may be available for the purpose but
subject to the limitations of the Declaration of Trust and any
applicable votes of the Board of Trustees of the Fund pursuant
thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds available for payment to holders
of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of a Portfolio, the Custodian
is authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank designated by
the redeeming shareholders. In connection with the redemption or
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<PAGE>
repurchase of Shares of the Fund, the Custodian shall honor
checks drawn on the Custodian by a holder of Shares, which checks
have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a
writing signed or initialed by one or more person or persons as
the Board of Trustees shall have from time to time authorized.
Each such writing shall set forth the specific transaction or
type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices; provided that the Fund has followed any
security procedures agreed to from time to time by Fund and the
Custodian, including, but not limited to, the security procedures
selected by the Fund in the Funds Transfer Addendum attached
hereto. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any
three-party agreement which requires a segregated asset account
in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor
expenses of handling securities or other similar items
relating to its duties under this Contract, provided
that all such payments shall be accounted for to the
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund on
behalf of the Portfolio, checks, drafts and other
negotiable instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other dealings
with the securities and property of the Fund on behalf
of the Portfolio except as otherwise directed by the
Board of Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority
of any person to act in accordance with such vote or (b) of any
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<PAGE>
determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such
vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees of the Fund to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the
outstanding Shares of each Portfolio or, if directed in writing
to do so by the Fund on behalf of the Portfolio, shall itself
keep such books of account and/or compute such net asset value
per Share. If so directed, the Custodian shall also calculate
daily the net income of the Portfolio as described in the Fund's
currently effective prospectus related to such Portfolio and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per Share
and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Fund's currently
effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create
and maintain all records relating to its activities and
obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940,
with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours
of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation
of securities owned by each Portfolio and held by the Custodian
and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund
on behalf of each applicable Portfolio may from time to time
request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other
requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of
the Portfolios at such times as the Fund may reasonably require,
with reports by independent public accountants on the accounting
system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
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<PAGE>
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so
state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation
for its services and expenses as Custodian, as agreed upon from
time to time between the Fund on behalf of each applicable
Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting
pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or
willful misconduct or the negligence or willful misconduct of a
sub-custodian or agent, the Custodian shall be without liability
to the Fund for any loss, liability, claim or expense resulting
from or caused by; (i) events or circumstances beyond the
reasonable control of the Custodian or any sub-custodian or
Securities System or any agent or nominee of any of the
foregoing, including, without limitation, nationalization or
expropriation, imposition of currency controls or restrictions,
the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or
technological failures or interruptions, computer viruses or
communications disruptions, acts of war or terrorism, riots,
revolutions, work stoppages, natural disasters or other similar
events or acts; (ii) errors by the Fund or the Investment Advisor
in their instructions to the Custodian provided such instructions
have been in accordance with this Contract; (iii) the insolvency
of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or
other commercially prevalent payment or clearing system to
deliver to the Custodian's sub-custodian or agent securities
purchased or in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company,
corporation, or other body in charge of registering or
transferring securities in the name of the Custodian, the Fund,
the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to
transfer such securities including non-receipt of bonus,
dividends and rights and other accretions or benefits; (vi)
delays or inability to perform its duties due to any disorder in
market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or
15
<PAGE>
future law or regulation or order of the United States of
America, or any state thereof, or any other country, or political
subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution to the same extent as set forth with
respect to sub-custodians generally in this Contract.
If the Fund on behalf of a Portfolio requires the Custodian
to take any action with respect to securities, which action
involves the payment of money or which action may, in the opinion
of the Custodian, result in the Custodian or its nominee assigned
to the Fund or the Portfolio being liable for the payment of
money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates,
subsidiaries or agents, to advance cash or securities for any
purpose (including but not limited to securities settlements,
foreign exchange contracts and assumed settlement) or in the
event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such Portfolio's assets
to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect,
special or consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or
mailing; provided, however that the Fund shall not amend or
terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Declaration
of Trust, and further provided, that the Fund on behalf of one or
more of the Portfolios may at any time by action of its Board of
Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation
as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and
disbursements.
16
<PAGE>
15. Notices
Except as otherwise provided under this Contract, notices
and other writings shall be delivered or mailed postage prepaid
to:
If to the Company: Managers AMG Funds
40 Richards Avenue
Norwalk, Connecticut 06854
Attention: Donald S. Rumery
If to the Custodian:State Street Bank and Trust Company
One Heritage Drive/JPB 2S
North Quincy, Massachusetts 02171
Attention: Stephanie A. Ryer
or to such other address as the parties may hereafter specify in
writing and any notice or other writing when mailed shall be
deemed to have been received on the fifth business day after it
was mailed.
Telephone and facsimile notices shall be sufficient if
communicated to the party entitled to receive such notice at the
following numbers:
If to the Company:
Telephone: (203) 831-4122 Facsimile: (203) 857-5316
If to the Custodian:
Telephone: (617) 985-4591 Facsimile: (617) 537-5003
or to such other numbers as the parties may specify by written
notice under this Section and any facsimile notice shall be
deemed to have been received on the date of its transmission
provided that if such day is not a business day or it is received
after normal business hours on the day of its transmission, it
shall be deemed to have been received at the opening of business
on the first business day next following the transmission
thereof.
16. Successor Custodian
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the
Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities and other assets of
each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the
securities and other assets of each such Portfolio held in a
Securities System.
17
<PAGE>
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Trustees of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees
shall have been delivered to the Custodian on or before the date
when such termination shall become effective, then the Custodian
shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000,
all securities, funds and other properties held by the Custodian
on behalf of each applicable Portfolio and all instruments held
by the Custodian relative thereto and all other property held by
it under this Contract on behalf of each applicable Portfolio and
to transfer to an account of such successor custodian all of the
securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of
the Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period
as the Custodian retains possession of such securities, funds and
other properties and the provisions of this Contract relating to
the duties and obligations of the Custodian shall remain in full
force and effect.
17. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund on behalf of each of the Portfolios, may
from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
18. Additional Funds
In the event that the Fund establishes one or more series of
Shares in addition to the Essex Aggressive Growth Fund with
respect to which it desires to have the Custodian render services
as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a
Portfolio hereunder.
19. Massachusetts Law to Apply
18
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This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.
20. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund on behalf of each of
the Portfolios and the Custodian relating to the custody of the
Fund's assets.
21. Counterparts
This Contract may be executed in several counterparts, each
of which shall be deemed to be an original, and all such
counterparts taken together shall constitute but one and the same
Contract.
22. Reproduction of Documents
This Contract and all schedules, exhibits, attachments and
amendments hereto may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties hereto all/each agree that
any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in
evidence.
23. Data Access Addendum
Each of the Fund and the Custodian agree to abide by the
provisions of the Data Access Addendum attached hereto.
24. Shareholder Communications Election
SEC Rule 14b-2 requires banks which hold securities for the
account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial
owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this
information. In order to comply with the rule, the Custodian
needs the Fund to indicate whether it authorizes the Custodian to
provide the Fund's name, address, and share position to
requesting companies whose securities the Fund owns. If the Fund
tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the
Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting
to disclosure of this information for all securities owned by the
Fund or any funds or accounts established by the Fund. For the
Fund's protection, the Rule prohibits the requesting company from
using the Fund's name and address for any purpose other than
corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
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<PAGE>
YES [ ] The Custodian is authorized to release
the Fund's name, address, and share positions.
NO [ ] The Custodian is not authorized to
release the Fund's name, address, and share
positions.
[The remainder of this page is intentionally left blank.]
20
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the _______ day of _________________, 1999.
ATTEST MANAGERS AMG FUNDS
By:________________________
Name:
Its:
ATTEST STATE STREET BANK AND TRUST COMPANY
By:_________________________
Name: Ronald E. Logue
Its: Vice Chairman
21
<PAGE>
Exhibit h
- -----------
TRANSFER AGENCY AND SERVICE AGREEMENT
between
MANAGERS AMG FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
-----
1. Terms of Appointment and Duties 1
2. Third Party Administrators for Defined Contribution
Plans 4
3. Fees and Expenses 5
4. Representations and Warranties of the Transfer Agent 6
5. Representations and Warranties of the Fund 6
6. Wire Transfer Operating Guidelines 7
7. Data Access and Proprietary Information 8
8. Indemnification 10
9. Standard of Care 11
10. Year 2000 12
11. Confidentiality 12
12. Covenants of the Fund and the Transfer Agent 13
13. Termination of Agreement 13
14. Assignment and Third Party Beneficiaries 14
15. Subcontractors 14
16. Miscellaneous 15
17. Additional Funds 16
18. Limitations of Liability of the Trustees and
Shareholders 16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1999 , by and
between MANAGERS AMG FUNDS, a Massachusetts business
trust, having its principal office and place of business at
40 Richards Ave, Norwalk, CT (the "Fund"), and STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a
separate portfolio of securities and other assets;
WHEREAS, the Fund intends to initially offer shares in
series, such series shall be named in the attached Schedule A
which may be amended by the parties from time to time (each such
series, together with all other series subsequently established
by the Fund and made subject to this Agreement in accordance with
Section 17, being herein referred to as a "Portfolio", and
collectively as the "Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint
the Transfer Agent as its transfer agent, dividend disbursing
agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Transfer Agent
desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
l. Terms of Appointment and Duties
1.1 Transfer Agency Services. Subject to the terms and
conditions set forth in this Agreement, the Fund, on behalf
of the Portfolios, hereby employs and appoints the Transfer
Agent to act as, and the Transfer Agent agrees to act as its
transfer agent for the Fund's authorized and issued shares
of its beneficial interest, $ par value, ("Shares"),
dividend disbursing agent, custodian of certain retirement
plans and agent in connection with any accumulation,
open-account or similar plan provided to the shareholders of
each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective
prospectus and statement of additional information
("prospectus") of the Fund on behalf of the applicable
Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program. In
accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the
Portfolios, as applicable and the Transfer Agent, the
Transfer Agent agrees that it will perform the following
services:
(a) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Declaration of Trust of the Fund
(the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(c) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(d) In respect to the transactions in items (a), (b) and
(c) above, the Transfer Agent shall execute transactions
directly with broker-dealers authorized by the Fund;
(e) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption,
pay over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(h) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Transfer Agent of indemnification satisfactory to the
Transfer Agent and protecting the Transfer Agent and the
Fund, and the Transfer Agent at its option, may issue
replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(i) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Transfer Agent shall also provide the Fund on a regular
basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation,
when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
1.2 Additional Services. In addition to, and neither in lieu
nor in contravention of, the services set forth in the above
paragraph, the Transfer Agent shall perform the following
services:
(a) Other Customary Services. Perform the customary
services of a transfer agent, dividend disbursing agent,
custodian of certain retirement plans and, as relevant,
agent in connection with accumulation, open-account or
similar plan (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
preparing Shareholder meeting lists, mailing Shareholder
proxies, Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and
other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders,
and providing Shareholder account information.
(b) Control Book (also known as "Super Sheet"). Maintain a
daily record and produce a daily report for the Fund of all
transactions and receipts and disbursements of money and
securities and deliver a copy of such report for the Fund
for each business day to the Fund no later than 9:00 AM
Eastern Time, or such earlier time as the Fund may
reasonably require, on the next business day.
(c) "Blue Sky" Reporting. The Fund shall (i) identify to
the Transfer Agent in writing those transactions and assets
to be treated as exempt from blue sky reporting for each
State; and (ii) verify the establishment of transactions
for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Transfer Agent for the Fund's blue sky
State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance
by the Fund and providing a system which will enable the
Fund to monitor the total number of Shares sold in each
State.
(d) National Securities Clearing Corporation (the "NSCC").
(i) accept and effectuate the registration and maintenance
of accounts through Networking and the purchase, redemption,
transfer and exchange of shares in such accounts through
Fund/SERV (networking and Fund/SERV being programs operated
by the NSCC on behalf of NSCC's participants, including the
Fund), in accordance with, instructions transmitted to and
received by the Transfer Agent by transmission from NSCC on
behalf of broker-dealers and banks which have been
established by, or in accordance with the instructions of
authorized persons, as hereinafter defined on the dealer
file maintained by the Transfer Agent; (ii) issue
instructions to Fund's banks for the settlement of
transactions between the Fund and NSCC (acting on behalf of
its broker-dealer and bank participants); (iii) provide
account and transaction information from the affected Fund's
records on DST Systems, Inc. computer system TA2000 ("TA2000
System") in accordance with NSCC's Networking and Fund/SERV
rules for those broker-dealers; and (iv) maintain
Shareholder accounts on TA2000 System through Networking.
(e) New Procedures. New procedures as to who shall provide
certain of these services in Section 1 may be established in
writing from time to time by agreement between the Fund and
the Transfer Agent. The Transfer Agent may at times perform
only a portion of these services and the Fund or its agent
may perform these services on the Fund's behalf.
(f) Additional Telephone Support Services. If the parties
elect to have the Transfer Agent provide additional
telephone support services under this Agreement, the parties
will agree to such services, fees and sub-contracting as
stated in Schedule 1.2(f) entitled "Telephone Support
Services" attached hereto.
2. Third Party Administrators for Defined Contribution Plans
2.1 The Fund may decide to make available to certain of its
customers, a qualified plan program (the "Program") pursuant to
which the customers ("Employers") may adopt certain plans of
deferred compensation ("Plan or Plans") for the benefit of the
individual Plan participant (the "Plan Participant"), such
Plan(s) being qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended ("Code") and administered by
third party administrators which may be plan administrators as
defined in the Employee Retirement Income Security Act of 1974,
as amended)(the "TPA(s)").
2.2 In accordance with the procedures established in the initial
Schedule 2.1 entitled "Third Party Administrator Procedures", as
may be amended by the Transfer Agent and the Fund from time to
time ("Schedule 2.1"), the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in
the name of the Trustees, Plans or TPAs as the case may be as
omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of
the TPA or its designee as the Trustee for the benefit of the
Plan; and
(c) Perform all services under Section 1 as transfer agent
of the Funds and not as a record-keeper for the Plans.
2.3 Transactions identified under Section 2 of this Agreement
shall be deemed exception services ("Exception Services") when
such transactions:
(a) Require the Transfer Agent to use methods and
procedures other than those usually employed by the Transfer
Agent to perform services under Section 1 of this Agreement;
(b) Involve the provision of information to the Transfer
Agent after the commencement of the nightly processing cycle of
the TA2000 System; or
(c) Require more manual intervention by the Transfer Agent,
either in the entry of data or in the modification or
amendment of reports generated by the TA2000 System than is
usually required by non-retirement plan and pre-nightly
transactions.
3. Fees and Expenses
3.1 Fee Schedule. For the performance by the Transfer Agent
pursuant to this Agreement, the Fund agrees to pay the
Transfer Agent an annual maintenance fee for each
Shareholder account as set forth in the attached fee
schedule ("Schedule 3.1"). Such fees and out-of-pocket
expenses and advances identified under Section 3.2 below may
be changed from time to time subject to mutual written
agreement between the Fund and the Transfer Agent.
3.2 Out-of-Pocket Expenses. In addition to the fee paid under
Section 3.1 above, the Fund agrees to reimburse the Transfer
Agent for out-of-pocket expenses, including but not limited to
confirmation production, postage, forms, telephone, microfilm,
microfiche, mailing and tabulating proxies, records storage, or
advances incurred by the Transfer Agent for the items set out in
Schedule 3.1 attached hereto. In addition, any other expenses
incurred by the Transfer Agent at the request or with the consent
of the Fund, will be reimbursed by the Fund.
3.3 Postage. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be
advanced to the Transfer Agent by the Fund at least seven (7)
days prior to the mailing date of such materials.
3.4 Invoices. The Fund agrees to pay all fees and reimbursable
expenses within thirty (30) days following the receipt of
the respective billing notice, except for any fees or
expenses which are subject to good faith dispute. In the
event of such a dispute, the Fund may only withhold that
portion of the fee or expense subject to the good faith
dispute. The Fund shall notify the Transfer Agent in
writing within twenty-one (21) calendar days following the
receipt of each billing notice if the Fund is disputing any
amounts in good faith. If the Fund does not provide such
notice of dispute within the required time, the billing
notice will be deemed accepted by the Fund.
4. Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in
good standing under the laws of The Commonwealth of
Massachusetts.
4.2 It is duly qualified to carry on its business in The
Commonwealth of Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
5. Representations and Warranties of the Fund
The Fund represents and warrants to the Transfer Agent that:
5.1 It is a business trust duly organized and existing and in
good standing under the laws of .
5.2 It is empowered under applicable laws and by its Declaration
of Trust and By-Laws to enter into and perform this
Agreement.
5.3 All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
5.4 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940,
as amended.
5.5 A registration statement under the Securities Act of 1933,
as amended is currently effective and will remain effective,
and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of
the Fund being offered for sale.
6. Wire Transfer Operating Guidelines/Articles 4A of the
Uniform Commercial Code
6.1 The Transfer Agent is authorized to promptly debit the
appropriate Fund account(s) upon the receipt of a payment
order in compliance with the selected security procedure
(the "Security Procedure") chosen for funds transfer and in
the amount of money that the Transfer Agent has been
instructed to transfer. The Transfer Agent shall execute
payment orders in compliance with the Security Procedure and
with the Fund instructions on the execution date provided
that such payment order is received by the customary
deadline for processing such a request, unless the payment
order specifies a later time. All payment orders and
communications received after this the customary deadline
will be deemed to have been received the next business day.
6.2 The Fund acknowledges that the Security Procedure it has
designated on the Fund Selection Form was selected by the
Fund from security procedures offered by the Transfer Agent.
The Fund shall restrict access to confidential information
relating to the Security Procedure to authorized persons as
communicated to the Transfer Agent in writing. The Fund
must notify the Transfer Agent immediately if it has reason
to believe unauthorized persons may have obtained access
to such information or of any change in the Fund's
authorized personnel. The Transfer Agent shall verify the
authenticity of all Fund instructions according to the
Security Procedure.
6.3 The Transfer Agent shall process all payment orders on the
basis of the account number contained in the payment order.
In the event of a discrepancy between any name indicated on
the payment order and the account number, the account number
shall take precedence and govern.
6.4 The Transfer Agent reserves the right to decline to process
or delay the processing of a payment order which (a) is in
excess of the collected balance in the account to be charged
at the time of the Transfer Agent's receipt of such payment
order; (b) if initiating such payment order would cause the
Transfer Agent, in the Transfer Agent's sole judgement, to
exceed any volume, aggregate dollar, network, time, credit
or similar limits which are applicable to the Transfer
Agent; or (c) if the Transfer Agent, in good faith, is
unable to satisfy itself that the transaction has been
properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on
all authorized requests to cancel or amend payment orders
received in compliance with the Security Procedure provided
that such requests are received in a timely manner affording
the Transfer Agent reasonable opportunity to act. However,
the Transfer Agent assumes no liability if the request for
amendment or cancellation cannot be satisfied.
6.6 The Transfer Agent shall assume no responsibility for
failure to detect any erroneous payment order provided that
the Transfer Agent complies with the payment order
instructions as received and the Transfer Agent complies
with the Security Procedure. The Security Procedure is
established for the purpose of authenticating payment orders
only and not for the detection of errors in payment orders.
6.7 The Transfer Agent shall assume no responsibility for lost
interest with respect to the refundable amount of any
unauthorized payment order, unless the Transfer Agent is
notified of the unauthorized payment order within thirty
(30) days of notification by the Transfer Agent of the
acceptance of such payment order. In no event (including
failure to execute a payment order) shall the Transfer Agent
be liable for special, indirect or consequential damages,
even if advised of the possibility of such damages.
6.8 When the Fund initiates or receives Automated Clearing House
credit and debit entries pursuant to these guidelines and
the rules of the National Automated Clearing House
Association and the New England Clearing House Association,
the Transfer Agent will act as an Originating Depository
Financial Institution and/or receiving depository Financial
Institution, as the case may be, with respect to such
entries. Credits given by the Transfer Agent with respect
to an ACH credit entry are provisional until the Transfer
Agent receives final settlement for such entry from the
Federal Reserve Bank. If the Transfer Agent does not
receive such final settlement, the Fund agrees that the
Transfer Agent shall receive a refund of the amount credited
to the Fund in connection with such entry, and the party
making payment to the Fund via such entry shall not be
deemed to have paid the amount of the entry.
6.9 Confirmation of Transfer Agent's execution of payment orders
shall ordinarily be provided within twenty four (24) hours
notice of which may be delivered through the Transfer
Agent's proprietary information systems, or by facsimile or
call-back. Fund must report any objections to the execution
of an order within thirty (30) days.
7. Data Access and Proprietary Information
7.1 The Fund acknowledges that the databases, computer programs,
screen formats, report formats, interactive design
techniques, and documentation manuals furnished to the Fund
by the Transfer Agent as part of the Fund's ability to
access certain Fund-related data ("Customer Data")
maintained by the Transfer Agent on databases under the
control and ownership of the Transfer Agent or other third
party ("Data Access Services") constitute copyrighted, trade
secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the
Transfer Agent or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary
to the Transfer Agent and further agrees that it shall not
divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without
limiting the foregoing, the Fund agrees for itself and its
employees and agents to:
(a) Use such programs and databases (i) solely on the
Fund's computers, or (ii) solely from equipment at the
location agreed to between the Fund and the Transfer Agent
and (iii) solely in accordance with the Transfer Agent's
applicable user documentation;
(b) Refrain from copying or duplicating in any way (other
than in the normal course of performing processing on the
Fund's computer(s)), the Proprietary Information;
(c) Refrain from obtaining unauthorized access to any
portion of the Proprietary Information, and if such access
is inadvertently obtained, to inform in a timely manner of
such fact and dispose of such information in accordance with
the Transfer Agent's instructions;
(d) Refrain from causing or allowing information
transmitted from the Transfer Agent's computer to the Fund's
terminal to be retransmitted to any other computer terminal
or other device except as expressly permitted by the
Transfer Agent (such permission not to be unreasonably
withheld);
(e) Allow the Fund to have access only to those authorized
transactions as agreed to between the Fund and the Transfer
Agent; and
(f) Honor all reasonable written requests made by the
Transfer Agent to protect at the Transfer Agent's expense the
rights of the Transfer Agent in Proprietary Information at common
law, under federal copyright law and under other federal or state
law.
7.2 Proprietary Information shall not include all or any portion
of any of the foregoing items that: (i) are or become publicly
available without breach of this Agreement; (ii) are released for
general disclosure by a written release by the Transfer Agent; or
(iii) are already in the possession of the receiving party at the
time or receipt without obligation of confidentiality or breach
of this Agreement.
7.3 The Fund acknowledges that its obligation to protect the
Transfer Agent's Proprietary Information is essential to the
business interest of the Transfer Agent and that the
disclosure of such Proprietary Information in breach of this
Agreement would cause the Transfer Agent immediate,
substantial and irreparable harm, the value of which would
be extremely difficult to determine. Accordingly, the
parties agree that, in addition to any other remedies that
may be available in law, equity, or otherwise for the
disclosure or use of the Proprietary Information in breach
of this Agreement, the Transfer Agent shall be entitled to
seek and obtain a temporary restraining order, injunctive
relief, or other equitable relief against the continuance of
such breach.
7.4 If the Fund notifies the Transfer Agent that any of the Data
Access Services do not operate in material compliance with
the most recently issued user documentation for such
services, the Transfer Agent shall endeavor in a timely
manner to correct such failure. Organizations from which
the Transfer Agent may obtain certain data included in the
Data Access Services are solely responsible for the contents
of such data and the Fund agrees to make no claim against
the Transfer Agent arising out of the contents of such third-
party data, including, but not limited to, the accuracy
thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE
PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER
AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
7.5 If the transactions available to the Fund include the
ability to originate electronic instructions to the Transfer
Agent in order to: (i) effect the transfer or movement of
cash or Shares; or (ii) transmit Shareholder information or
other information, then in such event the Transfer Agent
shall be entitled to rely on the validity and authenticity
of such instruction without undertaking any further inquiry
as long as such instruction is undertaken in conformity with
security procedures established by the Transfer Agent from
time to time.
7.6 Each party shall take reasonable efforts to advise its
employees of their obligations pursuant to this Section 7.
The obligations of this Section shall survive any earlier
termination of this Agreement.
8. Indemnification
8.1 The Transfer Agent shall not be responsible for, and the
Fund shall indemnify and hold the Transfer Agent harmless
from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct;
(b) The Fund's lack of good faith, negligence or willful
misconduct;
(c) The reliance upon, and any subsequent use of or action
taken or omitted, by the Transfer Agent, or its agents or
subcontractors on: (i) any information, records, documents,
data, stock certificates or services, which are received by
the Transfer Agent or its agents or subcontractors by
machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by
the Fund, and which have been prepared, maintained or
performed by the Fund or any other person or firm on behalf
of the Fund including but not limited to any previous
transfer agent or registrar; (ii) any instructions or
requests of the Fund or any of its officers; (iii) any
instructions or opinions of legal counsel with respect to
any matter arising in connection with the services to be
performed by the Transfer Agent under this Agreement which
are provided to the Transfer Agent after consultation with
such legal counsel; or (iv) any paper or document,
reasonably believed to be genuine, authentic, or signed by
the proper person or persons;
(d) The offer or sale of Shares in violation of federal or
state securities laws or regulations requiring that such Shares
be registered or in violation of any stop order or other
determination or ruling by any federal or any state agency with
respect to the offer or sale of such Shares;
(e) The negotiation and processing of any checks including
without limitation for deposit into the Fund's demand deposit
account maintained by the Transfer Agent; or
(f) Upon the Fund's request entering into any agreements
required by the National Securities Clearing Corporation (the
"NSCC") for the transmission of Fund or Shareholder data through
the NSCC clearing systems.
8.2 In order that the indemnification provisions contained in
this Section 8 shall apply, upon the assertion of a claim
for which the Fund may be required to indemnify the Transfer
Agent, the Transfer Agent shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect
to all developments concerning such claim. The Fund shall
have the option to participate with the Transfer Agent in
the defense of such claim or to defend against said claim in
its own name or in the name of the Transfer Agent. The
Transfer Agent shall in no case confess any claim or make
any compromise in any case in which the Fund may be required
to indemnify the Transfer Agent except with the Fund's prior
written consent.
9. Standard of Care
9.1 The Transfer Agent shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to insure
the accuracy of all services performed under this Agreement, but
assumes no responsibility and shall not be liable for loss or
damage due to errors unless said errors are caused by its
negligence, bad faith, or willful misconduct or that of its
employees, except as provided in Section 9.2 below.
9.2 In the case of Exception Services as defined in Section 2.3
herein, the Transfer Agent shall be held to a standard of gross
negligence and encoding and payment processing errors shall not
be deemed negligence.
10. Year 2000
The Transfer Agent will take reasonable steps to ensure that
its products (and those of its third-party suppliers)
reflect the available technology to offer products that are
Year 2000 ready, including, but not limited to, century
recognition of dates, calculations that correctly compute
same century and multi century formulas and date values, and
interface values that reflect the date issues arising
between now and the next one-hundred years, and if any
changes are required, the Transfer Agent will make the
changes to its products at a price to be agreed upon by the
parties and in a commercially reasonable time frame and will
require third-party suppliers to do likewise.
11. Confidentiality
11.1 The Transfer Agent and the Fund agree that they will not, at
any time during the term of this Agreement or after its
termination, reveal, divulge, or make known to any person,
firm, corporation or other business organization, any
customers' lists, trade secrets, cost figures and
projections, profit figures and projections, or any other
secret or confidential information whatsoever, whether of
the Transfer Agent or of the Fund, used or gained by the
Transfer Agent or the Fund during performance under this
Agreement. The Fund and the Transfer Agent further covenant
and agree to retain all such knowledge and information
acquired during and after the term of this Agreement
respecting such lists, trade secrets, or any secret or
confidential information whatsoever in trust for the sole
benefit of the Transfer Agent or the Fund and their
successors and assigns. In the event of breach of the
foregoing by either party, the remedies provided by Section
7.3 shall be available to the party whose confidential
information is disclosed. The above prohibition of
disclosure shall not apply to the extent that the Transfer
Agent must disclose such data to its sub-contractor or Fund
agent for purposes of providing services under this
Agreement.
11.2 In the event that any requests or demands are made for the
inspection of the Shareholder records of the Fund, other
than request for records of Shareholders pursuant to
standard subpoenas from state or federal government
authorities (i.e., divorce and criminal actions), the
Transfer Agent will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund
as to such inspection. The Transfer Agent expressly
reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by counsel that
it may be held liable for the failure to exhibit the
Shareholder records to such person or if required by law or
court order.
12. Covenants of the Fund and the Transfer Agent
12.1 The Fund shall promptly furnish to the Transfer Agent the
following:
(a) A certified copy of the resolution of the Board of
Trustees of the Fund authorizing the appointment of the
Transfer Agent and the execution and delivery of this
Agreement; and
(b) A copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund
for safekeeping of stock certificates, check forms and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
12.3 The Transfer Agent shall keep records relating to the
services to be performed hereunder, in the form and manner
as it may deem advisable. To the extent required by Section
31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Transfer Agent agrees that all
such records prepared or maintained by the Transfer Agent
relating to the services to be performed by the Transfer
Agent hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with
such Section and Rules, and will be surrendered promptly to
the Fund on and in accordance with its request.
13. Termination of Agreement
13.1 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
13.2 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, the
Transfer Agent reserves the right to charge for any other
reasonable expenses associated with such termination and a
charge equivalent to the average of three (3) months' fees.
Payment of such expenses or costs shall be in accordance
with Section 3.4 of this Agreement.
13.3 Upon termination of this Agreement, each party shall return
to the other party all copies of confidential or proprietary
materials or information received from such other party
hereunder, other than materials or information required to
be retained by such party under applicable laws or
regulations.
14. Assignment and Third Party Beneficiaries.
14.1 Except as provided in Section 15.1 below and the
Additional Telephone Support Services Schedule 1.2(f)
attached, neither this Agreement nor any rights or
obligations hereunder may be assigned by either party
without the written consent of the other party. Any attempt
to do so in violation of this Section shall be void. Unless
specifically stated to the contrary in any written consent to an
assignment, no assignment will release or discharge the
assignor from any duty or responsibility under this
Agreement.
14.2 Except as explicitly stated elsewhere in this
Agreement, nothing under this Agreement shall be construed
to give any rights or benefits in this Agreement to anyone
other than the Transfer Agent and the Fund, and the duties
and responsibilities undertaken pursuant to this Agreement
shall be for the sole and exclusive benefit of the Transfer
Agent and the Fund. This Agreement shall inure to the
benefit of and be binding upon the parties and their
respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a
partnership or joint venture between the Transfer Agent and
the Fund. Other than as provided in Section 15.1 and
Schedule 1.2(f), neither party shall make any commitments
with third parties that are binding on the other party
without the other party's prior written consent.
15. Subcontractors
15.1 The Transfer Agent may, without further consent on the
part of the Fund, subcontract for the performance hereof with (i)
Boston Financial Data Services, Inc., a Massachusetts corporation
("BFDS") which is duly registered as a transfer agent pursuant to
Section 17A(c)(2) of the Securities Exchange Act of 1934, as
amended, (ii) a BFDS subsidiary duly registered as a transfer
agent or (iii) a BFDS affiliate duly registered as a transfer
agent; provided, however, that the Transfer Agent shall be fully
responsible to the Fund for the acts and omissions of BFDS or its
subsidiary or affiliate as it is for its own acts and omissions.
15.2 Nothing herein shall impose any duty upon the Transfer
Agent in connection with or make the Transfer Agent liable for
the actions or omissions to act of unaffiliated third parties
such as by way of example and not limitation, Airborne Services,
Federal Express, United Parcel Service, the U.S. Mails, the NSCC
and telecommunication companies, provided, if the Transfer Agent
selected such company, the Transfer Agent shall have exercised
due care in selecting the same.
16. Miscellaneous
16.1 Amendment. This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or
approved by a resolution of the Board of Trustees of the
Fund.
16.2 Massachusetts Law to Apply. This Agreement shall be
construed and the provisions thereof interpreted under and
in accordance with the laws of The Commonwealth of
Massachusetts.
16.3 Force Majeure. In the event either party is unable to
perform its obligations under the terms of this Agreement
because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not
be liable for damages to the other for any damages resulting
from such failure to perform or otherwise from such causes.
16.4 Consequential Damages. Neither party to this Agreement
shall be liable to the other party for consequential damages
under any provision of this Agreement or for any
consequential damages arising out of any act or failure to
act hereunder.
16.5 Survival. All provisions regarding indemnification,
warranty, liability, and limits thereon, and confidentiality
and/or protections of proprietary rights and trade secrets
shall survive the termination of this Agreement.
16.6 Severability. If any provision or provisions of this
Agreement shall be held invalid, unlawful, or unenforceable,
the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired.
16.7 Priorities Clause. In the event of any conflict,
discrepancy or ambiguity between the terms and conditions
contained in this Agreement and any Schedules or attachments
hereto, the terms and conditions contained in this Agreement
shall take precedence.
16.8 Waiver. No waiver by either party or any breach or default
of any of the covenants or conditions herein contained and
performed by the other party shall be construed as a waiver
of any succeeding breach of the same or of any other
covenant or condition.
16.9 Merger of Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any
prior agreement with respect to the subject matter hereof
whether oral or written.
16.10Counterparts. This Agreement may be executed by
the parties hereto on any number of counterparts, and all of
said counterparts taken together shall be deemed to
constitute one and the same instrument.
16.11Reproduction of Documents. This Agreement and
all schedules, exhibits, attachments and amendments hereto
may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other
similar process. The parties hereto each agree that any
such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative
proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement,
facsimile or further reproduction shall likewise be
admissible in evidence.
16.12Notices. All notices and other communications as required
or permitted hereunder shall be in writing and sent by first
class mail, postage prepaid, addressed as follows or to such
other address or addresses of which the respective party
shall have notified the other.
(a) If to State Street Bank and Trust Company,
to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
Attention: Legal Department
Facsimile: (617) 774-2287
(b) If to the Fund, to:
Attention:
17. Additional Funds
In the event that the Fund establishes one or more series of
Shares in addition to the attached Schedule A with respect
to which it desires to have the Transfer Agent render
services as transfer agent under the terms hereof, it shall
so notify the Transfer Agent in writing, and if the Transfer
Agent agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
18. Limitations of Liability of the Trustees and Shareholders
A copy of the Declaration of Trust of the Trust is on file
with the Secretary of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on
behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are
not binding upon any of the Trustees or Shareholders
individually but are binding only upon the assets and
property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf by and through
their duly authorized officers, as of the day and year first
above written.
BY:___________________________________
ATTEST:
________________________________
STATE STREET BANK AND TRUST COMPANY
BY:_______________________________
Vice Chairman
ATTEST:
<PAGE>
SCHEDULE A
[Fund List]
STATE STREET BANK AND TRUST COMPANY
BY:_________________________________
BY:__________________________________
<PAGE>
SCHEDULE 1.2(f)
ADDITIONAL TELEPHONE SUPPORT FEES AND SERVICES
Dated ____________
I. SERVICES
1. Transfer Agent and Telephone Support Functions
a. Answer telephone inquiries from [XXX 8 a.m. to 8
p.m. Boston time Monday through Friday except Christmas Day
XXX] [XXX OTHER HOLIDAY COVERAGE AVAILABLE?XXX] from [XXX
existing customers and prospective customers XXX] of the
Fund [XXX for sales literature XXX] in accordance with the
telephone script provided by the Fund.
b.Answer questions pertaining thereto the extent that such
questions are answerable based upon the information
supplied to the Transfer Agent by the Fund.
c.[XXX As the Fund and the Transfer Agent may agree in
writing, the Transfer Agent will receive calls and take
written transaction requests from shareholders of the Fund.
Transfer Agent transactions include: [XXX telephone
redemptions, account maintenance, exchanges, transfers,
confirmed purchases, account balances and general inquiries
XXX]. Some transactions may result in research which will
be done by the Fund. Other calls may be referred directly
to the Fund. Fax any referrals to [XXX name of company XXX]
on the same day the telephone call is received.XXX];
2. Incorporate new information into the above referenced
script upon written instructions from the Fund;
3. Maintain prospect detail information for six (6) months
thereafter, provide such information to the Fund in the
form that the Fund may reasonably request;
4. Send all literature orders for information from BFDS/DST
[XXX [how?] [to whom?] XXX] a minimum of [XXX one XXX]
transmission per day;
5. Provide the Fund with a [XXX daily/weekly/monthly XXX]
telephone report detailing the calls received during the
[XXX day/week/month XXX];
6. [XXX Provide the Fund with monthly conversion reports as
selected by the Fund from DST's standard report package.
XXX]
7. TARGET SERVICE LEVELS: Average speed of answer is fifteen
(15) seconds, abandon rate of no more than 2%, and an
overall service level of 85%. The averages will be
calculated on a weekly basis.
II. SUBCONTRACTORS
1. The Transfer Agent may, without further consent on the part
of the Fund, subcontract ministerial telephone support
services for the performance hereof.
III. FEES
STATE STREET BANK AND TRUST COMPANY
BY:_______________________________
BY:______________________________
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated ____________
1. On each Business Day, the TPA(s) shall receive, on behalf
of and as agent of the Fund(s), Instructions (as
hereinafter defined) from the Plan. Instructions shall
mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the
redemption of Shares; in each case based on the Plan's
receipt of purchase orders and redemption requests by
Participants in proper form by the time required by the
term of the Plan, but not later than the time of day at
which the net asset value of a Fund is calculated, as
described from time to time in that Fund's prospectus.
Each Business Day on which the TPA receives Instructions
shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of
such Instructions, to the applicable Plan.
3. On the next succeeding Business Day following the Trade
Date on which it accepted Instructions for the purchase and
redemption of Shares, (TD+1), the TPA(s) shall notify the
Transfer Agent of the net amount of such purchases or
redemptions, as the case may be, for each of the Plans. In
the case of net purchases by any Plan, the TPA(s) shall
instruct the Trustees of such Plan to transmit the
aggregate purchase price for Shares by wire transfer to the
Transfer Agent on (TD+1). In the case of net redemptions
by any Plan, the TPA(s) shall instruct the Fund's custodian
to transmit the aggregate redemption proceeds for Shares by
wire transfer to the Trustees of such Plan on (TD+1). The
times at which such notification and transmission shall
occur on (TD+1) shall be as mutually agreed upon by each
Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan,
which record shall reflect Shares purchased and redeemed,
including the date and price for all transactions, and
Share balances. The TPA(s) shall maintain on behalf of each
of the Plans a single master account with the Transfer
Agent and such account shall be in the name of that Plan,
the TPA(s), or the nominee of either thereof as the record
owner of Shares owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of
redemptions of Shares and all other distributions not
reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the
Plans, periodic account statements showing the total number
of Shares owned by that Plan as of the statement closing
date, purchases and redemptions of Shares by the Plan
during the period covered by the statement, and the
dividends and other distributions paid to the Plan on
Shares during the statement period (whether paid in cash or
reinvested in Shares).
7. The TPA(s) shall, at the request and expense of each Fund,
transmit to the Plans prospectuses, proxy materials,
reports, and other information provided by each Fund for
delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and
transmit to each Fund or any agent designated by it such
periodic reports covering Shares of each Plan as each Fund
shall reasonably conclude are necessary to enable the Fund
to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of
purchase orders and redemption requests placed by the
Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account
balance information for the Plan(s) and daily and monthly
purchase summaries expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that
prospectuses, proxy materials, periodic reports and other
materials relating to each Fund be furnished to
Participants in which event the Transfer Agent or each Fund
shall mail or cause to be mailed such materials to
Participants. With respect to any such mailing, the TPA(s)
shall, at the request of the Transfer Agent or each Fund,
provide at the TPA(s)'s expense complete and accurate set
of mailing labels with the name and address of each
Participant having an interest through the Plans in Shares.
STATE STREET BANK AND TRUST COMPANY
BY:__________________________________
BY:_________________________________
SCHEDULE 3.1
FEES
Dated ____________
STATE STREET BANK AND TRUST
COMPANY
BY:_________________________________
BY:__________________________________
Exhibit i
- -----------
October 19, 1999
Managers AMG Funds
40 Richards Avenue
Norwalk, Connecticut 06854
Ladies and Gentlemen:
As counsel to Managers AMG Funds (the "Trust"), we have been
asked to render our opinion in connection with the issuance by
the Trust of an unlimited number of shares, $.001 par value per
share (the "Shares"), of the Trust representing interests in the
Essex Aggressive Growth Fund (the "Fund"), the sole portfolio
series of the Trust, which has been established and designated in
Section 4.2 of the Trust's Master Trust Agreement dated June 18,
1999, as amended to date, and as more fully described in the
prospectus and statement of additional information contained in
Pre-Effective Amendment No. 2 (the "Amendment") to the
Registration Statement on Form N-1A (Registration No. 333-84639)
of the Trust.
We have examined the Master Trust Agreement of the Trust
dated June 18, 1999, as amended to date, the By-Laws of the
Trust, certain resolutions adopted by the Board of Trustees of
the Trust, the prospectus and statement of additional information
which form a part of the Amendment and such other documents as we
deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the
Shares, when sold in accordance with the terms of the prospectus
and statement of additional information relating to the Shares,
as in effect at the time of the sale, will be legally issued,
fully-paid and non-assessable by the Trust.
We also hereby consent to the reference to this firm in the
prospectus and statement of additional information which form a
part of the Amendment and to a copy of this opinion being filed
as an exhibit to the Amendment.
Very truly yours,
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit j.1
- ------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Statement of Additional
Information constituting part of this Registration Statement on
Form N-1A (File No. 333-84639) of our report dated October 19,
1999, on our audit of the statement of assets and liabilities of
Managers AMG Funds -- Essex Aggressive Growth Fund.
We also consent to the references to our firm under the
caption "Independent Accountants" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 21, 1999
<PAGE>
Exhibit j.2
- ---------------
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the use in Pre-Effective Amendment No. 2 of
Registration Statement No. 333-84639 of Managers AMG Funds
Essex Aggressive Growth Fund of our report dated October 15,
1999.
We also consent to the reference to us under the heading
"Past Performance of Essex" appearing in the Prospectus,
which is a part such Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 21, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Essex Investment Management
Company, LLC:
We have examined the accompanying Schedule of Quarterly and
Annual Rates of Return for the Institutional Growth Equity
Composite (the "Schedule") of Essex Investment Management
Company, LLC (the "Company") for each of the quarterly and
annual investment periods from January 1, 1993 through
September 30, 1999. The Schedule is the responsibility of
the Company's management. Our responsibility is to express
an opinion on the Schedule based on our examination.
Our examination was conducted in accordance with the
attestation standards established by the American Institute
of Certified Public Accountants and, accordingly, included
examining on test basis, evidence supporting the Schedule
and performing such other procedures as we considered
necessary in the circumstances. We believe that our
examination provides a reasonable basis for our opinion.
In our opinion, such Schedule presents the rates of return
for the Institutional Growth Equity Composite of the Company
for each of the quarterly and annual investment periods from
January 1, 1993 through September 30, 1999 in all material
respects, in accordance with the measurement and disclosure
criteria as set forth in the Notes to the Schedule.
Boston, Massachusetts
October 15, 1999
<PAGE>
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
INSTITUTIONAL GROWTH EQUITY COMPOSITE
Schedule of Quarterly and Annual Rates of Return
January 1, 1993 to September 30, 1999
<TABLE>
<CAPTION>
YEAR QUARTER GROSS RETURN NET RETURN
- ---- ------- ------------ ----------
<S> <C> <C> <C>
1993 MAR -0.85
JUN 6.53
SEP 8.81
DEC -0.49
TOTAL 14.37 13.15%
1994 MAR -6.69
JUN -2.08
SEP 10.48
DEC 1.93
TOTAL 2.90 1.77%
1995 MAR 5.91
JUN 14.64
SEP 13.49
DEC 7.06
TOTAL 47.52 46.05%
1996 MAR 6.80
JUN 15.57
SEP 0.95
DEC -5.50
TOTAL 17.75 16.51%
1997 MAR -12.99
JUN 17.65
SEP 15.07
DEC -3.36
TOTAL 13.84 12.62%
1998 MAR 14.82
JUN 7.85
SEP -10.62
DEC 37.40
TOTAL 52.08 50.56%
1999 MAR 24.79
JUN 5.83
SEP -0.16
Y-T-D Return 31.86 30.86%
</TABLE>
See notes to Schedule
<PAGE>
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
INSTITUTIONAL GROWTH EQUITY COMPOSITE
NOTES TO THE SCHEDULE
1. ORGANIZATION
Essex Investment Management Company, LLC ("Essex") is an
independent investment advisor providing investment
advisory services to corporate retirement funds,
endowments, foundations, Taft-Hartley funds, public
funds, and individuals. The company was founded in 1976.
2. COMPOSITE DEFINITION
Accounts included in this composite seek long-term growth
of capital by investing in equity securities of companies
with potential for growth. An institutional account is
eligible for inclusion in the composite if full
discretionary authority has been granted, and once the
account has at least $1 million in net assets.
Performance figures include all accounts under the
company's management which are defined by the profile
described above. An account is included in the composite
beginning with the first full quarter of eligibility.
Closed accounts are eligible for inclusion through the
completion of the last full quarter under management. No
selective periods of performance have been used.
3. RETURN CALCULATION
The performance results have been prepared using an
internal rate of return formula that is consistent with
the Bank Administration Institute's (BAI) formula for
each individual account included in the composite. The
individual account's monthly returns are asset weighted
using the beginning-of-month net asset values to arrive
at a monthly composite return. The quarterly return is
determined by compounding each of the monthly composite
returns in the quarter. The annual return is determined
by compounding the four quarterly composite returns.
The time-weighted total rate of return is calculated for
each individual account as follows:
Monthly rate of return for an eligible account is
calculated using the (BAI) formula. This is an Internal
Rate of Return that uses beginning and ending market
values. Additions and withdrawals to accounts are
recorded as of the transaction date by Essex when
management is notified of such a transaction by either
the trustee, custodian bank or the customer. These cash
flows time are weighted for the number of days in the
month that they affect the portfolio.
<PAGE>
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
INSTITUTIONAL GROWTH EQUITY COMPOSITE
NOTES TO THE SCHEDULE
Net returns reflect the application of an annual expense
ratio of 1.10% applied quarterly (i.e. .275% per
quarter).
4. FEES
Performance results are presented on a gross of fee basis
and exclude management and custodial fees.
Fee Schedule as of September 30, 1999:
Account Assets Annual Fee
-------------- -------------
First $2 million 1.5%
Over $2 million 1.0%
5. OTHER MATTERS
Clients or prospective clients should not assume they
will have an investment experience similar to that
indicated by Essex past performance results.
<PAGE>
Exhibit m
- -------------
MANAGERS AMG FUNDS
Plan of Distribution Adopted Pursuant to Rule 12b-1
WHEREAS, Managers AMG Funds, an unincorporated association
of the type commonly known as a business trust organized under
the laws of the Commonwealth of Massachusetts (the "Trust"),
engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized (i) to issue shares of
beneficial interest ("Shares") in separate series, with the
shares of each such series representing the interests in a
separate portfolio of securities and other assets, and (ii) to
divide the shares within each such series into two or more
classes; and
WHEREAS, the Trust has established one portfolio series, the
Essex Aggressive Growth Fund (such fund being referred to herein
as the "Initial Fund" - such series, together with all other
series subsequently established by the Trust and made subject to
this Plan, being referred to herein individually as a "Fund" and
collectively as the "Funds");
WHEREAS, the Trust may be deemed a distributor of the Shares
within the meaning of Rule 12b-1 under the Act, and desires to
adopt a Plan of Distribution with respect to its shares of the
Initial Fund pursuant to such Rule (the "Plan"); and
WHEREAS, the Trust may enter into one or more agreements
(each, an "Agreement") for the sale of the Shares with one or
more underwriters, distributors, dealers or brokers (each, a
"Distributor"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees
who are not interested persons of the Trust (as defined in the
Act) and who have no direct or indirect financial interest in the
operation of this Plan or any Agreement with any Distributor and
any agreements relating thereto (the "Qualified Trustees"),
having determined, in the exercise of their reasonable business
judgment and in light of their fiduciary duties under state law
and under Section 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan and such Agreements will
benefit the Shares of the Initial Fund and its shareholders, have
accordingly approved this Plan and the Agreements by votes cast
in person at a meeting called for the purpose of voting on this
Plan and the Agreements and any agreements related thereto.
NOW, THEREFORE, the Trust hereby adopts this Plan in
accordance with Rule 12b-1 under the Act, on the following terms
and conditions:
1. Distribution Activities. Subject to the supervision of
the Board of Trustees, the Trust may engage, directly or
indirectly, in financing any activities primarily intended to
result in the sale of Shares, including, but not limited to, the
following: (1) making payments to underwriters, securities
dealers and others engaged in the sale of Shares, including
payments to a Distributor to compensate or reimburse other
persons for engaging in such activities and (2) paying expenses
or providing reimbursement of expenditures incurred by the
Distributor or other persons in connection with the offer or sale
of Shares, including expenses relating to the formulation and
implementation of marketing strategies and promotional activities
such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation,
printing and distribution of sales literature and reports for
recipients other than existing shareholders of the Trust, and
obtaining such information, analyses and reports with respect to
marketing and promotional activities and investor accounts as the
Trust may, from time to time, deem advisable. The Trust and the
Funds are authorized to engage in the activities listed above,
and in other activities primarily intended to result in the sale
of Shares, either directly or through other persons with which
the Trust has entered into Agreements pursuant to the Plan.
2. Maximum Expenditures. The expenditures to be made by
the Initial Fund pursuant to this Plan and the basis upon which
payment of such expenditures will be made shall be determined
from time to time by the Trustees, but in no event may such
expenditures exceed the following: (i) with respect to Shares of
the Initial Fund, an annual rate of 0.25% of the average daily
value of net assets represented by such Shares, and (ii) with
respect to Shares of any Fund subsequently established by the
Trust and made subject to this Plan, the annual rate as agreed
upon and specified in an addendum hereto. The expenditures to be
made pursuant to this Plan shall commence with respect to Shares
of a Fund as of the date on which this Plan becomes effective
with respect to each such Fund.
3. Payments. Pursuant to this Plan, the Trust shall make
periodic payments to the Distributor at the annual rate provided
for in the Agreements with such Distributor with respect to the
Shares of each Fund. The Distributor may in turn remit to and
allocate among selected dealers and others (including affiliates
of the Distributor) in consideration of and as reimbursement for
expenses incurred in the provision of distribution and marketing
services, such amounts as the Distributor shall determine. Any
amounts received by the Distributor and not so allocated may be
retained by the Distributor as compensation to the Distributor
for providing services under the Agreement and/or as
reimbursement for expenses incurred in connection with the
distribution and promotion of the sale of the Shares.
4. Term and Termination.
(a) Initial Fund. This Plan shall become effective
with respect to the Shares of the Initial Fund as of the later of
(i) the date on which an amendment to the Registration Statement
on Form N-1A with respect to the Shares becomes effective under
the Securities Act of 1933, as amended or (ii) the date on which
the Initial Fund commences offering the Shares to the public and
shall continue in effect with respect to the Shares (subject to
Section 4(d) hereof) until one year from the date of such
effectiveness, unless the continuation of this Plan shall have
been approved with respect to the Shares in accordance with the
provisions of Section 4(c) hereof.
(b) Additional Funds. This Plan shall become
effective with respect to the Shares of each additional Fund
established by the Trust after the date hereof and made subject
to this Plan upon commencement of the initial public offering
thereof (provided that the Plan has previously been approved with
respect to the Fund by votes of a majority of both (i) the Board
of Trustees of the Trust and (ii) the Qualified Trustees, cast in
person at a meeting held before the initial public offering of
such additional Fund thereof and called for the purpose of voting
on such approval), and shall continue in effect with respect to
each such additional Fund or class (subject to Section 4(d)
hereof) for one year thereafter, unless the continuation of this
Plan shall have been approved with respect to such additional in
accordance with the provisions of Section 4(c) hereof.
(c) Continuation. This Plan and the Agreements shall
continue in effect with respect to each Fund subsequent to the
initial term specified in Section 4(a) and (b) for so long as
such continuance is specifically approved at least annually by
votes of a majority of both (i) the Board of Trustees of the
Trust and (ii) the Qualified Trustees, cast in person at a
meeting called for the purpose of voting on this Plan, subject to
any shareholder approval requirements existing under applicable
law.
(d) Termination.
(i) This Plan may be terminated at any time with
respect to the Shares of any Fund thereof by vote of a
majority of the Qualified Trustees, or by vote of a majority
of the outstanding voting Shares of that Fund. For purposes
of this Plan, the term "vote of a majority of the
outstanding voting Shares" of any Fund shall mean the vote
of the lesser of (A) 67 percent or more of the outstanding
voting Shares present at such meeting, if the holders of
more than 50 percent of the outstanding voting Shares are
present and represented by proxy; or (B) 50 percent or more
of the Shares. The Plan may remain in effect with respect
to a Fund even if it has been terminated in accordance with
this Section 4(d) with respect to one or more other Funds of
the Trust.
(ii) The Agreements may be terminated at any time,
without penalty, with respect to the Shares of any Fund by
vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding voting Shares of that Fund on
sixty days' written notice to the Distributor. In addition,
the Agreements shall provide for automatic termination in
the event of their assignment.
5. Amendments. This Plan may not be amended to increase
materially the amount of expenditures provided for in Section 2
hereof unless such amendment is approved by a vote of a majority
of the outstanding Shares of each Fund with respect to which a
material increase in the amount of distribution expenditures is
proposed, and no material amendment to the Plan shall be made
unless approved in the manner provided for annual renewal in
Section 4(c) hereof. Otherwise, this Plan may be amended with
respect to the Shares of a Fund by vote of a majority of the
Qualified Trustees or the outstanding voting Shares of that Fund.
6. Independent Trustees. While this Plan is in effect
with respect to any Fund, the selection and nomination of
Trustees who are not interested persons (as defined in the Act)
of the Trust shall be committed to the discretion of the Trustees
who are not interested persons.
7. Quarterly Reports. The Treasurer of the Trust and the
Treasurer of the Distributor shall provide to the Trustees of the
Trust and the Trustees shall review, at least quarterly, a
written report of the amounts expended for the distribution of
the Shares pursuant to this Plan and the purposes for which such
expenditures were made.
8. Recordkeeping. The Trust shall preserve copies of this
Plan, the Agreements and any related agreements and all reports
made pursuant to Section 7 hereof, for a period of not less than
six years from the date of this Plan and the Agreements
(including any related agreements) or such reports, as the case
may be, the first two years in an easily accessible place.
Dated: October 15, 1999
