Securities and Exchange Commission
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ________ ___
Post-Effective Amendment No. ________ ___
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No.___________ ___
(Check appropriate box or boxes)
THE MANAGERS AMG FUNDS
- - ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
40 Richards Avenue, Norwalk, Connecticut 06854
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(Address of Principal Executive Offices)
Philip H. Newman, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
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(Name and Address of Agent for Service)
As soon as practicable after the effective date of this
Registration Statement
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(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>
THE MANAGERS AMG FUNDS
ESSEX AGGRESSIVE GROWTH FUND
_____________________
PROSPECTUS
DATED _____, 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
------
<S> <C>
KEY INFORMATION ABOUT THE ESSEX AGGRESSIVE GROWTH FUND 2
Goals, Principal Strategies and Principal Risk Factors of the Fund 2
Risk Summary 2
Market Risk 2
Price Risk 3
Sector (Industry) Risk 3
Economic Risk 3
Liquidity Risk 3
Currency Risk 3
Political Risk 3
Year 2000 Risk 3
FEES AND EXPENSES OF THE FUND 4
Fees and Expenses 4
ESSEX AGGRESSIVE GROWTH FUND 5
Objective 5
Principal Investment Strategies 5
Principal Risk Factors 5
Should You Invest in this Fund? 6
THE MANAGERS AMG FUNDS 6
PAST PERFORMANCE OF ESSEX 7
OTHER INVESTMENT PRACTICES AND RELATED RISKS 8
YOUR ACCOUNT 10
Minimum Investments in the Fund 10
HOW TO PURCHASE SHARES 12
DISTRIBUTION PLANS 12
HOW TO SELL SHARES 13
INVESTOR SERVICES 14
THE FUND AND ITS POLICIES 14
ACCOUNT STATEMENTS 15
DIVIDENDS AND DISTRIBUTIONS 15
TAX INFORMATION 15
</TABLE>
(i)
<PAGE>
KEY INFORMATION ABOUT THE ESSEX AGGRESSIVE GROWTH FUND
This Prospectus contains important information for anyone
interested in investing in the ESSEX AGRESSIVE GROWTH FUND (the
"Fund"), a series of THE 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.
GOALS, PRINCIPAL STRATEGIES AND PRINCIPAL RISK FACTORS OF THE
FUND
<TABLE>
<CAPTION>
GOALS PRINCIPAL STRATEGIES PRINCIPAL RISK FACTORS
----- -------------------- ----------------------
<S> <C> <C>
Long-term capital Invests principally in Market Risk
appreciation by equity securities of Price Risk
investing primarily small-, medium- and Short Selling Risk
in a diversified large-sized U.S. and non- Sector (Industry) Risk
portfolio consisting U.S. companies Economic Risk
mainly of the equity Liquidity Risk
securities of growth- Seeks investments in Currency Risk
oriented companies companies with the Political Risk
potential for long-term Year 2000 Risk
growth
</TABLE>
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RISK SUMMARY
All investments involve some type and level of risk. Risk is
the possibility that you will lose money or not make any
additional money by investing in the Fund.
Before you invest, please make sure that you have read, and
understand, the risk factors that apply to the Fund. As with any
mutual fund, you could lose money.
Please keep in mind that shares of the Fund:
* Are not deposits or obligations of any bank
* Are not guaranteed or endorsed by any bank
* Are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any
other federal agency
The following are the Principal Risk Factors associated with
the Fund.
MARKET RISK
Market risk is also called systematic risk. It typically
refers to the basic variability that stocks exhibit as a result
of stock market fluctuations. Despite the unique influences on
individual companies, stock prices in general rise and fall as a
result of investors' perceptions of the market as a whole. The
consequences of market risk are that if the stock market drops in
value, the value of 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.
Most international markets do not move together with U.S.
markets, or with other international markets.
2
<PAGE>
PRICE RISK
As investors perceive and forecast good business prospects,
they are willing to pay higher prices for securities. Higher
prices therefore reflect higher expectations. If expectations
are not met, or if expectations are lowered, the prices of the
securities will drop. This happens with individual securities or
the financial markets overall.
SHORT SELLING RISK
The Fund may sell securities short. A short sale is a
transaction in which the Fund sells a security it does not own in
anticipation that the market price of that security will decline.
When the Fund makes a short sale, it must borrow the security
sold short to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing the
security at the market price at the time of replacement. If the
Fund uses this technique at inappropriate times or judges market
conditions incorrectly, such investments may lower the Fund's
return or result in a loss. The Fund's potential loss from an
uncovered short position is unlimited. The Fund also could
experience losses if this investment technique were poorly
correlated with its other investments, or if the Fund were unable
to liquidate its position because of an illiquid secondary
market.
SECTOR (INDUSTRY) RISK
Companies that are in similar businesses may be similarly
affected by particular economic or market events, which may in
certain circumstances cause the value of securities in all
companies in that sector or industry to decrease. To the extent
the Fund has substantial holdings within a particular sector or
industry, the risks associated with that sector or industry
increase. Diversification among groups of companies in different
businesses may reduce sector (industry) risk but may also dilute
potential returns.
ECONOMIC RISK
The prevailing economic environment is important to the
health of all businesses. However, some companies are more
sensitive to changes in the domestic and/or global economy than
others. These types of companies are often referred to as
cyclical businesses. Countries in which a large portion of
businesses are in cyclical industries are thus also very
economically sensitive and carry a higher amount of economic
risk.
LIQUIDITY RISK
Liquidity Risk is the risk that the Fund cannot sell a
security at a reasonable price within a reasonable time frame
when it wants or needs to due to a lack of buyers for the
security. This risk applies to all assets in varying degrees.
However, it is higher for small-capitalization stocks and stocks
of foreign companies than it typically is for
large-capitalization domestic stocks.
CURRENCY RISK
The value of foreign securities in an investor's home
currency depends both upon the price of the securities and the
exchange rate of the currency. Adverse currency fluctuations are
an additional risk of foreign investing. Currency risk may be
reduced through diversification among currencies or hedging with
the use of foreign currency contracts.
POLITICAL RISK
Changes in the political status of any country can have
profound effects on the values of securities within that country
as well as the credit quality of the securities. Related risk
factors are the regulatory environment within any country or
industry and the sovereign health of the country. These risks
may be reduced only by carefully monitoring the economic,
political and regulatory atmosphere within countries and
diversifying across countries.
3
<PAGE>
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 the sub-adviser and outside vendors will be fully Year 2000
compliant. In addition, the Fund is unable to predict the impact
of this problem on the portfolio companies in which the Fund
invests. The Fund will continue to monitor developments relating
to the Year 2000 problem.
FEES AND EXPENSES OF THE FUND
The following information is provided to assist in
understanding certain fees and expenses that an investor will
incur in connection with buying and holding shares of the Fund.
Since the Fund had not commenced operations as of the date of
this prospectus, the information about the Fund is based on
annualized projected expenses for the fiscal year ending
___________, 1999. The information below should not be
considered a representation of past or future expenses, as actual
expenses may be greater or lower than those shown. Keep in mind
that the Fund has no sales charge (load).
<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
Short-Term Trading Fee..................................... 1.00%*
Redemption Fee............................................. None
Exchange Fee............................................... None
Maximum Account Fee........................................ None
</TABLE>
[FN]
* Applies to redemptions or exchanges occurring within 30
days of a purchase, at any point subsequent to the first 60 days
following the inception of the Fund. See "Short-Term Trading"
under the caption "How to Sell Shares."
</FN>
4
<PAGE>
FEES AND EXPENSES
Annual Fund Operating Expenses (expenses that are deducted
from Fund assets)
<TABLE>
<CAPTION>
<S> <C>
Management Fee** ___
Distribution (12b-1) Fees 0.00%
Other Expenses ___
Total Annual Fund Operating Expenses*** ___
</TABLE>
[FN]
** The Management Fee is the fee paid to The Managers Funds
LLC, the Fund's investment manager. All or a portion of this fee
is paid to the sub-adviser, Essex Investment Management Company,
LLC.
*** The Managers Funds LLC and Essex Investment Management
Company, LLC have voluntarily agreed, for an indefinite period,
to limit Total Annual Fund Operating Expenses to %, subject
to later reimbursement by the Fund in certain circumstances. See
"The 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
------ -------
------ -------
+Your costs for the Fund, including the expense limitation
currently in effect, would be $_____ and $____ for one year and
three years, respectively.
ESSEX AGGRESSIVE GROWTH FUND
OBJECTIVE
The Fund's objective is to achieve long-term capital
appreciation by investing primarily in a diversified portfolio
consisting mainly of the equity securities of growth-oriented
companies.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least
65% of its total assets in equity securities of U.S. and non-U.S.
companies, such as common and preferred stocks. The Fund invests
in small-, medium- and large-sized companies.
Essex Investment Management Company, LLC ("Essex") serves as
sub-adviser to the Fund. Essex uses its own methodology to
select portfolio investments. Essex emphasizes a growth approach
to investing, that is, Essex selects stocks that it believes can
generate and maintain strong earnings growth. Generally, Essex
looks for companies with quality management, strong finances and
established market positions. A stock is sold if Essex believes
that the current stock price is not supported by its expectations
regarding the company's future growth potential. In addition,
Essex may seek to capitalize on declines in the prices of
specific equity securities or stock indexes through short sales
or investments in a variety of derivative instruments.
5
<PAGE>
PRINCIPAL RISK FACTORS
The principal risks of the Fund are the risks generally of
investing in stocks. They include 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 sub-adviser's skill in
assessing the potential of the securities in which the Fund
invests.
The primary risk of growth stocks is that they may be more
sensitive to market movements because their prices tend to
reflect more of future investor expectations rather than just
current profits. If such expectations are not met, or if
expectations are lowered, the prices of the securities will drop.
To the extent that the Fund invests in those kinds of stocks, it
will be exposed to the risks 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.
Smaller companies may have more limited product lines,
markets or financial resources than larger companies. The
securities of smaller companies may trade less frequently and in
more limited volume than those of larger, more mature companies.
To the extent that the Fund invests in those kinds of stocks, it
will be exposed to the risks associated with those kinds of
investments. As a result, the Fund may fluctuate significantly
more in value than larger-cap stocks and the funds that focus
exclusively on larger-cap stocks.
Stocks of foreign companies, and particularly those of
companies in developing countries and emerging markets, present
significant risks for U.S. investors. They tend to be less
liquid and more volatile than their U.S. counterparts, in part
because accounting standards and market regulations tend to be
less standardized and economic and political climates less
stable. Since the value of foreign securities in an investor's
home currency depends on the price of the securities and the
exchange rate of the currency, fluctuations in the exchange rate
of such currencies may reduce or eliminate gains or create
losses. As suggested above, these risks usually are higher in
developing countries and emerging markets, such as most countries
in Africa, Asia, Latin America and the Middle East. To the
extent that the Fund invests in those kinds of stocks, it will be
exposed to the risks associated with those kinds of investments.
For these and other reasons, the Fund may underperform other
stock funds (such as U.S. domestic stock funds) which focus on
U.S. stocks when stocks of companies located in emerging markets
or developing countries are out of favor.
The Fund's use of short sales or other derivative
instruments involves distinct investment risks and transaction
costs. While the use of these investment techniques can be used
to further the Fund's objective, under certain market conditions,
they can increase the volatility of the Fund and decrease the
liquidity of the Fund. When the Fund makes a short sale, it
must borrow the security sold short to make delivery to the
buyer. The Fund then is obligated to replace the security
borrowed by purchasing the security at the market price at the
time of replacement. The price at such time may be more or less
than the price at which the security was sold by the Fund. The
Fund may have to pay a premium to borrow the security and is
obligated to pay the lender amounts equal to any dividends or
interest that accrue during the period of the loan. If the price
of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security,
the Fund will incur a loss. Any loss will be increased by the
premium and transaction costs described above. Although the
Fund's gain is limited to the price at which it sold the security
short, the potential loss is theoretically unlimited. While a
short sale is outstanding, the Fund is required to collateralize
its obligations, which has the practical effect of limiting the
extent to which the Fund may engage in short sales.
Shares of the Fund will rise and fall in value and there is
a risk that you could lose money by investing in the Fund. The
Fund cannot be certain that it will achieve its goals. The
Fund's shares are not bank deposits and are not guaranteed,
endorsed or insured by any financial institution, government
entity or the FDIC.
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
6
<PAGE>
* 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.
__________________________________________________________________
THE MANAGERS AMG FUNDS
The Managers AMG Funds is intended to be a no-load mutual
fund family currently 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.
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 since
1989. Mr. McNay is the Chairman and Chief Investment Officer of
Essex, a position he has held since that firm's formation. Mr.
Beckham is the Principal Vice President of Essex, a position he
has held since 1995.
The Fund is obligated by its investment management agreement
to pay an annual management fee to the Investment Manager of
____% of the average daily net assets of the Fund. The
Investment Manager, in turn, pays Essex __% of the average daily
net assets of the Fund for its services as sub-adviser. From
time to time, Essex may waive or reimburse all or a portion of
its fee.
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 compensation from the Fund for these services. Pursuant to an
Administrative and Marketing Services 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.
7
<PAGE>
The Investment Manager has voluntarily agreed, for an
indefinite period, to waive fees and pay or reimburse the Fund to
the extent total expenses of the Fund exceed __%. The Fund is
obligated to repay the Investment 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
Investment Manager is subject to the further obligation that such
repayment would not cause the Fund's expenses in any such future
year to exceed __%. The Investment Manager and Essex may
change or terminate these voluntary arrangements at any time, but
this Prospectus would be supplemented to describe the change.
PAST PERFORMANCE OF ESSEX
The table below sets forth the investment performance for the
period from July 1, 1989 to June 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. For periods after December 31, 1992, the
performance includes only those accounts with at least $1.0 million
in net assets. The performance is an asset-weighted composite of the
compounded internal rates of return for all such accounts during each period
indicated. The investment performance for each period has been
adjusted to give effect to estimated fees and expenses in the
amount of __%, which is the estimated expense ratio of the Fund,
net of 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 June 30, 1999. The method used for calculating
the performance of such accounts differs from the method
prescribed by the Securities and Exchange Commission for
calculating the total return for mutual funds.
The investment performance of the accounts is compared to the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index).
The S&P 500 Index is made up of primarily large 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 a benchmark, the performance of the S&P 500 Index may
not be comparable to the performance of the accounts because,
unlike the performance of the accounts, the performance of the
index has not been adjusted for any fees or expenses. The
information provided does not represent the performance of the
Essex Aggressive Growth Fund, which commenced operations on ___
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 S&P 500
Composite Return Index Return
---------------- ------------
<S> <C> <C>
1989 (six months only)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999 (six months only)
1-year (ended 6-30-99)
5-year average annual
10-year average annual
5-year cumulative
10-year cumulative
</TABLE>
8
<PAGE>
The accounts 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 (the "Code"). The performance results for the accounts
shown above might have been less favorable had the accounts been
subject to these requirements, restrictions and limitations.
OTHER INVESTMENT PRACTICES AND RELATED RISKS
The Fund may also engage in certain other investment
practices and is subject to the additional risks described below.
Bonds. The Fund may invest in bonds and other types of debt
securities. The value of any bonds held by the Fund is likely to
decline when interest rates rise; this risk is greater for bonds
with longer maturities. A bond issuer also could default on
principal or interest payments, possibly causing a loss for the
Fund.
Restricted and Illiquid Securities. The Fund may purchase
restricted or illiquid securities. Any securities that are
thinly traded or whose resale is restricted can be difficult to
sell at a desired time and price. Some of these securities are
new and complex, and trade only among institutions; the markets
for these securities are still developing, and may not function
as efficiently as established markets. Owning a large percentage
of restricted or illiquid securities could hamper the Fund's
ability to raise cash to meet redemptions. Also, because there
may not be an established market price for these securities, the
Fund may have to estimate their value. This means that their
valuation (and, to a much smaller extent, the valuation of the
Fund) may have a subjective element.
Repurchase Agreements. The Fund may buy securities with the
understanding that the seller will buy them back with interest at
a later date. If the seller is unable to honor its commitment to
repurchase the securities, the Fund could lose money.
Foreign Securities. The Fund may purchase foreign
securities. Foreign securities generally are more volatile than
their U.S. counterparts, in part because of higher political and
economic risks, lack of reliable information and fluctuations in
currency exchange rates. These risks are usually higher in less
developed countries. The Fund may use foreign currency
transactions and related instruments to hedge its foreign
investments. In addition, foreign securities may be more
difficult to resell and the markets for them less efficient than
for comparable U.S. securities. Even where a foreign security
increases in price in its local currency, the appreciation may be
diluted by the negative effect of exchange rates when the
security's value is converted to U.S. dollars. Foreign
withholding taxes also may apply and errors and delays may occur
in the settlement process for foreign securities.
International Exposure. Many U.S. companies in which the
Fund may invest generate significant revenues and earnings from
abroad. As a result, these companies and the prices of their
securities may be affected by weaknesses in global and regional
economies and the relative value of foreign currencies to the
U.S. dollar. These factors, taken as a whole, could adversely
affect the price of Fund shares.
Derivatives. The Fund may invest in derivatives.
Derivatives, a category that includes options and futures, are
financial instruments whose value derives from another security,
an index or a currency. The Fund may use derivatives for hedging
(attempting to offset a potential loss in one position by
establishing an interest in an opposite position). This includes
the use of currency-based derivatives for hedging its positions
in foreign securities. The Fund may also use derivatives for
speculation (investing for potential income or capital gain).
While hedging can guard against potential risks, it adds to the
Fund's expenses and can eliminate some opportunities for gains.
There is also a risk that a derivative intended as a hedge may
not perform as expected. The main risk with derivatives is that
some types can amplify a gain or loss, potentially earning or
losing substantially more money than the actual cost of the
derivative. With some derivatives, whether used for hedging
9
<PAGE>
or speculation, there is also the risk that the counterparty may
fail to honor its contract terms, causing a loss for the Fund.
Short-Term Trading. Short-term trading can increase a
Fund's transaction costs and may increase your tax liability.
The investment strategies may at times include short-term
trading.
Defensive Investing. During unusual market conditions, the
Fund may place up to 100% of its total assets in cash or quality
short-term debt securities including repurchase agreements. To
the extent that a Fund does this, it is not pursuing its
objective.
YOUR ACCOUNT
As an investor, you pay no sales charges to invest in the
Fund and, except in the case of certain short-term traders (see
"How to Sell Shares - Short-Term Trading") 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.
Securities traded in foreign markets may trade when the NYSE
is closed. Those securities are generally valued at the closing
of the exchange where they are primarily traded. Therefore, the
Fund's NAV may change on days when investors may not be able to
purchase or redeem Fund shares.
The Fund's investments are valued based on market values.
If a particular event would materially affect the Fund's NAV or
if market quotations are not readily available, then the Pricing
Committee of the Board of Trustees may value the Fund's
investments based on an evaluation of fair value.
MINIMUM INVESTMENTS IN THE FUND
All 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.
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
SEP IRA 25,000 1,000
Simple IRA 25,000 1,000
Education IRA 25,000 N/A
</TABLE>
The Fund may, in its 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.
- - ------------------------------------------------------------------
10
<PAGE>
__________________________________________________________________
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.
A SEP IRA is an IRA that allows employers or persons who are
self-employed to make contributions to an account.
A SIMPLE IRA is an employer plan and a series of IRAs that
allows contributions by and for employees.
An EDUCATION IRA is an IRA with non-deductible contributions
and tax-free growth of assets and distributions. The account
must be used to pay qualified educational expenses.
- - -----------------------------------------------------------------
You should consult your tax professional for more information on
IRA accounts.
11
<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) ________ Call (800) ________
ADVISORS, BANK for further instructions for further instructions
TRUST AND 401(K)
AGENTS ONLY
- - -----------------------------------------------------------------------------
DIRECT Complete the account Write a letter of
SHAREHOLDERS: application. instruction and a
check payable to The
*BY MAIL Mail the application Managers AMG Funds
and a check payable to:
to The Managers AMG
Funds to: The Managers AMG Funds
c/o Boston Financial
The Managers AMG Funds Data Services, Inc.
c/o Boston Financial P.O. Box 8517
Data Services, Inc. Boston, MA 02266-8517
P.O. Box 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) __________. The
minimum additional
investment is $1,000.
- - -----------------------------------------------------------------------------
</TABLE>
FOR BANK WIRES: Please call and notify the Fund at (800)
__________. Then instruct your bank to wire the money to
State Street Bank and Trust Company, Boston, MA 02101; ABA
#011000028; BFN-The Managers AMG Funds A/C ______, 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 and for services provided to
shareholders. Under the plan, the Board of Trustees may
authorize payments at an annual rate of up to 0.25% of the Fund's
average annual net assets. The Trustees have not authorized the
payment of any fees to date.
HOW TO SELL SHARES
You may sell your shares at any time. Your shares will be
sold at the NAV calculated after the Fund's Transfer Agent
accepts your order. Orders received after 4:00 p.m. New York
Time will receive the NAV per share determined at the close of
trading on the next NYSE trading day.
12
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIONS
------------
<S> <C>
THROUGH YOUR INVESTMENT Contact your investment
ADVISOR advisor or other investment
professional
- - -----------------------------------------------------------------------------
INVESTMENT ADVISORS, BANK Call (800) ________ 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:
The 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) ________.
_____________________________________________________________________________
</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.
Short-Term Trading. The Fund is designed for investors with
a long-term outlook. The Fund is not designed for short-term
traders whose frequent purchases and redemptions can disrupt the
Fund's investment program and result in additional transaction
costs. Therefore, if a shareholder redeems or exchanges shares
of the Fund within 30 days after purchasing such shares, the Fund
will assess a short-term trading fee on the redemption or
exchange transaction equal to 1.00% of the dollar amount of the
transaction. For the first 60 days subsequent to the inception
of the Fund, no short-term trading fees will be assessed. The
assessment of such short-term trading fees will be made to all
applicable short-term trades thereafter. The fee is deducted
from the redemption or exchange proceeds and is paid to the Fund,
not the Investment Manager. The purpose of the fee is to
reimburse the Fund for brokerage and other transaction costs and
to allocate these costs to the investor making the redemption or
exchange, so that other shareholders of the Fund are not
adversely affected by the transaction. The Fund will use the
"first-in, first-out" method for determining whether redemption
or exchange transactions fall within the 30-day holding period.
INVESTOR SERVICES
Automatic Reinvestment Plan allows your dividends and capital
gain distributions to be reinvested in additional shares of your
Fund. You can elect to receive cash.
13
<PAGE>
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.
Individual Retirement Accounts are available to you at no
additional cost. Call us at (800) ___________ 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. Except in the case of certain
short-term trades (See "How to Sell Shares - Short-Term
Trading"), 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)
* 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 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.
14
<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
* fail to certify that they are exempt from withholding
15
<PAGE>
[THE MANAGERS AMG FUNDS LOGO]
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: The Managers AMG Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) ________
TRUSTEES
Sean M. Healey
16
<PAGE>
For More Information
Additional Information for the Fund, including the Statement
of Additional Information, is available to you free upon request.
By Telephone: Call 1-800-________
By Mail: Write to: The Managers AMG Funds
On the Internet: Electronic copies are available
on our website at http://www.________________
Text-only copies of these documents are also available on the
SEC's website at http://www.sec.gov, by sending a request and a
duplication fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009, or by visiting the SEC's Public
Reference Room in Washington, DC (1-800-SEC-0330).
INVESTMENT COMPANY ACT REGISTRATION NUMBER _______________.
17
<PAGE>
THE MANAGERS AMG FUNDS
ESSEX AGGRESSIVE GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
__________, 1999
You can obtain a free copy of the Fund's Prospectus by
calling The Managers AMG Funds at (800) ____________. 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.
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
GENERAL INFORMATION 2
INVESTMENT OBJECTIVES AND POLICIES 2
Investment Techniques and Associated Risks 2
Diversification Requirements for the Fund 8
Fundamental Investment Restrictions 8
Temporary Defensive Position 9
Portfolio Turnover 9
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 10
Trustees' Compensation 10
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 10
Control Persons 10
Management Ownership 11
MANAGEMENT OF THE FUND 11
Investment Manager 11
Compensation of Investment Manager and Sub-Adviser 11
Voluntary Fee Waivers and Expense Limitations 12
Investment Management and Sub-Advisory Agreements 12
Custodian 14
Transfer Agent 14
Independent Public Accountants 14
BROKERAGE ALLOCATION AND OTHER PRACTICES 15
PURCHASE, REDEMPTION AND PRICING OF SHARES 15
Purchasing Shares 15
Redeeming Shares 16
Exchange of Shares 17
Net Asset Value 17
Dividends and Distributions 18
Distribution Plan 18
CERTAIN TAX MATTERS 18
Federal Income Taxation of Fund-in General 18
Taxation of the Fund's Investments 19
Federal Income Taxation of Shareholders 19
Foreign Shareholders 20
State and Local Taxes 20
Other Taxation 20
PERFORMANCE DATA 20
Total Return 21
Performance Comparisons 21
Massachusetts Business Trust 21
Description of Shares 22
Additional Information 23
</TABLE>
(i)
<PAGE>
GENERAL INFORMATION
This Statement of Additional Information relates only to the
Essex Aggressive Growth Fund. The Fund is a series of shares of
beneficial interest of The Managers AMG Funds, a no-load mutual
fund family, formed as a Massachusetts business trust (the
"Trust").
This Statement of Additional Information describes the
financial history, management and operation of 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."
Investments in the Fund are not:
* Deposits or obligations of any bank
* Guaranteed or endorsed by any bank
* Federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other
federal agency
INVESTMENT OBJECTIVES AND POLICIES
The following is additional information regarding the
investment objectives and policies used by the Fund in an attempt
to achieve its objective as stated in its Prospectus. The Fund
is an open-end management investment company. The Fund is
diversified.
The Fund is designed for investors who seek long-term capital
appreciation by investing primarily in a diversified portfolio
consisting mainly of equity securities of growth oriented
companies. The Fund seeks to achieve this objective by investing
its assets in equity securities of U.S. and non-U.S. companies
with small-, mid- and large- capitalizations.
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.
2
<PAGE>
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
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 certain
foreign securities. 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.
3
<PAGE>
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
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.
The Fund will not routinely hedge its foreign currency
exposure unless the Fund has to be protected from currency risk.
(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 that it invests. When
the Fund buys or sells a futures contact, the Fund must segregate
cash and/or liquid securities for the value of the contract.
There are additional risks associated with futures contracts.
It may be impossible to determine the future price of the
securities, and securities may not be marketable enough to close
out the contract when the Fund desires to do so.
Equity Index Futures Contracts. The 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."
4
<PAGE>
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 in which it was valued in the
Fund's portfolio. The price the Fund's portfolio may pay for
illiquid securities or receives upon resale may be lower than the
price paid or received for similar securities with a more liquid
market. Accordingly, the valuations of these securities will
reflect any limitations on their liquidity.
The Funds' may purchase Rule 144A securities eligible for
sale without registration under the 1933 Act. These securities
may be determined to be illiquid in accordance with the
guidelines established by The Managers Funds 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.
5
<PAGE>
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
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 in anticipation of a decrease in the market price
of that security. A broker retains
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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.
(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.
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<PAGE>
(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
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_% 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_% 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.
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<PAGE>
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.
Since the Fund commenced operations on _______________, 1999,
the portfolio turnover rate has not been computed for the Fund.
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.
SEAN M. HEALEY* - Trustee, President, Secretary and Treasurer;
Executive Vice President for Affiliated Managers Group, Inc.
since April 1995. From August 1987 through March 1995, he served
in a variety of roles in the Mergers and Acquisitions Department
of Goldman, Sachs & Co., the last of which was as Vice President.
His address is Two International Place, 23rd Floor, Boston,
Massachusetts 02110. He has served as a Trustee of The Managers
Funds since March 1999. His date of birth is May 9, 1961.
____________________ - Trustee; ________________.
____________________ - Trustee; ________________.
____________________ - Trustee; ________________.
____________________ - Trustee; ________________.
Trustees' Compensation
Each Trustee is currently paid an annual fee of $___________
for serving as Trustee of the Trust. Each Trustee also receives
an additional fee of $_______ for each in-person meeting attended
and $_______ for each telephonic meeting. In addition to their
service as Trustees of The Manager Funds (as described above),
the Trustees may serve as directors of other corporations that
are unrelated to the Trust.
The Trustees compensation has not been provided because the
Fund commenced operations on ______________, 1999.
- - ------------------------------
1 Mr. Healey is an "interested person" (as defined in the 1940 Act) of
the Fund.
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<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of ___________, 1999, ________________ "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.
As of ______________, 1999, the following persons or
entities owned more than 5% of the outstanding shares of the
Fund. Certain of these shareholders are omnibus processing
organizations.
Management Ownership
As of ______________, 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 Affiliated Managers Group, Inc. ("AMG"), and AMG serves as the
Managing Member of the LLC. AMG is located at Two International
Place, 23rd Floor, Boston, Massachusetts 02110.
The 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 _____, 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
subadviser which manages the assets of the Fund (the "Sub-
Adviser" or "Essex"). The Investment Manager receives no
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.
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<PAGE>
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.
Voluntary Fee Waivers and Expense Limitations
The Investment Manager has voluntarily agreed, for an
indefinite period, to limit total annual fund operating expenses
to %, subject to later reimbursement by the Fund in certain
circumstances. See "The Managers AMG Funds" in the Prospectus
for further information.
In general, the Investment Manager may decide to waive or
reimburse all or a portion of its fees from the Fund for a
variety of reasons, such as attempting to make the Fund's
performance more competitive as compared to similar funds. The
effect of the voluntary 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. From time to time, the Sub-Adviser may decide to
waive or reimburse all or a portion of the fees due and payable
from the Investment Manager. Voluntary fee waivers and expense
limitations by the Investment Manager or by the Sub-Adviser may
be terminated or reduced in amount at any time and solely in the
discretion of the Investment Manager or Sub-Adviser.
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.
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 ___, 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.
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<PAGE>
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
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.
Administrative and Marketing Reimbursement Agreement
12
<PAGE>
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 compensation from the Fund for these services. Pursuant to an
Administrative and Marketing Services 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 and the Investment Manager have adopted a joint
Code of Ethics under Rule 17j-1 of the 1940 Act. The Code of
Ethics generally requires employees of the Investment Manager to
preclear any personal securities investment (with limited
exceptions such as government securities). The preclearance
requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the
proposed investment. The restrictions are applicable to all
employees of the Investment Manager and 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 _______, 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.
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.
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<PAGE>
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, One Post Office Square, Boston,
Massachusetts 02109, 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
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.
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<PAGE>
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.
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. 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.
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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.
Short-Term Trading
The Fund is designed for investors with a long-term outlook.
The Fund is not designed for short-term traders whose frequent
purchases and redemptions can disrupt the Fund's investment
program and result in additional transaction costs. Therefore,
if a shareholder redeems or exchanges shares of the Fund within
30 days after purchasing such shares, the Fund will assess a
short-term trading fee on the redemption or exchange transaction
equal to 1.00% of the dollar amount of the transaction. For the
first 60 days subsequent to the inception of the Fund, no short-
term trading fees will be assessed. Any assessment of short-term
trading fees will be made to short-term trades subsequent to that
time. The fee is deducted from the redemption or exchange
proceeds and is paid to the Fund, not the Investment Manager.
The purpose of the fee is to reimburse the Fund for brokerage and
other transaction costs and to allocate these costs to the
investor making the redemption or exchange, so that other
shareholders of the Fund are not adversely affected by the
transaction. The Fund will
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<PAGE>
use the "first-in, first-out" method for determining whether
redemption or exchange transactions fall within the 30-day holding period.
Exchange of Shares
Except in the case of certain short-term traders (see
"Redeeming Shares" above), 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.
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.
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<PAGE>
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) the payment of compensation and/or
reimbursement to the Distributor, underwriters, securities
dealers and others engaged in the sale of shares, including
payments to be used by the Distributor to compensate or reimburse
securities dealers (which securities dealers may be affiliates of
the Distributor) engaged in the distribution and marketing of
shares and furnishing ongoing assistance to investors, and
(2) payment of compensation to and/or reimbursement of expenses
incurred by the Distributor or any other person in connection
with the servicing of shareholder accounts, including payments to
securities dealers and others in consideration of the provision
of personal service to investors and/or the maintenance or
servicing of shareholder accounts and expenses associated with
the provision of personal service by the Distributor directly to
investors. 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.
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.
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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
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
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<PAGE>
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.
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
____________, 1999, there is no current performance information
for the Fund.
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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
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 Stock Index, the Standard &
Poor's 400 Stock 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
21
<PAGE>
shareholder may be held personally liable to the extent that claims
are not satisfied by the Fund. However, upon payment of such
liability, the shareholder will be entitled to reimbursement from
the general assets of the Fund. The Trustees of the Trust intend
to conduct the operations of the Trust in a way as to avoid, as
far as possible, ultimate liability of the shareholders of the Fund.
The Declaration of Trust further provides that the name of
the Trust refers to the Trustees collectively as Trustees, not as
individuals or personally, that no Trustee, officer, employee or
agent of the Fund or to a shareholder, and that no Trustee,
officer, employee or agent is liable to any third persons in
connection with the affairs of the Fund, except if the liability
arises from his or its own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall
look solely to the property of the Fund for any satisfaction of
claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs
of the Fund.
The Trust shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning
termination by action of the shareholders or by action of the
Trustees upon notice to the shareholders.
Description of Shares
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which 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
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Trustees in writing, stating that they wish to communicate with
other shareholders with a view to obtaining signatures to request
a meeting for the purpose of voting upon the question of removal
of any of the Trustees and accompanies by a form of communication
and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books
of the Trust; or (2) inform such applicants as to the approximate
number of shareholders of record, and the approximate cost of
mailing to them the proposed shareholder communication and form
of request. If the Trustees elect to follow the latter, the
Trustees, upon the written request of such applicants accompanied
by a tender of the material to be mailed and the reasonable
expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as
recorded on the books, unless within five business days after
such tender the Trustees shall mail to such applicants and file
with the SEC, together with a copy of the material to be mailed,
a written statement signed by at least a majority of the Trustees
to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such
opinion. After opportunity for hearing upon the objections
specified in the written statements filed, the SEC may, and if
demanded by the Trustees or by such applicants shall, enter an
order either sustaining one or more objections or refusing to
sustain any of such objections, or if, after the entry of an
order sustaining one or more objections, the SEC shall find,
after notice and opportunity for a hearing, that all objections
so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all
shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
The Trustees have authorized the issuance and sale to the
public of shares of 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.
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ESSEX AGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
[To be filed by Amendment]
REPORT OF INDEPENDENT ACCOUNTANTS
[To be filed by Amendment]
24
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PART C
To the Registration Statement of
The Managers AMG Funds (the "Trust")
Item 23. Exhibits.
EXHIBIT NO. DESCRIPTION
- - ----------- -----------
a. Master Trust Agreement dated June 18, 1999, filed herewith.
b. By-Laws of the Trust dated June 18, 1999, filed herewith.
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., filed herewith.
d.1 Form of Investment Management Agreement between Registrant and
The Managers Funds LLC, filed herewith.
d.2 Form of Sub-Advisory Agreement between The Managers Funds LLC and
Essex Investment Management Company, LLC with respect to the
Essex Aggressive Growth Fund, filed herewith.
e. Distribution Agreement between the Registrant and The Managers
Funds LLC, to be filed by amendment.
f. Not applicable.
g. Custodian Agreement between the Registrant and State Street Bank
and Trust Company, to be filed by amendment.
h. Transfer Agency Agreement between the Registrant and Boston
Financial Data Services, Inc., to be filed by amendment.
i. Opinion and Consent of Goodwin, Procter & Hoar LLP with respect
to the Essex Aggressive Growth Fund, to be filed by amendment.
j. Consent of PricewaterhouseCoopers LLP, to be filed by amendment.
k. Not Applicable.
C-1
<PAGE>
l. Not Applicable.
m. Form of Plan of Distribution Pursuant to Rule 12b-1, to be filed
by amendment.
n. Not applicable.
o. Not applicable.
Item 24. Persons Controlled by or Under Common Control with Registrant.
None.
Item 25. Indemnification.
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.
C-2
<PAGE>
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:
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-3
<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-4
<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 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 6th day of August, 1999.
The Managers AMG Funds
By: /s/ Sean M. Healey
-------------------------------------
Name: Sean M. Healey
Title: President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Sean M. Healey Sole Trustee, President (principal August 6, 1999
--------------- executive officer) and Treasurer
Sean M. Healey (principal financial and accounting
officer)
C-5
<PAGE>
Exhibit a
- - ----------
<PAGE>
THE MANAGERS AMG FUNDS
MASTER TRUST AGREEMENT
June 18, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I - NAME AND DEFINITIONS 1
Section 1.1 Name and Principal Office 1
Section 1.2 Definitions 1
(a) "By-Laws" 1
(b) "class" 1
(c) "Commission" 2
(d) "Declaration of Trust" 2
(e) "1940 Act" 2
(f) "Shareholder" 2
(g) "Shares" 2
(h) "Sub-Trust" or "Series" 2
(i) "Trust" 2
(j) "Trustees" 2
ARTICLE II - PURPOSE OF TRUST 2
ARTICLE III - THE TRUSTEES 2
Section 3.1 Number, Designation, Election, Term, etc. 2
(a) Trustees 2
(b) Number 2
(c) Election and Term 3
(d) Resignation and Retirement 3
(e) Removal 3
(f) Vacancies 3
(g) Effect of Death, Resignation, etc 4
(h) No Accounting 4
Section 3.2 Powers of Trustees 4
(a) Investments 5
(b) Disposition of Assets 5
(c) Ownership Powers 5
(d) Subscription 5
(e) Form of Holding 5
(f) Reorganization, etc. 5
(g) Voting Trusts, etc. 6
(h) Compromise 6
(i) Partnerships, etc. 6
(j) Borrowing and Security 6
(k) Guarantees, etc. 6
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
(l) Insurance 6
(m) Pensions, etc. 6
(n) Distribution Plans 7
Section 3.3 Certain Contracts 7
(a) Advisory 7
(b) Administration 7
(c) Distribution 7
(d) Custodian and Depository 7
(e) Transfer and Dividend Disbursing Agency 7
(f) Shareholder Servicing 8
(g) Accounting 8
Section 3.4 Payment of Trust Expenses and Compensation of Trustees9
Section 3.5 Ownership of Assets of the Trust 9
Section 3.6 Action by Trustees 9
ARTICLE IV - SHARES 9
Section 4.1 Description of Shares 9
Section 4.2Establishment and Designation of Sub-Trusts and Classes11
(a) Assets Belonging to Sub-Trusts 11
(b) Liabilities Belonging to Sub-Trusts 12
(c) Dividends 12
(d) Liquidation 13
(e) Voting 13
(f) Redemption by Shareholder 13
(g) Redemption by Trust 14
(h) Net Asset Value 14
(i) Transfer 15
(j) Equality 15
(k) Fractions 15
(l) Conversion Rights 15
(m) Class Differences 15
Section 4.3 Ownership of Shares 15
Section 4.4 Investments in the Trust 16
Section 4.5 No Pre-emptive Rights 16
Section 4.6 Status of Shares and Limitation of Personal Liability 16
Section 4.7 No Appraisal Rights 16
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS 16
Section 5.1 Voting Powers 16
Section 5.2 Meetings 17
Section 5.3 Record Dates 17
Section 5.4 Quorum and Required Vote 18
Section 5.5 Action by Written Consent 18
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Section 5.6 Inspection of Records 18
Section 5.7 Additional Provisions 18
Section 5.8 Shareholder Communications 18
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION 19
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable;
Notice 19
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond
or Surety 20
Section 6.3 Indemnification of Shareholders 20
Section 6.4 Indemnification of Trustees, Officers, etc. 20
Section 6.5 Compromise Payment 21
Section 6.6 Indemnification Not Exclusive, etc. 21
Section 6.7 Liability of Third Persons Dealing with Trustees 22
ARTICLE VII - MISCELLANEOUS 22
Section 7.1 Duration and Termination of Trust 22
Section 7.2 Reorganization 22
Section 7.3 Amendments 23
Section 7.4 Filing of Copies; References; Headings 23
Section 7.5 Applicable Law 24
Section 7.6 Integration 24
</TABLE>
(iii)
<PAGE>
(iv)
<PAGE>
(v)
<PAGE>
THE MANAGERS AMG FUNDS
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts this 18th day of June, 1999, by the Trustees
hereunder, and by the holders of shares of beneficial interest to
be issued hereunder as hereinafter provided.
W I T N E S S E T H:
WHEREAS this Trust has been formed to carry on the business
of an investment company; and
WHEREAS this Trust is authorized to issue its shares of
beneficial interest in separate series, each separate series to
be a Sub-Trust hereunder, and to issue classes of Shares of any
Sub-Trust or divide Shares of any Sub-Trust into two or more
classes, all in accordance with the provisions hereinafter set
forth; and
WHEREAS the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts business
trust in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets which they may from
time to time acquire in any manner as Trustees hereunder IN TRUST
to manage and dispose of the same upon the following terms and
conditions for the benefit of the holders from time to time of
shares of beneficial interest in this Trust and the Sub-Trusts
created hereunder as hereinafter set forth.
ARTICLE I - NAME AND DEFINITIONS
--------------------------------
Section 1.1 Name and Principal Office. This Trust shall
be known as "The 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. The
principal office of the Trust shall be located at 40 Richards
Avenue, Norwalk, Connecticut 06854 or at such other location as
the Trustees may from time to time determine.
Section 1.2 Definitions. Whenever used herein, unless
otherwise required by the context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time;
<PAGE>
(b) "class" refers to any class of Shares of any
Series or Sub-Trust established and designated under or in
accordance with the provisions of Article IV;
(c) "Commission" shall have the meaning given it in
the 1940 Act;
(d) "Declaration of Trust" shall mean this Master
Trust Agreement as amended or restated from time to time;
(e) "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as amended
from time to time;
(f) "Shareholder" means a record owner of Shares;
(g) "Shares" refers to the transferable units of
interest into which the beneficial interest in the Trust and each
Sub-Trust of the Trust and/or any class of any Sub-Trust (as the
context may require) shall be divided from time to time;
(h) "Sub-Trust" or "Series" refers to a series of
Shares established and designated under or in accordance with the
provisions of Article IV;
(i) "Trust" refers to the Massachusetts business trust
established by this Declaration of Trust, as amended from time to
time, inclusive of each and every Sub-Trust established
hereunder; and
(j) "Trustees" refers to the Trustees of the Trust and
of each Sub-Trust hereunder named herein or elected in accordance
with Article III.
ARTICLE II - PURPOSE OF TRUST
-----------------------------
The purpose of the Trust is to operate as an investment
company and to offer Shareholders of the Trust and each Sub-Trust
of the Trust one or more investment programs primarily in
securities and debt instruments.
<PAGE>
ARTICLE III - THE TRUSTEES
--------------------------
Section 3.1 Number, Designation, Election, Term, etc.
(a) Trustees. The initial Trustee hereof and of each
Sub-Trust hereunder shall be Sean M. Healey, Two International
Place, 23rd Floor, Boston, Massachusetts 02110.
(b) Number. The Trustees serving as such, whether
named above or hereafter becoming Trustees, may increase or
decrease the number of Trustees to a number other than the number
theretofore determined. No decrease in the number of Trustees
shall have the effect of removing any Trustee from office prior
to the expiration of such Trustee's term, but the number of
Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
(c) Election and Term. Trustees in addition to those
named herein may become such by election by Shareholders or the
Trustees in office pursuant to Section 3.1(f). Each Trustee,
whether named above or hereafter becoming a Trustee, shall serve
as a Trustee of the Trust and of each Sub-Trust hereunder during
the lifetime of this Trust and until its termination as
hereinafter provided except as such Trustee sooner dies, resigns,
retires or is removed. Subject to Section 16(a) of the 1940 Act,
the Trustees may elect their own successors and may, pursuant to
Section 3.1(f) hereof, appoint Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may
resign or retire as a Trustee, by written instrument signed by
such Trustee and delivered to the other Trustees or to any
officer of the Trust, and such resignation or retirement shall
take effect upon such delivery or upon such later date as is
specified in such instrument and shall be effective as to the
Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or
without cause at any time: (i) by written instrument, signed by
at least two-thirds of the number of Trustees in office
immediately prior to such removal, specifying the date upon which
such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting called for
the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds of the Shares then
outstanding and filed with the Trust's custodian. Any such
removal shall be effective as to the Trust and each Sub-Trust
hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any of
the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may (but so long as there are at
least two remaining Trustees, need not unless required by the
<PAGE>
1940 Act) be filled by a majority of the remaining Trustees,
subject to the provisions of Section 16(a) of the 1940 Act,
through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine and such
appointment shall be effective upon the written acceptance of the
person named therein to serve as a Trustee and agreement by such
person to be bound by the provisions of this Declaration of
Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of retirement, resignation or increase
in number of Trustees to be effective at a later date shall
become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As
soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment is effective, the Trust
estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
(g) Effect of Death, Resignation, etc. The death,
resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not operate to annul or terminate the
Trust or any Sub-Trust hereunder or to revoke or terminate any
existing agency or contract created or entered into pursuant to
the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by
the 1940 Act or under circumstances which would justify removal
for cause, no person ceasing to be a Trustee as a result of
death, resignation, retirement, removal or incapacity (nor the
estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such
cessation.
Section 3.2 Powers of Trustees. Subject to the
provisions of this Declaration of Trust, the business of the
Trust shall be managed by the Trustees, and they shall have all
powers necessary or convenient to carry out that responsibility
and the purpose of the Trust. The Trustees in all instances
shall act as principals, and are and shall be free from the
control of the Shareholders. The Trustees shall have full power
and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the
Trust. The Trustees shall not be bound or limited by present or
future laws or customs with regard to investment by trustees or
fiduciaries, but shall have full authority and absolute power and
control over the assets of the Trust and the business of the
Trust to the same extent as if the Trustees were the sole owners
of the assets of the Trust and the business in their own right,
including such authority, power and control to do all acts and
things as they, in their uncontrolled discretion, shall deem
proper to accomplish the purposes of this Trust. Without
limiting the foregoing, the Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend
and repeal them to the extent that such By-Laws do not reserve
that right to the Shareholders; they may sue or be sued in the
name of the Trust; they may from time to time in accordance with
the provisions of Section 4.1 hereof establish Sub-Trusts, each
such Sub-Trust to operate as a separate and distinct investment
<PAGE>
medium and with separately defined investment objectives and
policies and distinct investment purposes; they may from time to
time in accordance with the provisions of Section 4.1 hereof
establish classes of Shares of any Series or Sub-Trust or divide
the Shares of any Series or Sub-Trust into classes; they may as
they consider appropriate elect and remove officers and appoint
and terminate agents and consultants and hire and terminate
employees, any one or more of the foregoing of whom may be a
Trustee, and may provide for the compensation of all of the
foregoing; they may appoint from their own number, and terminate,
any one or more committees consisting of two or more Trustees,
including without implied limitation an executive committee,
which may, when the Trustees are not in session and subject to
the 1940 Act, exercise some or all of the power and authority of
the Trustees as the Trustees may determine; in accordance with
Section 3.3 they may employ one or more advisers, administrators,
depositories and custodians and may authorize any depository or
custodian to employ subcustodians or agents and to deposit all or
any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer,
dividend, accounting or Shareholder servicing agents or any of
the foregoing, provide for the distribution of Shares by the
Trust through one or more distributors, principal underwriters or
otherwise, and set record dates or times for the determination of
Shareholders or various of them with respect to various matters;
they may compensate or provide for the compensation of the
Trustees, officers, advisers, administrators, custodians, other
agents, consultants and employees of the Trust or the Trustees on
such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the
Trustees and to any employee, adviser, administrator,
distributor, depository, custodian, transfer and dividend
disbursing agent, or any other agent or consultant of the Trust
such authority, powers, functions and duties as they consider
desirable or appropriate for the conduct of the business and
affairs of the Trust, including without implied limitation, the
power and authority to act in the name of the Trust and any
Sub-Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not
inconsistent with the 1940 Act or other applicable law, the
Trustees shall have power and authority for and on behalf of the
Trust and each separate Sub-Trust established hereunder:
(a) Investments. To invest and reinvest cash and
other property, and to hold cash or other property uninvested
without in any event being bound or limited by any present or
future law or custom in regard to investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend,
pledge, mortgage, hypothecate, write options on and lease any or
all of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or
exercise any rights of ownership, with respect to stock or other
securities, debt instruments or property; and to execute and
deliver proxies or powers of attorney to such person or persons
as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities,
<PAGE>
debt instruments or property as the Trustees shall deem proper;
(d) Subscription. To exercise powers and rights of
subscription or otherwise which in any manner arise out of
ownership of securities or debt instruments;
(e) Form of Holding. To hold any security, debt
instrument or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in
the name of the Trustees or of the Trust or of any Sub-Trust or
in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate
in any plan for the reorganization, consolidation or merger of
any corporation or issuer, any security or debt instrument of
which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any
security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of
any securities or debt instruments in acting through a committee,
depositary, voting trustee or otherwise, and in that connection
to deposit any security or debt instrument with, or transfer any
security or debt instrument to, any such committee, depositary or
trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so
deposited or transferred) as the Trustees shall deem proper, and
to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise
adjust claims in favor of or against the Trust or any Sub-Trust
or any matter in controversy, including but not limited to claims
for taxes;
(i) Partnerships, etc. To enter into joint ventures,
general or limited partnerships and any other combinations or
associations;
(j) Borrowing and Security. To borrow funds and to
mortgage and pledge the assets of the Trust or any part thereof
to secure obligations arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the
payment of any notes or other obligations of any person; to make
contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such
obligations;
<PAGE>
(l) Insurance. To purchase and pay for entirely out
of Trust property such insurance and/or bonding as they may deem
necessary or appropriate for the conduct of the business,
including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, consultants,
investment advisers, managers, administrators, distributors,
principal underwriters, or independent contractors, or any
thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have
been taken or omitted by any such person in any such capacity,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the
power to indemnify such person against such liability; and
(m) Pensions, etc. To pay pensions for faithful
service, as deemed appropriate by the Trustees, and to adopt,
establish and carry out pension, profit-sharing, share bonus,
share purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of
providing such retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the Trust.
(n) Distribution Plans. To adopt on behalf of the
Trust or any Sub-Trust with respect to any class thereof a plan
of distribution and related agreements thereto pursuant to the
terms of Rule 12b-1 of the 1940 Act and to make payments from the
assets of the Trust or the relevant Sub-Trust or Sub-Trusts
pursuant to said Rule 12b-1 Plan.
Section 3.3 Certain Contracts. Subject to compliance
with the provisions of the 1940 Act, but notwithstanding any
limitations of present and future law or custom in regard to
delegation of powers by trustees generally, the Trustees may, at
any time and from time to time and without limiting the
generality of their powers and authority otherwise set forth
herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited
partnerships, other type of organizations, or individuals (a
"Contracting Party"), to provide for the performance and
assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any
Sub-Trust, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the
Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of
the Trustees and in conformity with the stated policy of the
Trustees with respect to the investments of the Trust or of the
assets belonging to any Sub-Trust of the Trust (as that phrase is
defined in subsection (a) of Section 4.2), to manage such
investments and assets, make investment decisions with respect
<PAGE>
thereto, and to place purchase and sale orders for portfolio
transactions relating to such investments and assets;
(b) Administration. Subject to the general
supervision of the Trustees and in conformity with any policies
of the Trustees with respect to the operations of the Trust and
each Sub-Trust (including each class thereof), to supervise all
or any part of the operations of the Trust and each Sub-Trust,
and to provide all or any part of the administrative and clerical
personnel, office space and office equipment and services
appropriate for the efficient administration and operations of
the Trust and each Sub-Trust;
(c) Distribution. To distribute the Shares of the
Trust and each Sub-Trust (including any classes thereof), to the
principal underwriter of such Shares, and/or to act as agent of
the Trust and each Sub-Trust in the sale of Shares and the
acceptance or rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository
for and to maintain custody of the property of the Trust and each
Sub-Trust and accounting records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To
maintain records of the ownership of outstanding Shares, the
issuance and redemption and the transfer thereof, and to disburse
any dividends declared by the Trustees and in accordance with the
policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with
respect to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares, and
similar matters; and
(g) Accounting. To handle all or any part of the
accounting responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all
of the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto
may contain such terms interpretive of or in addition to the
delineation of the services, duties and responsibilities provided
for, including provisions that are not inconsistent with the 1940
Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent
or limit the Trust or a Contracting Party from entering into
sub-contractual arrangements relating to any of the matters
referred to in Sections 3.3(a) through (g) hereof.
The fact that:
<PAGE>
(i) any of the Shareholders, Trustees or officers
of the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter or
distributor or agent of or for any Contracting Party, or of or
for any parent or affiliate of any Contracting Party or that the
Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust or any Sub-Trust, or
that
(ii) any Contracting Party may have a contract
providing for the rendering of any similar services to one or
more other corporations, trusts, associations, partnerships,
limited partnerships or other organizations, or have other
business or interests, shall not affect the validity of any
contract for the performance and assumption of services, duties
and responsibilities to, for or of the Trust or any Sub-Trust
and/or the Trustees or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing the same or
create any liability or accountability to the Trust, any
Sub-Trust or its Shareholders, provided that in the case of any
relationship or interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the
material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such
relationship or interest and the contract involved is approved in
good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or
disinterested Trustees are less than a quorum of all of the
Trustees), (y) the material facts as to such relationship or
interest and as to the contract have been disclosed to or are
known by the Shareholders entitled to vote thereon and the
contract involved is specifically approved in good faith by vote
of the Shareholders, or (z) the specific contract involved is
fair to the Trust as of the time it is authorized, approved or
ratified by the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of
Trustees. The Trustees are authorized to pay or to cause to be
paid out of the principal or income of the Trust or any
Sub-Trust, or partly out of principal and partly out of income,
and to charge or allocate the same to, between or among such one
or more of the Sub-Trusts and/or one or more classes of Shares
thereof that may be established and designated pursuant to
Article IV, as the Trustees deem fair, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection
with the Trust, any Sub-Trust and/or any class of Shares thereof,
or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal
underwriter, auditor, counsel, depository, custodian, transfer
agent, dividend disbursing agent, accounting agent, Shareholder
servicing agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without
limiting the generality of any other provision hereof, the
Trustees shall be entitled to reasonable compensation from the
Trust for their services as Trustees and may fix the amount of
such compensation.
<PAGE>
Section 3.5 Ownership of Assets of the Trust. Title to
all of the assets of the Trust and of each Sub-Trust shall at all
times be considered as vested in the Trustees.
Section 3.6 Action by Trustees. Except as otherwise
provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by
the Trustees on behalf of or with respect to the Trust or any
Sub-Trust or class thereof may be taken by a majority of the
Trustees present at a meeting of Trustees (a quorum, consisting
of at least one-half of the Trustees then in office, being
present), within or without Massachusetts, including any meeting
held by means of a conference telephone or other communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation
by such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in
office (or such larger or different number as may be required by
the 1940 Act or other applicable law).
ARTICLE IV - SHARES
-------------------
Section 4.1 Description of Shares. The beneficial
interest in the Trust shall be divided into Shares, all with
$.001 par value, but the Trustees shall have the authority from
time to time to issue Shares in one or more Series (each of which
Series of Shares shall represent the beneficial interest in a
separate and distinct Sub-Trust of the Trust, including without
limitation each Sub-Trust specifically established and designated
in Section 4.2), as they deem necessary or desirable. For all
purposes under this Declaration of Trust or otherwise, including,
without implied limitation, (i) with respect to the rights of
creditors and (ii) for purposes of interpreting the relevant
rights of each Sub-Trust and the Shareholders of each Sub-Trust,
each Sub-Trust established hereunder shall be deemed to be a
separate trust. The Trustees shall have exclusive power without
the requirement of Shareholder approval to establish and
designate such separate and distinct Sub-Trusts, and to fix and
determine the relative rights and preferences as between the
shares of the separate Sub-Trusts as to right of redemption and
the price, terms and manner of redemption, special and relative
rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion
rights, and conditions under which the several Sub-Trusts shall
have separate voting rights or no voting rights.
In addition, the Trustees shall have exclusive power,
without the requirement of Shareholder approval, to issue classes
of Shares of any Sub-Trust or divide the Shares of any Sub-Trust
into classes, each class having such different dividend,
liquidation, voting and other rights as the Trustees may
determine, and may establish and designate the specific classes
of Shares of each Sub-Trust. The fact that a Sub-Trust shall
have initially been established and designated without any
specific establishment or designation of classes (i.e., that all
Shares of such Sub-Trust are initially of a single class), or
that a Sub-Trust shall have more than one established and
designated class, shall not limit the authority of the Trustees
to establish and designate separate classes, or one or more
additional classes, of said Sub-Trust without approval of the
<PAGE>
holders of the initial class thereof, or previously established
and designated class or classes thereof.
The number of authorized Shares and the number of Shares of
each Sub-Trust or class thereof that may be issued is unlimited,
and the Trustees may issue Shares of any Sub-Trust or class
thereof for such consideration and on such terms as they may
determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined
by the Trustees shall be fully paid and non-assessable (but may
be subject to mandatory contribution back to the Trust as
provided in subsection (g) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares
previously issued and reacquired of any Sub-Trust or class
thereof into one or more Sub-Trusts or classes thereof that may
be established and designated from time to time. The Trustees
may hold as treasury Shares, reissue for such consideration and
on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Sub-Trust or
class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books
or establish record dates and times for the purposes of
determining the holders of Shares entitled to be treated as such,
to the extent provided or referred to in Section 5.3.
The establishment and designation of any Sub-Trust or of any
class of Shares of any Sub-Trust in addition to those established
and designated in Section 4.2 shall be effective (i) upon the
execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation of the relative
rights and preferences of the Shares of such Sub-Trust or class,
(ii) upon the execution of an instrument in writing by an officer
of the Trust pursuant to the vote of a majority of the Trustees,
or (iii) as otherwise provided in either such instrument. At any
time that there are no Shares outstanding of any particular
Sub-Trust or class previously established and designated, the
Trustees may by an instrument executed by a majority of their
number (or by an instrument executed by an officer of the Trust
pursuant to the vote of a majority of the Trustees) abolish that
Sub-Trust or class and the establishment and designation thereof.
Each instrument establishing and designating any Sub-Trust shall
have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any
organization in which any such person is interested may acquire,
own, hold and dispose of Shares of any Sub-Trust (including any
classes thereof) of the Trust to the same extent as if such
person were not a Trustee, officer or other agent of the Trust;
and the Trust may issue and sell or cause to be issued and sold
and may purchase Shares of any Sub-Trust (including any classes
thereof) from any such person or any such organization subject
only to the general limitations, restrictions or other provisions
applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof) generally.
Section 4.2 Establishment and Designation of Sub-Trusts
and Classes. Without limiting the authority of the Trustees set
<PAGE>
forth in Section 4.1 to establish and designate any further
Sub-Trusts, the Trustees hereby establish and designate one (1)
Sub-Trust: (i) Essex Growth Fund, which shall have a single
class of Shares. The Shares of such Sub-Trust and any Shares of
any further Sub-Trust that may from time to time be established
and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Sub-Trust at the
time of establishing and designating the same) have the following
relative rights and preferences:
(a) Assets Belonging to Sub-Trusts. All consideration
received by the Trust for the issue or sale of Shares of a
particular Sub-Trust or any classes thereof, together with all
assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall be held
by the Trustees in trust for the benefit of the holders of Shares
of that Sub-Trust or class thereof and shall irrevocably belong
to that Sub-Trust (and be allocable to any classes thereof) for
all purposes, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings,
profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds,
in whatever form the same may be, together with any General Items
(as hereinafter defined) allocated to that Sub-Trust as provided
in the following sentence, are herein referred to as "assets
belonging to" that Sub-Trust (and allocable to any classes
thereof). In the event that there are any assets, income,
earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular
Sub-Trust (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the
Sub-Trusts established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem
fair and equitable; and any General Items so allocated to a
particular Sub-Trust shall belong to that Sub-Trust (and be
allocable to any classes thereof). Each such allocation by the
Trustees shall be conclusive and binding upon the holders of all
Shares of all Sub-Trusts (including any classes thereof) for all
purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets
belonging to each particular Sub-Trust shall be charged with the
liabilities in respect of that Sub-Trust and all expenses, costs,
charges and reserves belonging to that Sub-Trust, and any general
liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular
Sub-Trust shall be allocated and charged by the Trustees to and
among any one or more of the Sub-Trusts established and
designated from time to time in such manner and on such basis as
<PAGE>
the Trustees in their sole discretion deem fair and equitable.
In addition, the liabilities in respect of a particular class of
Shares of a particular Sub-Trust and all expenses, costs, charges
and reserves belonging to that class of Shares, and any general
liabilities, expenses, costs, charges or reserves of that
particular Sub-Trust which are not readily identifiable as
belonging to any particular class of Shares of that Sub-Trust
shall be allocated and charged by the Trustees to and among any
one or more of the classes of Shares of that Sub-Trust
established and designated from time to time in such manner and
on such basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to a Sub-Trust or class thereof
are herein referred to as "liabilities belonging to" that
Sub-Trust or class thereof. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders, creditors and any
other persons dealing with the Trust or any Sub-Trust (including
any classes thereof) for all purposes. Any creditor of any
Sub-Trust may look only to the assets of that Sub-Trust to
satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon
the Shareholders.
(c) Dividends. Dividends and distributions on Shares
of a particular Sub-Trust or any class thereof may be paid with
such frequency as the Trustees may determine, which may be daily
or otherwise pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Sub-Trust or class,
from such of the income and capital gains, accrued or realized,
from the assets belonging to that Sub-Trust, or in the case of a
class, belonging to that Sub-Trust and allocable to that class,
as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All
dividends and distributions on Shares of a particular Sub-Trust
or class thereof shall be distributed pro rata to the holders of
Shares of that Sub-Trust or class in proportion to the number of
Shares of that Sub-Trust or class held by such holders at the
date and time of record established for the payment of such
dividends or distributions, except that in connection with any
dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established
by the Trustees under such program or procedure. Such dividends
and distributions may be made in cash or Shares of that Sub-Trust
or class or a combination thereof as determined by the Trustees
or pursuant to any program that the Trustees may have in effect
at the time for the election by each Shareholder of the mode of
the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at
the net asset value thereof as determined in accordance with
subsection (h) of Section 4.2.
The Trustees shall have full discretion to determine which
items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the holders of Shares of each Sub-Trust
or any class thereof that has been established and designated
shall be entitled to receive, when and as declared by the
Trustees, the excess of the assets belonging to that Sub-Trust,
or in the case of a class, belonging to that Sub-Trust and
allocable to that class, over the liabilities belonging to that
Sub-Trust or class. The assets so distributable to the holders
of Shares of any particular Sub-Trust or class thereof shall be
<PAGE>
distributed among such holders in proportion to the number of
Shares of that Sub-Trust or class thereof held by them and
recorded on the books of the Trust. The liquidation of any
particular Sub-Trust or class thereof may be authorized at any
time by vote of a majority of the Trustees then in office.
(e) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a whole Share shall be entitled to
one vote for each dollar of net asset value standing in such
Shareholder's name on the books of the Trust irrespective of the
Series thereof or class thereof and all Shares of all Series and
classes thereof shall vote together as a single class; provided,
however, that as to any matter (i) with respect to which a
separate vote of one or more Series or classes thereof is
required by the 1940 Act or the provisions of the writing
establishing and designating the Sub-Trust or class, such
requirements as to a separate vote by such Series or class
thereof shall apply in lieu of all Shares of all Series and
classes thereof voting together; and (ii) as to any matter which
affects the interests of one or more particular Series or classes
thereof, only the holders of Shares of the one or more affected
Series or classes shall be entitled to vote, and each such Series
or class shall vote as a separate class.
(f) Redemption by Shareholder. Each holder of Shares
of a particular Sub-Trust or any class thereof shall have the
right at such times as may be permitted by the Trust to require
the Trust to redeem all or any part of such holder's Shares of
that Sub-Trust or class thereof at a redemption price equal to
the net asset value per Share of that Sub-Trust or class thereof
next determined in accordance with subsection (h) of this Section
4.2 after the Shares are properly tendered for redemption,
subject to any contingent deferred sales charge or redemption
charge in effect at the time of redemption. Payment of the
redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may, subject to the requirements of the
1940 Act, make payment wholly or partly in securities or other
assets belonging to the Sub-Trust of which the Shares being
redeemed are part at the value of such securities or assets used
in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone
payment of the redemption price and may suspend the right of the
holders of Shares of any Sub-Trust or class thereof to require
the Trust to redeem Shares of that Sub-Trust during any period or
at any time when and to the extent permissible under the 1940
Act.
(g) Redemption by Trust. Each Share of each Sub-Trust
or class thereof that has been established and designated is
subject to redemption by the Trust at the redemption price which
would be applicable if such Share was then being redeemed by the
Shareholder pursuant to subsection (f) of this Section 4.2:
(i) at any time, if the Trustees determine in their sole
discretion and by majority vote that failure to so redeem may
have materially adverse consequences to the Trust or any
Sub-Trust or to the holders of the Shares of the Trust or any
Sub-Trust thereof or class thereof, or (ii) upon such other
conditions as may from time to time be determined by the Trustees
<PAGE>
and set forth in the then current Prospectus of the Trust. Upon
such redemption the holders of the Shares so redeemed shall have
no further right with respect thereto other than to receive
payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of
any Sub-Trust shall be (i) in the case of a Sub-Trust whose
Shares are not divided into classes, the quotient obtained by
dividing the value of the net assets of that Sub-Trust (being the
value of the assets belonging to that Sub-Trust less the
liabilities belonging to that Sub-Trust) by the total number of
Shares of that Sub-Trust outstanding, and (ii) in the case of a
class of Shares of a Sub-Trust whose Shares are divided into
classes, the quotient obtained by dividing the value of the net
assets of that Sub-Trust allocable to such class (being the value
of the assets belonging to that Sub-Trust allocable to such class
less the liabilities belonging to such class) by the total number
of Shares of such class outstanding; all determined in accordance
with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from
time to time.
The Trustees may determine to maintain the net asset value
per Share of any Sub-Trust at a designated constant dollar amount
and in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declarations of income
attributable to that Sub-Trust as dividends payable in additional
Shares of that Sub-Trust at the designated constant dollar amount
and for the handling of any losses attributable to that
Sub-Trust. Such procedures may provide that in the event of any
loss each Shareholder shall be deemed to have contributed to the
capital of the Trust attributable to that Sub-Trust such
Shareholder's pro rata portion of the total number of Shares
required to be cancelled in order to permit the net asset value
per Share of that Sub-Trust to be maintained, after reflecting
such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by
making an investment in any Sub-Trust with respect to which the
Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event
of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust
or class thereof shall be transferable, but transfers of Shares
of a particular Sub-Trust or class thereof will be recorded on
the Share transfer records of the Trust applicable to that
Sub-Trust or class only at such times as Shareholders shall have
the right to require the Trust to redeem Shares of that Sub-Trust
or class and at such other times as may be permitted by the
Trustees.
(j) Equality. Except as provided herein or in the
instrument designating and establishing any class of Shares or
any Sub-Trust, all Shares of each particular Sub-Trust or class
thereof shall represent an equal proportionate interest in the
assets belonging to that Sub-Trust, or in the case of a class,
belonging to that Sub-Trust and allocable to that class, subject
to the liabilities belonging to that Sub-Trust or class, and each
Share of any particular Sub-Trust or class shall be equal to each
other Share of that Sub-Trust or class; but the provisions of
this sentence shall not restrict any distinctions permissible
under subsection (c) of this Section 4.2 that may exist with
respect to dividends and distributions on Shares of the same
<PAGE>
Sub-Trust or class. The Trustees may from time to time divide or
combine the Shares of any particular Sub-Trust or class into a
greater or lesser number of Shares of that Sub-Trust or class
without thereby changing the proportionate beneficial interest in
the assets belonging to that Sub-Trust or class or in any way
affecting the rights of Shares of any other Sub-Trust or class.
(k) Fractions. Any fractional Share of any Sub-Trust
or class, if any such fractional Share is outstanding, shall
carry proportionately all the rights and obligations of a whole
Share of that Sub-Trust or class, including rights and
obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the
Trust.
(l) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the
authority to provide that holders of Shares of any Sub-Trust or
class thereof shall have the right to convert said Shares into
Shares of one or more other Sub-Trust or class thereof in
accordance with such requirements and procedures as may be
established by the Trustees.
(m) Class Differences. The relative rights and
preferences of the classes of any Sub-Trust may differ in such
other respects as the Trustees may determine to be appropriate in
their sole discretion, provided that such differences are set
forth in the instrument establishing and designating such classes
and executed by a majority of the Trustees (or by an instrument
executed by an officer of the Trust pursuant to a vote of a
majority of the Trustees).
Section 4.3 Ownership of Shares. The ownership of Shares
shall be recorded on the books of the Trust or of a transfer or
similar agent for the Trust, which books shall be maintained
separately for the Shares of each Sub-Trust and each class
thereof that has been established and designated. No
certificates certifying the ownership of Shares need be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the use of facsimile
signatures, the transfer of Shares and similar matters. The
record books of the Trust as kept by the Trust or any transfer or
similar agent, as the case may be, shall be conclusive as to who
are the Shareholders and as to the number of Shares of each
Sub-Trust and class thereof held from time to time by each such
Shareholder.
Section 4.4 Investments in the Trust. The Trustees may
accept or reject investments in the Trust and each Sub-Trust from
such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from
time to time authorize or determine. The Trustees may authorize
any distributor, principal underwriter, custodian, transfer agent
or other person to accept orders for the purchase of Shares that
conform to such authorized terms and to reject any purchase
orders for Shares whether or not conforming to such authorized
terms.
<PAGE>
Section 4.5 No Pre-emptive Rights. Shareholders shall
have no pre-emptive or other right to subscribe to any additional
Shares or other securities issued by the Trust or any Sub-Trust.
Section 4.6 Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving
only the rights provided in this instrument. Every Shareholder
by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the Trust
or any Sub-Trust thereof nor entitle the representative of any
deceased Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but only to
the rights of said decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to
the whole or any part of the Trust property or right to call for
a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind
personally any Shareholder, nor except as specifically provided
herein to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
Section 4.7 No Appraisal Rights. Shareholders shall have
no right to demand payment for their shares or to any other
rights of dissenting shareholders in the event the Trust
participates in any transaction which would give rise to
appraisal or dissenters' rights by a shareholder of a corporation
organized under Chapter 156B of the General Laws of the
Commonwealth of Massachusetts, or otherwise.
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------------------
<PAGE>
Section 5.1 Voting Powers. The Shareholders shall have
power to vote only (i) for the election or removal of Trustees as
provided in Section 3.1, (ii) with respect to any contract with a
Contracting Party as provided in Section 3.3 as to which
Shareholder approval is required by the 1940 Act, (iii) with
respect to any termination or reorganization of the Trust to the
extent and as provided in Sections 7.1 and 7.2, (iv) with respect
to any amendment of this Declaration of Trust to the extent and
as provided in Section 7.3, (v) to the same extent as the
stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class
action on behalf of the Trust or any Sub-Trust thereof or the
Shareholders (provided, however, that a Shareholder of a
particular Sub-Trust shall not be entitled to a derivative or
class action on behalf of any other Sub-Trust (or Shareholder of
any other Sub-Trust) of the Trust) and (vi) with respect to such
additional matters relating to the Trust as may be required by
the 1940 Act, this Declaration of Trust, the By-Laws or any
registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary
or desirable. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy.
Proxies may be given by or on behalf of a shareholder orally or
in writing or pursuant to any computerized, telephonic, or
mechanical data gathering process. A proxy with respect to
Shares held in the name of two or more persons shall be valid if
executed or otherwise given by or on behalf of any one of them
unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed or otherwise given by or on
behalf of a Shareholder shall be deemed valid unless challenged
at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration of Trust or the By-Laws
to be taken by Shareholders.
Section 5.2 Meetings. No annual or regular meeting of
Shareholders is required. Special meetings of Shareholders may
be called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to
be given by the Trustees by mailing such notice at least seven
days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust.
The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any
Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice
of any meeting of Shareholders for a period of 30 days after
written application by Shareholders holding at least 10% of the
Shares then outstanding requesting a meeting be called for any
other purpose requiring action by the Shareholders as provided
herein or in the By-Laws, then Shareholders holding at least 10%
of the Shares then outstanding may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner
provided for herein in case of call thereof by the Trustees.
<PAGE>
Section 5.3 Record Dates. For the purpose of determining
the Shareholders who are entitled to vote or act at any meeting
or any adjournment thereof, or who are entitled to participate in
any dividend or distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer
books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees
may determine; or without closing the transfer books the Trustees
may fix a date and time not more than 90 days prior to the date
of any meeting of Shareholders or other action as the date and
time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated
as Shareholders of record for purposes of such other action, and
any Shareholder who was a Shareholder at the date and time so
fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though such Shareholder
has since that date and time disposed of such Shareholder's
Shares, and no Shareholder becoming such after that date and time
shall be so entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 5.4 Quorum and Required Vote. Except as
otherwise provided by the 1940 Act or other applicable law,
thirty percent of the Shares entitled to vote shall be a quorum
for the transaction of business at a Shareholders' meeting, but
any lesser number shall be sufficient for adjournments. Any
meeting of shareholders, whether or not a quorum is present, may
be adjourned for any lawful purpose provided that no meeting
shall be adjourned for more than six months beyond the originally
scheduled meeting date. Any adjourned session or sessions may be
held, within a reasonable time after the date set for the
original meeting without the necessity of further notice. A
majority of the Shares voted at a meeting of which a quorum is
present shall decide any questions and a plurality shall elect a
Trustee, except when a different vote is required or permitted by
any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the
provisions of the 1940 Act and other applicable law, any action
taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by the 1940 Act or
by any express provision of this Declaration of Trust or the
By-Laws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the
Trust shall be open to inspection by Shareholders for any lawful
purpose reasonably related to a Shareholder's interest as a
Shareholder. The Trustees may from time to time establish
reasonable standards including standards governing what
information and documents are to be furnished, at what time and
location and at whose expense with respect to Shareholder
inspection of Trust records to the same extent as is permitted
stockholders of a Massachusetts business corporation under the
Massachusetts Business Corporation Law.
<PAGE>
Section 5.7 Additional Provisions. The By-Laws may
include further provisions for Shareholders' votes and meetings
and related matters not inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or
more Shareholders of record who have been such for at least six
months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least
$25,000 or at least 1% of the 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 a request for a Shareholder meeting and
accompanied 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 Sub-Trust,
as applicable; or (2) inform such applicants as to the
approximate number of Shareholders of record, and the approximate
cost of mailing to them the proposed communication and form of
request.
If the Trustees elect to follow the course specified in
clause (2) above, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed
and of 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 Commission, 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. The Trustees shall
thereafter comply with any order entered by the Commission and
the requirements of the 1940 Act and the Securities Exchange Act
of 1934.
<PAGE>
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION
-----------------------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice. All persons extending credit to, contracting
with or having any claim against the Trust shall look only to the
assets of the Sub-Trust with which such person dealt for payment
under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or
future, nor any other Sub-Trust shall be personally liable
therefor. Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees
or any of them in connection with the Trust shall be conclusively
deemed to have been executed or done only by or for the Trust (or
the Sub-Trust) or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer
against any liability to the Trust or the Shareholders to which
such Trustee or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of
Trustee or of such officer.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of the Commonwealth of Massachusetts and
shall recite to the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets
and property of the Trust, or the particular Sub-Trust in
question, as the case may be, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety. The exercise by the Trustees of their powers
and discretion hereunder shall be binding upon everyone
interested. A Trustee shall be liable for such Trustee's own
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for errors
of judgment or mistakes of fact or law. Subject to the
foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent,
employee, consultant, adviser, administrator, distributor or
principal underwriter, custodian or transfer, dividend
disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee; (b) the Trustees may take advice
of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust and their duties as
Trustees, and shall be under no liability for any act or omission
in accordance with such advice or for failing to follow such
advice; and (c) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of
account of the Trust and upon written reports made to the
<PAGE>
Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee
of a Contracting Party appointed by the Trustees pursuant to
Section 3.3. The Trustees as such shall not be required to give
any bond or surety or any other security for the performance of
their duties.
Section 6.3 Indemnification of Shareholders. In case any
Shareholder (or former Shareholder) of any Sub-Trust of the Trust
shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or
having been a Shareholder and not because of such Shareholder's
acts or omissions or for some other reason, said Sub-Trust (upon
proper and timely request by the Shareholder) shall assume the
defense against such charge and satisfy any judgment thereon, and
the Shareholder or former Shareholder (or such Shareholder's
heirs, executors, administrators or other legal representatives
or in the case of a corporation or other entity, its corporate or
other general successor) shall be entitled out of the assets of
said Sub-Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc.
The Trust shall indemnify (from the assets of the Sub-Trust or
Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person")) against all
liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person
may be or may have been involved as a party or otherwise or with
which such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a
Trustee or officer, director or trustee, except with respect to
any matter as to which it has been determined that such Covered
Person had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (such conduct referred to
hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i)
a final decision on the merits by a court or other body before
whom the proceeding was brought that the person to be indemnified
was not liable by reason of Disabling Conduct, (ii) dismissal of
a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the
facts, that the indemnitee was not liable by reason of Disabling
Conduct by (a) a vote of a majority of a quorum of Trustees who
are neither "interested persons" of the Trust as defined in
section 2(a)(19) of the 1940 Act nor parties to the proceeding,
or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by
any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or
penalties), may be paid from time to time by the Sub-Trust in
<PAGE>
question in advance of the final disposition of any such action,
suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-Trust in
question if it is ultimately determined that indemnification of
such expenses is not authorized under this Article VI and (i) the
Covered Person shall have provided security for such undertaking,
(ii) the Trust shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or
an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the Covered Person ultimately will be found entitled
to indemnification.
Section 6.5 Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered Person
referred to in Section 6.4, pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for
any other expenses shall be provided unless such indemnification
shall be approved (a) by a majority of the disinterested Trustees
who are not parties to the proceeding or (b) by an independent
legal counsel in a written opinion. Approval by the Trustees
pursuant to clause (a) or by independent legal counsel pursuant
to clause (b) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance
with any of such clauses as indemnification if such Covered
Person is subsequently adjudicated by a court of competent
jurisdiction to have been liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against
whom the action, suit or other proceeding in question or another
action, suit or other proceeding on the same or similar grounds
is then or has been pending or threatened, and a "disinterested"
person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending or
threatened. Nothing contained in this Article shall affect any
rights to indemnification to which personnel of the Trust, other
than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
Section 6.7 Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
<PAGE>
ARTICLE VII - MISCELLANEOUS
---------------------------
Section 7.1 Duration and Termination of Trust. Unless
terminated as provided herein, the Trust shall continue without
limitation of time and, without limiting the generality of the
foregoing, no change, alteration or modification with respect to
any Sub-Trust or class thereof shall operate to terminate the
Trust. The Trust may be terminated at any time by a majority of
the Trustees then in office subject to a favorable vote of a
majority of the outstanding voting securities, as defined in the
1940 Act.
Upon termination, after paying or otherwise providing for
all charges, taxes, expenses and liabilities, whether due or
accrued or anticipated as may be determined by the Trustees, the
Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets to
distributable form in cash, securities or other property, or any
combination thereof, and distribute the proceeds to the
Shareholders in conformity with the provisions of subsection (d)
of Section 4.2.
Section 7.2 Reorganization. The Trust, or any one or
more Sub-Trusts, may, either as the successor, survivor, or
non-survivor, (1) consolidate or merge with one or more other
trusts, sub-trusts, partnerships, associations or corporations
organized under the laws of the Commonwealth of Massachusetts or
any other state of the United States, to form a consolidated or
merged trust, partnership, limited liability company, association
or corporation under the laws of which any one of the constituent
entities is organized with the Trust to be the survivor or
non-survivor of such consolidation or merger, or (2) transfer a
substantial portion of its assets to one or more other trusts,
sub-trusts, partnerships, limited liability companies,
associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, sub-trusts,
partnerships, limited liability companies, associations or
corporations transfer a substantial portion of its assets to it,
any such consolidation, merger or transfer to be upon such terms
and conditions as are specified in an agreement and plan of
reorganization authorized and approved by the Trustees and
entered into by the Trust, or one or more Sub-Trusts as the case
may be, in connection therewith. Any such consolidation, merger
or transfer may be authorized at any time by vote of a majority
of the Trustees then in office.
Section 7.3 Amendments. All rights granted to the
Shareholders under this Declaration of Trust are granted subject
to the reservation of the right to amend this Declaration of
Trust as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or
Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or
Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights
of Shareholders) may be amended at any time, so long as such
amendment does not materially adversely affect the rights of any
Shareholder with respect to which such amendment is or purports
to be applicable and so long as such amendment is not in
contravention of applicable law, including the 1940 Act, by an
instrument in writing signed by a majority of the then Trustees
(or by an officer of the Trust pursuant to the vote of a majority
<PAGE>
of such Trustees). Any amendment to this Declaration of Trust
that materially adversely affects the rights of Shareholders may
be adopted at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust
pursuant to a vote of a majority of such Trustees) when
authorized to do so by the vote in accordance with subsection (e)
of Section 4.2 of Shareholders as specified in Section 5.4
hereof. Subject to the foregoing, any such amendment shall be
effective as of any prior or future time as provided in the
instrument containing the terms of such amendment or, if there is
no provision therein with respect to effectiveness, upon the
execution of such instrument and of a certificate (which may be a
part of such instrument) executed by a Trustee or officer of the
Trust to the effect that such amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The
original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may
rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of
the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the
Trust to be a copy of this instrument or of any such amendments.
In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein," "hereof" and
"hereunder" shall be deemed to refer to this instrument as a
whole as the same may be amended or affected by any such
amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control
or affect the meaning, construction or effect of this instrument.
This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is
made in the Commonwealth of Massachusetts, and it is created
under and is to be governed by and construed and administered
according to the laws of said Commonwealth. The Trust shall be
of the type referred to in Section 1 of Chapter 182 of the
Massachusetts General Laws and of the type commonly called a
Massachusetts business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Section 7.6 Integration. This Declaration of Trust
constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned hereunto has set his
hand and seal in the City of Boston, Commonwealth of
Massachusetts, for himself and his assigns, as of the day and
year first above written.
/s/ Sean M. Healey
---------------------------------------------
Sean M. Healey
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk County, ss
Then personally appeared before me the within-named Sean M.
Healey, who acknowledged the execution of the foregoing
instrument to be his free act and deed, before me, this 18th day
of June, 1999.
/s/ Ellen Lindsey
-----------------------------------------------
Notary Public
[Notarial Seal]
My commission expires: 8/02/02
------------------------
<PAGE>
Exhibit b
- - ----------
<PAGE>
BY-LAWS
OF
THE MANAGERS AMG FUNDS
ARTICLE 1
---------
Agreement and Declaration of Trust and Principal Office
-------------------------------------------------------
1.1 Agreement and Declaration of Trust. These By-Laws
shall be subject to the Master Trust Agreement, as from time to
time in effect (the "Declaration of Trust"), of The Managers AMG
Funds, the Massachusetts business trust established by the
Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of
the Trust shall be located in Boston, Massachusetts.
ARTICLE 2
---------
Meetings of Trustees
--------------------
2.1 Regular Meetings. Regular meetings of the Trustees may
be held without call or notice at such places and at such times
as the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may
be held at any time and at any place designated in the call of
the meeting when called by the Chairman of the Trustees, the
President or the Treasurer or by two or more Trustees, sufficient
notice thereof being given to each Trustee by the Secretary or an
Assistant Secretary or by the officer of the Trustees calling the
meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of
a special meeting to send notice by mail at least forty-eight
hours or by telegram at least twenty-four hours before the
meeting addressed to the Trustee at his or her usual or last
known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before
the meeting. Notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by him or her
before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of
notice to him or her. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
<PAGE>
2.4 Quorum. At any meeting of the Trustees a majority of
the Trustees then in office shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
2.5 Participation by Telephone. One or more of the
Trustees or of any committee of the Trustees may participate in a
meeting thereof by means of a conference telephone or similar
communications equipment allowing all persons participating in
the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
---------
Officers
--------
3.1 Enumeration; Qualification. The Trustees may, but are
not required to, elect or appoint officers of the Trust. The
officers of the Trust, if officers are elected or appointed,
shall be a Chairman of the Trustees, a President, a Treasurer, a
Secretary, Vice Presidents, and Assistant Treasurers, Assistant
Secretaries and Assistant Vice Presidents, if any, as the
Trustees from time to time may in their discretion elect or as
appointed from time to time pursuant to authority delegated by
the Trustees. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The
Chairman of the Trustees shall be a Trustee and may but need not
be a shareholder; and any other officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by
the same person.
3.2 Election. If the Trustees choose to have a Chairman of
the Trustees, a President, a Treasurer, or a Secretary, such
officers shall be elected annually by the Trustees at a meeting
held within the first six months of the Trust's fiscal year. The
meeting at which the officers are elected shall be known as the
annual meeting of Trustees. Other officers, if any, may be
elected or appointed by the Trustees at said meeting or at any
other time. Vacancies in any office may be filled at any time.
3.3 Tenure. The Chairman of the Trustees, the President,
the Treasurer, and the Secretary, if elected, shall hold office
until the next annual meeting of the Trustees and until their
respective successors are chosen and qualified, or in each case
until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each
agent shall retain authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these By-
Laws, if officers are elected or appointed, each officer shall
have, in addition to the duties and powers set forth below in
subsections 3.4(a) through 3.4(g) and in the Declaration of
Trust, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and
powers as the Trustees may from time to time designate. If no
officers are elected or appointed, agents of the Trust selected
by the Trustees may exercise the duties and powers set forth
below in subsections 3.4(a) through 3.4(g) and in the Declaration
2
<PAGE>
of Trust, as well as such duties and powers as are commonly
incident to those offices as if the Trust were organized as a
Massachusetts business corporation and such other duties and
powers as the Trustees may from time to time designate.
(a) Chairman; President. Unless the Trustees
otherwise provide, the Chairman of the Trustees, or, if there is
none, or in the absence of the Chairman, the President shall
preside at all meetings of the shareholders and of the Trustees.
The President shall be the chief executive officer.
(b) Vice President. The Vice President, or if there
be more than one Vice President, the Vice Presidents in the order
determined by the Trustees (or if there be no such determination,
then in the order of their election) shall in the absence of the
President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions
upon the President. The Vice Presidents shall perform such other
duties and have such other powers as the Board of Trustees may
from time to time prescribe.
(c) Treasurer. The Treasurer shall be the chief
financial and accounting officer of the Trust, and shall, subject
to the provisions of the Declaration of Trust and to any
arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar
agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties
and powers as may be designated from time to time by the Trustees
or by the President.
(d) Assistant Treasurer. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers in the
order determined by the Trustees (or if there be no such
determination, then in the order of their election), shall, in
the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other
powers as the Board of Trustees may from time to time prescribe.
(e) Secretary. The Secretary shall record all
proceedings of the shareholders and the Trustees in books to be
kept therefor, which books or a copy thereof shall be kept at the
principal office of the Trust. In the absence of the Secretary
from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a
temporary secretary chosen at such meeting shall record the
proceedings thereof in the aforesaid books.
(f) Assistant Secretary. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order
determined by the Trustees (or if there be no determination, then
in the order of their election), shall, in the absence of the
Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3
<PAGE>
(g) Assistant Vice Presidents. With respect to each
Assistant Vice President and the Vice President to whom such
Assistant Vice President reports, such Assistant Vice President,
or if there be more than one, the Assistant Vice President
reporting to a given Vice President in the order determined by
the Trustees (or if there be no determination, then in the order
of their election), shall, in the absence of such Vice President
or in the event of his inability or refusal to act, perform the
duties and exercise the powers of such Vice President and shall
perform such other duties and have such other powers as the Board
of Trustees may from time to time prescribe.
3.5 Resignations and Removals. Any Trustee or officer may
resign at any time by written instrument signed by him or her and
delivered to the Chairman, the President or the Secretary or to a
meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some other time.
The Trustees may remove any officer elected by them with or
without cause. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee or officer resigning
and no officer removed shall have any right to any compensation
for any period following his or her resignation or removal, or
any right to damages on account of such removal.
ARTICLE 4
---------
Committees
----------
4.1 General. The Trustees, by vote of a majority of the
Trustees then in office, may elect from their number an Executive
Committee or other committees and may delegate thereto some or
all of their powers except those which by law, by the Declaration
of Trust, or by these By-Laws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make
rules for the conduct of its business, but unless otherwise
provided by the Trustees or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by
these By-Laws for the Trustees themselves. All members of such
committees shall hold such offices at the pleasure of the
Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their
powers or duties shall keep records of its meetings and shall
report its action to the Trustees. The Trustees shall have power
to rescind any action of any committee, but no such rescission
shall have retroactive effect.
ARTICLE 5
---------
Reports
-------
5.1 General. The Trustees and officers shall render
reports at the time and in the manner required by the Declaration
of Trust or any applicable law. Officers and Committees shall
render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
4
<PAGE>
ARTICLE 6
---------
Fiscal Year
-----------
6.1 General. The fiscal year of the Trust shall be fixed
by resolution of the Trustees.
ARTICLE 7
---------
Seal
----
7.1 General. The seal of the Trust shall consist of a flat-
faced die with the word "Massachusetts," together with the name
of the Trust and the year of its organization cut or engraved
thereon, but, unless otherwise required by the Trustees, the seal
shall not be necessary to be placed on, and its absence shall not
impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
---------
Execution of Papers
-------------------
8.1 General. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other
manner, all deeds, leases, contracts, notes and other obligations
made by the Trustees may be signed by the President, any Vice
President, the Treasurer, any Assistant Treasurer, Secretary or
any Assistant Secretary, and need not bear the seal of the Trust.
The Chairman of the Board, President, Treasurer or Secretary may
determine which persons have authority to sign any documents on
behalf of the Trust and establish related policies.
ARTICLE 9
---------
Issuance of Share Certificates
------------------------------
9.1 Share Certificates. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all shareholders. In
that event, a shareholder may receive a certificate stating the
number of shares owned by him, in such form as shall be
prescribed from time to time by the Trustees. Such certificate
shall be signed by the president or a vice president and by the
treasurer or assistant treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer agent, or
5
<PAGE>
by a registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued
by the Trust with the same effect as if he were such officer at
the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees shall prescribe.
9.3 Issuance of New Certificate to Pledgee. The Trustees
may in their discretion, or the Treasurer may pursuant to
authority delegated by the Trustees, institute a policy of
enabling a pledgee of shares transferred as collateral security
to obtain a new certificate if the instrument of transfer
substantially describes the debt or duty that is intended to be
secured thereby. Such new certificate shall express on its face
that it is held as collateral security, and the name of the
pledgor shall be stated thereon, who alone shall be liable as a
shareholder, and entitled to vote thereon.
9.4 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
----------
Dealings with Trustees and Officers
-----------------------------------
10.1 General. Any Trustee, officer or other agent of the
Trust may acquire, own and dispose of shares of the Trust to the
same extent as if he were not a Trustee, officer or agent; and
the Trustees may accept subscriptions to shares or repurchase
shares from any firm or company in which any Trustee, officer or
other agent of the Trust may have an interest.
ARTICLE 11
----------
Amendments to the By-Laws
-------------------------
11.1 General. These By-Laws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at
any meeting of the Trustees, or by one or more writings signed by
such a majority.
Adopted: June 18, 1999
6
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Exhibit d.1
- - -----------
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the ________day of_____________, 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 THE 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
5
<PAGE>
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 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.
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<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 "The Managers AMG
Funds" means and refers to the Trustees from time to time serving
under the Master Trust Agreement of the Trust dated June __, 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.
ATTEST: THE MANAGERS AMG FUNDS
________________________ By:____________________________
Secretary President
ATTEST: THE MANAGERS FUNDS LLC
________________________ By:____________________________
Assistant Secretary President
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 ___% 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.
From time to time, the Adviser may 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 _____% of the average 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
<PAGE>
Exhibit d.2
- - -----------
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ________ day of __________, 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 _____________________ 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, THE 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.
1. (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 thereto (such Master
Trust Agreement, as presently in effect and as it shall
from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws and amendments thereto
(such By-Laws, as presently in effect and as it shall
from time to time be amended, 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 the Essex Aggressive Growth
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 ,
1999 and all amendments thereto;
(e) The Fund's Registration Statement on Form
N-1A under the Securities Act of 1933 as amended (the
"1933 Act") and the 1940 Act (File No. )
as filed with the Securities and Exchange Commission on
August ___, 1999, and all amendments thereto (the
"Registration Statement");
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<PAGE>
(f) The Fund's most recent prospectus (such
prospectus, as in effect from time to time and all
amendments and supplements thereto are herein called
the "Prospectus");
(g) All resolutions of the Board of Trustees of
the Trust pertaining to the objectives, investment
policies and investment restrictions of the Funds; and
(h) Copies of the Advisory Agreement between the
Trust and the Adviser relating to the Funds.
The Adviser will furnish the Sub-Adviser from time
to time with copies of all amendments of or supplements
to items (a), (b), (e), (f), (g) and (h) to the extent
such amendments or supplements relate to or affect the
obligations of the Sub-Adviser 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. 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 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 unless 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.
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(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. With the prior approval of the
Trustees, 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. Such prior approval may be obtained
from the Trustees with respect to the Sub-Adviser's
investment program and need not be obtained on a
transaction-by-transaction basis.
The Sub-Adviser will advise the Funds' 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, 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
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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
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.
(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.
5. COMPLIANCE WITH APPLICABLE REGULATIONS.
In performing its duties hereunder, the Sub-Adviser
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(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 all records it maintains for the
Trust 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.
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
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(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. DURATION AND TERMINATION OF THIS AGREEMENT.
(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.
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(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.
8. 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.
9. RESERVATION OF NAME.
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.
10. 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.:
Attention: Peter Lebovitz
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Sub-Adviser: Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
Facsimile No.:
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.
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IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have
caused this Agreement to be executed as of the date first set
forth above.
ATTEST: THE MANAGERS FUNDS LLC
By:____________________ By:________________________
ATTEST: ESSEX INVESTMENT MANAGEMENT
COMPANY, LLC
By:_____________________ By:_________________________
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SCHEDULE A
Essex Aggressive Growth Fund
- - ----------------------------
The Adviser shall pay to the Sub-Adviser an annual gross
investment sub-advisory fee equal to ____% 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;
provided, however, that in all events, the Adviser shall be
entitled to retain fees under the Advisory Agreement in an
aggregate amount sufficient to reimburse the Adviser for all
direct and indirect costs incurred by the Adviser and reasonably
determined by the Adviser to be attributable to performing its
services under the Advisory Agreement with respect to the Fund.
The Sub-Adviser agrees that, during any period in which the
Adviser has voluntarily 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 voluntarily 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
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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.
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