MANAGERS AMG FUNDS
ESSEX AGGRESSIVE GROWTH FUND
____________________________
STATEMENT OF ADDITIONAL INFORMATION
DATED NOVEMBER 1, 1999, AS SUPPLEMENTED
FEBRUARY 9, 2000
_______________________________________________________________________________
You can obtain a free copy of the Prospectus of the Essex
Aggressive Growth Fund (the "Fund") by calling Managers AMG Funds
at (800) 835-3879. The Prospectus provides the basic information
about investing in the Fund.
This Statement of Additional Information is not a Prospectus.
It contains additional information regarding the activities and
operations of the Fund. It should be read in conjunction with
the Fund's Prospectus.
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TABLE OF CONTENTS
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GENERAL INFORMATION 3
INVESTMENT OBJECTIVES AND POLICIES 3
Investment Techniques and Associated Risks 3
Diversification Requirements for the Fund 8
Fundamental Investment Restrictions 8
Temporary Defensive Position 9
Portfolio Turnover 9
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 10
Trustees' Compensation 11
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 11
Control Persons 11
Management Ownership 11
MANAGEMENT OF THE FUND 12
Investment Manager 12
Compensation of Investment Manager and Sub-Adviser 12
Fee Waivers and Expense Limitations 12
Investment Management and Sub-Advisory Agreements 13
Custodian 15
Transfer Agent 15
Independent Public Accountants 15
BROKERAGE ALLOCATION AND OTHER PRACTICES 15
PURCHASE, REDEMPTION AND PRICING OF SHARES 16
Purchasing Shares 16
Redeeming Shares 17
Exchange of Shares 17
Net Asset Value 18
Dividends and Distributions 18
Distribution Plan 18
CERTAIN TAX MATTERS 19
Federal Income Taxation of Fund-in General 19
Taxation of the Fund's Investments 19
Federal Income Taxation of Shareholders 20
Foreign Shareholders 20
State and Local Taxes 21
Other Taxation 21
PERFORMANCE DATA 21
Total Return 21
Performance Comparisons 22
Massachusetts Business Trust 22
Description of Shares 23
Additional Information 24
REPORT OF INDEPENDENT ACCOUNTANTS 25
FINANCIAL STATEMENT 26
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GENERAL INFORMATION
This Statement of Additional Information relates only to the
Essex Aggressive Growth Fund (the "Fund"). The Fund is a series
of shares of beneficial interest of Managers AMG Funds, a no-load
mutual fund family, formed as a Massachusetts business trust (the
"Trust"). The Trust was organized on June 18, 1999.
This Statement of Additional Information describes the
financial history, management and operation of the Fund, as well
as the Fund's investment objectives and policies. It should be
read in conjunction with the Fund's current Prospectus. The
Trust's executive office is located at 40 Richards Avenue,
Norwalk, CT 06854.
The Managers Funds LLC, a subsidiary of Affiliated Managers
Group, Inc., serves as investment manager to the Fund and is
responsible for the Fund's overall administration and
distribution. See "Management of the Fund."
INVESTMENT OBJECTIVES AND POLICIES
The following is additional information regarding the
investment objectives and policies used by the Fund in an attempt
to achieve its objective as stated in its Prospectus. The Fund
is a diversified open-end management investment company.
The Fund invests primarily in equity securities of U.S.
companies with the potential for long-term growth. Although the
Fund may invest in companies of any size, the Fund will invest
primarily in companies with market capitalizations of between
$500 million and $20 billion. Ordinarily, the Fund invests in 50
to 60 companies from pre-selected sectors of the market.
Initially, the Fund will focus on the specialty retail,
technology, health care, financial services, energy services and
basic industries sectors. Generally, the Fund limits its
investments in any specific company to 5% of its assets.
Investment Techniques and Associated Risks
The following are descriptions of the types of securities
that may be purchased by the Fund. Also see "Quality and
Diversification Requirements of the Fund."
(1) Cash Equivalents. The Fund may invest in cash
equivalents. Cash equivalents include certificates of deposit,
bankers acceptances, commercial paper, short-term corporate debt
securities and repurchase agreements.
Bankers Acceptances. The Fund may invest in bankers
acceptances. Bankers acceptances are short-term credit
instruments used to finance the import, export, transfer or
storage of goods. These instruments become "accepted" when a
bank guarantees their payment upon maturity.
Eurodollar bankers acceptances are bankers acceptances
denominated in U.S. Dollars and are "accepted" by foreign
branches of major U.S. commercial banks.
Certificates of Deposit. The Fund may invest in certificates
of deposit. Certificates of deposit are issues against money
deposited into a bank (including eligible foreign branches of
U.S. banks) for a definite period of time. They earn a specified
rate of return and are normally negotiable.
Commercial Paper. The Fund may invest in commercial paper.
Commercial Paper refers to promissory notes that represent an
unsecured debt of a corporation or finance company. They have a
maturity of less than 9 months. Eurodollar commercial paper
refers to promissory notes payable in U.S. Dollars by European
issuers.
Repurchase Agreements. The Fund may enter into repurchase
agreements with brokers, dealers or banks that meet the credit
guidelines which have been approved by the Fund's Board of
Trustees. In a repurchase agreement, the Fund buys a security
from a bank or a broker-dealer that has agreed to repurchase the
same security at a mutually agreed upon date and price. The
resale price normally is the purchase price plus a mutually
agreed upon interest rate. This interest rate is effective for
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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.
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(4) Foreign Securities. The Fund may invest in foreign
securities either directly or indirectly in the form of American
Depositary Receipts or similar instruments. Investments in
securities of foreign issuers and in obligations of domestic
banks involve different and additional risks from those
associated with investing in securities of U.S. issuers. There
may be limited information available to investors which is
publicly available, and generally foreign issuers are not subject
to uniform accounting, auditing and financial standards and
requirements like those applicable to U.S. issuers. Any foreign
commercial paper must not be subject to foreign withholding tax
at the time of purchase.
Investors should be aware that the value of 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.
(5) Futures Contracts. The Fund may buy and sell futures
contracts to protect the value of the Fund's portfolio against
changes in the prices of the securities in which it invests.
When the Fund buys or sells a futures contact, the Fund must
segregate cash and/or liquid securities equivalent to the value
of the contract.
There are additional risks associated with futures contracts.
It may be impossible to determine the future price of the
securities, and securities may not be marketable enough to close
out the contract when the Fund desires to do so.
Equity Index Futures Contracts. The Fund may enter into
equity index futures contracts. An equity index future contract
is an agreement for the Fund to buy or sell an index relating to
equity securities at a mutually agreed upon date and price.
Equity index futures contracts are often used to hedge against
anticipated changes in the level of stock prices. When the Fund
enters into this type of contract, the Fund makes a deposit
called an "initial margin." This initial margin must be equal to
a specified percentage of the value of the contract. The rest of
the payment is made when the contract expires.
(6) Illiquid Securities, Private Placements and Certain
Unregistered Securities. The Fund may invest in privately
placed, restricted, Rule 144A or other unregistered securities.
The Fund may not acquire illiquid holdings if, as a result, more
than 15% of the Fund's total assets would be in illiquid
investments. Subject to this Fundamental policy limitation, the
Fund may acquire investments that are illiquid or have limited
liquidity, such as private placements or investments that are not
registered under the Securities Act of 1933, as amended (the
"1933 Act") and cannot be offered for public sale in the United
States without first being registered under the 1933 Act. An
investment is considered "illiquid" if it cannot be disposed of
within seven (7) days in the normal course of business at
approximately the same amount at which it was valued in the
Fund's portfolio. The price the Fund's portfolio may pay for
illiquid securities or receives upon resale may be lower than the
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.
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The Fund may purchase Rule 144A securities eligible for sale
without registration under the 1933 Act. These securities may be
determined to be illiquid in accordance with the guidelines
established by The Managers Funds LLC and approved by the
Trustees. The Trustees will monitor these guidelines on a
periodic basis.
Investors should be aware that the Fund may be subject to a
risk if the Fund should decide to sell these securities when a
buyer is not readily available and at a price which the Fund
believes represents the security's value. In the case where an
illiquid security must be registered under the 1933 Act before it
may be sold, the Fund may be obligated to pay all or part of the
registration expenses. Therefore, a considerable time may elapse
between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market
conditions develop, the Fund may obtain a less favorable price
than was available when it had first decided to sell the
security.
(7) Obligations of Domestic and Foreign Banks. Banks are
subject to extensive governmental regulations. These regulations
place limitations on the amounts and types of loans and other
financial commitments which may be made by the bank and the
interest rates and fees which may be charged on these loans and
commitments. The profitability of the banking industry depends
on the availability and costs of capital funds for the purpose of
financing loans under prevailing money market conditions.
General economic conditions also play a key role in the
operations of the banking industry. Exposure to credit losses
arising from potential financial difficulties of borrowers may
affect the ability of the bank to meet its obligations under a
letter of credit.
(8) Option Contracts.
Covered Call Options. The Fund may write ("sell") covered
call options on individual stocks, equity indices and futures
contracts, including equity index futures contracts. Written
call options must be listed on a national securities exchange or
a futures exchange.
A call option is a short-term contract that is generally for
no more than nine months. This contract gives a buyer of the
option, in return for a paid premium, the right to buy the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can purchase the
underlying security or contract regardless of its market price.
A call option is considered "covered" if the Fund that is writing
the option owns or has a right to immediately acquire the
underlying security or contract.
The Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Fund makes
a closing purchase transaction when it buys a call option on the
same security or contract with has the same price and expiration
date. As a result, the Fund will realize a loss if the amount
paid is less than the amount received from the sale. A closing
purchase transaction may only be made on an exchange that has a
secondary market for the option with the same price and
expiration date. There is no guarantee that the secondary market
will have liquidity for the option.
There are risks associated with writing covered call options.
The Fund is required to pay brokerage fees in order to write
covered call options as well as fees for the purchases and sales
of the underlying securities or contracts. The portfolio
turnover rate of the Fund may increase due to the Fund writing a
covered call option.
Covered Put Options. The Fund may write ("sell") covered put
options on individual stocks, equity indices and futures
contracts, including equity index futures contracts.
A put option is a short-term contract that is generally for
no more than nine months. This contract gives a buyer of the
option, in return for a paid premium, the right to sell the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can sell the underlying
security or contract at the option price regardless of its market
price. A put option is considered "covered" if the Fund which is
writing the option owns or has a right to immediately acquire the
underlying security or contract. The seller of a put option
assumes the risk of the decrease of the value of the underlying
security. If the underlying security decreases, the buyer could
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.
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The Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Fund makes
a closing purchase transaction when it buys a put option on the
same security or contract with the same price and expiration
date. As a result, the Fund will realize a loss if the amount
paid is less than the amount received from the sale. A closing
purchase transaction may only be made on an exchange that has a
secondary market for the option with the same price and
expiration date. There is no guarantee that the secondary market
will have liquidity for the option.
There are risks associated with writing covered put options.
The Fund is required to pay brokerage fees in order to write
covered put options as well as fees for the purchases and sales
of the underlying securities or contracts. The portfolio
turnover rate of the Fund may increase due to the Fund writing a
covered put option.
Dealer Options. Dealer Options are also known as
Over-the-Counter options ("OTC"). Dealer options are puts and
calls where the strike price, the expiration date and the premium
payment are privately negotiated. The bank's creditworthiness
and financial strength are judged by the Sub- Adviser and must be
determined to be as good as the creditworthiness and strength of
the banks to whom the Fund lends its portfolio securities.
Puts and Calls. The Fund may buy options on individual
stocks, equity indices and equity futures contracts. The Fund's
purpose in buying these puts and calls is to protect itself
against an adverse affect in changes of the general level of
market prices in which the Fund operates. A put option gives the
buyer the right upon payment to deliver a security or contract at
an agreed upon date and price. A call option gives the buyer the
right upon payment to ask the seller of the option to deliver the
security or contract at an agreed upon date and price.
(9) Rights and Warrants. The Fund may purchase rights and
warrants. Rights are short-term obligations issued in
conjunction with new stock issues. Warrants give the holder the
right to buy an issuer's securities at a stated price for a
stated time.
(10) Securities Lending. The Fund may lend its portfolio
securities in order to realize additional income. This lending
is subject to the Fund's investment policies and restrictions.
Any loan of portfolio securities must be secured at all times by
collateral that is equal to or greater than the value of the
loan. If a seller defaults, the Fund may use the collateral to
satisfy the loan. However, if the buyer defaults, the buyer may
lose some rights to the collateral securing the loans of
portfolio securities.
(11) Segregated Accounts. The Fund will establish a
segregated account with its Custodian after it has entered into
either a repurchase agreement or certain options, futures and
forward contracts. The segregated account will maintain cash
and/or liquid securities that are equal in value to the
obligations in the agreement.
(12) Short Sales. The Fund may enter into short sales.
The Fund enters into a short sale when it sells a security that
it does not own. A broker retains the proceeds of the sales
until the Fund replaces the sold security. The Fund arranges
with the broker to borrow the security. The Fund must replace
the security at its market price at the time of the replacement.
As a result, the Fund may have to pay a premium to borrow the
security and the Fund may, but will not necessarily, receive any
interest on the proceeds of the sale. The Fund must pay to the
broker any dividends or interest payable on the security until
the security is replaced. Collateral, consisting of cash, or
marketable securities, is used to secure the Fund's obligation to
replace the security. The collateral is deposited with the
broker. If the price of the security sold increases between the
time of the sale and the time the Fund replaces the security, the
Fund will incur a loss. If the price declines during that
period, the Fund will realize a capital gain. The capital gain
will be decreased by the amount of transaction costs and any
premiums, dividends or interest the Fund will have to pay in
connection with the short sale. The loss will be increased by
the amount of transaction costs and any premiums, dividends or
interest the Fund will have to pay in connection with the short
sale. For tax planning reasons, the Fund may also engage in
short sales with respect to a security that the Fund currently
holds or has a right to acquire, commonly referred to as a "short
against the box."
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(13) When-Issued Securities. The Fund may purchase
securities on a when-issued basis. The purchase price and the
interest rate payable, if any, on the securities are fixed on the
purchase commitment date or at the time the settlement date is
fixed. The value of these securities is subject to market
fluctuation. For fixed-income securities, no interest accrues to
the Fund until a settlement takes place. At the time the Fund
makes a commitment to purchase securities on a when-issued basis,
the Fund will record the transaction, reflect the daily value of
the securities when determining the net asset value of the Fund,
and if applicable, calculate the maturity for the purposes of
determining the average maturity from the date of the
Transaction. At the time of settlement, a when-issued security
may be valued below the amount of the purchase price.
To facilitate these transactions, the Fund will maintain a
segregated account with the Custodian that will include cash, or
marketable securities, in an amount which is at least equal to
the commitments. On the delivery dates of the transactions, the
Fund will meet its obligations from maturities or sales of the
securities held in the segregated account and/or from cash flow.
If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could incur a
loss or a gain due to market fluctuation. Furthermore, the Fund
may be at a disadvantage if the other party to the transaction
defaults. When-issued transactions may allow the Fund to hedge
against unanticipated changes in interest rates.
Diversification Requirements for the Fund
The Fund intends to meet the diversification requirements of
the 1940 Act as currently in effect. Investments not subject to
the diversification requirements could involve an increased risk
to an investor should an issuer, or a state or its related
entities, be unable to make interest or principal payments or
should the market value of such securities decline.
Fundamental Investment Restrictions
The following investment restrictions have been adopted by
the Trust with respect to the Fund. Except as otherwise stated,
these investment restrictions are "fundamental" policies. A
"fundamental" policy is defined in the 1940 Act to mean that the
restriction cannot be changed without the vote of a "majority of
the outstanding voting securities" of the Fund. A majority of
the outstanding voting securities is defined in the 1940 Act as
the lesser of (a) 67% or more of the voting securities present at
a meeting if the holders of more than 50% of the outstanding
voting securities are present or represented by proxy, or (b)
more than 50% of the outstanding voting securities.
The Fund may not:
(1) Issue senior securities. For purposes of this
restriction, borrowing money, making loans, the issuance of
shares of beneficial interest in multiple classes or series, the
deferral of Trustees' fees, the purchase or sale of options,
futures contracts, forward commitments and repurchase agreements
entered into in accordance with the Fund's investment policies,
are not deemed to be senior securities.
(2) Borrow money, except (i) in amounts not to exceed 33 1/3%
of the value of the Fund's total assets (including the amount
borrowed) taken at market value from banks or through reverse
repurchase agreements or forward roll transactions, (ii) up to an
additional 5% of its total assets for temporary purposes, (iii)
in connection with short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv)
the Fund may purchase securities on margin to the extent
permitted by applicable law. For purposes of this investment
restriction, investments in short sales, roll transactions,
futures contracts, options on futures contracts, securities or
indices and forward commitments, entered into in accordance with
the Fund's investment policies, shall not constitute borrowing.
(3) Underwrite the securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter under the
Securities Act of 1933.
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(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 1/3% of the Fund's total assets taken at market value, (ii)
enter into repurchase agreements, (iii) purchase all or a portion
of an issue of debt securities, bank loan participation
interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is
made upon the original issuance of the securities and (iv) lend
portfolio securities and participate in an interfund lending
program with other series of the Trust provided that no such loan
may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of the Fund's total assets.
(7) With respect to 75% of its total assets, purchase
securities of an issuer (other than the U.S. Government, its
agencies, instrumentalities or authorities or repurchase
agreements collateralized by U.S. Government securities and other
investment companies), if: (a) such purchase would cause more
than 5% of the Fund's total assets taken at market value to be
invested in the securities of such issuer; or (b) such purchase
would at the time result in more than 10% of the outstanding
voting securities of such issuer being held by the Fund.
(8) Invest more than 25% of its total assets in the
securities of one or more issuers conducting their principal
business activities in the same industry (excluding the U.S.
Government or its agencies or instrumentalities).
If any percentage restriction described above for the Fund is
adhered to at the time of investment, a subsequent increase or
decrease in the percentage resulting from a change in the value
of the Fund's assets will not constitute a violation of the
restriction.
Unless otherwise provided, for purposes of investment
restriction (8) above, the term "industry" shall be defined by
reference to the SEC Industry Codes set forth in the Directory of
Companies Required to File Annual Reports with the Securities and
Exchange Commission.
Temporary Defensive Position
The Fund may invest up to 100% of its assets in cash for
temporary defensive purposes. This strategy may be inconsistent
with the Fund's principal investment strategies and may be used
in an attempt to respond to adverse market, economic, political
or other conditions. During such a period, the Fund may not
achieve its investment objective.
Portfolio Turnover
Generally, the Fund purchases securities for investment
purposes and not for short-term trading profits. However, the
Fund may sell securities without regard to the length of time
that the security is held in the portfolio if such sale is
consistent with the Fund's investment objectives. A higher
degree of portfolio activity may increase brokerage costs to the
Fund.
The portfolio turnover rate is computed by dividing the
dollar amount of the securities which are purchased or sold
(whichever amount is smaller) by the average value of the
securities owned during the year. Short-term investments such as
commercial paper, short-term U.S. Government securities and
variable rate securities (those securities with intervals of less
than one-year) are not considered when computing the portfolio
turnover rate.
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BOARD OF TRUSTEES AND OFFICERS OF THE TRUST
The Board of Trustees and Officers of the Trust, their
business addresses, principal occupations and dates of birth are
listed below. The Board of Trustees provides broad supervision
over the affairs of the Trust and the Fund. Unless otherwise
noted, the address of the Trustees and Officers is the address of
the Trust: 40 Richards Avenue, Norwalk, CT 06854.
JACK W. ABER - Trustee; Professor of Finance, Boston University
School of Management since 1972. He has served as a Trustee of
the Trust since June 1999. He also serves as a Trustee of The
Managers Funds. His address is 595 Commonwealth Avenue, Boston,
Massachusetts 02215. His date of birth is September 9, 1937.
WILLIAM E. CHAPMAN, II - Trustee; President and Owner, Longboat
Retirement Planning Solutions. From 1990 to 1998, he served in a
variety of roles with Kemper Funds, the last of which was
President of the Retirement Plans Group. Prior to joining
Kemper, he spent 24 years with CIGNA in investment sales,
marketing and general management roles. He has served as a
Trustee of the Trust since June 1999. He also serves as a
Trustee of The Managers Funds. His address is 380 Gulf of Mexico
Drive, Longboat Key, Florida 34228. His date of birth is
September 23, 1941.
SEAN M. HEALEY* - Trustee; President of Affiliated Managers
Group, Inc. since October 1999. From April 1995 to October 1999,
he was Executive Vice President of Affiliated Managers Group,
Inc. From August 1987 through March 1995, he served in a variety
of roles in the Mergers and Acquisitions Department of Goldman,
Sachs & Co., the last of which was as Vice President. His
address is Two International Place, 23rd Floor, Boston,
Massachusetts 02110. He has served as a Trustee of the Trust
since June 1999. He also serves as a Trustee of The Managers
Funds. His date of birth is May 9, 1961.
EDWARD J. KAIER - Trustee; Partner, Hepburn Willcox Hamilton &
Putnam since 1977. He has served as a Trustee of the Trust since
June 1999. He also serves as a Trustee of The Managers Funds.
His address is 1100 One Penn Center, Philadelphia, Pennsylvania
19103. His date of birth is September 23, 1945.
ERIC RAKOWSKI - Trustee; Professor, University of California at
Berkeley School of Law since 1990. Visiting Professor, Harvard
Law School 1998-1999. He has served as a Trustee of the Trust
since June 1999. He also serves as a Trustee of The Managers
Funds. His address is 1535 Delaware Street, Berkeley, California
94703-1281. His date of birth is June 5, 1958.
PETER M. LEBOVITZ - President; President of The Managers Funds
LLC. From September 1994 to April 1999, he was Managing Director
of The Managers Funds, L.P. (the predecessor to The Managers
Funds LLC). From June 1993 to June 1994, he was the Director of
Marketing for Hyperion Capital Management, Inc. From April 1989
to June 1993, he was Senior Vice President for Greenwich Asset
Management, Inc. His date of birth is January 18, 1955.
DONALD S. RUMERY - Treasurer and Principal Accounting Officer;
Chief Financial Officer of The Managers Funds LLC (formerly The
Managers Funds, L.P.) since December 1994. From March 1990 to
December 1994, he was a Vice President of Signature Financial
Group. From August 1980 to March 1990, he held various positions
with The Putnam Companies, the last of which was Vice President.
His date of birth is May 29, 1958.
JOHN KINGSTON, III - Secretary; Vice President of Affiliated
Managers Group, Inc. since March 1999. From June 1998 to
February 1999, he served in a general counseling capacity with
Morgan Stanley Dean Witter Investment Management Inc. From
September 1994 to May 1998 he was an Associate with Ropes and
Gray. His date of birth is October 23, 1965.
PETER M. MCCABE - Assistant Treasurer; Portfolio Administrator of
The Managers Funds LLC (formerly The Managers Funds, L.P.) since
August 1995. From July 1994 to August 1995, he was a Portfolio
Administrator at Oppenheimer Capital, L.P. His date of birth is
September 8, 1972.
10
<PAGE>
LAURA A. DESALVO - Assistant Secretary; Legal/Compliance Officer
of The Managers Funds LLC (formerly The Managers Funds, L.P.)
since September 1997. From August 1994 to June 1997, she was a
law student. Her date of birth is November 10, 1970.
<TABLE>
<CAPTION>
Trustees' Compensation
Compensation Table:
Total Compensation
From the
Aggregate Fund and the
Name of Compensation Fund Complex
Trustee From the Fund(a) Paid to Trustees(b)
___________ _______________________ _________________________
<S> <C> <C>
Jack W. Aber $4,000 $24,000
William E. Chapman, II $4,000 $24,000
Sean M. Healey none none
Edward K. Kaier $4,000 $24,000
Eric Rakowski $4,000 $24,000
____________________
</TABLE>
[FN]
(a) Compensation is estimated for the Fund's fiscal year ending
October 31, 2000. The Fund does not provide any pension or
retirement benefits for the Trustees.
(b) Total compensation includes estimated compensation to be
paid during the 12-month period ending October 31, 2000 for
services as Trustees of The Managers Funds.
</FN>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of October 19, 1999, through its ownership of 100% of the
shares of the Fund Affiliated Managers Group, Inc. ("AMG")
"controlled" (within the meaning of the 1940 Act) the Fund. An
entity or person which "controls" a particular Fund could have
effective voting control over that Fund.
No other person or entity owned shares of the Fund.
Management Ownership
As of October 19, 1999, all management personnel (i.e.,
Trustees and Officers) as a group owned beneficially less than 1%
of the outstanding shares of the Fund.
11
<PAGE>
MANAGEMENT OF THE FUND
Investment Manager and Sub-Adviser
The Trustees provide broad supervision over the operations
and affairs of the Trust and the Fund. The Managers Funds LLC
(the "Investment Manager") serves as investment manager to and
distributor of the Fund. The Managers Funds LLC is a subsidiary
of AMG, and AMG serves as the Managing Member of the LLC. AMG is
located at Two International Place, 23rd Floor, Boston,
Massachusetts 02110.
The Investment Manager and its corporate predecessors have
had over 20 years of experience in evaluating sub-advisers for
individuals and institutional investors. As part of its services
to the Fund under an investment management agreement with the
Trust dated October 19, 1999 (the "Investment Management
Agreement"), the Investment Manager also carries out the daily
administration of the Trust and Fund. For its investment
management services, the Investment Manager receives an
investment management fee from the Fund. All or a portion of
the investment management fee paid by the Fund to the Investment
Manager is used to pay the advisory fees of Essex Investment
Management Company, LLC, the sub-adviser which manages the assets
of the Fund (the "Sub-Adviser" or "Essex"). The Investment
Manager receives no additional compensation from the Fund for its
administration services. Essex was selected by the Investment
Manager, subject to the review and approval of the Trustees.
Essex is the successor firm to Essex Investment Management
Company, Inc. which was formed in 1976. AMG indirectly owns a
majority interest in Essex. As of December 31, 1998, Essex's
assets under management totaled approximately $5.6 billion.
Essex's address is 125 High Street, Boston, MA 02110. Stephen D.
Cutler, President, Joseph C. McNay, Chairman and Chief Investment
Officer, and Daniel Beckham, Principal and Vice President, are
the portfolio managers for the Fund.
The Sub-Adviser has discretion, subject to oversight by the
Trustees and the Investment Manager, to purchase and sell
portfolio assets, consistent with the Fund's investment
objectives, policies and restrictions. Generally, the services
which the Sub-Adviser provides to the Fund are limited to asset
management and related recordkeeping services. The Sub-Adviser
may also serve as a discretionary or non-discretionary investment
adviser to management or advisory accounts which are unrelated in
any manner to the Investment Manager or its affiliates.
Compensation of Investment Manager and Sub-Adviser by the Fund
As compensation for the investment management services
rendered and related expenses under the Investment Management
Agreement, the Fund has agreed to pay the Investment Manager an
investment management fee, which is computed daily as percentages
of the average of the value of the net assets of the Fund and may
be paid monthly. As compensation for the investment management
services rendered and related expenses under the Sub-Advisory
Agreement, the Investment Manager has agreed to pay the
Sub-Adviser a fee (net of all mutually agreed upon fee waivers
and reimbursements required by applicable law) for managing the
portfolio, which is also computed daily and paid monthly. The
fee paid to the Sub-Adviser is paid out of the fee the Investment
Manager receives from the Fund and does not increase the expenses
of the Fund.
Fee Waivers and Expense Limitations
The Investment Manager has contractually agreed, for a
period of no less than eighteen (18) months, to limit total
annual fund operating expenses to 1.10%, subject to later
reimbursement by the Fund in certain circumstances. The waiver
may, at the discretion of the Investment Manager, be continued
beyond such point. See "Managers AMG Funds" in the Prospectus
for further information.
The Investment Manager has decided to waive all or a portion
of its fees from the Fund or reimburse expenses to the Fund for a
variety of reasons, including attempting to make the Fund's
performance more competitive as compared to similar funds. The
effect of the expense limitation in effect at the date of this
Statement of Additional Information on the management fees which
are expected to be payable by the Fund is reflected in the
Expense Information located at the front of the Fund's
Prospectus. In addition to any other waiver and/or reimbursement
agreed to by the Investment Manager, Essex from time to time may
waive all or a portion of its fee. In such an event, the
Investment Manager will, subject to certain conditions, waive an
equal amount of the management fee. Shareholders will be
notified of any change in the management fees of the Fund on or
about the time that such fees or expenses become effective.
12
<PAGE>
Investment Management and Sub-Advisory Agreements
The Managers Funds LLC serves as investment manager to the
Fund under the Investment Management Agreement. The Investment
Management Agreement permits the Investment Manager to from time
to time engage one or more sub-advisers to assist in the
performance of its services. Pursuant to the Investment
Management Agreement, the Investment Manager has entered into a
sub-advisory agreement with Essex Investment Management Company,
LLC, dated October 19, 1999 (the "Sub-Advisory Agreement").
The Investment Management Agreement and the Sub-Advisory
Agreement provide for an initial term of two years and thereafter
shall continue in effect from year to year so long as such
continuation is specifically approved at least annually (i) by
either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the
Fund, and (ii) in either event by the vote of a majority of the
Trustees of the Trust who are not parties to the agreements or
"interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of
voting on such continuance. The Investment Management Agreement
and the Sub-Advisory Agreement may be terminated, without
penalty, by the Board of Trustees, by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) by the
Investment Manager or (in the case of the Sub-Advisory Agreement)
by the Sub-Adviser on not more than 60 days' written notice to
the other party and to the Fund. The Investment Management
Agreement and the Sub-Advisory Agreement terminate automatically
in the event of assignment, as defined under the 1940 Act and
regulations thereunder.
The Investment Management Agreement provides that the
Investment Manager is specifically responsible for:
* developing and furnishing continuously an investment
program and strategy for the Fund in compliance with the Fund's
investment objective and policies as set forth in the Trust's
current Registration Statement;
* providing research and analysis relative to the
investment program and investments of the Fund;
* determining (subject to the overall supervision and
review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by the Fund and what
portion, if any, of the assets of the Fund shall be held in cash
or cash equivalents; and
* making changes on behalf of the Trust in the
investments of the Fund.
Under the Sub-Advisory Agreement, Essex is responsible for
performing substantially these same advisory services for the
Investment Manager and the Fund.
The Investment Management Agreement also provides that the
Investment Manager shall furnish the Fund with office space and
facilities, services of executives and administrative personnel
and certain other administrative services. The Investment
Manager compensates all executive and clerical personnel and
Trustees of the Trust if such persons are employees of the
Investment Manager or its affiliates.
The Fund pays all expenses not borne by its Investment
Manager or Sub-Adviser including, but not limited to, the charges
and expenses of the Fund's custodian and transfer agent,
independent auditors and legal counsel for the Fund and the
Trust's independent Trustees, 12b-1 fees, if any, all brokerage
commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses
for registration or qualification of its shares under federal and
state securities laws, all expenses of shareholders' and
Trustees' meetings and of preparing, printing and mailing reports
to shareholders and the compensation of Trustees who are not
directors, officers or employees of the Investment Manager, Sub-
Adviser or their affiliates, other than affiliated registered
investment companies.
13
<PAGE>
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.
Reimbursement Agreement
Under the Investment Management Agreement, the Investment
Manager provides a variety of administrative services to the Fund
and, under its distribution agreement with the Fund, the
Investment Manager provides a variety of shareholder and
marketing services to the Fund. The Investment Manager receives
no additional compensation from the Fund for these services.
Pursuant to a Reimbursement Agreement between the Investment
Manager and Essex, Essex reimburses the Investment Manager for
the costs the Investment Manager bears in providing such services
to the Fund.
Code of Ethics
The Trustees have adopted a Code of Ethics under Rule 17j-1
of the 1940 Act on behalf of the Trust. The Code of Ethics of
the Trust incorporates the code of ethics of the Investment
Manager (applicable to "access persons" of the Trust that are
also employees of the Investment Manager) and the code of ethics
of the Sub-Adviser (applicable to "access persons" of the Trust
that are also employees of the Sub-Adviser). In combination,
these codes of ethics generally require access persons to
preclear any personal securities investment (with limited
exceptions such as government securities). The preclearance
requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the
proposed investment. The restrictions also include a ban on
trading securities based on information about the trading within
a Fund.
Distribution Arrangements
Under a distribution agreement between the Fund and The
Managers Funds LLC dated October 19, 1999 (the "Distribution
Agreement"), The Managers Funds LLC serves as distributor (the
"Distributor") in connection with the offering of the Fund's
shares on a no-load basis. The Distributor bears certain
expenses associated with the distribution and sale of shares of
the Fund. The Distributor acts as agent in arranging for the
sale of the Fund's shares without sales commission or other
compensation.
The Distribution Agreement between the Trust and the
Distributor may be terminated by either party under certain
specified circumstances and will automatically terminate on
assignment in the same manner as the Investment Management
Agreement. The Distribution Agreement may be continued annually
so long as such continuation is specifically approved at least
annually (i) by either the Trustees of the Trust or by vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, and (ii) in either event by the vote of a
majority of the Trustees of the Trust who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the
purpose of voting on such continuance.
14
<PAGE>
Custodian
State Street Bank and Trust Company ("State Street" or the
"Custodian"), 1776 Heritage Drive, North Quincy, Massachusetts,
is the Custodian for the Fund. It is responsible for holding all
cash assets and all portfolio securities of the Fund, releasing
and delivering such securities as directed by the Fund,
maintaining bank accounts in the names of the Fund, receiving for
deposit into such accounts payments for shares of the Fund,
collecting income and other payments due the Fund with respect to
portfolio securities and paying out monies of the Fund. In
addition, when the Fund trades in futures contracts and those
trades would require the deposit of initial margin with a futures
commission merchant ("FCM"), the Fund will enter into a separate
special custodian agreement with a custodian in the name of the
FCM which agreement will provide that the FCM will be permitted
access to the account only upon the Fund's default under the
contract.
The Custodian is authorized to deposit securities in
securities depositories or to use the services of sub-
custodians, including foreign sub-custodians, to the extent
permitted by and subject to the regulations of the Securities and
Exchange Commission.
Transfer Agent
Boston Financial Data Services, Inc., P.O. Box 8517, Boston,
Massachusetts 02266-8517, is the transfer agent (the "Transfer
Agent") for the Fund.
Independent Public Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts 02110, is the independent public accountant for the
Fund. PricewaterhouseCoopers LLP conducts an annual audit of the
financial statements of the Fund, assists in the preparation
and/or review of each of the Fund's federal and state income tax
returns and consults with the Fund as to matters of accounting
and federal and state income taxation.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Sub-Advisory Agreement provides that the Sub-Adviser
place all orders for the purchase and sale of securities which
are held in the Fund's portfolio. In executing portfolio
transactions and selecting brokers or dealers, it is the policy
and principal objective of the Sub-Adviser to seek best price and
execution. It is expected that securities will ordinarily be
purchased in the primary markets. The Sub-Adviser shall consider
all factors that it deems relevant when assessing best price and
execution for the Fund, including the breadth of the market in
the security, the price of the security, the financial condition
and execution capability of the broker or dealer and the
reasonableness of the commission, if any (for the specific
transaction and on a continuing basis).
In addition, when selecting brokers to execute transactions
and in evaluating the best available net price and execution, the
Sub-Adviser is authorized by the Trustees to consider the
"brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as
amended), provided by the broker. The Sub-Adviser is also
authorized to cause the Fund to pay a commission to a broker who
provides such brokerage and research services for executing a
portfolio transaction which is in excess of the amount of
commission another broker would have charged for effecting that
transaction. The Sub-Adviser must determine in good faith,
however, that such commission was reasonable in relation to the
value of the brokerage and research services provided viewed in
terms of that particular transaction or in terms of all the
accounts over which the Sub-Adviser exercises investment
discretion. Brokerage and research services received from such
brokers will be in addition to, and not in lieu of, the services
required to be performed by each Sub-Adviser. The Fund may
purchase and sell portfolio securities through brokers who
provide the Fund with research services.
The Trustees will periodically review the total amount of
commissions paid by the Fund to determine if the commissions paid
over representative periods of time were reasonable in relation
to commissions being charged by other brokers and the benefits to
the Fund of using particular brokers or dealers. It is possible
that certain of the services received by the Sub-Adviser
attributable to a particular transaction will primarily benefit
one or more other accounts for which investment discretion is
exercised by the Sub-Adviser.
15
<PAGE>
The fees of the Sub-Adviser are not reduced by reason of
their receipt of such brokerage and research services.
Generally, the Sub-Adviser does not provide any services to the
Fund except portfolio investment management and related record-
keeping services.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchasing Shares
Investors may open accounts with the Fund through their
financial planners or investment professionals, or by the Trust
in limited circumstances as described in the Prospectus. Shares
may also be purchased through bank trust departments on behalf of
their clients, other investors such as corporations, endowment
funds and charitable foundations, and tax-exempt employee
welfare, pension and profit-sharing plans. There are no charges
by the Trust for being a customer for this purpose. The Trust
reserves the right to determine which customers and which
purchase orders the Trust will accept.
Certain investors may purchase or sell Fund shares through
broker-dealers or through other processing organizations who may
impose transaction fees or other charges in connection with this
service. Shares purchased in this way may be treated as a single
account for purposes of the minimum initial investment. The Fund
may from time to time make payments to such broker-dealers or
processing organizations for certain recordkeeping services.
Investors who do not wish to receive the services of a
broker-dealer or processing organization may consider investing
directly with the Trust. Shares held through a broker-dealer or
processing organization may be transferred into the investor's
name by contacting the broker-dealer or processing organization
or the Transfer Agent. Certain processing organizations may
receive compensation from the Trust's Investment Manager and/or
the Sub-Adviser.
Purchase orders received by the Fund before 4:00 p.m. New
York Time, c/o Boston Financial Data Services, Inc. at the
address listed in the Prospectus on any Business Day will receive
the net asset value computed that day. Orders received after
4:00 p.m. by certain processing organizations which have entered
into special arrangements with the Investment Manager will also
receive that day's offering price. The broker-dealer, omnibus
processor or investment professional is responsible for promptly
transmitting orders to the Trust. Orders transmitted to the
Trust at the address indicated in the Prospectus will be promptly
forwarded to the Transfer Agent.
Federal Funds or Bank Wires used to pay for purchase orders
must be in U.S. dollars and received in advance, except for
certain processing organizations which have entered into special
arrangements with the Trust. Purchases made by check are
effected when the check is received, but are accepted subject to
collection at full face value in U.S. funds and must be drawn in
U.S. Dollars on a U.S. bank.
To ensure that checks are collected by the Trust,
redemptions of shares which were purchased by check are not
effected until the clearance of the check, which may take up to
15 days after the date of purchase unless arrangements are made
with the Investment Manager. However, during this 15 day period,
such shareholder may exchange such shares into any series of The
Managers Funds. The 15 day holding period for redemptions would
still apply to such exchanges.
If the check accompanying any purchase order does not clear,
or if there are insufficient funds in your bank account, the
transaction will be canceled and you will be responsible for any
loss the Trust incurs. For current shareholders, the Fund can
redeem shares from any identically registered account in the Fund
as reimbursement for any loss incurred. The Trust has the right
to prohibit or restrict all future purchases in the Trust in the
event of any nonpayment for shares. Third party checks which are
payable to an existing shareholder who is a natural person (as
opposed to a corporation or partnership) and endorsed over to the
Fund or State Street Bank and Trust Company will be accepted.
16
<PAGE>
In the interest of economy and convenience, share
certificates will not be issued. All share purchases are
confirmed to the record holder and credited to such holder's
account on the Trust's books maintained by the Transfer Agent.
Redeeming Shares
Any redemption orders received by the Trust before 4:00 p.m.
New York Time on any Business Day will receive the net asset
value determined at the close of trading on the New York Stock
Exchange (the "NYSE") on that day.
Redemption orders received after 4:00 p.m. will be redeemed
at the net asset value determined at the close of trading on the
next Business Day. Redemption orders transmitted to the Trust at
the address indicated in the Prospectus will be promptly
forwarded to the Transfer Agent. If you are trading through a
broker-dealer or investment adviser, such investment professional
is responsible for promptly transmitting orders. There is no
redemption charge. The Fund reserves the right to redeem
shareholder accounts (after 60 days notice) when the value of the
Fund shares in the account falls below $500 due to redemptions.
Whether the Fund will exercise its right to redeem shareholder
accounts will be determined by the Investment Manager on a
case-by-case basis.
If the Fund determines that it would be detrimental to the
best interest of the remaining shareholders of the Fund to make
payment wholly or partly in cash, payment of the redemption price
may be made in whole or in part by a distribution in kind of
securities from the Fund, in lieu of cash, in conformity with the
applicable rule of the SEC. If shares are redeemed in kind, the
redeeming shareholder might incur transaction costs in converting
the assets to cash. The method of valuing portfolio securities
is described under the "Net Asset Value," and such valuation will
be made as of the same time the redemption price is determined.
Investors should be aware that redemptions from the Fund may
not be processed if a redemption request is not submitted in
proper form. To be in proper form, the request must include the
shareholder's taxpayer identification number, account number,
Fund number and signatures of all account holders. All
redemptions will be mailed to the address of record on the
shareholder's account. In addition, if a shareholder sends a
check for the purchase of shares of the Fund and shares are
purchased before the check has cleared, the transmittal of
redemption proceeds from the shares will occur upon clearance of
the check which may take up to 15 days. The Fund reserves the
right to suspend the right of redemption and to postpone the date
of payment upon redemption beyond seven days as follows: (i)
during periods when the NYSE is closed for other than weekends
and holidays or when trading on the NYSE is restricted as
determined by the SEC by rule or regulation, (ii) during periods
in which an emergency, as determined by the SEC, exists that
causes disposal by the Fund of, or evaluation of the net asset
value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the SEC may
permit.
Exchange of Shares
An investor may exchange shares from the Fund into shares of
any series of The Managers Funds without any charge. An investor
may make such an exchange if following such exchange the investor
would continue to meet the Fund's minimum investment amount.
Shareholders should read the Prospectus of the series of The
Managers Funds they are exchanging into. Investors may exchange
only into accounts that are registered in the same name with the
same address and taxpayer identification number. Shares are
exchanged on the basis of the relative net asset value per share.
Since exchanges are purchases of a series of The Managers Funds
and redemptions of the Fund, the usual purchase and redemption
procedures and requirements apply to each exchange. Shareholders
are subject to federal income tax and may recognize capital gains
or losses on the exchange for federal income tax purposes.
Settlement on the shares of any series of The Managers Funds will
occur when the proceeds from redemption become available. The
Trust reserves the right to discontinue, alter or limit the
exchange privilege at any time.
17
<PAGE>
Net Asset Value
The Fund computes its Net Asset value once daily on Monday
through Friday on each day on which the NYSE is open for trading,
at the close of business of the NYSE, usually 4:00 p.m. New York
Time. The net asset value will not be computed on the day the
following legal holidays are observed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund may close for purchases and redemptions at such other
times as may be determined by the Board of Trustees to the extent
permitted by applicable law. The time at which orders are
accepted and shares are redeemed may be changed in case of an
emergency or if the NYSE closes at a time other than 4:00 p.m.
New York Time.
The net asset value of the Fund is equal to the value of the
Fund (assets minus liabilities) divided by the number of shares
outstanding. Fund securities listed on an exchange are valued at
the last quoted sale price on the exchange where such securities
are principally traded on the valuation date, prior to the close
of trading on the NYSE, or, lacking any sales, at the last quoted
bid price on such principal exchange prior to the close of
trading on the NYSE. Over-the-counter securities for which
market quotations are readily available are valued at the last
sale price or, lacking any sales, at the last quoted bid price on
that date prior to the close of trading on the NYSE. Securities
and other instruments for which market quotations are not readily
available are valued at fair value, as determined in good faith
and pursuant to procedures established by the Trustees.
Dividends and Distributions
The Fund declares and pays dividends and distributions as
described in the Prospectus.
If a shareholder has elected to receive dividends and/or
their distributions in cash and the postal or other delivery
service is unable to deliver the checks to the shareholder's
address of record, the dividends and/or distribution will
automatically be converted to having the dividends and/or
distributions reinvested in additional shares. No interest will
accrue on amounts represented by uncashed dividend or redemption
checks.
Distribution Plan
The Trust has adopted a "Plan of Distribution Pursuant to
Rule 12b-1" (the "Distribution Plan") under which the Trust may
engage, directly or indirectly, in financing any activities
primarily intended to result in the sale of shares, including,
but not limited to, (1) making payments to underwriters,
securities dealers and others engaged in the sale of shares,
including payments to the Distributor to compensate or reimburse
other persons for engaging in such activities and (2) paying
expenses or providing reimbursement of expenditures incurred by
the Distributor or other persons in connection with the offer or
sale of shares, including expenses relating to the formulation
and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, the
preparation, printing and distribution of sales literature and
reports for recipients other than existing shareholders of the
Trust, and obtaining such information, analyses and reports with
respect to marketing and promotional activities and investor
accounts as the Trust may, from time to time, deem advisable.
The Trust and the Fund are authorized to engage in the activities
listed above, and in other activities primarily intended to
result in the sale of shares, either directly or through other
persons with which the Trust has entered into greements pursuant
to the Distribution Plan. Under the Distribution Plan, the Board
of Trustees may authorize payments which may not exceed on an
annual basis 0.25% of the average annual net assets of the Fund.
The Trustees have not authorized the payment of any fees to date.
18
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CERTAIN TAX MATTERS
Federal Income Taxation of Fund-in General
The Fund intends to qualify and elect to be treated each
taxable year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), although it cannot give complete assurance that it
will qualify to do so. Accordingly, the Fund must, among other
things, (a) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90%
test"); and (b) satisfy certain diversification requirements on a
quarterly basis.
If the Fund should fail to qualify as a regulated investment
company in any year, it would lose the beneficial tax treatment
accorded regulated investment companies under Subchapter M of the
Code and all of its taxable income would be subject to tax at
regular corporate rates without any deduction for distributions
to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of the Fund's
current or accumulated earnings and profits. Also, the
shareholders, if they received a distribution in excess of
current or accumulated earnings and profits, would receive a
return of capital that would reduce the basis of their shares of
the Fund to the extent thereof. Any distribution in excess of a
shareholder's basis in the shareholder's shares would be taxable
as gain realized from the sale of such shares.
The Fund will be liable for a nondeductible 4% excise tax on
amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement. To avoid the tax, during
each calendar year the Fund must distribute an amount equal to at
least 98% of the sum of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, and
its net capital gain income for the 12-month period ending on
October 31, in addition to any undistributed portion of the
respective balances from the prior year. For that purpose, any
income or gain retained by the Fund that is subject to corporate
tax will be considered to have been distributed by year end. The
Fund intends to make sufficient distributions to avoid this 4%
excise tax.
Taxation of the Fund's Investments
Original Issue Discount; Market Discount. For federal
income tax purposes, debt securities purchased by the Fund may be
treated as having original issue discount. Original issue
discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price.
Original issue discount is treated for federal income tax
purposes as income earned by the Fund, whether or not any income
is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of
original issue discount is determined on the basis of a constant
yield to maturity which takes into account the compounding of
accrued interest. Under Section 1286 of the Code, an investment
in a stripped bond or stripped coupon may result in original
issue discount.
Debt securities may be purchased by the Fund at a discount
that exceeds the original issue discount plus previously accrued
original issue discount remaining on the securities, if any, at
the time the Fund purchases the securities. This additional
discount represents market discount for federal income tax
purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the
date of issue and having market discount, the gain realized on
disposition will be treated as interest to the extent it does not
exceed the accrued market discount on the security (unless the
Fund elects to include such accrued market discount in income in
the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Fund may be required
to capitalize, rather than deduct currently, part or all of any
direct interest expense incurred or continued to purchase or
carry any debt security having market discount, unless the Fund
makes the election to include market discount currently. Because
the Fund must include original issue discount in income, it will
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.
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Options and Futures Transactions. Certain of the Fund's
investments may be subject to provisions of the Code that (i)
require inclusion of unrealized gains or losses in the Fund's
income for purposes of the 90% test, and require inclusion of
unrealized gains in the Fund's income for purposes of the excise
tax and the distribution requirements applicable to regulated
investment companies; (ii) defer recognition of realized losses;
and (iii) characterize both realized and unrealized gain or loss
as short-term and long-term gain, irrespective of the holding
period of the investment. Such provisions generally apply to,
among other investments, options on debt securities, indices on
securities and futures contracts. The Fund will monitor its
transactions and may make certain tax elections available to it
in order to mitigate the impact of these rules and prevent
disqualification of the Fund as a regulated investment company.
Federal Income Taxation of Shareholders
General. Dividends paid by the Fund may be eligible for the
70% dividends-received deduction for corporations. The
percentage of the Fund's dividends eligible for such tax
treatment may be less than 100% to the extent that less than 100%
of the Fund's gross income may be from qualifying dividends of
domestic corporations. Any dividend declared in October,
November or December and made payable to shareholders of record
in any such month is treated as received by such shareholder on
December 31, provided that the Fund pays the dividend during
January of the following calendar year.
Distributions by the Fund can result in a reduction in the
fair market value of the Fund's shares. Should a distribution
reduce the fair market value below a shareholder's cost basis,
such distribution nevertheless may be taxable to the shareholder
as ordinary income or capital gain, even though, from an
investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider
the tax implications of buying shares just prior to a taxable
distribution. The price of shares purchased at that time
includes the amount of any forthcoming distribution. Those
investors purchasing shares just prior to a taxable distribution
will then receive a return of investment upon distribution which
will nevertheless be taxable to them.
Foreign Shareholders
Dividends of net investment income and distribution of
realized net short-term gain in excess of net long-term loss to a
shareholder who is a nonresident alien individual, fiduciary of a
foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) unless
the dividends are effectively connected with a U.S. trade or
business of the shareholder, in which case the dividends will be
subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations.
Distributions treated as long-term capital gains to foreign
shareholders will not be subject to U.S. tax unless the
distributions are effectively connected with the shareholder's
trade or business in the United States or, in the case of a
shareholder who is a nonresident alien individual, the
shareholder was present in the United States for more than 182
days during the taxable year and certain other conditions are
met.
In the case of a foreign shareholder who is a nonresident
alien individual or foreign entity, the Fund may be required to
withhold U.S. federal income tax as "backup withholding" at the
rate of 31% from distributions treated as long-term capital gains
and from the proceeds of redemptions, exchanges or other
dispositions of the Fund's shares unless IRS Form W-8 is
provided. Transfers by gift of shares of the Fund by a foreign
shareholder who is a non-resident alien individual will not be
subject to U.S. federal gift tax, but the value of shares of the
Fund held by such shareholder at his or her death will be
includible in his or her gross estate for U.S. federal estate tax
purposes.
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State and Local Taxes
The Fund may also be subject to state and/or local taxes in
jurisdictions in which the Fund is deemed to be doing business.
In addition, the treatment of the Fund and its shareholders in
those states which have income tax laws might differ from
treatment under the federal income tax laws. Shareholders should
consult with their own tax advisers concerning the foregoing
state and local tax consequences of investing in the Fund.
Other Taxation
The Fund is a series of a Massachusetts business trust.
Under current law, neither the Trust nor the Fund is liable for
any income or franchise tax in The Commonwealth of Massachusetts,
provided that the Fund continues to qualify as a regulated
investment company under Subchapter M of the Code.
Shareholders should consult their tax advisers about the
application of the provisions of tax law described in this
Statement of Additional Information in light of their particular
tax situations.
PERFORMANCE DATA
From time to time, the Fund may quote performance in terms
of yield, actual distributions, total return or capital
appreciation in reports, sales literature, and advertisements
published by the Fund. Since the Fund commenced operations on
November 1, 1999, there is no current performance information for
the Fund.
Total Return
The Fund may advertise performance in terms of average
annual total return for 1-, 5- and 10-year periods, or for such
lesser periods that the Fund has been in existence. Average
annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the
initial amount invested to the ending redeemable value, according
to the following formula:
P (1 + T) N = ERV
In the above formula, P = a hypothetical initial payment of
$1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of the hypothetical $1,000 payment
made at the beginning of the 1-, 5- or 10-year periods at the end
of the year or period
The figure is then annualized. The formula assumes that any
charges are deducted from the initial $1,000 payment and assumes
that all dividends and distributions by the Fund are reinvested
at the price stated in the Prospectus on the reinvestment dates
during the period.
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Performance Comparisons
The Fund may compare its performance to the performance of
other mutual funds having similar objectives. This comparison
must be expressed as a ranking prepared by independent services
or publications that monitor the performance of various mutual
funds such as Lipper, Inc. ("Lipper") and Morningstar, Inc.,
("Morningstar") . Lipper prepares the "Lipper Composite Index,"
a performance benchmark based upon the average performance of
publicly offered stock funds, bond funds, and money market funds
as reported by Lipper. Morningstar, a widely used independent
research firm, also ranks mutual funds by overall performance,
investment objectives and assets. The Fund's performance may
also be compared to the performance of various unmanaged indices
such as the Standard & Poor's 500 Composite Stock Price Index,
the Standard & Poor's 400 Composite Stock Price Index or the Dow
Jones Industrial Average.
Massachusetts Business Trust
The Fund is a series of a "Massachusetts business trust." A
copy of the Declaration of Trust for the Trust is on file in the
office of the Secretary of The Commonwealth of Massachusetts.
The Declaration of Trust and the By-Laws of the Trust are
designed to make the Trust similar in most respects to a
Massachusetts business corporation. The principal distinction
between the two forms concerns shareholder liability and are
described below.
Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as
partners for the obligations of the trust. This is not the case
for a Massachusetts business corporation. However, the
Declaration of Trust of the Trust provides that the shareholders
shall not be subject to any personal liability for the acts or
obligations of the Fund and that every written agreement,
obligation, instrument or undertaking made on behalf of the Fund
shall contain a provision to the effect that the shareholders are
not personally liable thereunder.
No personal liability will attach to the shareholders under
any undertaking containing such provision when adequate notice of
such provision is given, except possibly in a few jurisdictions.
With respect to all types of claims in the latter jurisdictions,
(i) tort claims, (ii) contract claims where the provision
referred to is omitted from the undertaking, (iii) claims for
taxes, and (iv) certain statutory liabilities in other
jurisdictions, a shareholder may be held personally liable to the
extent that claims are not satisfied by the Fund. However, upon
payment of such liability, the shareholder will be entitled to
reimbursement from the general assets of the Fund. The Trustees
of the Trust intend to conduct the operations of the Trust in a
way as to avoid, as far as possible, ultimate liability of the
shareholders of the Fund.
The Declaration of Trust further provides that the name of
the Trust refers to the Trustees collectively as Trustees, not as
individuals or personally, that no Trustee, officer, employee or
agent of the Fund or to a shareholder, and that no Trustee,
officer, employee or agent is liable to any third persons in
connection with the affairs of the Fund, except if the liability
arises from his or its own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall
look solely to the property of the Fund for any satisfaction of
claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs
of the Fund.
The Trust shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning
termination by action of the shareholders or by action of the
Trustees upon notice to the shareholders.
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Description of Shares
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which the Fund
represents a separate series of shares of beneficial interest.
See "Massachusetts Business Trust" above.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares ($0.001 par value)
of one or more series and to divide or combine the shares of any
series, if applicable, without changing the proportionate
beneficial interest of each shareholder in the Fund or assets of
another series, if applicable. Each share of the Fund represents
an equal proportional interest in the Fund with each other share.
Upon liquidation of the Fund, shareholders are entitled to share
pro rata in the net assets of the Fund available for distribution
to such shareholders. See "Massachusetts Business Trust" above.
Shares of the Fund have no preemptive or conversion rights and
are fully paid and nonassessable. The rights of redemption and
exchange are described in the Prospectus and in this Statement of
Additional Information.
The shareholders of the Trust are entitled to one vote for
each dollar of net asset value (or a proportionate fractional
vote in respect of a fractional dollar amount), on matters on
which shares of the Fund shall be entitled to vote. Subject to
the 1940 Act, the Trustees themselves have the power to alter the
number and the terms of office of the Trustees, to lengthen their
own terms, or to make their terms of unlimited duration subject
to certain removal procedures, and appoint their own successors,
provided however, that immediately after such appointment the
requisite majority of the Trustees have been elected by the
shareholders of the Trust. The voting rights of shareholders are
not cumulative so that holders of more than 50% of the shares
voting can, if they choose, elect all Trustees being selected
while the shareholders of the remaining shares would be unable to
elect any Trustees. It is the intention of the Trust not to hold
meetings of shareholders annually. The Trustees may call
meetings of shareholders for action by shareholder vote as may be
required by either the 1940 Act or by the Declaration of Trust of
the Trust.
Shareholders of the Trust have the right, upon the
declaration in writing or vote of more than two-thirds of its
outstanding shares, to remove a Trustee from office. The
Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of
10% of the shares of the Trust. In addition, whenever ten or
more shareholders of record who have been shareholders of record
for at least six months prior to the date of the application, and
who hold in the aggregate either shares of the Fund having a net
asset value of at least $25,000 or at least 1% of the Trust's
outstanding shares, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with
other shareholders with a view to obtaining signatures to request
a meeting for the purpose of voting upon the question of removal
of any of the Trustees and accompanies by a form of communication
and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books
of the Trust; or (2) inform such applicants as to the approximate
number of shareholders of record, and the approximate cost of
mailing to them the proposed shareholder communication and form
of request. If the Trustees elect to follow the latter, the
Trustees, upon the written request of such applicants accompanied
by a tender of the material to be mailed and the reasonable
expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as
recorded on the books, unless within five business days after
such tender the Trustees shall mail to such applicants and file
with the SEC, together with a copy of the material to be mailed,
a written statement signed by at least a majority of the Trustees
to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such
opinion. After opportunity for hearing upon the objections
specified in the written statements filed, the SEC may, and if
demanded by the Trustees or by such applicants shall, enter an
order either sustaining one or more objections or refusing to
sustain any of such objections, or if, after the entry of an
order sustaining one or more objections, the SEC shall find,
after notice and opportunity for a hearing, that all objections
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.
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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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Report of Independent Accountants
To the Board of Trustees of Managers AMG Funds and the
Shareholder of Essex Aggressive Growth Fund:
In our opinion, the accompanying statement of assets and
liabilities presents fairly, in all material respects, the
financial position of Managers AMG Funds -- Essex Aggressive
Growth Fund (the "Fund") at October 15, 1999, in conformity with
generally accepted accounting principles. This financial
statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this
statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statement, assessing the accounting principles
used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 19, 1999
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FINANCIAL STATEMENT
Managers AMG Funds
Statement of Assets and Liabilities
Essex Aggressive Growth Fund
October 15, 1999
Assets:
Cash $ 100,000
Total assets $ 100,000
Paid-in Capital (Applicable to 10,000 shares issued and
outstanding $ 100,000
with $0.001 par value; unlimited shares authorized)
Net Assets $ 100,000
Managers AMG Funds - Essex Aggressive Growth Fund
Notes to Financial Statement
(1) ORGANIZATION
The Essex Aggressive Growth Fund ( the "Fund") is the initial
series of Managers AMG Funds (the "Trust"), a Massachusetts
business trust organized on June 18, 1999. The Fund is
registered under the Investment Company Act of 1940, as amended
(the "1940 Act") as an open-end, diversified management
investment company. The Fund has had no operations to date,
other than the sale to Affiliated Managers Group, Inc. ("AMG") of
10,000 shares of the Fund on October 15, 1999.
The costs incurred and to be incurred in connection with the
organization of the Trust and the registration and initial
offering of shares of the Fund, including legal expenses, will be
borne by AMG. These costs will not be subject to reimbursement
by the Fund.
(2) INVESTMENT ADVISORY AND DISTRIBUTION SERVICES
Under the terms of an Investment Management Agreement (the
"Agreement"), the Fund is obligated to pay The Managers Funds LLC
(the "Manager") an annualized management fee of 1.00% of the
average daily net assets of the Fund. Pursuant to the Agreement,
the Manager has agreed, for a period of no less than eighteen
(18) months, to waive fees and pay or reimburse the Fund to the
extent total expenses of the Fund exceed 1.10%. The Fund is
obligated to repay the Manager such amounts waived, paid or
reimbursed in future years, if any, when the Fund's expenses fall
below such rate, provided that this occurs within 3 years after
the waiver or reimbursement. The repayment to the Manager is
subject to the further obligation that such repayment would not
cause the Fund's expenses in any such future year to exceed
1.10%.
The Trust, on behalf of the Fund, has adopted a distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under
the Plan, the Board of Trustees may authorize payments at an
annual rate of up to 0.25% of the Fund's average daily net
assets. The Plan provides that such payments will be used to pay
for the marketing of shares of the Fund. The Board of Trustees
has not authorized the payment of any fees to date under the
Plan.
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_______________________________
1Mr. Healey is an "interested person" (as defined in the
1940 Act) of the Trust.
