Registration Nos. 333-84639
811-9521
Securities and Exchange Commission
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ____ ___
Post-Effective Amendment No. 6 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 8 X
(Check appropriate box or boxes)
MANAGERS AMG FUNDS
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(Exact Name of Registrant as Specified in Charter)
40 Richards Avenue, Norwalk, Connecticut 06854
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(Address of Principal Executive Offices)
Philip H. Newman, Esq.
Elizabeth Shea Fries, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
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(Name and Address of Agent for Service)
As soon as practicable after the effective date of this
Registration Statement
---------------------------------------------------------------
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective (check
appropriate box):
__ Immediately upon filing pursuant to __ On (date) pursuant to
paragraph (b) paragraph (b)
__ 60 days after filing pursuant to __ On (date) pursuant to
paragraph (a)(1) paragraph (a)(1)
X 75 days after filing pursuant to __ On (date) pursuant to paragraph
paragraph (a)(2) of Rule 485 (a)(2) of Rule 485
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
[Draft of 11/15/00]
MANAGERS AMG FUNDS
FRONTIER SMALL COMPANY VALUE FUND
FRONTIER GROWTH FUND
_____________________
PROSPECTUS
DATED JANUARY __, 2001
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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Page
KEY INFORMATION 1
SUMMARY OF THE GOALS, PRINCIPAL STRATEGIES AND
PRINCIPAL RISK FACTORS OF THE FUNDS 1
PERFORMANCE SUMMARY 4
SMALL COMPANY VALUE FUND 4
GROWTH FUND 4
FEES AND EXPENSES OF THE FUNDS 6
FEES AND EXPENSES 6
EXAMPLE 6
FRONTIER SMALL COMPANY VALUE FUND 7
OBJECTIVE 7
PRINCIPAL INVESTMENT STRATEGIES 7
SHOULD YOU INVEST IN THIS FUND? 7
FRONTIER GROWTH FUND 8
OBJECTIVE 8
PRINCIPAL INVESTMENT STRATEGIES 8
SHOULD YOU INVEST IN THIS FUND? 8
MANAGERS AMG FUNDS 9
SMALL COMPANY VALUE FUND 9
GROWTH FUND 9
PAST PERFORMANCE OF FRONTIER 10
YOUR ACCOUNT 12
MINIMUM INVESTMENTS IN THE FUNDS 12
HOW TO PURCHASE SHARES 13
DISTRIBUTION PLAN 13
HOW TO SELL SHARES 14
INVESTOR SERVICES 14
THE FUNDS AND THEIR POLICIES 15
ACCOUNT STATEMENTS 15
DIVIDENDS AND DISTRIBUTIONS 16
TAX INFORMATION 16
</TABLE>
<PAGE>
KEY INFORMATION
This Prospectus contains important information for anyone
interested in investing in the FRONTIER SMALL COMPANY VALUE FUND
(the "Small Company Value Fund") and/or the FRONTIER GROWTH FUND
(the "Growth Fund"), each a series of MANAGERS AMG FUNDS. Please
read this document carefully before you invest and keep it for
future reference. You should base your purchase of shares of the
Funds on your own goals, risk preferences and investment time
horizons.
SUMMARY OF THE GOALS, PRINCIPAL STRATEGIES AND PRINCIPAL RISK
FACTORS OF THE FUNDS
The following is a summary of the goals, principal
strategies and principal risk factors of the Funds.
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FUND GOALS PRINCIPAL STRATEGIES PRINCIPAL RISK
FACTORS
----- ------ --------------------- ---------------
SMALL Long-term Invests primarily in Market Risk
COMPANY capital equity securities of Management Risk
VALUE FUND appreciation small capitalization Sector Risk
companies Small-Cap
Company Risk
Invests primarily in Value Stock
companies that, at the Risk
time of purchase, have
market capitalizations
between $100 million
and $1.5 billion and
are priced below three
(3) times book value
Ordinarily invests in
50 to 100 companies
that are selected from
all sectors of the
market based upon a
bottom-up analysis of
each company's
fundamentals;
currently, the fund
focuses on companies
in the financial
services, consumer
discretionary,
technology, producer
durables, utilities
and materials and
processing sectors
GROWTH FUND Long-term Invests primarily in Market Risk
capital common stocks of U.S. Management Risk
appreciation companies with the Growth Stock
potential for long- Risk
term growth Large and Mid-
Cap Stock Risk
Invests primarily in Sector Risk
companies with
capitalizations of at
least $5 billion,
although it may invest
in companies of any
size
Ordinarily invests in
80 to 120 companies
that are believed to
have superior earnings
growth potential;
companies are selected
from all sectors of
the market based upon
a bottom-up analysis
of each company's
fundamentals;
currently the Fund
focuses on companies
in the technology,
health care, consumer
growth, producer
durables, financial
services and
communications sectors
</TABLE>
<PAGE>
All investments involve some type and level of risk. Risk
is the possibility that you will lose money or not make any
additional money by investing in the Funds. Before you invest,
please make sure that you have read, and understand, the risk
factors that apply to the Funds. The following is a discussion
of the principal risk factors of the Funds.
GROWTH STOCK RISK (GROWTH FUND)
Growth stocks may be more sensitive to market movements
because their prices tend to reflect future investor expectations
rather than just current profits. As investors perceive and
forecast good business prospects, they are willing to pay higher
prices for securities. Higher prices therefore reflect higher
expectations. If such expectations are not met, or if
expectations are lowered, the prices of the securities will drop.
In addition, growth stocks tend to be more sensitive than other
stocks to increases in interest rates, which will generally cause
the prices of growth stocks to fall. To the extent that the
Growth Fund invests in those kinds of stocks, it will be exposed
to the risks associated with those kinds of investments. For
these and other reasons, the Growth Fund may underperform other
stock funds (such as value funds) when stocks of growth companies
are out of favor.
LARGE AND MID-CAP STOCK RISK (GROWTH FUND)
During good market and economic conditions, the prices of
larger company stocks may not rise as quickly or as significantly
as prices of stocks of well-managed smaller companies. For these
and other reasons, the Growth Fund may underperform other stock
funds (such as small-company stock funds) when stocks of large
and medium-sized companies are out of favor.
MARKET RISK
The Funds are subject to the risks generally of investing in
stocks, commonly referred to as "market risk." Market risk
includes the risk of sudden and unpredictable drops in value of
the market as a whole and periods of lackluster performance.
Despite unique influences on individual companies, stock prices
in general rise and fall as a result of investors' perceptions of
the market as a whole. The consequences of market risk are that
if the stock market drops in value, the value of the Funds'
portfolios of investments is also likely to decrease in value.
The increase or decrease in the value of the Funds' investments,
in percentage terms, may be more or less than the increase or
decrease in the value of the market.
MANAGEMENT RISK
The Funds are subject to management risk because they are
actively managed investment portfolios. Management risk is the
chance that poor security selection will cause the Funds to
underperform other funds with similar objectives. The success of
the Funds' investment strategy depends significantly on the skill
of Frontier Capital Management Company, LLC ("Frontier") in
assessing the potential of the securities in which the Funds
invest. Frontier will apply its investment techniques and risk
analyses in making investment decisions for the Funds, but there
can be no guarantee that these will produce the desired result.
SECTOR RISK
Companies that are in similar businesses may be similarly
affected by particular economic or market events, which may in
certain circumstances cause the value of securities in all
companies of a particular sector of the market to decrease. To
the extent the Funds have substantial holdings within a
particular sector, the risks associated with that sector
increase. Diversification among groups of companies in different
businesses may reduce sector risk but may also dilute potential
returns.
SMALL-CAP COMPANY RISK (SMALL COMPANY VALUE FUND)
Small capitalization companies often have greater price
volatility, lower trading volume, and less liquidity than larger,
more established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and
experience, smaller shares of their product or service markets,
fewer financial resources, and less competitive strength than
larger companies. For these and other reasons, the Small Company
Value Fund
<PAGE>
may underperform other stock funds (such as large-
company stock funds) when stocks of smaller companies are out of
favor.
VALUE STOCK RISK (SMALL COMPANY VALUE FUND)
"Value" stocks can perform differently from the market as a
whole and other types of stocks and can continue to be
undervalued by the market for long periods of time. With value
investing, a stock may not achieve its expected value because the
circumstances causing it to be underpriced do not change. For
this reason, the Small Company Value Fund may underperform other
stock funds (such as larger company growth stock funds) when
smaller company value stocks are out of favor.
<PAGE>
PERFORMANCE SUMMARY
SMALL COMPANY VALUE FUND
Because the Small Company Value Fund has not completed a
full calendar year's operations, performance information is not
included in this Prospectus. Information regarding Frontier's
performance with respect to a proprietary benefit plan account
that was continuously managed by Frontier with investment
objectives, policies and strategies substantially similar to
those of the Small Company Value Fund is provided elsewhere in
this prospectus. See "Past Performance of Frontier."
GROWTH FUND
The following bar chart illustrates the risks of investing
in the Growth Fund by showing, for periods prior to the Growth
Fund's inception on September 19, 2000, the year-by-year total
return of Frontier Growth Fund, L.P., the predecessor to the
Growth Fund. The chart illustrates how the performance of the
predecessor fund has varied over the past ten years, assuming
that all dividend and capital gain distributions have been
reinvested. The predecessor fund began operations on March 7,
1988, and its objectives, policies, guidelines and restrictions
were, in all material respects, the same as the Growth Fund's.
The predecessor fund was not registered as a mutual fund and
therefore was not subject to certain investment restrictions that
are imposed upon mutual funds. If the predecessor fund had been
registered as a mutual fund, the predecessor fund's performance
may have been adversely affected. The performance of the
predecessor fund was calculated according to the standardized SEC
method, except that quarterly rather than daily fund values were
used. Past performance does not guarantee future results.
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ANNUAL RETURNS - LAST TEN CALENDAR YEARS*
1990 0.90%
1991 56.68%
1992 8.77%
1993 5.34%
1994 (5.13)%
1995 26.08%
1996 16.25%
1997 15.47%
1998 31.65%
1999 42.59%
</TABLE>
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<CAPTION>
For the period January 1, 2000 through June 30, 2000, the
total return was 16.07%.
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Best Quarter*: 33.23% (4th Quarter 1998)
Worst Quarter*: (18.18)% (3rd Quarter 1998)
<FN>
*Reflects performance of predecessor fund for periods prior
to the Growth Fund's inception on September 19, 2000.
</FN>
</TABLE>
The following table compares the Growth Fund's performance
to that of a broadly based securities market index. Again, the
table assumes that dividends and capital gain distributions have
been reinvested for the Growth Fund and the applicable Index. As
always, the past performance of the Growth Fund is not an
indication of how the Growth Fund will perform in the future.
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<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS A PERCENTAGE) AS OF 12/31/99*
<S> <C> <C> <C>
1 YEAR 5 YEARS 10 YEARS
------ -------- ---------
Growth Fund 42.59% 26.01% 18.50%
S&P 500 Index 21.03% 28.58% 18.22%
<FN>
*Reflects performance of predecessor fund for periods prior
to the Growth Fund's inception on September 19, 2000.
</FN>
</TABLE>
<PAGE>
FEES AND EXPENSES OF THE FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY
IF YOU BUY AND HOLD SHARES OF THE FUNDS.
FEES AND EXPENSES
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SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
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Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions None
Maximum Account Fee None
</TABLE>
<TABLE>
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ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
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SMALL COMPANY VALUE GROWTH
FUND FUND
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Management Fee 1.10% 0.85%
Distribution (12b-1) Fees 0.25% 0.25%
Other Expenses 0.32%1 0.19%1
Total Annual Fund Operating Expenses 1.67% 1.29%
Fee Waiver and Reimbursement (0.12)%2 (0.05)%2
Net Annual Fund Operating Expenses 1.55% 1.24%
<FN>
1Because the Funds are new, the "Other Expenses" of the
Funds are based on annualized projected expenses and average net
assets for the fiscal year ending September 30, 2001.
2The Managers Funds LLC and Frontier have contractually
agreed for a period of not less than eighteen (18) months, to
limit Net Annual Fund Operating Expenses to 1.55% and 1.24% of
the Small Company Value Fund's and the Growth Fund's average
annual net assets, respectively, subject to later reimbursement
by the respective Fund in certain circumstances. See "Managers
AMG Funds."
</FN>
</TABLE>
EXAMPLE
The following Example will help you compare the cost of
investing in the Funds to the cost of investing in other mutual
funds. The Example makes certain assumptions. It assumes that
you invest $10,000 as an initial investment in the Funds for the
time periods indicated and then redeem all of your shares at the
end of those periods. It also assumes that your investment has a
5% total return each year and the Funds' operating expenses
remain the same. Although your actual costs may be higher or
lower, based on the above assumptions, your costs would be:
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1 YEAR 3 YEARS
------ -------
Small Company $158 $239
Value Fund
Growth Fund $126 $191
</TABLE>
The Example reflects the impact of each Fund's contractual
expense limitation for the initial eighteen (18) month period
covered by the Example.
The Example should not be considered a representation of
past or future expenses, as actual expenses may be greater or
lower than those shown.
<PAGE>
FRONTIER SMALL COMPANY VALUE FUND
OBJECTIVE
The Small Company Value Fund's objective is to achieve long-
term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Small Company Value Fund invests primarily in equity
securities of small capitalization companies that Frontier
believes are undervalued. The Small Company Value Fund primarily
invests in companies that, at the time of purchase, have market
capitalizations between $100 million and $1.5 billion and are
priced below three (3) times book value. The Small Company Value
Fund's equity investments will consist of common stocks,
preferred stocks and convertible preferred stocks. Ordinarily,
the Small Company Value Fund invests in 50 to 70 companies that
are selected based upon a bottom-up analysis of each company's
fundamentals. Currently, the Small Company Value Fund focuses on
companies in the financial services, consumer discretionary,
technology, producer durables, utilities and materials and
processing sectors.
Frontier serves as sub-adviser to the Small Company Value
Fund. Frontier's investment process will emphasize valuation and
earnings potential. Frontier evaluates companies for investment
using traditional bottom-up fundamental research methods
including assessments of earnings quality, return on capital,
earnings potential compared to consensus estimates, quality of
management, financial leverage, secular and cyclical trends,
insider buying and internal or external catalysts to improved
performance. In addition to price to book value, the valuation
metrics to be reviewed include market capitalization to revenue,
free cash flow yield, enterprise value to earnings, comparison to
private market value, and investment risk/reward. Generally,
Frontier will sell a security if the company's earnings
fundamentals are deteriorating, or if it believes valuations are
above sustainable or historical levels.
For temporary or defensive purposes, the Small Company Value
Fund may invest, without limit, in cash or quality short-term
debt securities including repurchase agreements. To the extent
that the Small Company Value Fund is invested in these
instruments, the Small Company Value Fund will not be pursuing
its investment objective.
SHOULD YOU INVEST IN THIS FUND?
This Fund MAY be suitable if you:
* Are seeking exposure to equity markets
* Are willing to accept a higher degree of risk for the
opportunity of higher potential returns
* Have an investment time horizon of five years or more
This Fund MAY NOT be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with stock market risk
* Are seeking current income
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WHAT ARE YOU INVESTING IN? You are buying shares of a pooled
investment known as a mutual fund. It is professionally managed
and gives you the opportunity to invest in a wide variety of
companies industries and markets. This Fund is not a complete
investment program and there is no guarantee that it will reach
its stated goals.
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<PAGE>
FRONTIER GROWTH FUND
OBJECTIVE
The Growth Fund's objective is to achieve long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Growth Fund invests primarily in common stocks of U.S.
companies with the potential for long-term growth. Although the
Growth Fund may invest in companies of any size, the Growth Fund
will invest primarily in companies with market capitalizations
greater than $1 billion. Ordinarily, the Growth Fund invests in
80 to 120 companies that Frontier believes have superior earnings
growth potential. Companies are selected from all sectors of the
market based upon a bottom-up analysis of each company's
fundamentals. Currently, the Growth Fund focuses on companies in
the technology, health care, consumer growth, producer durables,
financial services and communications sectors. Generally, the
Growth Fund limits its investments in any specific company to 5%
of its assets.
Frontier serves as sub-adviser to the Growth Fund.
Frontier's investment process begins with the identification of
business sectors it believes possess above-average growth
potential. Frontier seeks to identify such economic sectors
based upon an analysis of economic, political, and other relevant
trends. Frontier then seeks to identify a limited number of
major industries in such sectors as likely beneficiaries of these
trends. Further industry research is conducted through company
visits, attendance at industry conferences and meetings with Wall
Street analysts. Frontier then looks for individual investments
through a combination of computerized screening and traditional
fundamental investment research. The computerized screening
techniques developed by Frontier focus on companies with dividend
growth, equity growth, earnings growth, earnings momentum, and
earnings surprises. Once the systematic screening of companies
is complete, a focus list of several hundred companies is
developed. This list of companies is then analyzed using
traditional fundamental research methods including an assessment
of management strengths, corporate strategy, product positioning
and financial outlook.
For temporary or defensive purposes, the Growth Fund may
invest, without limit, in cash or quality short-term debt
securities including repurchase agreements. To the extent that
the Growth Fund is invested in these instruments, the Growth Fund
will not be pursuing its investment objective.
SHOULD YOU INVEST IN THIS FUND?
This Fund MAY be suitable if you:
* Are seeking an opportunity for some equity returns in your
investment portfolio
* Are willing to accept a higher degree of risk for the
opportunity of higher potential returns
* Have an investment time horizon of five years or more
This Fund MAY NOT be suitable if you:
* Are seeking stability of principal
* Are investing with a shorter time horizon in mind
* Are uncomfortable with stock market risk
* Are seeking current income
-----------------------------------------------------------------
WHAT ARE YOU INVESTING IN? You are buying shares of a pooled
investment known as a mutual fund. It is professionally managed
and gives you the opportunity to invest in a wide variety of
companies industries and markets. This Fund is not a complete
investment program and there is no guarantee that it will reach
its stated goals.
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<PAGE>
MANAGERS AMG FUNDS
Managers AMG Funds is a no-load mutual fund family comprised
of different funds, each having distinct investment management
objectives, strategies, risks and policies. Frontier Small
Company Value Fund and Frontier Growth Fund are two of the funds
in the fund family.
The Managers Funds LLC (the "Investment Manager"), a
subsidiary of Affiliated Managers Group, Inc., serves as
investment manager to the Funds and is responsible for each
Fund's overall administration and distribution. The Investment
Manager also monitors the performance, security holdings and
investment strategies of Frontier, the sub-adviser of the Funds
and, when appropriate, evaluates any potential new asset managers
for the fund family.
Frontier has day-to-day responsibility for managing each
Fund's portfolio. Frontier, located at 99 Summer Street, Boston,
Massachusetts 02110, is the successor firm to Frontier Capital
Management Company, Inc., which was formed in 1980. Affiliated
Managers Group, Inc. indirectly owns a majority interest in
Frontier. As of September 30, 2000, Frontier had assets under
management of approximately $5.4 billion.
SMALL COMPANY VALUE FUND
Thomas W. Duncan, Jr. and William A. Teichner, CFA are the
portfolio managers for the Small Company Value Fund. Mr. Duncan
is a Vice President of Frontier, a position he has held since
1996. Prior to that time, Mr. Duncan was a Research Analyst with
Frontier from 1993. Mr. Teichner is also a Vice President of
Frontier, a position he has held since 1995.
The Small Company Value Fund is obligated by its investment
management agreement to pay an annual management fee to the
Investment Manager of 1.10% of the average daily net assets of
the Small Company Value Fund. The Investment Manager, in turn,
pays Frontier 1.10% of the average daily net assets of the Small
Company Value Fund for its services as sub-adviser. Under its
investment management agreement with the Small Company Value
Fund, the Investment Manager provides a variety of administrative
services to the Small Company Value Fund and, under its
distribution agreement with the Small Company Value Fund, the
Investment Manager provides a variety of shareholder,
distribution and marketing services to the Small Company Value
Fund.
The Investment Manager has contractually agreed, for a
period of not less than eighteen (18) months, to waive fees and
pay or reimburse the Small Company Value Fund to the extent total
expenses of the Small Company Value Fund exceed 1.55% of the
Small Company Value Fund's average daily net assets. The Small
Company Value Fund is obligated to repay the Investment Manager
such amounts waived, paid or reimbursed in future years provided
that the repayment occurs within 3 years after the waiver or
reimbursement and that such repayment would not cause the Small
Company Value Fund's expenses in any such future year to exceed
1.55% of the Small Company Value Fund's average daily net assets.
In addition to any other waiver or reimbursement agreed to by the
Investment Manager, Frontier 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.
GROWTH FUND
J. David Wimberly, CFA, and Stephen M. Knightly, CFA, are
the portfolio managers for the Growth Fund. Mr. Wimberly is the
Chairman of Frontier, a position he has held since 1980. Mr.
Knightly is a Vice President of Frontier, a position he has held
since December 1994.
The Growth Fund is obligated by its investment management
agreement to pay an annual management fee to the Investment
Manager of 0.85% of the average daily net assets of the Growth
Fund. The Investment Manager, in turn, pays Frontier 0.85% of
the average daily net assets of the Growth Fund for its services
as sub-adviser. Under its investment management agreement with
the Growth Fund, the Investment Manager provides a variety of
<PAGE>
administrative services to the Growth Fund and, under its
distribution agreement with the Growth Fund, the Investment
Manager provides a variety of shareholder, distribution and
marketing services to the Growth Fund.
The Investment Manager has contractually agreed, for a
period of not less than eighteen (18) months, to waive fees and
pay or reimburse the Growth Fund to the extent total expenses of
the Fund exceed 1.24% of the Growth Fund's average daily net
assets. The Growth Fund is obligated to repay the Investment
Manager such amounts waived, paid or reimbursed in future years
provided that the repayment occurs within 3 years after the
waiver or reimbursement and that such repayment would not cause
the Growth Fund's expenses in any such future year to exceed
1.24% of the Growth Fund's average daily net assets. In addition
to any other waiver or reimbursement agreed to by the Investment
Manager, Frontier 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.
PAST PERFORMANCE OF FRONTIER
The table below sets forth the investment performance for
the period from January 1, 1999 to December 31, 2000 of a
proprietary benefit plan account that was continuously managed by
Frontier with investment objectives, policies and strategies
substantially similar to those of the Small Company Value Fund
(the "Proprietary Account"). The Proprietary Account's
investment performance has been adjusted to give effect on a
quarterly basis to fees and expenses in the amount of 1.55%,
which is the expense ratio of the Small Company Value Fund, net
of contractual waivers and reimbursements. The chart illustrates
how the performance of the Proprietary Account has varied over
the past 8 quarters, assuming that all dividend and capital gain
distributions have been reinvested.
The table compares the Proprietary Account's performance to
the Russell 2000 Value Index. The Russell 2000 Value Index
measures the performance of those companies with lower price-to-
book ratios and lower forecasted growth values which are among
the 2,000 smallest companies in the Russell 3000 Index (which
itself represents the performance of the 3,000 largest U.S.
companies based on total market capitalization). Although used
as a benchmark, the performance of the Russell 2000 Value Index
may not be comparable to the Proprietary Account because, unlike
the performance of the Proprietary Account, the performance of
the Russell 2000 Value Index has not been adjusted for any fees
or expenses.
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Russell 2000 Value
Proprietary Account Index
------------------- ---------------------
March 31, 1999 (6.61)% (9.69)
June 30, 1999 28.16% 16.56%
September 30,1999 (2.64)% (7.82)%
December 31, 1999 13.29% 1.53%
Total Annual Return 32.02% (1.48)%
March 31, 2000 10.84% 3.82%
June 30, 2000 10.83% 1.95%
September 30, 2000 10.70% 7.34%
December 31, 2000
Total Annual Return
Total Cumulative Return
Annualized:
1 Year
2 Years
Since Inception
</TABLE>
<PAGE>
The information provided does not represent the performance
of the Small Company Value Fund, which commenced operations on
, 2001 and has a limited performance record of its own. The
following information should not be considered a prediction of
future performance of the Small Company Value Fund. The Small
Company Value Fund's performance may be higher or lower than that
shown above.
The Proprietary Account is not subject to the same types of
expenses to which the Small Company Value Fund is subject, nor to
the diversification requirements, specific tax restrictions and
investment limitations imposed on the Fund by the Investment
Company Act of 1940, as amended (the "1940 Act") or the Internal
Revenue Code of 1986, as amended (the "Code"). The performance
of the Proprietary Account might have been less favorable had the
Proprietary Account been subject to these requirements,
restrictions and limitations. Past performance does not
guarantee future results.
<PAGE>
YOUR ACCOUNT
As an investor, you pay no sales charges to invest in the
Funds and you pay no charges to redeem out of the Funds. The
price at which you purchase and redeem your shares is equal to
the net asset value per share (NAV) next determined after your
purchase or redemption order is received on each day the New York
Stock Exchange (NYSE) is open for trading. The NAV is equal to
the Fund's net worth (assets minus liabilities) divided by the
number of shares outstanding. Each Fund's NAV is calculated at
the close of regular business of the NYSE, usually 4:00 p.m. New
York Time.
Each Fund's investments are valued based on market values.
If market quotations are not readily available for any security,
the value of the security will be based on an evaluation of its
fair value, pursuant to procedures established by the Board of
Trustees.
MINIMUM INVESTMENTS IN THE FUND
Cash investments in the Funds must be in U.S. Dollars.
Third-party checks which are payable to an existing shareholder
who is a natural person (as opposed to a corporation or
partnership) and endorsed over to the applicable Fund or State
Street Bank and Trust Company will be accepted.
Subject to approval by the Investment Manager and Frontier,
you may be permitted to purchase shares of the Funds by means of
an in-kind contribution of securities, which will be valued in
accordance with the applicable Fund's pricing procedures. As
with a cash purchase of shares, an in-kind contribution will also
be subject to the applicable Fund's minimum investment
requirements.
The following provides the minimum initial and additional
investments in the Funds:
<TABLE>
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INITIAL INVESTMENT ADDITIONAL INVESTMENT
------------------ ---------------------
Regular accounts $25,000 $1,000
Traditional IRA 25,000 1,000
Roth IRA 25,000 1,000
</TABLE>
The Funds or the underwriter may, in their discretion, waive
the minimum and initial investment amounts at any time.
-------------------------------------------------------------------
A TRADITIONAL IRA is an individual retirement account.
Contributions may be deductible at certain income levels and
earnings are tax-deferred while your withdrawals and
distributions are taxable in the year that they are made.
A ROTH IRA is an IRA with non-deductible contributions and tax-
free growth of assets and distributions. The account must be held
for five years and certain other conditions must be met in order
to qualify.
You should consult your tax professional for more information on
IRA accounts.
-------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
HOW TO PURCHASE SHARES
INITIAL PURCHASE ADDITIONAL PURCHASES
------------------------------------------
<S> <C> <C>
THROUGH YOUR CONTACT YOUR SEND ANY ADDITIONAL
INVESTMENT ADVISOR INVESTMENT ADVISOR MONIES TO YOUR
OR OTHER INVESTMENT INVESTMENT
PROFESSIONAL. PROFESSIONAL AT THE
ADDRESS APPEARING ON
YOUR ACCOUNT
STATEMENT.
ALL SHAREHOLDERS: Complete the account
application.
* BY MAIL Mail the application Write a letter of
and a check payable instruction and a
to Managers AMG check payable to
Funds to: Managers AMG Funds
to:
Managers AMG Funds
c/o Boston Financial Managers AMG Funds
Data Services, Inc. c/o Boston Financial
P.O. Box 8517 Data Services, Inc.
Boston, MA 02266- P.O. Box 8517
8517 Boston, MA 02266-
8517
* BY TELEPHONE Not Available Include your account
# and Fund name on
your check
If your account has
already been
established, call
the Transfer Agent
at (800) 252-0682.
The minimum
additional
investment is $1,000
* BY INTERNET Not Available If your account has
already been
established, see our
website at
http://www.managersa
mg.com. The minimum
additional
investment is
$1,000.
</TABLE>
FOR BANK WIRES: Please call and notify the Fund at (800)
252-0682. Then instruct your bank to wire the money to
State Street Bank and Trust Company, Boston, MA 02101; ABA
#011000028; BFN Managers AMG Funds A/C 9905-472-8, FBO
Shareholder name, account number and Fund name. Please be
aware that your bank may charge you a fee for this service.
If you invest through a third party such as a bank, broker-
dealer or other fund distribution organization, rather than
directly with the Trust, the policies, fees and minimum
investment amounts may be different than those described in this
Prospectus. The Funds may also participate in programs with many
national brokerage firms which limit the transaction fees for the
shareholder and may pay fees to these firms for participation in
these programs.
DISTRIBUTION PLAN
The Funds have adopted a distribution plan to pay for the
marketing of each Fund's shares. Under the plan, the Board of
Trustees has authorized payments at an annual rate of up to 0.25%
of each Fund's average daily net assets to The Managers Funds LLC
for providing distribution services.
<PAGE>
HOW TO SELL SHARES
You may sell your shares at any time. Your shares will be
sold at the NAV calculated after the Fund's Transfer Agent
receives your order. Orders received after 4:00 p.m. New York
Time will receive the NAV per share determined at the close of
trading on the next NYSE trading day.
<TABLE>
<CAPTION>
INSTRUCTIONS
--------------------------------------------------------------
<S> <C>
THROUGH YOUR Contact your investment advisor or other
INVESTMENT ADVISOR investment professional.
ALL SHAREHOLDRES:
* BY MAIL Write a letter of instruction containing:
* the name of the Fund
* dollar amount or number of shares to
be sold
* your name
* your account number
* signatures of all owners on account
Mail letter to:
Managers AMG Funds
c/o Boston Financial Data Services,
Inc.
P.O. Box 8517
Boston, MA 02266-8517
* BY TELEPHONE If you elected telephone redemption
privileges on your account application,
call us at (800) 252-0682.
* BY INTERNET See our website at
http://www.managersamg.com.
</TABLE>
Redemptions of $25,000 and over require a signature
guarantee. A signature guarantee helps to protect against fraud.
You can obtain one from most banks and securities dealers. A
notary public cannot provide a signature guarantee. In joint
accounts, both signatures must be guaranteed.
Telephone redemptions are available only for redemptions
which are below $25,000.
INVESTOR SERVICES
Automatic Reinvestment Plan allows your dividends and
capital gain distributions to be reinvested in additional shares
of the Fund. You can elect to receive cash.
Automatic Investments allows you to make automatic
deductions from a designated bank account.
Systematic Withdrawals allows you to make automatic monthly
withdrawals of $100 or more. Withdrawals are normally completed
on the 25th day of each month. If the 25th day of any month is a
weekend or a holiday, the withdrawal will be completed on the
next business day.
<PAGE>
Individual Retirement Accounts are available to you at no
additional cost. Call us at (800) 835-3879 for more information
and an IRA kit.
The Funds have an Exchange Privilege which allows you to
exchange your shares of the Funds for shares of any series of
Managers AMG Funds, The Managers Funds, Managers Trust I and
Managers Trust II. There is no fee associated with the Exchange
Privilege. Be sure to read the Prospectus of any series of
Managers AMG Funds, The Managers Funds, Managers Trust I or
Managers Trust II that you wish to exchange into. You can
request your exchange in writing, by telephone (if elected on the
application), by internet or through your investment advisor,
bank or investment professional.
The Fund will not be responsible for any losses resulting
from unauthorized transactions if it follows reasonable security
procedures designed to verify the identity of the investor. You
should verify the accuracy of your confirmation statements
immediately after you receive them. If you do not want the
ability to sell and exchange by telephone or internet, call the
Fund for instructions.
THE FUNDS AND THEIR POLICIES
The Funds are series of a "Massachusetts business trust."
The Board of Trustees may, without the approval of the
shareholders, create additional series at any time. Also at any
time, the Board of Trustees may, without shareholder approval,
divide these series or any other series into two or more classes
of shares with different preferences, privileges, and expenses.
The Funds reserve the right to:
* redeem an account if the value of the account falls below
$25,000 due to redemptions;
* suspend redemptions or postpone payments when the NYSE is
closed for any reason other than its usual weekend or holiday
closings or when trading is restricted by the Securities and
Exchange Commission;
* change the minimum investment amounts;
* delay sending out redemption proceeds for up to seven days
(this usually applies to very large redemptions without notice,
excessive trading or during unusual market conditions);
* make a redemption-in-kind (a payment in portfolio securities
instead of in cash) if we determine that a redemption is too
large and/or may cause harm to the Fund and its shareholders;
* refuse any purchase or exchange request if we determine that
such request could adversely affect the Fund's NAV, including if
such person or group has engaged in excessive trading (to be
determined in our discretion);
* after prior warning and notification, close an account due
to excessive trading; and
* terminate or change the Exchange Privilege or impose fees in
connection with exchanges or redemptions.
ACCOUNT STATEMENTS
You will receive quarterly and yearly statements detailing
your account activity. All investors (other than IRA accounts)
will also receive a Form 1099-DIV in January, detailing the tax
characteristics of any dividends and distributions that you have
received in your account, whether taken in cash or as additional
shares. You will also receive a confirmation after each trade
executed in your account.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Income dividends and net capital gain distributions, if any,
are normally declared and paid annually in December.
We will automatically reinvest your distributions of
dividends and capital gains unless you tell us otherwise. You
may change your election by writing to us at least 10 days prior
to the scheduled payment date.
TAX INFORMATION
Please be aware that the following tax information is
general and refers to the provisions of the Internal Revenue Code
of 1986, as amended, which are in effect as of the date of this
Prospectus. You should consult a tax adviser about the status of
your distributions from the Funds.
All dividends and short-term capital gains distributions are
generally taxable to you as ordinary income, whether you receive
the distribution in cash or reinvest it for additional shares.
An exchange of a Fund's shares for shares of another Fund will be
treated as a sale of the first Fund's shares and any gain on the
transaction may be subject to federal income tax.
Keep in mind that distributions may be taxable to you at
different rates depending on the length of time the Fund held the
applicable investment and not the length of time that you held
your Fund shares. When you do sell your Fund shares, a capital
gain may be realized, except for certain tax-deferred accounts,
such as IRA accounts.
Federal law requires the Funds to withhold taxes on
distributions paid to shareholders who;
* fail to provide a social security number or taxpayer
identification number;
* fail to certify that their social security number or
taxpayer identification number is correct; or
* fail to certify that they are exempt from withholding.
The initial investors in the Growth Fund are expected to
include clients of Frontier, some of whom may invest by means of
a contribution of securities in exchange for shares of the Growth
Fund in which no current tax will be incurred. In connection
with these transactions, each investor's tax basis in the
contributed securities will carry over to the Growth Fund, which
basis may be lower than the current market value of the
securities. When the Growth Fund subsequently sells these
contributed securities, the Growth Fund may realize a larger gain
(or smaller loss) for tax purposes than would have been the case
if the same securities had been purchased directly by the Growth
Fund with cash. The larger gain (or smaller loss) may result in
shareholders accelerating (or deferring) the federal income tax
liability they otherwise would have incurred in the absence of
the tax-free contribution of securities.
<PAGE>
MANAGERS AMG FUNDS
FRONTIER SMALL COMPANY VALUE FUND
FRONTIER GROWTH FUND
INVESTMENT MANAGER AND FUND DISTRIBUTOR
The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203) 857-5321 or (800) 835-3879
SUB-ADVISER
Frontier Capital Management Company, LLC
99 Summer Street
Boston, Massachusetts 02110
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
TRANSFER AGENT
Boston Financial Data Services, Inc.
Attn: Managers AMG Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) 252-0682
TRUSTEES
Jack W. Aber
William E. Chapman, II
Sean M. Healey*
Edward J. Kaier
Eric Rakowski
*Interested Person
<PAGE>
For More Information
Additional information for the Funds, including the
Statement of Additional Information, is available to you without
charge and may be requested as follows:
By Telephone: Call 1-800-835-3879
By Mail: Managers AMG Funds
40 Richards Avenue
Norwalk, CT 06854
On the Internet: Electronic copies are available
on our website at
http://www.managersamg.com
A current Statement of Additional Information for each Fund
is on file with the Securities and Exchange Commission and is
incorporated by reference (is legally part of this prospectus).
Text-only copies are available on the EDGAR database of the SEC's
website at http://www.sec.gov, and copies of this information may
be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or
by writing the SEC's Public Reference Section, Washington, D.C.
20549-0102 (202-942-8090). Information about the Funds also may
be reviewed and copied at the SEC's Public Reference Room.
INVESTMENT COMPANY ACT REGISTRATION NUMBER 811-9521
<PAGE>
MANAGERS AMG FUNDS
FRONTIER SMALL COMPANY VALUE FUND
FRONTIER GROWTH FUND
____________________________
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY __, 2001
_________________________________________________________________
You can obtain a free copy of the Prospectus of the Frontier
Small Company Value Fund (the "Small Company Value Fund") and the
Frontier Growth Fund (the "Growth Fund and, collectively with the
Small Company Value Fund, the "Funds") 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 Funds. It should be read in conjunction with
the Funds' Prospectus.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
GENERAL INFORMATION 1
INVESTMENT OBJECTIVES AND POLICIES 1
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS 2
DIVERSIFICATION REQUIREMENTS FOR THE FUNDS 6
FUNDAMENTAL INVESTMENT RESTRICTIONS 6
TEMPORARY DEFENSIVE POSITION 8
PORTFOLIO TURNOVER 8
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 8
TRUSTEES' COMPENSATION 9
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 10
CONTROL PERSONS 10
MANAGEMENT OWNERSHIP 10
MANAGEMENT OF THE FUND 10
INVESTMENT MANAGER AND SUB-ADVISER 10
COMPENSATION OF INVESTMENT MANAGER AND SUB-ADVISER BY
THE FUND 11
FEE WAIVERS AND EXPENSE LIMITATIONS 11
INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS 11
REIMBURSEMENT AGREEMENT 12
CODE OF ETHICS 13
DISTRIBUTION ARRANGEMENTS 13
CUSTODIAN 13
TRANSFER AGENT 13
INDEPENDENT PUBLIC ACCOUNTANTS 13
BROKERAGE ALLOCATION AND OTHER PRACTICES 14
PURCHASE, REDEMPTION AND PRICING OF SHARES 14
PURCHASING SHARES 14
REDEEMING SHARES 15
EXCHANGE OF SHARES 16
NET ASSET VALUE 16
DIVIDENDS AND DISTRIBUTIONS 16
DISTRIBUTION PLAN 17
CERTAIN TAX MATTERS 17
FEDERAL INCOME TAXATION OF FUNDS-IN GENERAL 17
TAXATION OF THE FUNDS' INVESTMENTS 17
FEDERAL INCOME TAXATION OF SHAREHOLDERS 18
FOREIGN SHAREHOLDERS 18
STATE AND LOCAL TAXES 19
OTHER TAXATION 19
PERFORMANCE DATA 19
TOTAL RETURN 19
PERFORMANCE COMPARISONS 20
MASSACHUSETTS BUSINESS TRUST 20
DESCRIPTION OF SHARES 20
ADDITIONAL INFORMATION 22
</TABLE>
<PAGE>
GENERAL INFORMATION
This Statement of Additional Information relates only to the
Frontier Small Company Value Fund and the Frontier Growth Fund
(the "Funds"). Each 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 Funds, as well
as each Fund's investment objectives and policies. It should be
read in conjunction with each Fund's current Prospectus. The
Trust's executive office is located at 40 Richards Avenue,
Norwalk, CT 06854.
The Managers Funds LLC, a subsidiary of Affiliated Managers
Group, Inc., serves as investment manager to the Funds and is
responsible for the overall administration and distribution of
the Funds. See "Management of the Funds."
INVESTMENT OBJECTIVES AND POLICIES
The following is additional information regarding the
investment objectives and policies used by each Fund in an
attempt to achieve its objective as stated in its Prospectus.
The Funds are both diversified open-end management investment
companies.
SMALL COMPANY VALUE FUND
The Small Company Value Fund invests primarily in equity
securities of small capitalization companies that Frontier
believes are undervalued. The Small Company Value Fund primarily
invests in companies that, at the time of purchase, have market
capitalizations between $100 million and $1.5 billion and are
priced below three (3) times book value. The Small Company Value
Fund's equity investments will consist of common stocks,
preferred stocks and convertible preferred stocks. Ordinarily,
the Small Company Value Fund invests in 50 to 70 companies that
are selected based upon a bottom-up analysis of each company's
fundamentals. Currently, the Small Company Value Fund focuses on
companies in the financial services, consumer discretionary,
technology, producer durables, utilities and materials and
processing sectors.
Frontier serves as sub-advisor to the Small Company Value
Fund. Frontier's investment process will emphasize valuation and
earnings potential. Frontier evaluates companies for investment
using traditional bottom-up fundamental research methods
including assessments of earnings quality, return on capital,
earnings potential compared to consensus estimates, quality of
management, financial leverage, secular and cyclical trends,
insider buying and internal or external catalysts to improved
performance. In addition to price to book value, the valuation
metrics to be reviewed include market capitalization to revenue,
free cash flow yield, enterprise value to earnings, comparison to
private market value, and investment risk/reward. Generally,
Frontier will sell a security if the company's earnings
fundamentals are deteriorating, or if it believes valuations are
above sustainable or historical levels.
GROWTH FUND
The Growth Fund invests primarily in equity securities of
U.S. companies with the potential for long-term growth. Although
the Growth Fund may invest in companies of any size, the Growth
Fund will invest primarily in companies with market
capitalizations greater than $1 billion. Ordinarily, the Growth
Fund invests in 80 to 120 companies from pre-selected sectors of
the market.
Investments are made through a process that combines a
strategic overview of the securities markets with systematic
screening using a disciplined, quantitative approach and
traditional research techniques. Initially, the Growth Fund will
focus on the technology, health care, consumer growth, producer
durables, financial services and utilities/communications
sectors. Generally, the Growth Fund limits its investments in
any specific company to 5% of its assets.
<PAGE>
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
The following are descriptions of the types of securities
that may be purchased by the Funds. Also see "Quality and
Diversification Requirements of the Funds."
(1) Cash Equivalents. The Funds may invest in cash
equivalents. Cash equivalents include certificates of deposit,
bankers acceptances, commercial paper, short-term corporate debt
securities and repurchase agreements.
Bankers Acceptances. The Funds may invest in bankers
acceptances. Bankers acceptances are short-term credit
instruments used to finance the import, export, transfer or
storage of goods. These instruments become "accepted" when a
bank guarantees their payment upon maturity.
Eurodollar bankers acceptances are bankers acceptances
denominated in U.S. Dollars and are "accepted" by foreign
branches of major U.S. commercial banks.
Certificates of Deposit. The Funds may invest in
certificates of deposit. Certificates of deposit are issues
against money deposited into a bank (including eligible foreign
branches of U.S. banks) for a definite period of time. They earn
a specified rate of return and are normally negotiable.
Commercial Paper. The Funds may invest in commercial paper.
Commercial Paper refers to promissory notes that represent an
unsecured debt of a corporation or finance company. They have a
maturity of less than 9 months. Eurodollar commercial paper
refers to promissory notes payable in U.S. Dollars by European
issuers.
Repurchase Agreements. The Funds may enter into repurchase
agreements with brokers, dealers or banks that meet the credit
guidelines which have been approved by the Board of Trustees. In
a repurchase agreement, a Fund buys a security from a bank or a
broker-dealer that has agreed to repurchase the same security at
a mutually agreed upon date and price. The resale price normally
is the purchase price plus a mutually agreed upon interest rate.
This interest rate is effective for the period of time the Fund
is invested in the agreement and is not related to the coupon
rate on the underlying security. The period of these repurchase
agreements will be short, and at no time will the Funds enter
into repurchase agreements for more than seven days.
Repurchase agreements could have certain risks that may
adversely affect the Funds. If a seller defaults, the Funds 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 Funds may enter
into reverse repurchase agreements. In a reverse repurchase
agreement, a Fund sells a security and agrees to repurchase the
same security at a mutually agreed upon date and price. The
price reflects the interest rates in effect for the term of the
agreement. For the purposes of the Investment Company Act of
1940, as amended (the "1940 Act"), a reverse repurchase agreement
is also considered as the borrowing of money by the Fund and,
therefore, a form of leverage which may cause any gains or losses
for the Fund to become magnified.
The Funds will invest the proceeds of borrowings under
reverse repurchase agreements. In addition, the Funds 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 Funds will not invest
the proceeds of a reverse repurchase agreement for a period that
is longer than the reverse repurchase agreement itself. The
Funds 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 Funds may invest some
of their 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
2
<PAGE>
which is publicly available, and generally emerging market
issuers are not subject to uniform accounting, auditing and
financial standards and requirements like those required by U.S.
issuers.
Investors should be aware that the value of a Fund's
investments in emerging markets securities may be adversely
affected by changes in the political, economic or social
conditions, expropriation, nationalization, limitation on the
removal of funds or assets, controls, tax regulations and other
foreign restrictions in emerging market countries. These risks
may be more severe than those experienced in foreign countries.
Emerging market securities trade with less frequency and volume
than domestic securities and therefore may have greater price
volatility and lack liquidity. Furthermore, there is often no
legal structure governing private or foreign investment or
private property in some emerging market countries. This may
adversely affect a Fund's operations and the ability to obtain a
judgment against an issuer in an emerging market country.
(4) Foreign Securities. The Funds may invest in foreign
securities either directly or indirectly in the form of American
Depository Receipts or similar instruments. Investments in
securities of foreign issuers and in obligations of domestic
banks involve different and additional risks from those
associated with investing in securities of U.S. issuers. There
may be limited information available to investors which is
publicly available, and generally foreign issuers are not subject
to uniform accounting, auditing and financial standards and
requirements like those applicable to U.S. issuers. Any foreign
commercial paper must not be subject to foreign withholding tax
at the time of purchase.
Investors should be aware that the value of a Fund's
investments in foreign securities may be adversely affected by
changes in political or social conditions, confiscatory taxation,
diplomatic relations, expropriation, nationalization, limitation
on the removal of funds or assets, or the establishment of
exchange controls or other foreign restrictions and tax
regulations in foreign countries. In addition, due to the
differences in the economy of these foreign countries compared to
the U.S. economy, whether favorably or unfavorably, portfolio
securities may appreciate or depreciate and could therefore
adversely affect a Fund's operations. It may also be difficult
to obtain a judgment against a foreign creditor. Foreign
securities trade with less frequency and volume than domestic
securities and therefore may have greater price volatility.
Furthermore, changes in foreign exchange rates will have an
affect on those securities that are denominated in currencies
other than the U.S. Dollar.
Forward Foreign Currency Exchange Contracts. The Funds 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, a Fund's custodian will segregate cash or
marketable securities in an amount not less than the value of the
Fund's total assets committed to these contracts. Generally, the
Funds will not enter into contracts that are greater than 90
days.
Forward foreign currency contracts have additional risks. It
may be difficult to determine the market movements of the
currency. The value of a Fund's assets may be adversely affected
by changes in foreign currency exchange rates and regulations and
controls on currency exchange. Therefore, the Funds may incur
costs in converting foreign currency.
If the Funds engage in an offsetting transaction, the Funds
will experience a gain or a loss determined by the movement in
the contract prices. An "offsetting transaction" is one where a
Fund enters into a transaction with the bank upon maturity of the
original contract. The Funds 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 Funds may invest some
of their assets in securities denominated in foreign currencies.
The Funds will compute and distribute the income earned by the
Funds 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 Funds earn the income and
the time that the income is converted into U.S. Dollars, the
Funds may be required to sell their securities in order to make
3
<PAGE>
distributions in U.S. Dollars. As a result, the liquidity of a
Fund's securities may have an adverse affect on such Fund's
performance.
(5) Futures Contracts. The Funds may buy and sell futures
contracts and options on future contracts to attempt to maintain
exposure to the equity markets while holding cash for temporary
liquidity needs, or protect the value of their portfolios against
changes in the prices of the securities in which they invest.
When the Funds buy or sell a futures contract, the Funds 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 Funds desire to do so.
Equity Index Futures Contracts. The Funds may enter into
equity index futures contracts. An equity index future contract
is an agreement for the Funds 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 Funds
enter into this type of contract, the Funds make 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 Funds may invest in privately
placed, restricted, Rule 144A or other unregistered securities.
Neither Fund may acquire illiquid holdings if, as a result, more
than 15% of that Fund's total assets would be in illiquid
investments. Subject to this Fundamental policy limitation, the
Funds 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
relevant Fund's portfolio. The price a Fund's portfolio may pay
for illiquid securities or may receive upon resale may be lower
than the price paid or received for similar securities with a
more liquid market. Accordingly, the valuations of these
securities will reflect any limitations on their liquidity.
The Funds may purchase Rule 144A securities eligible for sale
without registration under the 1933 Act. These securities may be
determined to be illiquid in accordance with the guidelines
established by The Managers Funds LLC and approved by the
Trustees. The Trustees will monitor these guidelines on a
periodic basis.
Investors should be aware that the Funds may be subject to a
risk if the Funds should decide to sell these securities when a
buyer is not readily available and at a price which the Funds
believe 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 Funds 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 Funds
may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market
conditions develop, the Funds 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 Funds 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.
4
<PAGE>
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 Funds may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Funds make
a closing purchase transaction when they buy a call option on the
same security or contract with has the same price and expiration
date. As a result, the Funds 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 Funds are 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 Funds may increase due to the writing of a
covered call option.
Covered Put Options. The Funds may write ("sell") covered
put options on individual stocks, equity indices and futures
contracts, including equity index futures contracts.
A put option is a short-term contract that is generally for
no more than nine months. This contract gives a buyer of the
option, in return for a paid premium, the right to sell the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can sell the underlying
security or contract at the option price regardless of its market
price. A put option is considered "covered" if the Fund which is
writing the option owns or has a right to immediately acquire the
underlying security or contract. The seller of a put option
assumes the risk of the decrease of the value of the underlying
security. If the underlying security decreases, the buyer could
exercise the option and the underlying security or contract could
be sold to the seller at a price that is higher than its current
market value.
The Funds may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Funds make
a closing purchase transaction when they buy a put option on the
same security or contract with the same price and expiration
date. As a result, the Funds 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 Funds are 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 Funds may increase due to the writings of 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 Funds lend portfolio securities.
Puts and Calls. The Funds may buy options on individual
stocks, equity indices and equity futures contracts. The Funds'
purpose in buying these puts and calls is to protect against an
adverse affect in changes of the general level of market prices
in which the Funds operate. 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 Funds 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.
5
<PAGE>
(10) Securities Lending. The Funds may lend portfolio
securities in order to realize additional income. This lending
is subject to each Fund's investment policies and restrictions.
Any loan of portfolio securities must be secured at all times by
collateral that is equal to or greater than the value of the
loan. If a seller defaults, a Fund may use the collateral to
satisfy the loan. However, if the buyer defaults, the buyer may
lose some rights to the collateral securing the loans of
portfolio securities.
(11) Segregated Accounts. The Funds will establish a
segregated account with their Custodian after they have 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 Funds may enter into short sales.
The Funds enter into a short sale when they sell a security that
they do not own. A broker retains the proceeds of the sales
until the Funds replace the sold security. The Funds arrange with
the broker to borrow the security. The Funds must replace the
security at its market price at the time of the replacement. As
a result, the Funds may have to pay a premium to borrow the
security and the Funds may, but will not necessarily, receive any
interest on the proceeds of the sale. The Funds 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 Funds' 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 Funds replace the security, the
Funds will incur a loss. If the price declines during that
period, the Funds will realize a capital gain. The capital gain
will be decreased by the amount of transaction costs and any
premiums, dividends or interest the Funds 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 Funds will have to pay in connection with the short
sale. For tax planning reasons, the Funds may also engage in
short sales with respect to a security that the Funds currently
hold or have a right to acquire, commonly referred to as a "short
against the box."
(13) When-Issued Securities. The Funds may purchase
securities on a when-issued basis. The purchase price and the
interest rate payable, if any, on the securities are fixed on the
purchase commitment date or at the time the settlement date is
fixed. The value of these securities is subject to market
fluctuation. For fixed-income securities, no interest accrues to
the Funds until a settlement takes place. At the time the Funds
make a commitment to purchase securities on a when-issued basis,
the Funds will record the transaction, reflect the daily value of
the securities when determining the net asset value of the Funds,
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 Funds 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
Funds will meet their obligations from maturities or sales of the
securities held in the segregated account and/or from cash flow.
If the Funds choose to dispose of the right to acquire a
when-issued security prior to its acquisition, they could incur a
loss or a gain due to market fluctuation. Furthermore, the Funds
may be at a disadvantage if the other party to the transaction
defaults. When-issued transactions may allow the Funds to hedge
against unanticipated changes in interest rates.
DIVERSIFICATION REQUIREMENTS FOR THE FUNDS
The Funds intend 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 Funds. Except as otherwise stated,
these investment restrictions are "fundamental" policies. A
"fundamental" policy is defined in the 1940 Act to mean that the
restriction cannot be changed without the vote of a "majority of
the outstanding voting securities" of the relevant 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
6
<PAGE>
securities present at a meeting if the holders of more than 50%
of the outstanding voting securities are present or represented
by proxy, or (b) more than 50% of the outstanding voting
securities.
Each Fund may not:
(1) Issue senior securities. For purposes of this
restriction, borrowing money, making loans, the issuance of
shares of beneficial interest in multiple classes or series, the
deferral of Trustees' fees, the purchase or sale of options,
futures contracts, forward commitments and repurchase agreements
entered into in accordance with the Fund's investment policies,
are not deemed to be senior securities.
(2) Borrow money, except (i) in amounts not to exceed 33
1/3% of the value of the Fund's total assets (including the
amount borrowed) taken at market value from banks or through
reverse repurchase agreements or forward roll transactions, (ii)
up to an additional 5% of its total assets for temporary
purposes, (iii) in connection with short-term credits as may be
necessary for the clearance of purchases and sales of portfolio
securities and (iv) the Fund may purchase securities on margin to
the extent permitted by applicable law. For purposes of this
investment restriction, investments in short sales, roll
transactions, futures contracts, options on futures contracts,
securities or indices and forward commitments, entered into in
accordance with the Fund's investment policies, shall not
constitute borrowing.
(3) Underwrite the securities of other issuers, except to
the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter under the
Securities Act of 1933.
(4) Purchase or sell real estate, except that the Fund may
(i) acquire or lease office space for its own use, (ii) invest in
securities of issuers that invest in real estate or interests
therein, (iii) invest in securities that are secured by real
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.
7
<PAGE>
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
For temporary or defensive purposes, the Funds may invest,
without limit, in cash or quality short-term debt securities
including repurchase agreements. To the extent that the Funds
are invested in these instruments, the Funds will not be pursuing
their investment objectives.
PORTFOLIO TURNOVER
Generally, the Funds purchase securities for investment
purposes and not for short-term trading profits. However, the
Funds 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 relevant Fund's investment objectives. A
higher degree of portfolio activity may increase brokerage costs
to the Funds.
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.
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 Funds. 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, The Managers Trust I and The Managers Trust II.
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, The Managers Trust I and The
Managers Trust II. His address is 380 Gulf of Mexico Drive,
Longboat Key, Florida 34228. His date of birth is September 23,
1941.
SEAN M. HEALEY(1) - Trustee; President and Chief Operating Officer
of Affiliated Managers Group, Inc. since October 1999. From
April 1995 to October 1999, he was Executive Vice President of
Affiliated Managers Group, Inc. From August 1987 through March
1995, he served in a variety of roles in the Mergers and
Acquisitions Department of Goldman, Sachs & Co., the last of
which was as Vice President. 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, The Managers Trust I and The
Managers Trust II. His date of birth is May 9, 1961.
EDWARD J. KAIER - Trustee; Partner, Hepburn Willcox Hamilton &
Putnam since 1977. He has served as a Trustee of the Trust since
June 1999. He also serves as a Trustee of The Managers Funds,
The Managers Trust I and The Managers Trust II. His address is
1100 One Penn Center, Philadelphia, Pennsylvania 19103. His date
of birth is September 23, 1945.
-------------------------------
(1) Mr. Healey is an "interested person" (as defined in the 1940 Act)
of the Trust.
8
<PAGE>
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, The Managers Trust I and The Managers Trust II. 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 & 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.
LAURA A. PENTIMONE - 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:
Name of Aggregate Aggregate Total
Trustee Compensati Compensation Compensation
on from from the from the
the Fund Trust(a) Fund and the
Fund Complex
Paid to
Trustees (b)
--------------------------------------------------------
<S> <C> <C> <C>
Jack W. Aber - $4,000 $26,000
William E. - $4,000 $26,000
Chapman, II
Sean M. Healey none none none
Edward K. Kaier - $4,000 $26,000
Eric Rakowski - $4,000 $26,000
____________________
<FN>
(a) Compensation is estimated for each Fund's fiscal year ending
September 30, 2001. The Funds do 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 December 31, 2000 for
services as Trustees of The Managers Funds, The Managers
Trust I and The Managers Trust II.
</FN>
</TABLE>
9
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
CONTROL PERSONS
As of January __, 2001 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 Small
Company Value 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 Small
Company Value Fund.
As of September 19, 2000, 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 Growth
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 Growth Fund.
MANAGEMENT OWNERSHIP
As of January __, 2001, all management personnel (i.e.,
Trustees and Officers) as a group owned beneficially less than 1%
of the outstanding shares of the Small Company Value Fund.
As of September 19, 2000, all management personnel (i.e.,
Trustees and Officers) as a group owned beneficially less than 1%
of the outstanding shares of the Growth Fund.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER AND SUB-ADVISER
The Trustees provide broad supervision over the operations
and affairs of the Trust and the Funds. The Managers Funds LLC
(the "Investment Manager") serves as investment manager to and
distributor of the Funds. 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 Funds under an investment management agreement with the
Trust dated September 19, 2000, as amended by Letter Agreements
dated September 19, 2000, November 14, 2000 and January__, 2001,
(the "Investment Management Agreement"), the Investment Manager
also carries out the daily administration of the Trust and Funds.
For its investment management services, the Investment Manager
receives an investment management fee from each Fund. All or a
portion of the investment management fee paid by each Fund to the
Investment Manager is used to pay the advisory fees of Frontier
Capital Management Company, LLC, the sub-adviser which manages
the assets of each Fund (the "Sub-Adviser" or "Frontier"). The
Investment Manager receives no additional compensation from the
Funds for its administration services. Frontier was selected by
the Investment Manager, subject to the review and approval of the
Trustees. Frontier is the successor firm to Frontier Capital
Management Company, Inc. which was formed in 1980. AMG
indirectly owns a majority interest in Frontier. As of ______
Frontier's assets under management totaled approximately ___
billion. Frontier's address is 99 Summer Street, Boston, MA
02110. Thomas W. Duncan and William A. Teichner, CFA are the
portfolio managers for the Small Company Value Fund. J. David
Wimberly, CFA and Stephen M. Knightly, CFA are the portfolio
managers for the Growth Fund.
The Sub-Adviser has discretion, subject to oversight by the
Trustees and the Investment Manager, to purchase and sell
portfolio assets, consistent with each Fund's investment
objectives, policies and restrictions. Generally, the services
which the Sub-Adviser provides to the Funds are limited to asset
management and related record keeping 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.
10
<PAGE>
COMPENSATION OF INVESTMENT MANAGER AND SUB-ADVISER BY THE FUND
As compensation for the investment management services
rendered and related expenses under the Investment Management
Agreement, each Fund has agreed to pay the Investment Manager an
investment management fee, which is computed daily as a
percentage of the average of the value of the net assets of the
respective 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 each 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 each Fund and does not
increase the expenses of the Funds.
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 operating expenses for the Small Company Value Fund to
1.55%, subject to later reimbursement by the Small Company Value
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 contractually agreed, for a
period of no less than eighteen (18) months, to limit total
annual operating expenses for the Growth Fund to 1.24%, subject
to later reimbursement by the Growth 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 Funds or reimburse expenses to the Funds for
a variety of reasons, including attempting to make each 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 Funds is reflected in the
Expense Information located at the front of the Funds'
Prospectus.
In addition to any other waiver and/or reimbursement agreed
to by the Investment Manager, Frontier 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 a Fund on or about the
time that such fees or expenses become effective.
INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
The Managers Funds LLC serves as investment manager to the
Funds 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 Frontier, dated September 19, 2000
(the "Sub-Advisory Agreement"), as amended by a Letter Agreement,
dated January __, 2001.
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
Funds, 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 Funds. The Investment Management
Agreement and the Sub-Advisory Agreement terminate automatically
in the event of assignment, as defined under the 1940 Act and
regulations hereunder.
11
<PAGE>
The Investment Management Agreement provides that the
Investment Manager is specifically responsible for:
* developing and furnishing continuously an investment program
and strategy for the Funds in compliance with each Fund's
investment objectives 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 Funds;
* 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 Funds and what portion,
if any, of the assets of the Funds shall be held in cash or cash
equivalents; and
* making changes on behalf of the Trust in the investments of
the Funds.
Under the Sub-Advisory Agreement, Frontier is responsible
for performing substantially these same advisory services for the
Investment Manager and the Funds.
The Investment Management Agreement also provides that the
Investment Manager shall furnish the Funds 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 Funds pay all expenses not borne by their Investment
Manager or Sub-Adviser including, but not limited to, the charges
and expenses of each Fund's custodian and transfer agent,
independent auditors and legal counsel for the Funds and the
Trust's independent Trustees, 12b-1 fees, if any, all brokerage
commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses
for registration or qualification of its shares under federal and
state securities laws, all expenses of shareholders' and
Trustees' meetings and of preparing, printing and mailing reports
to shareholders and the compensation of Trustees who are not
directors, officers or employees of the Investment Manager, Sub-
Adviser or their affiliates, other than affiliated registered
investment companies.
The Sub-Advisory Agreement requires the Sub-Adviser to
provide fair and equitable treatment to the Funds in the
selection of portfolio investments and the allocation of
investment opportunities. However, it does not obligate the
Sub-Adviser to acquire for the Funds a position in any investment
which any of the Sub-Adviser's other clients may acquire. The
Funds shall have no first refusal, co-investment or other rights
in respect of any such investment, either for the Funds or
otherwise.
Although the Sub-Adviser makes investment decisions for the
Funds independent of those for its other clients, it is likely
that similar investment decisions will be made from time to time.
When the Funds 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 Funds 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 Funds. However, the
Trustees believe, over time, that coordination and the ability to
participate in volume transactions should benefit the Funds.
REIMBURSEMENT AGREEMENT
Under the Investment Management Agreement, the Investment
Manager provides a variety of administrative services to the
Funds and, under its distribution agreement with the Funds, the
Investment Manager provides a variety of shareholder and
marketing services to the Funds. The Investment Manager receives
no additional compensation from the Funds for these services.
Pursuant to a Reimbursement Agreement between the Investment
Manager and Frontier, Frontier reimburses the Investment Manager
for the costs the Investment Manager bears in providing such
services to the Funds.
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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 dated October 19, 1999
between the Fund and The Managers Funds (the "Distribution
Agreement"), as amended by a Letter Agreement dated January __,
2001, The Managers Funds LLC serves as distributor (the
"Distributor") in connection with the offering of each Fund's
shares on a no-load basis. The Distributor bears certain
expenses associated with the distribution and sale of shares of
the Funds. The Distributor acts as agent in arranging for the
sale of each Fund's shares without sales commission or other
compensation. Pursuant to the Distribution Agreement and the
Funds' Distribution Plan, the Trust pays the Distributor a fee in
the amount of 0.25% of the average net assets of each Fund for
its services as Distributor.
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 a Fund, and (ii) in either event by the vote of a
majority of the Trustees of the Trust who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the
purpose of voting on such continuance.
CUSTODIAN
State Street Bank and Trust Company ("State Street" or the
"Custodian"), 1776 Heritage Drive, North Quincy, Massachusetts,
is the Custodian for the Funds. It is responsible for holding
all cash assets and all portfolio securities of the Funds,
releasing and delivering such securities as directed by the
Funds, maintaining bank accounts in the names of the Funds,
receiving for deposit into such accounts payments for shares of
the Funds, collecting income and other payments due the Funds
with respect to portfolio securities and paying out monies of the
Funds. In addition, when the Funds trade in futures contracts
and those trades would require the deposit of initial margin with
a futures commission merchant ("FCM"), the Funds 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 Funds' 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 Funds.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts 02110, is the independent public accountant for the
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Funds. PricewaterhouseCoopers LLP conducts an annual audit of
the financial statements of the Funds, assists in the preparation
and/or review of each of the Funds' federal and state income tax
returns and consults with the Funds as to matters of accounting
and federal and state income taxation.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Sub-Advisory Agreement provides that the Sub-Adviser
place all orders for the purchase and sale of securities which
are held in each Fund's portfolios. 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 Funds, 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 Funds 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 Funds may
purchase and sell portfolio securities through brokers who
provide the Funds with research services.
The Trustees will periodically review the total amount of
commissions paid by the Funds to determine if the commissions
paid over representative periods of time were reasonable in
relation to commissions being charged by other brokers and the
benefits to the Funds of using particular brokers or dealers. It
is possible that certain of the services received by the
Sub-Adviser attributable to a particular transaction will
primarily benefit one or more other accounts for which investment
discretion is exercised by the Sub-Adviser.
The fees of the Sub-Adviser are not reduced by reason of
their receipt of such brokerage and research services.
Generally, the Sub-Adviser does not provide any services to the
Funds except portfolio investment management and related record-
keeping services.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASING SHARES
Investors may open accounts with the Funds through their
financial planners or investment professionals, or through the
Trust in limited circumstances as described in the Prospectus.
Shares may also be purchased through bank trust departments on
behalf of their clients, other 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
Funds may from time to time make payments to such broker-dealers
or processing organizations for certain record keeping 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.
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Purchase orders received by the Funds 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
Managers AMG Funds, The Managers Funds, The Managers Trust I or
The Managers Trust II. 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 Funds can
redeem shares from any identically registered account in the
Funds 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.
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. Each Fund reserves the right to redeem
shareholder accounts (after 60 days notice) when the value of the
Fund's shares in the account falls below $25,000 due to
redemptions. Whether the Funds will exercise their right to
redeem shareholder accounts will be determined by the Investment
Manager on a case-by-case basis.
If a 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 Funds
may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the request must include the
shareholder's taxpayer identification number, account number,
Fund number and signatures of all account holders. All
redemptions will be mailed to the address of record on the
shareholder's account. In addition, if a shareholder sends a
check for the purchase of shares of the Funds and shares are
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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 Funds reserve the
right to suspend the right of redemption and to postpone the date
of payment upon redemption beyond seven days as follows: (i)
during periods when the NYSE is closed for other than weekends
and holidays or when trading on the NYSE is restricted as
determined by the SEC by rule or regulation, (ii) during periods
in which an emergency, as determined by the SEC, exists that
causes disposal by the Funds of, or evaluation of the net asset
value of, portfolio securities to be unreasonable or
impracticable, or (iii) for such other periods as the SEC may
permit.
EXCHANGE OF SHARES
An investor may exchange shares from the Funds into shares
of any series of Managers AMG Funds, The Managers Funds, The
Managers Trust I or The Managers Trust II without any charge. An
investor may make such an exchange if following such exchange the
investor would continue to meet the Funds' minimum investment
amount. Shareholders should read the Prospectus of the series of
Managers AMG Funds, The Managers Funds, The Managers Trust I or
The Managers Trust II 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 Managers AMG
Funds, The Managers Funds, The Managers Trust I or The Managers
Trust II and redemptions of the Funds, the usual purchase and
redemption procedures and requirements apply to each exchange.
Shareholders are subject to federal income tax and may recognize
capital gains or losses on the exchange for federal income tax
purposes. Settlement on the shares of any series of Managers AMG
Funds, The Managers Funds, The Managers Trust I or The Managers
Trust II will occur when the proceeds from redemption become
available. The Trust reserves the right to discontinue, alter or
limit the exchange privilege at any time.
NET ASSET VALUE
The Funds compute their 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 Funds may close for purchases and redemptions at such other
times as may be determined by the Board of Trustees to the extent
permitted by applicable law. The time at which orders are
accepted and shares are redeemed may be changed in case of an
emergency or if the NYSE closes at a time other than 4:00 p.m.
New York Time.
The net asset value of the Funds is equal to the value of
the Funds (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 Funds declare and pay dividends and distributions as
described in the Prospectus.
If a shareholder has elected to receive dividends and/or
their distributions in cash and the postal or other delivery
service is unable to deliver the checks to the shareholder's
address of record, the dividends and/or distribution will
automatically be converted to having the dividends and/or
distributions reinvested in additional shares. No interest will
accrue on amounts represented by uncashed dividend or redemption
checks.
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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 Funds are authorized to engage in the
activities listed above, and in other activities primarily
intended to result in the sale of shares, either directly or
through other persons with which the Trust has entered into
agreements pursuant to the Distribution Plan. Under the
Distribution Plan, the Board of Trustees has authorized payments
to the Managers Funds LLC which may not exceed on a daily basis
0.25% of the average annual net assets of each Fund.
CERTAIN TAX MATTERS
FEDERAL INCOME TAXATION OF FUNDS-IN GENERAL
Each Fund intends to qualify and elect to be treated each
taxable year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), although the Funds cannot give complete assurance
that they will qualify to do so. Accordingly, the Funds must,
among other things, (a) derive at least 90% of 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 their business of
investing in such stock, securities or currencies (the "90%
test"); and (b) satisfy certain diversification requirements on a
quarterly basis.
If either 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 that
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
that 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 Funds 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 each 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
their 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 Funds that is subject to corporate
tax will be considered to have been distributed by year end. The
Funds intend to make sufficient distributions to avoid this 4%
excise tax.
TAXATION OF THE FUNDS' INVESTMENTS
Original Issue Discount; Market Discount. For federal
income tax purposes, debt securities purchased by the Funds may
be treated as having original issue discount. Original issue
discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price.
Original issue discount is treated for federal income tax
purposes as income earned by the Funds, whether or not any income
is actually received, and therefore is subject to the
distribution requirements of the Code. Generally, the amount of
original issue discount is determined on the basis of a constant
yield to maturity which takes into account the compounding of
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accrued interest. Under Section 1286 of the Code, an investment
in a stripped bond or stripped coupon may result in original
issue discount.
Debt securities may be purchased by the Funds at a discount
that exceeds the original issue discount plus previously accrued
original issue discount remaining on the securities, if any, at
the time the Funds purchase the securities. This additional
discount represents market discount for federal income tax
purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the
date of issue and having market discount, the gain realized on
disposition will be treated as interest to the extent it does not
exceed the accrued market discount on the security (unless the
Funds elect to include such accrued market discount in income in
the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Funds may be required
to capitalize, rather than deduct currently, part or all of any
direct interest expense incurred or continued to purchase or
carry any debt security having market discount, unless the Funds
make the election to include market discount currently. Because
the Funds must include original issue discount in income, it will
be more difficult for the Funds to make the distributions
required for the Funds to maintain its status as a regulated
investment company under Subchapter M of the Code or to avoid the
4% excise tax described above.
Options and Futures Transactions. Certain of the Funds'
investments may be subject to provisions of the Code that (i)
require inclusion of unrealized gains or losses in the Funds'
income for purposes of the 90% test, and require inclusion of
unrealized gains in the Funds' income for purposes of the excise
tax and the distribution requirements applicable to regulated
investment companies; (ii) defer recognition of realized losses;
and (iii) characterize both realized and unrealized gain or loss
as short-term and long-term gain, irrespective of the holding
period of the investment. Such provisions generally apply to,
among other investments, options on debt securities, indices on
securities and futures contracts. Each Fund will monitor its
transactions and may make certain tax elections available to it
in order to mitigate the impact of these rules and prevent
disqualification of the Fund as regulated investment companies.
FEDERAL INCOME TAXATION OF SHAREHOLDERS
General. Dividends paid by the Funds may be eligible for
the 70% dividends-received deduction for corporations. The
percentage of the Funds' dividends eligible for such tax
treatment may be less than 100% to the extent that less than 100%
of the Funds' 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 Funds pay the dividend during
January of the following calendar year.
Distributions by a Fund can result in a reduction in the
fair market value of such Fund's shares. Should a distribution
reduce the fair market value below a shareholder's cost basis,
such distribution nevertheless may be taxable to the shareholder
as ordinary income or capital gain, even though, from an
investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider
the tax implications of buying shares just prior to a taxable
distribution. The price of shares purchased at that time
includes the amount of any forthcoming distribution. Those
investors purchasing shares just prior to a taxable distribution
will then receive a return of investment upon distribution which
will nevertheless be taxable to them.
FOREIGN SHAREHOLDERS
Dividends of net investment income and 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.
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In the case of a foreign shareholder who is a nonresident
alien individual or foreign entity, the Funds 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 Funds' shares unless IRS Form W-8 is
provided. Transfers by gift of shares of the Funds 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
Funds held by such shareholder at his or her death will be
includible in his or her gross estate for U.S. federal estate tax
purposes.
STATE AND LOCAL TAXES
The Funds may also be subject to state and/or local taxes in
jurisdictions in which the Funds are deemed to be doing business.
In addition, the treatment of the Funds and their shareholders in
those states which have income tax laws might differ from
treatment under the federal income tax laws. Shareholders should
consult with their own tax advisers concerning the foregoing
state and local tax consequences of investing in the Funds.
OTHER TAXATION
The Funds are series of a Massachusetts business trust.
Under current law, neither the Trust nor the Funds are liable for
any income or franchise tax in The Commonwealth of Massachusetts,
provided that the Funds continue to qualify as regulated
investment companies under Subchapter M of the Code.
Shareholders should consult their tax advisers about the
application of the provisions of tax law described in this
Statement of Additional Information in light of their particular
tax situations.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms
of yield, actual distributions, total return or capital
appreciation in reports, sales literature, and advertisements
published by the Funds. Since the Small Company Value Fund
commenced operations on January , 2001, there is no
current performance information for the Small Company Value Fund.
For periods prior to the Growth Fund's inception on
September 19, 2000, the Growth Fund's performance reflects the
performance of the Growth Fund's predecessor, Frontier Growth
Fund, L.P. which began operations on March 7, 1988. The
predecessor fund was not registered as a mutual fund and,
therefore, was not subject to certain investment restrictions
that are imposed upon mutual funds. If the predecessor fund had
been registered as a mutual fund, the predecessor fund's
performance may have been adversely affected. The performance of
the predecessor fund was calculated according to the standardized
SEC method except that quarterly rather than daily fund values
were used. Past performance (including the performance of the
Fund's predecessor) does not guarantee future results.
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
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The figure is then annualized. The formula assumes that any
charges are deducted from the initial $1,000 payment and assumes
that all dividends and distributions by the Funds are reinvested
at the price stated in the Prospectus on the reinvestment dates
during the period
PERFORMANCE COMPARISONS
The Funds may compare their 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 Funds' performance may also
be compared to the performance of various unmanaged indices such
as the Russell 2000 Value Index, Russell 3000 Index, Wilshire
5000 Equity Index, Russell 3000 Growth Index, Russell 1000 Growth
Index, Standard & Poor's 500 Composite Stock Price Index, the
Standard & Poor's 400 Composite Stock Price Index or the Dow
Jones Industrial Average.
MASSACHUSETTS BUSINESS TRUST
The Funds are 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 Funds and that every written agreement,
obligation, instrument or undertaking made on behalf of the Funds
shall contain a provision to the effect that the shareholders are
not personally liable hereunder.
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 Funds. However, upon
payment of such liability, the shareholder will be entitled to
reimbursement from the general assets of the Funds. 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 Funds.
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 Funds 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 Funds, 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 Funds for any satisfaction of
claims arising in connection with the affairs of the Funds. 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 Funds.
The Trust shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning
termination by action of the shareholders or by action of the
Trustees upon notice to the shareholders.
DESCRIPTION OF SHARES
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which the Funds
represent separate series of shares of beneficial interest. See
"Massachusetts Business Trust" above.
20
<PAGE>
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 Funds or assets of
another series, if applicable. Each share of a Fund represents
an equal proportional interest in the Fund with each other share.
Upon liquidation of a 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 Funds have no preemptive or conversion rights and
are fully paid and nonassessable. The rights of redemption and
exchange are described in the Prospectus and in this Statement of
Additional Information.
The shareholders of the Trust are entitled to one vote for
each dollar of net asset value (or a proportionate fractional
vote in respect of a fractional dollar amount), on matters on
which shares of the Funds shall be entitled to vote. Subject to
the 1940 Act, the Trustees themselves have the power to alter the
number and the terms of office of the Trustees, to lengthen their
own terms, or to make their terms of unlimited duration subject
to certain removal procedures, and appoint their own successors,
provided however, that immediately after such appointment the
requisite majority of the Trustees have been elected by the
shareholders of the Trust. The voting rights of shareholders are
not cumulative so that holders of more than 50% of the shares
voting can, if they choose, elect all Trustees being selected
while the shareholders of the remaining shares would be unable to
elect any Trustees. It is the intention of the Trust not to hold
meetings of shareholders annually. The Trustees may call
meetings of shareholders for action by shareholder vote as may be
required by either the 1940 Act or by the Declaration of Trust of
the Trust.
Shareholders of the Trust have the right, upon the
declaration in writing or vote of more than two-thirds of its
outstanding shares, to remove a Trustee from office. The
Trustees will call a meeting of shareholders to vote on removal
of a Trustee upon the written request of the record holders of
10% of the shares of the Trust. In addition, whenever ten or
more shareholders of record who have been shareholders of record
for at least six months prior to the date of the application, and
who hold in the aggregate either shares of the Funds having a net
asset value of at least $25,000 or at least 1% of the Trust's
outstanding shares, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with
other shareholders with a view to obtaining signatures to request
a meeting for the purpose of voting upon the question of removal
of any of the Trustees and accompanies by a form of communication
and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books
of the Trust; or (2) inform such applicants as to the approximate
number of shareholders of record, and the approximate cost of
mailing to them the proposed shareholder communication and form
of request. If the Trustees elect to follow the latter, the
Trustees, upon the written request of such applicants accompanied
by a tender of the material to be mailed and the reasonable
expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as
recorded on the books, unless within five business days after
such tender the Trustees shall mail to such applicants and file
with the SEC, together with a copy of the material to be mailed,
a written statement signed by at least a majority of the Trustees
to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such
opinion. After opportunity for hearing upon the objections
specified in the written statements filed, the SEC may, and if
demanded by the Trustees or by such applicants shall, enter an
order either sustaining one or more objections or refusing to
sustain any of such objections, or if, after the entry of an
order sustaining one or more objections, the SEC shall find,
after notice and opportunity for a hearing, that all objections
so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all
shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
The Trustees have authorized the issuance and sale to the
public of shares of 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.
21
<PAGE>
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 Funds and, if given or made, such other representations or
information must not be relied upon as having been authorized by
the Trust, the Funds or the Distributor. The Prospectus and this
Statement of Additional Information do not constitute an offer to
sell or solicit an offer to buy any of the securities offered
thereby in any jurisdiction to any person to whom it is unlawful
for the Funds or the Distributor to make such offer in such
jurisdictions.
<PAGE>
PART C
To the Registration Statement of
Managers AMG Funds (the "Trust")
Item 23. Exhibits.
Exhibit No. Description
a.1 Master Trust Agreement dated June 18, 1999.(i)
a.2 Amendment No. 1 to Master Trust Agreement changing the
name of the "Essex Growth Fund" to "Essex Aggressive
Growth Fund."(iii)
a.3 Amendment No. 2 to Master Trust Agreement changing the
name of the Trust to "Managers AMG Funds."(iii)
a.4 Amendment No. 3 to Master Trust Agreement establishing
a new series of shares of beneficial interest of the
Trust designated as the "Frontier Growth Fund."(vii)
a.5 Amendment No. 4 to Master Trust Agreement establishing
a new series of shares of beneficial interest of the
Trust designated as the "First Quadrant Tax-Managed
Equity Fund."(vii)
b. By-Laws of the Trust dated June 18, 1999.(i)
c. Sections 4.2(d), 4.2(e), 4.2(f), 4.2(i), 4.2(j),
4.2(k), 4.2(m), 4.6, 6.3, 6.5, 6.6, 7.1, 7.2 and 7.3
and Article V of the Master Trust Agreement are
included in Exhibit a.(i)
d.1 Investment Management Agreement between the Registrant
and The Managers Funds LLC, dated as of October 19,
1999.(iii)
d.2 Form of Letter Agreement to Investment Management
Agreement between the Registrant and The Managers
Funds, LLC with respect to the Frontier Growth Fund,
dated as of September 19, 2000. (vi).
d.3 Form of Letter Agreement to Investment Management
Agreement between the Registrant and The Managers Funds
LLC with respect to the First Quadrant Tax-Managed
Equity Fund.(vii)
d.4 Form of Letter Agreement to Investment Management
Agreement between the Registrant and The Managers Funds
LLC with respect to the Frontier Small Company Value
Fund, filed herewith.
d.5 Sub-Advisory Agreement between The Managers Funds LLC
and Essex Investment Management Company, LLC with
respect to the Essex Aggressive Growth Fund, dated as
of October 19, 1999. (iii)
d.6 Form of Sub-Advisory Agreement between The Managers
Funds LLC and Frontier Capital Management Company, LLC
with respect to the Frontier Growth Fund, dated as of
September 19, 2000 (iv).
d.7 Form of Sub-Advisory Agreement between The Managers
Funds, LLC and First Quadrant, L.P. with respect to the
First Quadrant Tax-Managed Equity Fund, dated as of
November 14, 2000.(vii)
d.8 Form of Letter Agreement to Sub-Advisory Agreement
between The Managers Funds LLC and Frontier Capital
Management Company, LLC with respect to the Frontier
Small Company Value Fund, filed herewith.
e.1 Distribution Agreement between the Registrant and The
Managers Funds LLC, dated as of October 19, 1999. (iii)
e.2 Form of Letter Agreement to the Distribution Agreement
between the Registrant and The Managers Funds LLC with
respect to the Frontier Growth Fund. (vi)
e.3 Form of Letter Agreement to the Distribution Agreement
between the Registrant and The Managers Funds LLC with
respect to the Frontier Small Company Value Fund, filed
herewith.
f. Not applicable.
g. Form of Custodian Agreement between the Registrant and
State Street Bank and Trust Company. (iii)
h. Form of Transfer Agency Agreement between the
Registrant and Boston Financial Data Services, Inc. (iii)
i.1 Opinion and Consent of Goodwin, Procter & Hoar LLP with
respect to the Essex Aggressive Growth Fund.(iii)
i.2 Opinion and Consent of Goodwin, Procter & Hoar LLP with
respect to the Frontier Growth Fund. (vi)
i.3 Opinion and Consent of Goodwin, Procter & Hoar LLP with
respect to the First Quadrant Tax-Managed Equity
Fund.(vii)
i.3 Opinion and Consent of Goodwin, Procter & Hoar LLP with
respect to the Frontier Small Company Value Fund, to be
filed by Post-Effective Amendment.
j.1 Consent of PricewaterhouseCoopers LLP with respect to
the Essex Aggressive Growth Fund. (iii)
k. Not Applicable.
l. Power of Attorney dated September 9, 1999. (ii)
m. Plan of Distribution Pursuant to Rule 12b-1, dated as
of October 15, 1999.(iii)
n. Not applicable.
o. Not applicable.
p.1 Code of Ethics of the Trust.(vi)
p.2 Code of Ethics of The Managers Funds LLC.(vi)
p.3 Code of Ethics of Essex Investment Management Company,
LLC. (vii)
p.4 Code of Ethics of Frontier Capital Management Company,
LLC.(vi)
p.5 Code of Ethics of First Quadrant, L.P.(vii)
(i) Filed as an exhibit to the Registrant's Registration
Statement on Form N-1A, Registration No. 333-84639
(filed August 6, 1999), under the same exhibit number.
(ii) Filed as an exhibit to Pre-Effective Amendment No. 1 to
the Registrant's Registration Statement on Form N-1A,
Registration No. 333-84639 (filed September 23, 1999),
under the same exhibit number.
(iii) Filed as an exhibit to Pre-Effective Amendment No. 2 to
the Registrant's Registration Statement on Form N-1A,
Registration No. 333-84639 (filed November 1, 1999), under the
same exhibit number.
(iv) Filed as an exhibit to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A, Registration
No. 333-84639 (filed June 19, 2000), under the same exhibit
number.
(v) Filed as an exhibit to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A, Registration
No. 333-84639 (filed August 1, 2000), under the same exhibit
number.
(vi) Filed as an exhibit to Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-1A, Registration
No. 333-84639 (filed September 15, 2000), under the same exhibit
number.
(vii) Filed as an exhibit to Post-Effective Amendment No. 5
to the Registrant's Registration Statement on Form N-1A,
Registration No. 333-84639 (filed November 14, 2000), under the
same exhibit number.
Item 24. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 25. Indemnification.
Under Article VI of the Registrant's Master Trust
Agreement, any present or former Trustee, Officer, agent or
employee or person serving in such capacity with another
entity at the request of the Registrant ("Covered Person")
shall be indemnified against all liabilities, including but
not limited to amounts paid in satisfaction of judgments, in
compromises or as fines or penalties and expenses, including
reasonable legal and accounting fees, in connection with the
defense or disposition of any proceeding by or in the name
of the Registrant or any shareholder in his capacity as such
if: (i) a favorable final decision on the merits is made by
a court or administrative body; or (ii) a reasonable
determination is made by a vote of the majority of a quorum
of disinterested Trustees or by independent legal counsel
that the Covered Person was not liable by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in his office ("Disabling
Conduct"); or (iii) a determination is made to indemnify the
Covered Person under procedures approved by the Board of
Trustees which in the opinion of independent legal counsel
are not inconsistent with the Investment Company Act of
1940, as amended (the "1940 Act"). Said Article VI further
provides that the Registrant shall indemnify any Covered
Person against any such liabilities and expenses incurred in
connection with the defense or disposition of any other type
of proceeding except with respect to any matter as to which
the Covered Person shall have engaged in Disabling Conduct
or shall have been finally adjudicated not to have acted in
good faith and in the reasonable belief that such Covered
Person's action was in or not opposed to the best interests
of the Registrant.
Item 26. Business and Other Connections of Investment Adviser.
The Managers Funds LLC, a registered investment
adviser, is a subsidiary of Affiliated Managers Group, Inc.
("AMG") and AMG serves as its Managing Member. The Managers
Funds LLC serves as an investment adviser to investment
companies registered under the 1940 Act. The business and
other connections of the officers and directors of The
Managers Funds LLC, are listed in Schedules A and D of its
ADV Form as currently on file with the Commission, the text
of which Schedules are hereby incorporated herein by
reference. The file number of said ADV Form is 801-56365.
Essex Investment Management Company, LLC ("Essex')
serves as sub-adviser to the Essex Aggressive Growth Fund.
AMG owns a majority interest in Essex. Essex is the
successor firm to Essex Investment Management Company, Inc.,
which was formed in 1976. The business and other
connections of the officers and directors of Essex are
listed in Schedules A and D of its ADV Form as currently on
file with the Commission, the text of which Schedules are
hereby incorporated herein by reference. The file number of
said ADV Form is 801-12548.
Frontier Capital Management Company, LLC. ("Frontier")
serves as sub-adviser to the Frontier Growth Fund. AMG owns
a majority interest in Frontier. Frontier is the successor
firm to Frontier Capital Management Company, Inc., which was
formed in 1980. The business and other connections of the
officers and directors of Frontier are listed in Schedules A
and D of its ADV Form as currently on file with the
Commission, the text of which Schedules are hereby
incorporated herein by reference. The file number of said
ADV Form is 801-15724.
First Quadrant, L.P. ("First Quadrant") serves as sub-
adviser to the First Quadrant Tax-Managed Equity Fund. AMG
owns a majority interest in First Quadrant. First Quadrant
is the successor firm to First Quadrant Corporation, which
was formed in 1988. a registered investment adviser, The
business and other connections of the officers and directors
of First Quadrant are listed in Schedules A and D of its ADV
Form as currently on file with the Commission, the text of
which Schedules are hereby incorporated herein by reference.
The file number of said ADV Form is 801-51748.
Item 27. Principal Underwriters.
(a) The Managers Funds LLC acts as principal underwriter
for the Registrant. The Managers Funds LLC also acts
as principal underwriter for The Managers Funds, The
Managers Trust I and The Managers Trust II.
(b) The following information relates to the directors,
officers and partners of The Managers Funds LLC:
The business and other connections of the officers and
directors of The Managers Funds LLC are listed in Schedules
A and D of its ADV Form as currently on file with the
Commission, the text of which Schedules are hereby
incorporated herein by reference. The file number of said
ADV Form is 801-56365.
(c) Not applicable.
Item 28. Location of Accounts and Records.
The accounts and records of the Registrant are
maintained at the offices of the Registrant at 40 Richards
Avenue, Norwalk, Connecticut 06854 and at the offices of
the Custodian, State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02106 and 1776
Heritage Drive, North Quincy, Massachusetts 01171 and at
the offices of the Transfer Agent, Boston Financial Data
Services, Inc. 1776 Heritage Drive, North Quincy,
Massachusetts 01171.
Item 29. Management Services.
There are no management-related service contracts other
than the Investment Management Agreement relating to
management services described in Parts A and B.
Item 30. Undertakings.
Not applicable.
<PAGE>
Exhibit d.4
-----------
LETTER AGREEMENT
Frontier Small Company Value Fund
Investment Management Agreement
January __, 2001
The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854
Attn: Peter Lebovitz
Re: Investment Management Agreement between The Managers Funds LLC
and Managers AMG Funds, dated as of October 19, 1999
Ladies and Gentlemen:
Pursuant to Paragraph 1(b) of the Investment Management Agreement
between The Managers Funds LLC and Managers AMG Funds (the
"Trust"), dated October 19, 1999, the Trust hereby advises you
that it is creating a new series to be named Frontier Small
Company Value Fund (the "New Fund"), and that the Trust desires
The Managers Funds LLC to provide management and investment
advisory services with respect to the New Fund pursuant to the
terms and conditions of the Investment Management Agreement. The
investment advisory fees to be payable with respect to the New
Fund are reflected on the attached Schedule A.
Please acknowledge your agreement to provide such management and
investment advisory services to the New Fund by executing this
letter agreement in the space provided below and then returning
it to the undersigned.
Sincerely,
Managers AMG Funds
By: _______________________________
Name:
Title:
ACKNOWLEDGED AND ACCEPTED
The Managers Funds LLC
By: _______________________________
Name:
Title:
Date:
<PAGE>
SCHEDULE A
FRONTIER SMALL COMPANY VALUE FUND
Advisory Fees pursuant to Section 2(a)
The Trust shall pay to the Adviser an annual gross
investment advisory fee equal to 1.10% of the average daily net
assets of the Frontier Small Company Value Fund; provided,
however, that the Adviser agrees, for a period of not less than
eighteen (18) months, to waive its advisory fee and pay or
reimburse the Trust for expenses of the Fund to the extent total
expenses of the Fund would otherwise exceed 1.55% of the Fund's
average daily net assets. Such fee shall be accrued daily and
paid as soon as practical after the last day of each calendar
month.
In addition to the foregoing waiver, payment or
reimbursement (if any), the Adviser may from time to time
voluntarily waive all or a portion of the advisory fee payable
with respect to the Frontier Small Company Value Fund and/or pay
or reimburse the Trust for expenses of the Fund. In addition to
any amounts otherwise payable to the Adviser as an advisory fee
for current services under the Investment Management Agreement,
the Trust shall be obligated to pay the Adviser all amounts
previously waived, paid or reimbursed by the Adviser with respect
to the Frontier Small Company Value Fund, provided that the
amount of such additional payment in any year, together with all
other expenses of the Frontier Small Company Value Fund, in the
aggregate, would not cause the Frontier Small Company Value
Fund's expense ratio in such year to exceed 1.55% of the average
daily net assets of the Frontier Small Company Value Fund;and
provided, further that no additional payments shall be made with
respect to amounts waived, paid or reimbursed more than three (3)
years prior to the date the Fund accrues a liability with respect
to such additional payment.
Administration Fees Pursuant to Section 2(b)
None.
<PAGE>
Exhibit d.8
------------
LETTER AGREEMENT
Frontier Small Company Value Fund
Sub-Advisory Agreement
January , 2001
Frontier Capital Management Company, LLC
99 Summer Street
Boston, Massachusetts 02110
Attn: ______
Re: Sub-Advisory Agreement between The Managers Funds LLC
and Frontier Capital Management Company, LLC, dated as of
September 19, 2000
Ladies and Gentlemen:
Pursuant to Paragraph 1(b) of the Sub-Advisory Agreement between
The Managers Funds LLC (the "Adviser") and Frontier Capital
Management Company, LLC (the "Sub-Adviser"), dated September 19,
2000, the Adviser hereby advises you that Managers AMG Funds, a
Massachusetts business trust, (the "Trust") is creating a new
series to be named Frontier Small Company Value Fund (the "New
Fund"), and that the Adviser desires to retain the Sub-Adviser to
render investment advisory services with respect to the New Fund
pursuant to the terms and conditions of the Sub-Advisory
Agreement. The advisory fees to be payable with respect to the
New Fund are reflected on the attached Schedule A.
Please acknowledge your agreement to render such advisory
services to the New Fund by executing this letter agreement in
the space provided below and then returning it to the
undersigned.
Sincerely,
The Managers Funds LLC
By: _______________________________
Name:
Title:
ACKNOWLEDGED AND ACCEPTED
Frontier Capital Management Company, LLC
By: _______________________________
Name:
Title:
Date:
<PAGE>
SCHEDULE A
FRONTIER SMALL COMPANY VALUE FUND
Advisory Fees pursuant to Section 3
The Adviser shall pay to the Sub-Adviser an annual gross
investment sub-advisory fee equal to 1.10% of the average daily
net assets of the Frontier Small Company Value Fund. Such fee
shall be accrued daily and paid as soon as practical after the
last day of each calendar month.
The Sub-Adviser may voluntarily waive all or a portion of the
sub-advisory fee payable from time to time hereunder. The
Adviser agrees that, during any period in which the Sub-Adviser
has voluntarily waived all or a portion of the sub-advisory fee
hereunder, if requested by the Sub-Adviser, the Adviser will
waive an equal amount (or such lesser amount as the Sub-Adviser
may request) of the advisory fee payable by the Trust to the
Adviser with respect to the Fund under the Advisory Agreement.
The Sub-Adviser agrees that, during any period in which the
Adviser has waived all or a portion of the advisory fee payable
by the Trust to the Adviser under the Advisory Agreement with
respect to the Fund, if requested by the Adviser, the Sub-Adviser
will waive a pro rata share (or such lesser share as the Adviser
may request) of the sub-advisory fee payable hereunder with
respect to the Fund, such that the amount waived by the
Sub-Adviser shall bear the same ratio to the total amount of the
sub-advisory fees payable hereunder with respect to the Fund as
the amount waived by the Adviser bears to all fees payable to the
Adviser under the Advisory Agreement with respect to the Fund.
The Adviser agrees that, in addition to any amounts otherwise
payable to the Sub-Adviser with respect to the Fund hereunder,
the Adviser shall pay the Sub-Adviser all amounts previously
waived by the Sub-Adviser to the extent that such amounts are
subsequently paid by the Trust to the Adviser under the Advisory
Agreement, it being further agreed that, with respect to any such
amounts subsequently paid by the Trust to the Adviser, the amount
to be paid by the Adviser to the Sub-Adviser shall bear the same
ratio to the total amount paid by the Trust as the total amount
previously waived by the Sub-Adviser bears to the total amount of
the fees previously waived by the Adviser under the Advisory
Agreement with respect to the Fund.
The Sub-Adviser agrees that, during any period in which
the Adviser has agreed to pay or reimburse the Trust for expenses
of the Fund, if requested by the Adviser, the Sub-Adviser shall
pay or reimburse the Trust for the entire amount of all such
expenses of the Fund (or such lesser amount as the Adviser may
request). The Adviser agrees that, in addition to any amounts
otherwise payable to the Sub-Adviser with respect to the Fund
hereunder, the Adviser shall pay the Sub-Adviser all amounts
previously paid or reimbursed by the Sub-Adviser to the extent
that such amounts are subsequently paid by the Trust to the
Adviser under the Advisory Agreement.
<PAGE>
Exhibit e.3
------------
LETTER AGREEMENT
Frontier Small Company Value Fund
Distribution Agreement
January __, 2001
The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854
Attn: Peter Lebovitz
Re: Distribution Agreement between The Managers Funds LLC
and Managers AMG Funds, dated as of October 19, 1999
Ladies and Gentlemen:
Managers AMG Funds (the "Trust") hereby advises you that it is
creating a new series to be named Frontier Small Company Value
Fund (the "New Fund"), and that the Trust desires The Managers
Funds LLC ("Managers") to provide distribution services with
respect to the New Fund pursuant to the terms and conditions of
the Distribution Agreement between the Trust and Managers dated
October 19, 1999. The Trust agrees to pay Managers 0.25% of the
average daily value of net assets represented by shares of the
New Fund as payment for the services to be performed by Managers
pursuant to the Distribution Agreement with respect to the New
Fund.
Please acknowledge your agreement to provide the services
contemplated by the Distribution Agreement with respect to the
New Fund by executing this letter agreement in the space provided
below and then returning it to the undersigned.
Sincerely,
Managers AMG Funds
By: _______________________________
Name:
Title:
ACKNOWLEDGED AND ACCEPTED
The Managers Funds LLC
By: _______________________________
Name:
Title:
Date:
<PAGE>
Exhibit i.3
-----------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts, on the 16h day of November, 2000.
MANAGERS AMG FUNDS
BY:/s/John Kingston, III
---------------------
John Kingston, III
Secretary
Signature Title Date
/s/Jack W. Aber
Jack W. Aber* Trustee November 16, 2000
/s/William E. Chapman II
William E. Chapman, II* Trustee November 16, 2000
/s/Sean M. Healey
Sean M. Healey* Trustee November 16, 2000
/s/Edward J. Kaier
Edward J. Kaier* Trustee November 16, 2000
/s/Eric Rakowski
Eric Rakowski* Trustee November 16, 2000
/s/Peter M. Lebovitz
Peter M. Lebovitz* President and Principal November 16, 2000
Executive Officer
/s/Donald S. Rumery
Donald S. Rumery* Treasurer, Principal November 16, 2000
Financial Officer and 2000
Principal Accounting Officer
/s/John Kingston, III
---------------------
*By John Kingston, III pursuant to Power of Attorney filed herewith
