10
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
_____________The Managers Funds______________
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-
5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-
5(g) and 0-11.
1) Title of each class of securities to which transaction
applies:
_____________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_____________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated and state
how it was determined):
_____________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________
3) Filing Party:
____________________________________________________________
4) Date Filed:
____________________________________________________________
[X] Filing fee no longer applicable.
May 1997
Dear Managers Capital Appreciation Fund Shareholder:
The enclosed information statement details a recent portfolio
manager change in Managers Capital Appreciation Fund. In March,
we sent a letter to the Fund's shareholders which announced that
the Fund's Trustees had approved the hiring of Essex Investment
Management Company, Inc. to replace Dietche & Field Advisers.
Essex and Husic Capital Management now each manage approximately
one half of the Fund. We are optimistic that the Fund will
continue to benefit under the management of these two fine firms.
As a matter of regulatory compliance, we send you this
information statement which describes the management structure of
the Fund, ownership of Essex, as well as the terms of the sub-
advisory agreement with Essex which your Trustees have approved.
Please feel free to call us at (800)835-3879 should you have any
questions on the enclosed information statement. We thank you
for your continued interest in The Managers Funds.
Sincerely,
Robert P. Watson
President
THE MANAGERS FUNDS
Managers Capital Appreciation Fund
40 Richards Avenue
Norwalk, Connecticut 06854
____________________
INFORMATION STATEMENT
____________________
This information statement is being provided to the
shareholders of Managers Capital Appreciation Fund in lieu of a
proxy statement, pursuant to the terms of an exemptive order the
Trust has received from the Securities and Exchange Commission
which permits the Fund's manager to hire new sub-advisers and to
make changes to existing sub-adviser contracts with the approval
of the Trustees, but without obtaining shareholder approval.
This information statement will be mailed on or about April
__, 1997.
The Trust
Managers Capital Appreciation Fund (the "Capital
Appreciation Fund" or the "Fund") is an investment portfolio of
The Managers Funds, a Massachusetts business trust (the "Trust").
The Trust has entered into an investment management agreement
with The Managers Funds, L.P. (the "Manager"), dated August 17,
1990 (the "Management Agreement"). Under the Management
Agreement, it is the responsibility of the Manager to select,
subject to review and approval by the Trustees, one or more sub-
advisers (the "Sub-Advisers") to manage the portfolio of each
investment portfolio of the Trust (each a "Fund"), to review and
monitor the performance of these Sub-Advisers on an ongoing basis
and to recommend changes in the roster of Sub-Advisers to the
Trustees as appropriate. The Manager is responsible for
allocating the Funds' assets among the Sub-Advisers for each Fund
that has more than one Sub-Adviser. The portion of a Fund's
assets managed by a Sub-Adviser may be adjusted from time to time
in the sole discretion of the Manager, and it is possible that an
approved Sub-Adviser may not manage any portion of the Fund's
assets. The Manager is also responsible for conducting all
business operations of the Trust, except those operations
contracted to the custodian or transfer agent. As compensation
for its services, the Manager receives a fee from each Fund, out
of which the Manager pays all fees payable to the Sub-Advisers of
that Fund. The Funds, therefore, pay no fees to the Sub-
Advisers.
The Manager recommends Sub-Advisers for the Funds to the
Trustees based upon its continuing quantitative and qualitative
evaluation of the Sub-Advisers' skills in managing assets
pursuant to specific investment styles and strategies. Short-
term investment performance, by itself, is not a significant
factor in selecting or terminating a Sub-Adviser and the Manager
does not expect to recommend frequent changes of Sub-Advisers.
The Sub-Advisers do not provide any services to the Funds
except portfolio investment management and related record-keeping
services. However, in accordance with procedures adopted by the
Trustees, a Sub-Adviser or its affiliated broker-dealer may
execute portfolio transactions for a Fund and receive brokerage
commissions in connection therewith as permitted by Section 17(e)
of the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules thereunder.
The Sub-Advisory Agreement
Since December, 1986, Dietche & Field Advisers, Inc.
("Dietche") has served as one of the Fund's Sub-Advisers. At a
meeting held on March 10, 1997, the Trustees, including a
majority of the non-interested Trustees, approved the Manager's
recommendation to replace Dietche with a new sub-advisor with a
more growth-oriented investment approach than Dietche's value
style. Accordingly, the Trustees approved a sub-advisory
agreement (the "New Agreement") with Essex Investment Management
Company, Inc. ("Essex") which became effective immediately. The
recommendation to hire Essex was made by the Manager in the
ordinary course of its ongoing evaluation of sub-adviser
performance and investment strategy and after extensive research
of numerous candidate firms and qualitative and quantitative
analysis of each candidate's organizational structure, investment
process and style and long-term performance record. The Manager
believes that Essex 's management style is appropriately suited
to the Fund and expects Essex 's growth-oriented, "bottom-up"
style and relatively concentrated portfolio, to complement that
of the Fund's other Sub-Adviser, Husic Capital Management
("Husic").
Under the Management Agreement, the Fund pays the Manager a
fee equal to 0.80% of the Fund's average daily net assets. From
this amount, the Manager has paid (under the previous agreement
with Dietche), and will continue to pay (under the New Agreement
with Essex and the continuing agreement with Husic) each Sub-
Adviser a fee of 0.40% of the Fund's average daily net assets
under such Sub-Adviser's management. For the fiscal year ended
December 31, 1996, the Fund paid the Manager $761,925, of which
the Manager paid $189,483 and $60,917 to Dietche and Husic,
respectively. (The Manager also paid $130,562 to Hudson Capital
Management, the Sub-Adviser who was replaced by Husic in
September of 1996.) Accordingly, there is no change in
management fees payable by the Fund as a result of the change
from Dietche to Essex.
The New Agreement is somewhat different in form from the sub-
advisory agreement which had been in place with Dietche (the
"Previous Agreement"). In November 1994, the Trustees
unanimously approved the adoption of the new form with respect to
Sub-Advisers retained after that date and at their September 9,
1996 meeting the Trustees approved certain further changes to the
new form. The new form is very similar in substance to the
Previous Agreement in that it provides for the Sub-Adviser to
manage the portion of the Fund allocated to it on a discretionary
basis, provides for the Manager to compensate the Sub-Adviser for
its services, authorizes the Sub-Adviser to select the brokers or
dealers to effect portfolio transactions for the Fund, and
requires the Sub-Adviser to comply with the Fund's investment
policies and restrictions and with applicable law. However,
because the previous form of agreement had been in use for a
number of years, the Trustees believed it advisable to conform
the agreement to current standards; accordingly, the Previous
Agreement differs from the New Agreement in certain respects.
For example, the Sub-Adviser's responsibilities with respect to
compliance monitoring and insurance coverage have been clarified.
The form of the New Agreement is attached to this information
statement as Exhibit A.
Information on Essex
Following is a description of Essex, which is based on
information provided by the Sub-Adviser. The Sub-Adviser is not
affiliated with the Manager.
ESSEX INVESTMENT MANAGEMENT COMPANY, INC.
125 High Street
Boston, MA 02110
Essex is an employee-owned Massachusetts corporation which
is controlled by the firm's founder, Joseph C. McNay. The firm
commenced operations in 1976, and as of December 30, 1996, had
approximately $4.1 billion under management. Essex does not
serve as an advisor or sub-advisor to any other registered
investment companies. The firm's directors or principal officers
are set forth below; address of each is that of Essex.
Name Position
Joseph C. McNay
list other directors or principals
Board of Trustees' Recommendation
In approving the New Agreement, the Trustees, at an in-
person meeting called for the purpose held on March 10, 1997,
considered a number of factors, including (i) the nature and
quality of the services expected to be rendered by Essex to the
Fund; (ii) Essex's investment approach which is expected to
complement that of Husic and provide additional diversification
to the Fund; (iii) the structure of Essex and its ability to
provide services to the Fund; and (iv) that the fees payable
under the New Agreement will be identical to those payable under
the Previous Agreement, and that the terms of the two agreements
are substantially the same.
DESCRIPTION OF THE MANAGER
The Manager is a Delaware limited partnership, which
together with its predecessor entity, has served as the
investment manager to the Trust since the Trust's inception. The
sole general partner of the Manager is EAIMC Holdings Corp., of
which Robert P. Watson, President and a Trustee of the Trust, is
the sole shareholder. The Manager has no other general partners.
The following chart lists those officers and Trustees of the
Trust who are also affiliated with the Manager, and sets forth
the nature of those affiliations:
Name Position with the Trust Position with
the Manager
Robert P. Watson President and Trustee Chief Executive
Officer
Peter M. Lebovitz Vice President Managing Director
Donald S. Rumery Treasurer Director of
Operations
Kathleen Wood Secretary Vice President
Giancarlo (John) E. Rosati Assistant
Treasurer Vice President
Peter M. McCabe Assistant Treasurer Portfolio
Administrator
The principal occupation of each person listed above is his
or her occupation with the Manager. The address of each and of
the Manager is 40 Richards Avenue, Norwalk, Connecticut 06854.
The Trustees and Officers of the Trust, both individually and as
a group, own less than 1% of any FundOs outstanding shares.
The Trust has entered into an Administration and Shareholder
Servicing Agreement with the Manager whereby the Manager has
agreed to provide administration and shareholder services to the
Trust, its shareholders and certain institutions, such as bank
trust departments and registered investment advisers, that advise
or act as an intermediary with the Trust's shareholders. The
Fund currently pays 0.25% of its average daily net assets to the
Manager under the Administration Agreement. The fees paid by the
Fund to the Manager under the Management Agreement and under the
Administration Agreement during the fiscal year ended December
31, 1996 were $761,925 and $238,101, respectively.
The Trust has also entered into a Distribution Agreement
with the Manager whereby the Manager has agreed to provide
services with respect to the distribution of the Trust's shares.
No compensation is payable to the Manager for its services under
the Distribution Agreement.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 17, 1997, Resource Bank (Minneapolis, Minnesota)
owned 29% of the outstanding shares of the Fund in an omnibus
account.
ADDITIONAL INFORMATION
Other Matters
The Trust is not required to hold annual meetings of
shareholders and, therefore, it cannot be determined when the
next meeting of shareholders will be held. Shareholder proposals
to be considered for inclusion in the proxy statement for the
next meeting of shareholders must be submitted a reasonable time
before the proxy statement is mailed. Whether a proposal
submitted will be included in the proxy statement will be
determined in accordance with applicable state and federal law.
Copies of the most recent annual and semi-annual reports are
available without charge. To obtain a copy, call or write the
Manager, at 40 Richards Avenue, Norwalk, CT 06854, (800) 835-
3879.
By Order of the Trustees,
KATHLEEN WOOD
Secretary
Dated: April __, 1997
EXHIBIT A
FORM OF SUB-ADVISORY AGREEMENT
Attention: Joseph C. McNay
Essex Investment Management Company, Inc.
RE: Sub-Advisory Agreement
To whom it may concern:
The Managers Capital Appreciation Fund (the "Fund") is a series
of a Massachusetts business trust (the "Trust") that is
registered as an investment company under the Investment Company
Act of 1940, as amended, (the "Act"), and subject to the rules
and regulations promulgated thereunder.
The Managers Funds, L.P. (the "Manager") acts as the manager and
administrator of the Trust pursuant to the terms of a Management
Agreement with the Trust. The Manager is responsible for the day-
to-day management and administration of the Fund and the
coordination of investment of the FundOs assets. However,
pursuant to the terms of the Management Agreement, specific
portfolio purchases and sales for the FundOs investment
portfolios or a portion thereof, are to be made by advisory
organizations recommended by the Manager and approved by the
Trustees of the Trust.
1. Appointment as a Sub-Adviser. The Manager, being duly
authorized, hereby appoints and employs Essex Investment
Management Company, Inc. ("Sub-Adviser") as a discretionary asset
manager, on the terms and conditions set forth herein, of those
assets of the Fund which the Manager determines to allocate to
the Sub-Adviser (those assets being referred to as the "Fund
Account"). The Manager may, from time to time, with the consent
of the Sub-Adviser, make additions to the Fund Account and may,
from time to time, make withdrawals of any or all of the assets
in the Fund Account.
2. Portfolio Management Duties.
(a) Subject to the supervision of the Manager and of
the Trustees of the Trust, the Sub-Adviser shall manage
the composition of the Fund Account, including the
purchase, retention and disposition thereof, in
accordance with the FundOs investment objectives,
policies and restrictions as stated in the Fund's
Prospectus and Statement of Additional Information
(such Prospectus and Statement of Additional
Information for the Fund as currently in effect and as
amended or supplemented in writing from time to time,
being herein called the OProspectusO).
(b) The Sub-Adviser shall maintain such books and
records pursuant to Rule 31a-1 under the Act and Rule
204-2 under the Investment Advisers Act of 1940, as
amended (the OAdvisers ActO), with respect to the Fund
Account as shall be specified by the Manager from time
to time, and shall maintain such books and records for
the periods specified in the rules under the Act or the
Advisers Act. In accordance with Rule 31a-3 under the
Act, the Sub-Adviser agrees that all records under the
Act shall be the property of the Trust.
(c) The Sub-Adviser shall provide the TrustOs
Custodian, and the Manager on each business day with
information relating to all transactions concerning the
Fund Account. In addition, the Sub-Advisor shall be
responsive to requests from the Manager or the Trust's
Custodian for assistance in obtaining price sources for
securities held in the Fund Account, as well as for
periodically reviewing the prices of the securities
assigned by the Manager or the Trust's Custodian for
reasonableness and advising the Manager should any such
prices appear to be incorrect.
(d) The Sub-Adviser agrees to maintain adequate
compliance procedures to ensure its compliance with the
1940 Act, the Advisers Act and other applicable federal
and state regulations, and review information provided
by the Manager to assist the Manager in its compliance
review program.
(e) The Sub-Advisor agrees to maintain errors and
omissions or professional liability insurance coverage
with minimum coverage limits of $5 million throughout
the term of this agreement.
3. Allocation of Brokerage. The Sub-Adviser shall have
authority and discretion to select brokers, dealers and futures
commission merchants to execute portfolio transactions initiated
by the Sub-Adviser, and for the selection of the markets on or in
which the transactions will be executed.
(a) In doing so, the Sub-AdviserOs primary
responsibility shall be to obtain the best net price
and execution for the Fund. However, this
responsibility shall not be deemed to obligate the Sub-
Adviser to solicit competitive bids for each
transaction, and the Sub-Adviser shall have no
obligation to seek the lowest available commission cost
to the Fund, so long as the Sub-Adviser determines that
the broker, dealer or futures commission merchant is
able to obtain the best net price and execution for the
particular transaction taking into account all factors
the Sub-Adviser deems relevant, including, but not
limited to, the breadth of the market in the security
or commodity, the price, the financial condition and
execution capability of the broker, dealer or futures
commission merchant and the reasonableness of any
commission for the specific transaction and on a
continuing basis. The Sub-Adviser may consider the
brokerage and research services (as defined in Section
28(e) of the Securities Exchange Act of 1934, as
amended) made available by the broker to the Sub-
Adviser viewed in terms of either that particular
transaction or of the Sub-AdviserOs overall
responsibilities with respect to its clients, including
the Fund, as to which the Sub-Adviser exercises
investment discretion, notwithstanding that the Fund
may not be the direct or exclusive beneficiary of any
such services or that another broker may be willing to
charge the Fund a lower commission on the particular
transaction.
(b) The Manager shall have the right to request that
specified transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the
Manager and the Sub-Adviser, shall be executed by
brokers and dealers that provide brokerage or research
services to the Fund or the Manager, or as to which an
on-going relationship will be of value to the Fund in
the management of its assets, which services and
relationship may, but need not, be of direct benefit to
the Fund Account, so long as (i) the Manager determines
that the broker or dealer is able to obtain the best
net price and execution on a particular transaction and
(ii) the Manager determines that the commission cost is
reasonable in relation to the total quality and
reliability of the brokerage and research services made
available to the Fund or to the Manager for the benefit
of its clients for which it exercises investment
discretion, notwithstanding that the Fund Account may
not be the direct or exclusive beneficiary of any such
service or that another broker may be willing to charge
the Fund a lower commission on the particular
transaction
(c) The Sub-Adviser agrees that it will not execute
any portfolio transactions with a broker, dealer or
futures commission merchant which is an "affiliated
person" (as defined in the Act) of the Trust or of the
Manager or of any sub-adviser for the Trust except in
accordance with procedures adopted by the Trustees.
The Manager agrees that it will provide the Sub-Adviser
with a list of brokers and dealers which are
"affiliated persons" of the Trust, the Manager or the
Trust's sub-advisers.
4. Information Provided to the Manager and the Trust and to the
Sub-Adviser
(a) The Sub-Adviser agrees that it will make available
to the Manager and the Trust promptly upon their
request copies of all of its investment records and
ledgers with respect to the Fund Account to assist the
Manager and the Trust in monitoring compliance with the
Act, the Advisers Act, and other applicable laws. The
Sub-Adviser will furnish the TrustOs Board of Trustees
with such periodic and special reports with respect to
the Fund Account as the Manager or the Board of
Trustees may reasonably request.
(b) The Sub-Adviser agrees that it will notify the
Manager and the Trust in the event that the Sub-Adviser
or any of its affiliates: (i) becomes subject to a
statutory disqualification that prevents the Sub-
Adviser from serving as investment adviser pursuant to
this Agreement; or (ii) is or expects to become the
subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission or
other regulatory authority. Notification of an event
within (i) shall be given immediately; notification of
an event within (ii) shall be given promptly. The Sub-
Adviser has provided the information about itself set
forth in the Registration Statement and has reviewed
the description of its operations, duties and
responsibilities as stated therein and acknowledges
that they are true and correct in all material respects
and contain no material misstatement or omission, and
it further agrees to notify the Manager immediately of
any fact known to the Sub-Adviser respecting or
relating to the Sub-Adviser that causes any statement
in the Prospectus to become untrue or misleading in any
material respect or that causes the Prospectus to omit
to state a material fact.
(c) The Sub-Adviser represents that it is an
investment adviser registered under the Advisers Act
and other applicable laws and that the statements
contained in the Sub-AdviserOs registration under the
Advisers Act on Form ADV as of the date hereof, are
true and correct and do not omit to state any material
fact required to be stated therein or necessary in
order to make the statements therein not misleading.
The Sub-Adviser agrees to maintain the completeness and
accuracy in all material respects of its registration
on Form ADV in accordance with all legal requirements
relating to that Form. The Sub-Adviser acknowledges
that it is an Oinvestment adviserO to the Fund within
the meaning of the Act and the Advisers Act.
5. Compensation. The compensation of the Sub-Adviser for its
services under this Agreement shall be calculated and paid by the
Manager in accordance with the attached Schedule A. Pursuant to
the provisions of the Management Agreement between the Trust and
the Manager, the Manager is solely responsible for the payment of
fees to the Sub-Adviser, and the Sub-Adviser agrees to seek
payment of its fees solely from the Manager and not from the
Trust or the Fund.
6. Other Investment Activities of the Sub-Adviser. The Manager
acknowledges that the Sub-Adviser or one or more of its
affiliates may have investment responsibilities or render
investment advice to or perform other investment advisory
services for other individuals or entities ("Affiliated
Accounts"). The Manager agrees that the Sub-Adviser or its
affiliates may give advice or exercise investment responsibility
and take such other action with respect to other Affiliated
Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Fund Account, provided
that the Sub-Adviser acts in good faith and provided further,
that it is the Sub-Adviser's policy to allocate, within its
reasonable discretion, investment opportunities to the Fund
Account over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the
investment objectives and policies of the Fund and any specific
investment restrictions applicable thereto. The Manager
acknowledges that one or more of the Affiliated Accounts may at
any time hold, acquire, increase, decrease, dispose or otherwise
deal with positions in investments in which the Fund Account may
have an interest from time to time, whether in transactions which
involve the Fund Account or otherwise. The Sub-Adviser shall
have no obligation to acquire for the Fund Account a position in
any investment which any Affiliated Account may acquire, and the
Fund shall have no first refusal, co-investment or other rights
in respect of any such investment, either for the Fund Account or
otherwise.
7. Standard of Care. The Sub-Adviser shall exercise its best
judgment in rendering the services provided by it under this
Agreement. The Sub-Adviser shall not be liable for any act or
omission, error of judgment or mistake of law or for any loss
suffered by the Manager or the Trust in connection with the
matters to which this Agreement relates, provided that nothing in
this Agreement shall be deemed to protect or purport to protect
the Sub-Adviser against any liability to the Manager or the Trust
or to holders of the TrustOs shares representing interests in the
Fund to which the Sub-Adviser would otherwise be subject by
reason of willful malfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Sub-
AdviserOs reckless disregard of its obligations and duties under
this Agreement.
8. Assignment. This Agreement shall terminate automatically in
the event of its assignment (as defined in the Act and in the
rules adopted under the Act). The Sub-Adviser shall notify the
Trust in writing sufficiently in advance of any proposed change
of control, as defined in Section 2(a)(9) of the Act, as will
enable the Trust to consider whether an assignment under the Act
will occur, and to take the steps necessary to enter into a new
contract with the Sub-Adviser or such other steps as the Board of
Trustees may deem appropriate.
9. Amendment. This Agreement may be amended at any time, but
only by written agreement between the Sub-Adviser and the
Manager, which amendment is subject to the approval of the
Trustees and the shareholders of the Trust in the manner required
by the Act.
10. Effective Date; Term. This Agreement shall become effective
on March 10, 1997 and shall continue in effect for a term of two
years from that date. Thereafter, the Agreement shall continue
in effect only so long as its continuance has been specifically
approved at least annually by the Trustees, or the shareholders
of the Fund in the manner required by the Act. The aforesaid
requirement shall be construed in a manner consistent with the
Act and the rules and regulations thereunder.
11. Termination. This Agreement may be terminated by (i) the
Manager at anytime without penalty, upon notice to the Sub-
Adviser and the Trust, (ii) at any time without penalty by the
Trust or by vote of a majority of the outstanding voting
securities of the Fund (as defined in the Act) on notice to the
Sub-Adviser or (iii) by the Sub-Adviser at any time without
penalty, upon thirty (30) days' written notice to the Manager and
the Trust.
12. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule, or
otherwise, the remainder of this Agreement shall not be affected
thereby but shall continue in full force and effect.
13. Applicable Law. The provisions of this Agreement shall be
construed in a manner consistent with the requirements of the Act
and the rules and regulations thereunder. To the extent that
state law is not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be
amended from time to time, this Agreement shall be administered,
construed, and enforced according to the laws of the State of
Connecticut.
THE MANAGERS FUNDS, L.P.
BY: EAIMC HOLDINGS CORP.
General Partner
BY:
Its:
DATE:
ACCEPTED:
BY:
Its:
DATE:
Acknowledged:
The Managers Funds
BY:
Its:
DATE:
SCHEDULES: A. Fee Schedule.
SCHEDULE A
SUB-ADVISER FEE
For services provided to the Fund Account, The Managers Funds,
L.P. will pay, within 30 days of receipt of invoice from the Sub-
Adviser, a base quarterly fee for each calendar quarter at an
annual rate of 0.40% of average net assets in the Fund Account
during the quarter. Average assets shall be determined using the
average daily assets in the Fund Account during the calendar
quarter. The fee shall be pro-rated for any calendar quarter
during which the contract is in effect for only a portion of the
quarter.
