SMITH BREEDEN SERIES FUND
SMITH BREEDEN TRUST
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrants [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ? 240.14a-11(c) or
? 240.14a-12
SMITH BREEDEN SERIES FUND
SMITH BREEDEN TRUST
------------------------------------
(Name of Registrants as Specified In Their Charters)
Payment of Filing Fee (check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) 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
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a) 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: _____________
SMITH BREEDEN ASSOCIATES, INC.
100 Europa Drive, Suite 200
Chapel Hill, NC 27514
June 9, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of
shareholders (the "Meeting") of the Smith Breeden Short Duration U.S.
Government Fund, Smith Breeden Intermediate Duration U.S.
Government Fund, and Smith Breeden U.S. Equity Market Plus Fund
(the "Funds") of the Smith Breeden Series Fund or the Smith Breeden
Trust, as the case may be (the "Trusts") to be held on Friday, July 21,
2000, at 10:00 a.m., Chapel Hill time, at the offices of the Trusts, 100
Europa Drive, Suite 200, Chapel Hill, NC 27514. At the Meeting,
shareholders will be asked (i) to elect eight new members to the Trusts'
Board of Trustees to replace the current Trustees of the Trusts, (ii) to
approve the proposed management agreements between each Trust, on
behalf of each Fund, and The Managers Funds LLC ("Managers"),
(iii) to approve the proposed subadvisory agreement between Smith
Breeden Associates, Inc. ("Smith Breeden") and Managers for each
Fund, (iv) to amend the Trusts' Declarations of Trust to facilitate the
future reorganization of the Funds into the Managers fund complex
without additional shareholder approval, and (v) to permit Managers to
change the subadviser of each Fund in the future without seeking the
approval of the shareholders of the relevant Fund.
Smith Breeden and Managers believe that the approval of these
proposals (the "Proposals") will be beneficial to all parties, but most
importantly to the Funds' shareholders. With approximately $3.5 billion
in assets under management, the Managers fund complex is substantially
larger than the Trusts. As a result, and given Managers' experience in
the mutual fund business, Managers is better able to service shareholders'
day-to-day operational account and investment needs. Through the
proposed relationship with Managers, shareholders of the Funds should
have access to more extensive products and services, as well as to a
higher level of customer service and technology. Smith Breeden would
continue to manage the assets in the Funds in its capacity as subadviser,
thus enabling Smith Breeden to focus on its strength, portfolio
management. Managers has informed the Trustees of the Trusts that
Managers does not presently intend to increase the fees and expenses of
the Funds as a result of the Proposals and the transactions contemplated
thereby.
The Proposals have been carefully reviewed by the Trusts'
Board of Trustees, which recommends that you approve each of the
Proposals. Whether or not you plan to be present at the Meeting, your
vote is needed. Please complete, sign, and return the enclosed proxy
card(s) promptly, or cast your votes by telephone or via the internet
according to the instructions on the proxy card. A postage-paid
envelope is enclosed for the purpose of returning your proxy card(s)
by mail.
The Funds are using Shareholder Communications Corporation,
a professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the Meeting approaches, if we have not already
heard from you, you may receive a telephone call from Shareholder
Communications Corporation reminding you to exercise your right to
vote.
We thank you for your attention to this matter. We look
forward to seeing you at the Meeting or receiving your proxy card(s) (or
your votes by telephone or via the internet) so your shares may be voted
at the Meeting. If you have any questions on voting of proxies or the
Proposals to be considered at this meeting, please call us toll free at 800-
221-3137.
Sincerely yours,
Michael J. Giarla
Executive Vice President
and Chief Operating Officer
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE
ENCLOSED PROXY CARD(S) IN THE ENCLOSED ENVELOPE (OR
CAST YOUR VOTES BY TELEPHONE OR VIA THE INTERNET
ACCORDING TO THE INSTRUCTIONS ON THE PROXY CARD)
SO AS TO BE REPRESENTED AT THE MEETING.
SMITH BREEDEN SERIES FUND
SMITH BREEDEN TRUST
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Intermediate Duration U.S. Government Fund
Smith Breeden U.S. Equity Market Plus Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held July 21, 2000
___________
A special meeting of shareholders (the "Meeting") of Smith
Breeden Series Fund (the "Series Trust") and Smith Breeden Trust (the
"SB Trust," and together with the Series Trust, the "Trusts") will be
held at the offices of the Trusts, 100 Europa Drive, Suite 200, Chapel
Hill, NC 27514, on Friday, July 21, 2000 at 10:00 a.m., Chapel Hill
time, for the following purposes:
1. Proposal 1 - Election of Trustees. For the shareholders
of each Trust, to elect eight new members to the Board
of Trustees of that Trust to replace the current Trustees
of the Trust.
2. Proposal 2 - Proposed Management Agreements. For
the shareholders of each of the Smith Breeden Short
Duration U.S. Government Fund, Smith Breeden
Intermediate Duration U.S. Government Fund, and
Smith Breeden U.S. Equity Market Plus Fund (the
"Funds"), to approve the proposed management
agreements between each Trust, on behalf of each
Fund, and The Managers Funds LLC ("Managers"), as
described in the attached Proxy Statement.
3. Proposal 3 - Proposed Subadvisory Agreements. For
the shareholders of each Fund, to approve the proposed
subadvisory agreement between Managers and Smith
Breeden Associates, Inc., as described in the attached
Proxy Statement.
4. Proposal 4 - Amendment to the Trusts' Declarations of
Trust. For the shareholders of each Trust (with the
shareholders of both Funds of the Series Trust voting
together as a single class), to approve the proposed
amendment to the Trusts' Declarations of Trust to
facilitate the future merger of the Funds into the
Managers fund complex without additional shareholder
approval, as described in the attached Proxy Statement.
5. Proposal 5 - Future Subadviser Changes Without
Shareholder Approval. For the shareholders of each
Fund, to approve a proposal with respect to the future
operations of each Fund whereby each Fund may, from
time to time, to the extent permitted by an exemption
granted by the Securities and Exchange Commission,
permit the adviser to enter into new or amended
management agreement(s) with subadviser(s) with
respect to each Fund without obtaining shareholder
approval of such agreement(s), and to permit such
subadviser(s) to manage the assets of each Fund
pursuant to such management agreement(s), as
described in the attached Proxy Statement.
6. Other Business. For all shareholders to consider and
act upon such other matters as may properly come
before the Meeting.
Shareholders of record as of the close of business on May 30,
2000 will be entitled to notice of and to vote at the Meeting or any
adjournment thereof. If you attend the Meeting, you may vote your
shares in person. EVEN IF YOU EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE, SIGN, AND RETURN
THE ENCLOSED PROXY CARD(S) IN THE ENCLOSED POSTAGE-
PAID ENVELOPE (OR CAST YOUR VOTES BY TELEPHONE OR
VIA THE INTERNET ACCORDING TO THE INSTRUCTIONS ON
THE PROXY CARD). Any shareholder present at the Meeting may vote
personally on all matters brought before the Meeting and, in that event,
such shareholder's proxy will not be used.
June 9, 2000
MariantheS. Mewkill, Secretary
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Intermediate Duration U.S. Government
Fund
Smith Breeden U.S. Equity Market Plus Fund
of
SMITH BREEDEN SERIES FUND
SMITH BREEDEN TRUST
100 Europa Drive, Suite 200
Chapel Hill, NC 27514
____________________
PROXY STATEMENT
____________________
The enclosed proxies are solicited by the Board of
Trustees (the "Board") of Smith Breeden Series Fund (the
"Series Trust") and Smith Breeden Trust (the "SB Trust," and
together with the Series Trust, the "Trusts") for use at the
special meeting of shareholders (the "Meeting") to be held at
the offices of the Trusts, 100 Europa Drive, Suite 200, Chapel
Hill, NC 27514, at 10:00 a.m., Chapel Hill time, on Friday,
July 21, 2000, and at any adjournment thereof. Shareholders
of record at the close of business on May 30, 2000 (the
"Record Date") are entitled to vote at the Meeting or any
adjourned session. These proxy materials are being mailed, or
otherwise being made available, to shareholders on or about
June 9, 2000.
The Trusts are open-end management investment
companies organized in 1991 as business trusts under the laws
of Massachusetts. The shares of the Series Trust are divided
into two series of shares, each of which represents interests in
one of the following funds: Smith Breeden Short Duration
U.S. Government Fund and Smith Breeden Intermediate
Duration U.S. Government Fund. The shares of the SB Trust
are represented by one series of shares, which represents
interests in the Smith Breeden U.S. Equity Market Plus Fund.
These funds are referred to herein as the "Funds."
As of the Record Date, each Fund had the total number
of outstanding shares reflected in Appendix A. Each
shareholder is entitled to one vote for each full share and a
fractional vote for each fractional share outstanding on the
books of the Funds in the name of the shareholder or his or
her nominee on the Record Date. If you own shares of more
than one Fund, you should sign and return a proxy card for
each Fund of which you are a shareholder (or cast your votes
by telephone or via the internet according to the instructions
on the proxy card); for example, if you own shares of the
Smith Breeden Short Duration U.S. Government Fund and
shares of the Smith Breeden Intermediate Duration U.S.
Government Fund, you should cast votes for each of those
Funds. A different proxy card is enclosed for each Fund in
which you are a shareholder. You should sign and return each
of the cards (or vote by telephone or via the internet for each
Fund in which you are a shareholder).
Timely, properly executed proxies will be voted as you
instruct. If no specification is made with respect to a
proposal, shares will be voted in accordance with the
recommendation of the Trustees. At any time before it has
been voted, the enclosed proxy may be revoked by the signer
by a written revocation received by the Secretary of the
relevant Trust, by properly executing a later-dated proxy, or
by attending the Meeting and voting in person.
Solicitation of proxies by personal interview, mail, and
telephone may be made by officers and Trustees of the Trusts
and officers and employees of Smith Breeden Associates, Inc.,
a Kansas corporation that is registered as an investment
adviser under the Investment Advisers Act of 1940, as
amended ("Smith Breeden"), its affiliates and other
representatives of the Trusts, as described below in Section
VII.
The Trusts will furnish to you upon request, without
charge, a copy of the annual report for any Fund for that
Fund's most recent fiscal year and a copy of any Fund's
semi-annual report for any subsequent semi-annual period.
Please direct any such requests by telephone to the Trusts at
800-221-3137 or by writing to the Trusts at 100 Europa Drive,
Suite 200, Chapel Hill, NC 27514.
I. OVERVIEW - THE SMITH BREEDEN/MANAGERS TRANSACTION
The matters presented for approval at the Meeting have arisen in
connection with the transactions (collectively, the "Smith Breeden/Managers
Transaction") contemplated by an asset purchase agreement (together with
related documents, the "Purchase Agreement") among Smith Breeden, The Managers
Funds LLC ("Managers"), and Affiliated Managers Group,
Inc., the indirect parent of Managers ("AMG"), pursuant to
which Managers has agreed to purchase certain assets of Smith
Breeden related to its management of the Funds and assume
stated contractual liabilities.
As contemplated by the Purchase Agreement, Smith Breeden has agreed to
cooperate with Managers to obtain the approvals necessary: (
1) to cause Managers to be appointed as investment adviser to each Fund
(Proposal 2); (2) to cause Smith Breeden to be appointed as the subadviser
(the "Subadviser")to each Fund (Proposal 3); (3) to cause Managers to be
appointed as distributor to each Fund; (4) to cause certain
other third-party service providers to be appointed with respect
to each Fund; (5) to cause the shareholders of each Fund to
elect as trustees certain individuals mutually agreeable to the
parties (the "Nominees") (Proposal 1); (6) to cause the
respective Agreement and Declarations of Trust of the Trusts
to be amended so that the name of each Fund and each Trust is
changed to reflect its proposed relationship with Managers;
and (7) to cause the shareholders of each Trust to approve
certain changes to its Declaration of Trust to permit the
Trustees of the Trusts to cause each Fund to merge without
shareholder approval into an Acquiring Fund (as defined
below) if certain conditions are satisfied (Proposal 4). The
matters listed in the foregoing clauses (1) to (7) are sometimes
referred to herein as the "Restructuring Matters."
After the consummation of the Smith
Breeden/Managers Transaction and the implementation of the
Restructuring Matters, it is expected that each Fund will be
merged at an administratively convenient time into one of
three newly established series (each, an "Acquiring Fund") of
a no-load mutual fund family sponsored by Managers. Each
such merger (a "Future Merger") would be accomplished by
contributing the assets and liabilities of the relevant Fund to
the corresponding Acquiring Fund in exchange for shares of
the Acquiring Fund. The Future Mergers would be
accomplished pursuant to the power of the relevant Trustees
afforded by the proposed amendment to the Declarations of
Trust and without further shareholder approval. Such Future
Mergers, however, would be subject to a number of
conditions, including requirements that (i) each Acquiring
Fund would have investment policies that do not differ
materially from those of the Fund merging into it, (ii)
Managers would be the adviser of the Acquiring Funds, (iii)
Smith Breeden would be the Subadviser of the Acquiring
Funds and would be responsible for the day-to-day portfolio
management of the Acquiring Funds, (iv) the trustees of the
Acquiring Funds would be the same as the Trustees of the
corresponding Fund immediately prior to the Future Merger,
and (v) the management fees and expense limits of each
Acquiring Fund would be the same as those of the
corresponding Fund.
As consideration for the assets acquired and covenants
of Smith Breeden described above, Managers has agreed to
pay Smith Breeden up to $3 million in cash at the closing of
the Smith Breeden/Managers Transaction, subject to a
downward adjustment of up to $3 million depending on the
amount of aggregate net assets of the three Funds as of the
consummation of the Smith Breeden/Managers Transaction.
In the event of a downward adjustment, the amount of the
downward adjustment may be recouped by Smith Breeden on
the third anniversary of the closing of the Smith
Breeden/Managers Transaction if the net assets of the Funds
(or the Acquiring Funds, as the case may be) have increased in
accordance with a specified schedule. The Purchase
Agreement also provides that additional consideration would
be paid in the future, which additional consideration could be
as much as $4 million if assets grow to certain target levels.
Accordingly, the maximum consideration payable to Smith
Breeden is $7 million and is subject to the growth of assets in
the future.
In addition, the Purchase Agreement provides that if
Smith Breeden is approved as Subadviser of the Funds
pursuant to the subadvisory agreements for each Fund
described in Proposal 3 (the "Proposed Subadvisory
Agreements"), and if Smith Breeden is terminated during the
term of the Proposed Subadvisory Agreements by Managers
without cause (as defined in the Purchase Agreement), then
Managers' obligation to pay a portion of the additional
consideration described above would become fixed. As a
result, Managers would have to pay such portion of the
additional consideration if it terminates Smith Breeden without
cause (as defined in the Purchase Agreement). For these
purposes, the Purchase Agreement defines "cause" to include,
among other things, unsatisfactory investment performance
and departure of key personnel.
The consummation of the Smith Breeden/Managers
Transaction is contingent upon receiving approval of the
Restructuring Matters from the Board and/or shareholders of
the Funds, as the case may be, and on the net assets of the
Funds being at certain specified levels as of the closing date.
Other conditions precedent to the closing of the Smith
Breeden/Managers Transaction include, among other things,
that all regulatory filings, applications, and notifications have
been duly and properly made or obtained and the absence of
any material adverse changes to Smith Breeden or the Funds.
The Future Mergers are not a condition precedent to the
consummation of the Smith Breeden/Managers Transaction.
Both Managers and Smith Breeden have covenanted to
use their reasonable best efforts to cause the Smith
Breeden/Managers Transaction to fit within the safe harbor
provided by Section 15(f) of the Investment Company Act of
1940, as amended (the "1940 Act"), which permits an
investment adviser to receive a benefit in connection with the
assignment of an investment advisory contract if the conditions
specified in such statutory provisions are satisfied. The
conditions specified by Section 15(f) include (i) that the Smith
Breeden/Managers Transaction cannot place an "unfair
burden" on shareholders of the Funds and (ii) that 75% of the
Board of Trustees of the Trusts (or of the Board of Trustees of
a no-load mutual fund sponsored by Managers if the Future
Mergers are effected) must be Trustees who are not considered
interested persons of Smith Breeden or Managers under the
1940 Act for a period of three years from the consummation of
the Smith Breeden/Managers Transaction.
If the Smith Breeden/Managers Transaction is not
consummated for certain specified reasons, Smith Breeden is
prohibited from directly or indirectly soliciting, negotiating, or
entering into an agreement with any person other than
Managers relating to the possible acquisition of any direct or
indirect interest in Smith Breeden or its assets for a period of
three months after the termination of the Purchase Agreement.
If each of Proposals 1, 2, 3, and 4 described in this
Proxy Statement is not approved by the requisite shareholder
vote, Managers has no obligation to consummate the Smith
Breeden/Managers Transaction. The approval by shareholders
of Proposal 5 is not a condition to the consummation of the
Smith Breeden/Managers Transaction. If the Smith
Breeden/Managers Transaction is not consummated, no
Proposals will be given effect even if some or all of the
Proposals are approved by shareholders.
The closing of the Smith Breeden/Managers
Transaction is expected to take place promptly after the
Meeting.
II. PROPOSAL 1: ELECTION OF NOMINEES AS
TRUSTEES OF THE TRUSTS
The Board of the Trusts has nominated the Nominees
for election to the Board of the Trusts and, under this
Proposal, shareholders of the Funds are being asked to elect
each of these Nominees, such election to be effective on the
resignation of the current trustees of the Trusts, Douglas T.
Breeden, Michael J. Giarla, Stephen M. Schaefer, Myron S.
Scholes, and William F. Sharpe (the "Current Trustees").
Pertinent information about each Nominee, which information
was provided by Managers, is set forth below. Each Nominee
has indicated a willingness to serve if elected. If elected, each
Nominee will hold office until his or her successor is elected
and qualified. Each of the Current Trustees will resign their
positions on the Board of the Trusts upon consummation of the
Smith Breeden/Managers Transaction if the Nominees are
elected by the shareholders and the Smith Breeden/Managers
Transaction is consummated. If the Nominees are elected and
the Smith Breeden/Managers Transaction is consummated, the
Nominees will constitute the "New Board."
Information Regarding Nominees
In evaluating the Nominees, the Current Trustees took
into account the Nominees' background and experience with
The Managers Funds, a Massachusetts business trust
("Managers Trust"), and, as applicable, their experience with
Managers AMG Funds. Below are the names, ages, business
experience during the past five years, and other directorships
of the Nominees (as furnished to the Trusts). Each of the
Nominees is a current member of the Board of Managers
Trust. An asterisk (*) has been placed next to the name of the
only Nominee who would be considered an "interested
person," as defined in the 1940 Act, by virtue of that person's
affiliation with any of the Funds or Managers.
NAME AND AGE / ADDRESS, PRINCIPAL OCCUPATION AND
OTHER INFORMATION
Jack W. Aber (62) 595 Commonwealth Ave., Boston, MA 02215. Dr.
Aber is a Professor of Finance at the Boston University School of
Management. He also teaches in the Boston University School of Law's
Master's Program in Banking and Financial Law Studies, and is a member
of the board of advisors of The Banker's Magazine. Dr. Aber received a
B.S. degree from Pennsylvania State University, an M.B.A. in Finance
from Columbia University, and a D.B.A. in Finance from Harvard
Business School. He also serves as a Trustee of Managers AMG Funds.
William E. Chapman, II (58) 380 Gulf of Mexico Drive, Longboat Key,
FL 34228. Mr. Chapman has served as the President and Owner of
Longboat Retirement Planning Solutions, Inc. since 1998 and as an internal
consultant to Hewitt Associates since January 2000. From 1990 to 1998,
he served in a variety of roles with Kemper Funds, the last of which was
President of Kemper Retirement Plans Group. Prior to joining Kemper, he
spent 24 years with CIGNA in investment sales, marketing and general
management roles. He received an A.B. degree from Bowdoin College in
1963. He also serves as a Trustee of Managers AMG Funds.
Sean M. Healey* (39) Two International Place, 23rd Floor, Boston, MA
02110. Mr. Healey joined AMG in 1995 as Executive Vice President, and
in 1999, was appointed President and Chief Operating Officer. Prior to
joining AMG, Mr. Healey was a Vice President in the Mergers and
Acquisitions Department at Goldman, Sachs & Co.focusing on financial
institutions. Mr. Healey received a J.D. from Harvard Law School, an
M.A. from University College, Dublin, and an A.B. from Harvard
College. He also serves as a Trustee of Managers AMG Funds.
Edward J. Kaier (54) 1100 One Penn Center, Philadelphia, PA 19103.
Mr. Kaier is a partner in the law firm of Hepburn Willcox Hamilton &
Putnam, where he has practiced since 1977 and currently serves as
Chairman of the fiduciary law group. Previously, Mr. Kaier was a partner
in the law firm of Kaier & Kaier from 1974 to 1977. Mr. Kaier served as
a Trustee of the Lehman Brothers Institutional Funds Group Trust from
1993 to 1996. He earned an A.B. from Harvard College and a J.D. from
the University of Pennsylvania Law School. He also serves as a Trustee of
Managers AMG Funds.
Madeline H. McWhinney (78) 24 Blossom Cove Road, Red
Bank, New Jersey 07701. From 1977 to 1994, she was the President of
Dale, Elliot & Company, Inc., a management consulting firm. She served
as a Commissioner of the New Jersey Casino Commission from 1977 to
1981 and as Governor of the American Stock Exchange from 1974 to 1979.
Ms. McWhinney also served on the Finance Committees of the Carnegie
Corporation (from 1974 to 1987) and the Kettering Foundation (from 1975
to 1993) and was a Director and Chairman of the Finance Committee of
Atlantic Energy, Inc. from 1983 to 1993. She has also served as a Trustee,
Treasurer and member of the Finance and Investment Committees of the
Institute of International Education since 1975. From 1983 to 1998,she
was a member of the Advisory Board on Professional Ethics of the New
Jersey Supreme Court, and had been a member of the Investment Advisory
Committee of that Court since 1990. She earned a B.A. from Smith
College and an M.B.A. from New York University.
Steven J. Paggioli (50) 915 Broadway, Suite 1605, New York, NY
10010. Mr. Paggioli has been Executive Vice President and Director of
The Wadsworth Group since 1986 and Vice President, Secretary and
Director of First Fund Distributors, Inc., since 1991. Mr. Paggioli is also
Executive Vice President, Secretary and Director of Investment
Company Administration, LLC. Mr. Paggioli earned a B.A. and a J.D.
from the University of Connecticut. He also serves as a Trustee of
Professionally Managed Portfolios.
Eric Rakowski (41) 1535 Delaware Street, Berkeley, CA 94703-1281.
Dr. Rakowski is a Professor of Law at the University of California at
Berkeley. He recently was honored as a Chancellor's Professor at
Berkeley and named Director of the Kadish Center for Law, Morality, and
Public Affairs. Prior to arriving at Berkeley in 1990, Dr. Rakowski served
as a law clerk to U.S. Supreme Court Justice William J. Brennan, Jr., and
worked as a tax attorney at Davis Polk & Wardwell. He earned an A.B. in
Government from Harvard College, a B.Phil. and D.Phil. in Philosophy
from Oxford University, and a J.D. from Harvard Law School. He also
serves as a Trustee of Managers AMG Funds.
Thomas R. Schneeweis (53) 10 Cortland Drive, Amherst, MA 01002.
Since 1985, Dr. Schneeweis has been a Professor of Finance at the
Isenberg School of Management at the University of Massachusetts in
Amherst, Massachusetts where he has also served as a Director of the
Center for International Securities and Derivatives since 1994. He serves
on the Board of Directors of the Managed Funds Association and is
Chairman of the Education Committee of the Alternative Investment
Management Association. Dr. Schneeweis is also Managing Partner of
TRS Associates, a firm, which specializes in multi-advisor fund creation,
asset allocation, product design and risk management services; a director of
Navesink Investors Limited, an offshore hedge fund; the Chairman of the
London Metals Exchanges Index Committee; a member of the Dow Jones-
AIG Commodity Index Committee, and editor of The Journal of Alternative
Investments. He earned a B.A. from St. John's University in Collegeville,
Minnesota, an M.A. in History from the University of Wisconsin-Madison
and a Ph.D. in Finance from the University of Iowa.
As of the Record Date, Managers believes that the
Nominees as a group owned less than 1% of the outstanding
shares of each Fund.
For comparable biographical information regarding the
Current Trustees and principal executive officer of the Trusts,
see Appendix B of this Proxy Statement.
Information Regarding the Current Trustees of the Trusts
Each Current Trustee who is not an officer or affiliate
of the Trusts or Smith Breeden receives an aggregate annual
retainer of $38,750 for services rendered as a Trustee of the
Trusts, which is comprised of a fee of $31,250 for each
meeting attended in person and a fee of $2,500 for telephone
meetings. Each Trustee is also reimbursed for out-of-pocket
expenses incurred as a Trustee. The following table sets forth
information concerning fees paid to each Current Trustee
during the Trusts' fiscal year ended March 31, 2000. An
asterisk (*) has been placed next to the name of each Trustee
who would be considered an "interested person," as defined in
the 1940 Act, by virtue of that person's affiliation with any of
the Funds or Smith Breeden.
Pension or Retiremet Estimated Total
Aggregate Benefits Annual Compensation
Compensation Accrued as Part of Benefits Upon from Trust
Name From Trusts (1) Trust Expenses Retirement Paid to Trustee
Douglas T. Breeden* $0 None N/A $0
Michael J. Giarla* $0 None N/A $0
Stephen M. Schaefer $97,917 None N/A $97,917
Myron S. Scholes $97,917 None N/A $97,917
William F. Sharpe $97,917 None N/A $97,917
(1) The compensation of the Current Trustees is based on their
serving on the Boards of both Trusts.
As of the Record Date, the Trusts believe that the
officers, Current Trustees, and Nominees as a group owned
less than 1% of the outstanding shares of each Fund.
During the fiscal year ended March 31, 2000, each
Trust had three Board meetings. With respect to such fiscal
year, each Current Trustee attended 100% of the meetings of
each Board. Neither Board has standing audit, nominating, or
compensation committees.
Managers has advised the Trusts that if the Nominees
are elected, the annual fees for the New Board are anticipated
to be reduced and will represent an approximate pro-rata share
of the New Board's fees paid by each of the Funds, based on
each Fund's average net assets as a percentage of the average
net assets of all the funds encompassing the Trusts and
Managers Trust. On this basis, aggregate annual fees for
Managers Trust and the Trusts are expected to be $22,000 per
Trustee, which includes aggregate annual fees for the Trusts of
$2,000 per Trustee. Trustees would continue to be reimbursed
for any expenses incurred in attending meetings of the Trusts
and for other incidental expenses. The Trustees' fees are
subject to the approval of the Board upon its election;
shareholders are not being asked to vote on these fees.
Thereafter, Board fees may be reviewed periodically and
changed by the Board.
In the event that the Smith Breeden/Managers
Transaction is not consummated, the Current Trustees are
expected to remain in office, and the Nominees would not
become Trustees of the Trusts even if elected by the
shareholders.
Vote Required
For the election of each Nominee for the Board of each
Trust, the affirmative vote of a plurality of votes cast at the
Meeting, in person or by proxy, and with all series of a Trust
voting together as a single class, is necessary. This means that
in the case of the Series Trust, the Smith Breeden Short
Duration U.S. Government Fund and the Smith Breeden
Intermediate Duration U.S. Government Fund will vote
together as a single class.
THE BOARD OF EACH TRUST, INCLUDING
THOSE TRUSTEES WHO ARE NOT CONSIDERED
INTERESTED PESONS UNDER THE 1940 ACT
("INDEPENDENT TRUSTEES"), HAS CONSIDERED
THE NOMINEES AND RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ALL OF THE
NOMINEES UNDER PROPOSAL 1.
III.PROPOSAL 2: APPROVAL OR DISAPPROVAL OF THE PROPOSED MANAGEMENT
AGREEMENTS
The Board is proposing to replace Smith Breeden,
100 Europa Drive, Suite 200, Chapel Hill, NC 27514, with
Managers, 40 Richards Avenue, Norwalk, CT 06854, as the
investment adviser (the "Adviser") of the Funds pursuant to
the new management agreements between the relevant Trust,
on behalf of each Fund, and Managers (the "Proposed
Management Agreements"), with Smith Breeden being
retained as Subadviser of the Funds pursuant to the Proposed
Subadvisory Agreements (as described in relation to Proposal
3 below).
In connection with the Smith Breeden/Managers
Transaction, it is proposed that the services currently provided
by Smith Breeden under the current management agreements,
each dated August 1, 1994, between Smith Breeden and the
relevant Trust on behalf of each of the Funds (the "Current
Management Agreements") would be restructured. Should
this restructuring be implemented, each Fund would enter into
a Proposed Management Agreement and a proposed
administrative services agreement with Managers (the
"Proposed Administrative Services Agreement"), and
Managers would enter into a Proposed Subadvisory Agreement
with Smith Breeden relating to each Fund. A description of
the Proposed Management Agreements and the Proposed
Administrative Services Agreements appears in the following
section.
Description of the Proposed Management Agreements and
the Proposed Administrative Services Agreements
The Proposed Management Agreements, together with
the Proposed Subadvisory Agreements described below and
the Proposed Administrative Services Agreements approved by
the Trustees of the Trusts, provide for substantially similar
services and fees as those provided under the Current
Management Agreements. The Proposed Management
Agreements provide that, subject to the general supervision of
the Trustees, Managers will provide a continuous investment
program for the Funds and determine the composition of the
assets of the Funds, including the determination of the
purchase, retention, or sale of securities, cash, and other
investments for the Funds. During the term of the Proposed
Management Agreements, Managers will pay all expenses
incurred by it in connection with its activities under the
Proposed Management Agreements, including fees payable to
subadvisers, salaries and expenses of the officers and trustees
of the Funds who are employees of Managers or its affiliates,
and office rent of the Funds; but each Fund will be responsible
for all other expenses of its operation, including among others
brokerage commissions, interest, legal fees and expenses of
attorneys, and fees of auditors, transfer agents, dividend
disbursement agents, custodians, and shareholder servicing
agents. Managers will provide such services in accordance
with the Funds' investment objectives, investment policies,
and investment restrictions as stated in the registration
statement of the Trusts filed with the Securities and Exchange
Commission (the "SEC"), as supplemented and amended from
time to time. The provision of investment advisory services
by Managers to the Funds will not be exclusive under the
terms of the Proposed Management Agreements, and
Managers will be free to, and will, render investment advisory
services to others.
Unlike the Current Management Agreements, the
Proposed Management Agreements do not require Managers to
provide certain administrative services to the Funds. These
services would instead be provided by Managers pursuant to
the Proposed Administrative Services Agreements. Overall,
the scope of the services provided by Managers and the fees
charged by Managers for providing these services under the
Proposed Management Agreements and the Proposed
Administrative Services Agreements would be substantially
similar to the scope of services and fees currently provided to
the Funds under the Current Management Agreements.
The Proposed Management Agreements provide that
they will, unless sooner terminated as described below,
continue in effect for a period of two years from their effective
date and will continue from year to year thereafter with respect
to each Fund, so long as such continuance is approved at least
annually (i) by the vote of a majority of the Board of Trustees
of the relevant Trust or (ii) by the vote of a majority of the
outstanding voting securities of the relevant Fund (as defined
in the 1940 Act), and provided that in either event they are
also approved by the vote of a majority of the Independent
Trustees of the relevant Trust. Each Proposed Management
Agreement provides that it may be amended only in
accordance with the 1940 Act and that it terminates
automatically in the event of its assignment (as defined in the
1940 Act).
The Proposed Management Agreements may be
terminated at any time, without the payment of any penalty, (i)
by the relevant Trust by vote of a majority of its Board of
Trustees, (ii) by vote of a majority of the outstanding voting
securities of the relevant Trust, or (iii) with respect to any
Fund, by vote of a majority of the outstanding securities of
such Fund, upon 60 days' written notice to Managers. The
Proposed Management Agreements may be terminated by
Managers upon 60 days' written notice to the Trust.
The Proposed Management Agreements provide that,
except as may otherwise be required by the 1940 Act or the
rules thereunder, Managers shall not be subject to any liability
for any act or omission connected with services rendered
under the Proposed Management Agreements or for any losses
that may be sustained in the purchase, holding, or sale of any
security, except by reason of Managers' willful misfeasance,
bad faith, or gross negligence in the performance of its duties,
or by reason of Managers' reckless disregard of its obligations
and duties under the Proposed Management Agreements.
Under the Proposed Management Agreements, an
advisory fee based on the average daily net assets of each Fund
is payable by such Fund to Managers on a monthly basis as
compensation for all services rendered, facilities furnished,
and expenses borne by Managers, at the annual rates set forth
in the table below, which are the same as the annual advisory
fee rates for the Funds under the Current Management
Agreements.
Fund Annual Advisory Fee Rate
Smith Breeden Short Duration U.S. Government Fund .70%
Smith Breeden Intermediate Duration U.S. Government Fund .70%
Smith Breeden U.S. Equity Market Plus Fund .70%
The description of the Proposed Management
Agreements set forth above is qualified in its entirety by
reference to the form of Proposed Management Agreement,
which is attached hereto as Exhibit 1.
Managers has informed the Trusts that it intends to
make the same undertaking that Smith Breeden has made with
respect to the expenses of each Fund, under which Smith
Breeden voluntarily reimbursed each Fund's expenses so that
total operating expenses (including administrative fees and
distribution expenses for the Fund, but excluding interest,
taxes, brokerage commissions, and other costs incurred in
connection with portfolio securities transactions,
organizational expenses, and other capitalized expenditures
and extraordinary expenses) were 0.88% for the Smith
Breeden Intermediate Duration U.S. Government Fund,
0.78% for the Smith Breeden Short Duration U.S.
Government Fund, and 0.88% for the Smith Breeden U.S.
Equity Market Plus Fund. Such undertaking by Managers
would be for the period ending March 31, 2001 and would be
voluntary. In addition, during the course of the Trustees'
evaluation of the proposals, Managers agreed that for the two-
year period following Managers' appointment as adviser,
Managers would waive its fees and/or bear expenses of each
Fund to the extent necessary to cause the daily accrual of total
expenses of that Fund to be at the annual rates listed in the
first sentence of this paragraph (the "Expense Commitment").
The Expense Commitment for any given Fund would not
apply, however, on any day that the total assets of that Fund
are below $50 million or if the shareholders of that Fund
approve a new investment advisory agreement or a merger of
that Fund into another mutual fund. The assets of the Funds
as of May 30, 2000, were $182.3 million, $28.0 million, and
$34.3 million for the Smith Breeden U.S. Equity Market Plus
Fund, the Smith Breeden Intermediate Duration U.S.
Government Fund, and the Smith Breeden Short Duration
U.S. Government Fund, respectively.
On May 9, 2000, the Board, including a majority of the
Independent Trustees, voted to approve the Proposed
Management Agreements subject to the approval of the
shareholders of the Funds sought herein. In reviewing the
Proposed Management Agreements, the Board considered a
number of factors, including (i) the experience of Managers
and its personnel with the Managers fund complex, (ii) the fact
that the management fees under the Proposed Management
Agreements are identical to those imposed by the Current
Management Agreements, (iii) the Expense Commitment, (iv)
the fact that Smith Breeden will, assuming shareholder
approval of Proposal 3, continue to serve the Funds in an
investment advisory capacity pursuant to the Proposed
Subadvisory Agreements, (v) the benefits to the Funds of the
economies of scale and the greater marketing resources offered
by Managers, (vi) the resources and experience of Managers in
providing service to shareholders of the existing funds in the
Managers fund complex, (vii) the reduced economic incentives
for Smith Breeden, given the proposed level of fees for Smith
Breeden under the Proposed Subadvisory Agreements, (viii)
the economic disincentives for Managers to terminate Smith
Breeden other than for "cause" during the first five years that
Smith Breeden serves as Subadviser to each Fund, (ix) the
possible incentives for Smith Breeden afforded by the potential
for payments of a deferred purchase price if the assets of the
Funds grow during such period, (x) the ability of Managers
and Smith Breeden to retain and attract qualified personnel,
(xi) Managers' experience in connection with inspections by
relevant regulatory authorities, and (xii) results of financial
audits of Managers Trust.
Current Management Agreements. The Current
Management Agreements were last submitted to a vote of
shareholders of each Fund on June 20, 1994, for the purpose
of raising the management fees of the Funds. The continuance
of the Current Management Agreements was approved by the
Trustees on May 9, 2000. Pursuant to the Current
Management Agreements, and subject to the general
supervision of the Trustees, Smith Breeden provides a
continuous investment program for the Funds, including the
determination of the purchase, sale, or retention of securities,
cash, and other investments for the Funds.
Under the Current Management Agreements, the
advisory fees paid by each Fund during the past fiscal year are
presented in the table below.
Total Advisory Fee
Paid By Fund
Fund During Past Fiscal Year
Smith Breeden Short Duration U.S. Government Fund $ 374,112
Smith Breeden Intermediate Duration U.S. Government Fund $ 340,173
Smith Breeden U.S. Equity Market Plus Fund $1,465,858
Information about Managers (as furnished to the Trusts by
Managers)
Managers is organized as a Delaware limited liability
company. As of May 30, 2000, Managers managed and/or
administered 11 open-end investment companies with
combined assets of approximately $3.5 billion. Managers does
not serve as investment adviser or subadviser to any
investment company that has investment objectives similar to
those of the Funds.
Certain information regarding the officers of Managers
is set forth below. The address of each person is 40 Richards
Avenue, Norwalk, CT 06854.
NAME AND AGE / POSITION WITH MANAGERS / PRINCIPAL
OCCUPATIN FOR LAST 5 YEARS
Peter M. Lebovitz (45) / President (principal executive officer) / President
of Managers since April 1999. From September 1994 to April 1999, Vice
President and Managing Director of Managers.
Donald S. Rumery (42) /Director of Operations / Director of Operations
of Managers since April 1999. From December 1994 to April 1999, Chief
Financial Officer of Managers.
Thomas G. Hoffman (37) / Director of Research / Director of Research of
Managers since April 1999. From September 1994 to April 1999, Senior
Investment Analyst of Managers.
AMG, through its wholly owned subsidiary TMF Corp.,owns 100% of the interests
in the capital and 95% of the interests in the profits of Managers. AMG is
located at Two International Place, 23rd Floor, Boston, MA 02110. Each of
Peter Lebovitz, Donald Rumery and Thomas Hoffman are members of Managers.
Managers did not pay commissions to any affiliated brokers during the past
fiscal year.
No persons currently act as both officers or Trustees of the Trusts and
officers of Managers.
The effectiveness of this Proposal is conditioned on the consummation of
the Smith Breeden/Managers Transaction. Accordingly, in the event that the
Smith Breeden/Managers Transaction is not consummated, the Current Management
Agreements would remain in effect, and Smith Breeden would
continue to serve as adviser of the Funds, even if the Proposed
Management Agreements are approved by shareholders.
Vote Required
Shareholders of each Fund will vote on the approval or
disapproval of the Proposed Management Agreements only
with respect to that Fund. Adoption of this Proposal 2 for
each Fund will require the approval of a "vote of a majority of
the outstanding voting securities" of the Fund, as defined in
the 1940 Act. Under the 1940 Act, a "vote of a majority of
the outstanding voting securities" of each Fund is defined as
the lesser of (i) 67% of the Fund's outstanding shares
represented at a meeting at which more than 50% of the
outstanding shares are present in person or represented by
proxy or (ii) more than 50% of the Fund's outstanding shares.
EACH BOARD, INCLUDING ITS INDEPENDENT
TRUSTEES, HAS CAREFULLY REVIEWED
PROPOSAL 2 AND BELIEVES THAT IT IS IN THE
BEST INTERESTS OF THE SHAREHOLDERS OF
EACH FUND. THEREFORE, EACH BOARD
UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE TO
APPROVE PROPOSAL 2.
IV. PROPOSAL 3: APPROVAL OR DISAPPROVAL
OF SUBADVISORY AGREEMENTS
In connection with the replacement of Smith Breeden
by Managers as Adviser of the Funds, the Trustees
recommend that Smith Breeden be appointed as Subadviser for
each of the Funds. Accordingly, this Proposal seeks the
approval of the shareholders of the Funds for the Proposed
Subadvisory Agreements. Smith Breeden currently serves as
investment adviser to the Funds, so the Proposed Subadvisory
Agreements will allow Smith Breeden to continue to manage
the Funds on a day-to-day basis, subject to the general
supervision of Managers as Adviser. The description of the
Proposed Subadvisory Agreements set forth below is qualified
in its entirety by reference to the form of Proposed
Subadvisory Agreement, which is attached hereto as Exhibit 2.
The Proposed Subadvisory Agreements provide that,
subject to the general supervision of the Board of the relevant
Trust and Managers, Smith Breeden shall manage the
composition of each of the Funds, including the determination
of the purchase, retention, or sale of securities, cash, and other
investments for the Funds. Under the Proposed Subadvisory
Agreements, Smith Breeden is required to provide such
investment advisory services in accordance with each Fund's
investment objectives, investment policies, and investment
restrictions as stated in the relevant registration statement filed
with the SEC, as supplemented and amended from time to
time. The provision of investment advisory services by Smith
Breeden to the Funds will not be exclusive under the terms of
the Proposed Subadvisory Agreements, and Smith Breeden
will be free to, and will, render investment advisory services
to others.
The Proposed Subadvisory Agreements provide that
they will, unless sooner terminated as described below,
continue in effect for a period of two years from their effective
date and will continue thereafter with respect to each Fund, so
long as such continuance is approved at least annually (i) by
the vote of a majority of the Board of the relevant Trust or (ii)
by the vote of a majority of the outstanding voting securities of
the relevant Fund (as defined in the 1940 Act). The Proposed
Subadvisory Agreements provide that they may be amended
only in accordance with the 1940 Act and that they terminate
automatically in the event of their assignment (as defined in
the 1940 Act).
The Proposed Subadvisory Agreements may be
terminated: (i) by Managers at any time, without payment of a
penalty, upon notice to Smith Breeden and the relevant Trust,
(ii) at any time, without payment of a penalty, by the relevant
Trust or a majority of the outstanding voting securities of the
Fund, or (iii) by Smith Breeden at any time, without payment
of a penalty, upon 30 days' notice to Managers and the
relevant Trust. As noted previously, certain economic
disincentives for Managers exist should Managers terminate
Smith Breeden other than for "cause" during the first five
years that Smith Breeden serves as Subadviser to each Fund.
The Proposed Subadvisory Agreements provide that
Smith Breeden shall not be subject to any liability for any act
or omission, error of judgment, or mistake of law or for any
loss suffered by Managers or the relevant Trust in connection
with the Proposed Subadvisory Agreements, except by reason
of Smith Breeden's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of
Smith Breeden's reckless disregard of its obligations and
duties under the Proposed Subadvisory Agreements.
Under the Proposed Subadvisory Agreements, a
subadvisory fee is calculated daily based on the daily net assets
of each Fund and is payable by Managers to Smith Breeden on
a monthly basis as compensation for all services rendered and
expenses borne by Smith Breeden, at the annual subadvisory
fee rates set forth in the table below.
Fund /Annual Subadvisory Fee Rate
Smith Breeden Short Duration Fund. 0.05% through the first
anniversary of the Proposed Subadvisory
Agreement for the Fund and 0.10% thereafter; provided, however, that if
on any date after the first anniversary of the Proposed Subadvisory
Agreement for the Fund, the gross annualized fee received by Managers
under the Proposed Management Agreement is less than $403,200,
then such annual fee rate shall be reduced to 0.05% of
the Fund's daily net assets for that day.
Smith Breeden Intermediate Duration Fund. 0.05% through the first
anniversary of the Proposed Subadvisory Agreement for the Fund and
0.10% thereafter; provided, however, that if on any date after the
first anniversary of the Proposed Subadvisory Agreement for the Fund,
the gross annualized fee received by Managers under the Proposed
Management Agreement is less than $325,800, then such annual fee rate
shall be reduced to 0.05% of the Fund's daily net assets for that day.
Smith Breeden U.S. Equity Market Plus Fund. 0.05% through the first
anniversary of the Proposed Proposed Subadvisory Agreement for the Fund,
the gross annualized fee received by Managers under the Proposed
Management Agreement is less than $1,365,300, then such annual fee rate
shall be reduced to 0.15% of the Fund's Daily net assets for that day.
Pursuant to the Proposed Subadvisory Agreements,
Smith Breeden agrees that if Managers has waived all or a
portion of the advisory fee payable by Managers Trust with
respect to a Fund, or if Managers has agreed to pay or
reimburse the relevant Trust for expenses of a Fund above a
certain level, Smith Breeden will, upon request by Managers,
waive a pro-rata share of the subadvisory fee payable to Smith
Breeden pursuant to the Proposed Subadvisory Agreements, or
reimburse the relevant Trust for a pro-rata share of such
expenses, so that the amount of expenses waived or borne by
Smith Breeden will bear the same ratio to the total amount of
the subadvisory fees payable pursuant to the Proposed
Subadvisory Agreement with respect to such Fund as the
amount waived or borne by Managers bears to all fees payable
to the Adviser pursuant to the Proposed Management
Agreement relating to such Fund.
The effectiveness of this Proposal 3 is conditioned on
the approval of the Proposed Management Agreements
pursuant to Proposal 2 and the consummation of the Smith
Breeden/Managers Transaction. Accordingly, in the event that
the Smith Breeden/Managers Transaction is not consummated,
Smith Breeden will remain as Adviser of the Funds pursuant to
the Current Management Agreements, even if the Proposed
Subadvisory Agreements are approved by the shareholders.
Vote Required
Shareholders of each Fund will vote only on the
approval or disapproval of the Proposed Subadvisory
Agreement with respect to that Fund. Adoption of this
Proposal 3 for each Fund will require the approval of a "vote
of a majority of the outstanding voting securities" of the Fund,
as defined in the 1940 Act. Under the 1940 Act, a "vote of a
majority of the outstanding voting securities" of each Fund is
defined as the lesser of (i) 67% of the Fund's outstanding
shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or represented by
proxy or (ii) more than 50% of the Fund's outstanding shares.
EACH BOARD, INCLUDING ITS INDEPENDENT
TRUSTEES, HAS CAREFULLY REVIEWED
PROPOSAL 3 AND BELIEVES THAT IT IS IN THE
BEST INTERESTS OF THE SHAREHOLDERS OF
EACH FUND. THEREFORE, EACH BOARD
UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE TO
APPROVE PROPOSAL 3.
V. PROPOSAL 4: APPROVAL OR DISAPPROVAL OF AN AMENDMENT TO THE TRUSTS'
DECLARATIONS OF TRUST TO PERMIT THE FUTURE MERGER OF THE FUNDS INTO THE
MANAGERS FUND COMPLEX WITHOUT FUTURE SHAREHOLDER APPROVAL
In connection with the Smith Breeden/Managers
Transaction and the Future Mergers, the Board of the Trusts
recommends that shareholders approve the following
amendment to the Trusts' Declarations of Trust:
That Section 5 of Article IX of the Smith
Breeden Trust's Agreement and Declaration of
Trust (as amended) and Section 8.4 of the Smith
Breeden Series Fund's Agreement and
Declaration of Trust (as amended and restated)
are each further amended by adding the
following at the end of each such Section:
In addition to the foregoing, any Series of the
Trust (the "Relevant Series") may merge or
consolidate with or into, and may transfer
substantially all of its assets and liabilities to,
another series of any other registered
investment company (the "Surviving Fund")
upon the approval of a majority of the Trustees
(such a transaction being referred to herein as a
"Merger"), subject however to the following
conditions: (1) the investment advisory and
subadvisory arrangements, including any
commitments by the Surviving Fund's
investment adviser(s) with respect to total
expenses, are identical to those of the Relevant
Series, except that such arrangements may
allow the appointment of additional
subadviser(s) for a portion of the Surviving
Fund's assets; (2) the board of directors or
trustees of the Surviving Fund is the same as the
Trustees of the Trust; (3) the directors/trustees
of the Surviving Fund make a finding that the
levels of service provided by the Surviving
Fund are as high or higher than the levels of
service for the Relevant Series; (4) the Merger
is effected as a tax-free reorganization to the
Fund and its shareholders under the Internal
Revenue Code; (5) the Merger is effected in
conformity with the requirements of Rule 17a-8
under the 1940 Act that the Merger be in the
best interests of the Relevant Series'
shareholders and that it not result in any
dilution of those shareholders' interests; (6) in
approving the Merger, the Trustees who are not
"interested persons" of the Trust (within the
meaning of the 1940 Act) consult with counsel
who is not representing the Relevant Series'
investment adviser(s) with respect to the Merger
(although such counsel may belong to the same
firm that represents such investment adviser(s));
(7) the costs of the Merger are borne by parties
other than the Relevant Series or the Surviving
Fund; (8) that the Surviving Fund commits that
for at least three years from the date of any
transaction (i) occurring prior to the Merger,
(ii) involving the Relevant Series' investment
adviser, and (iii) described in Section 15(f) of
the 1940 Act, at least 75% of its
directors/trustees will not be "interested
persons" of the Surviving Fund as contemplated
by said Section 15(f); and (9) that the
investment policies of each Surviving Fund
shall not differ materially from those of the
Relevant Series.
The purpose of this Proposal is to facilitate the Smith
Breeden/Managers Transaction and the Future Mergers, the
effect of which will be to reorganize the Funds into the
Managers fund complex at an administratively convenient time
without future shareholder approval. The Amendment to the
Trusts' Declarations of Trust provides certain conditions that
must be met before the Smith Breeden/Managers Transaction
and the Future Mergers may be consummated. These
conditions are designed to ensure that the Future Mergers
result in changes in form, not in substance, and that any
Future Merger is conducted within parameters that are
designed to protect the shareholders of the Fund. For
example, as previously described, Managers will waive its fees
and absorb other expenses of each Acquiring Fund pursuant to
the terms of the Expense Commitment to ensure that each
Fund's operating expenses do not exceed its current levels for
a period of two years from the Smith Breeden/Managers
Transaction. The reference to "any transaction" in clause (8)
above is intended to refer to the Smith Breeden/Managers
Transaction. The exception in clause (1) above is intended to
allow the Surviving Funds' subadvisory agreements to track
the language currently found in the subadvisory agreements for
Managers Trust.
If the Smith Breeden/Managers Transaction and the
Future Mergers are consummated, the Funds will be merged
into the Acquiring Funds. As a result, Fund shareholders
would then be subject to the Declaration of Trust of Managers
Trust (or a trust in the Managers fund complex whose
Declaration of Trust is substantially the same as that of
Managers Trust). A comparison of the Declarations of Trust
of the Trusts and Managers Trust is presented below.
Comparison of Declarations of Trust
Each of the Series Trust, SB Trust, and Managers
Trust is organized as a Massachusetts business trust. The
Declarations of Trust of the Series Trust, the SB Trust, and
Managers Trust are similar in certain respects, but differ in
other instances. Certain provisions of these Declarations of
Trust are described below.
Shareholder Vote. The Series Trust and Managers
Trust each require a 66-2/3% shareholder vote to approve a
merger, sale of assets, or similar consolidation, unless the
transaction is recommended by the Trustees, in which case the
approval of a majority of the outstanding shares is required.
The SB Trust, on the other hand, allows the Trustees to effect
a merger of the Trust if such merger is approved by a majority
of the outstanding shares (as defined in the 1940 Act). In
addition, the SB Trust provides that it may be terminated by
vote of at least 50% of the shares of each series entitled to vote
and voting separately by series. The Series Trust, on the other
hand, provides that it may be terminated (i) by at least 66-
2/3% of the shares of each series entitled to vote and voting
separately by series or (ii) by a majority of such shares if such
termination is recommended by the Trustees. The
corresponding provision of the Declaration of Trust of
Managers Trust provides that it may be terminated by vote of
at least 66-2/3% of the shares of each series entitled to vote
and voting separately by series (regardless of whether the
Trustees approve such termination).
Liability and Indemnification. Each of the Trusts
provides that it will indemnify shareholders and former
shareholders for losses and expenses arising from liability by
reason of having been a shareholder. Each of the Trusts also
provides that its respective Trustees and officers shall not be
liable and shall be indemnified in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard
of duties. Managers Trust further provides that each of its
Trustees shall not be liable for monetary damages for breach
of fiduciary duty, except in certain enumerated circumstances.
The effectiveness of this Proposal is conditioned on the
consummation of the Smith Breeden/Managers Transaction.
Accordingly, in the event that the Smith Breeden/Managers
Transaction is not consummated, this proposed Amendment to
the Declarations of Trust will not become effective, even if it
is approved by the shareholders.
Vote Required
Adoption of this Proposal will require the approval of a
vote of a majority of the outstanding shares of each Trust, with
all series voting as a single class. This means that in the case
of the Series Trust, the Smith Breeden Short Duration U.S.
Government Fund and the Smith Breeden Intermediate
Duration U.S. Government Fund will vote together as a single
class.
EACH BOARD HAS CAREFULLY REVIEWED
THIS PROPOSAL AND BELIEVES THAT IT IS IN THE
BEST INTERESTS OF THE SHAREHOLDERS OF
EACH FUND. THEREFORE, EACH BOARD
UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE TO
APPROVE THIS PROPOSAL.
VI.PROPOSAL 5: APPROVAL OR DISAPPROVAL OF A PROPOSAL ALLOWING THE ADVISER
TO CHANGE THE SUBADVISER OF THE FUNDS WITHOUT SHAREHOLDER APPROVAL
With respect to each Fund, the Board is proposing that
shareholders grant approval to permit Managers to enter into
new or amended subadvisory agreements with a subadviser(s)
with respect to each Fund without obtaining shareholder
approval of such subadvisory agreements, and to permit such
subadviser(s) to manage the assets of each Fund pursuant to
such agreements. If shareholders approve this Proposal,
Managers expects that it would be able to take these actions
only to the extent permitted by an exemption granted to
Managers and Managers Trust (the "SEC Exemption Order"),
by any similar exemption granted by the SEC, or by any
applicable SEC rule.
The 1940 Act generally provides that an investment
adviser or subadviser to a mutual fund may act as such only
pursuant to a written agreement that has been approved by a
vote of a majority of the outstanding voting securities of the
fund, as well as by a vote of a majority of the trustees of the
fund who are not parties to such agreement or interested
persons of any party to such agreement. Managers, however,
has received the SEC Exemption Order, which permits
Managers, under specified conditions, to enter into new and
amended subadvisory agreements for each fund in Managers
Trust, including agreements with new subadvisers and
agreements with existing subadvisers if there is a material
change in the terms of the subadvisory agreement or if there is
an "assignment," as defined in the 1940 Act, or other event
causing termination of the existing subadvisory agreement,
without obtaining the approval of the fund's shareholders of
such new or amended subadvisory agreements. Such
subadvisory agreements must nevertheless be approved by the
trustees in accordance with the requirements of the 1940 Act.
The conditions of the SEC Exemption Order include the
requirement that within 60 days after entering into a new or
amended subadvisory agreement without shareholder approval,
each fund must provide to shareholders an information
statement setting forth substantially the information that would
be required in a proxy statement for a meeting of shareholders
to vote on the approval of the agreement. If the SEC
Exemption Order becomes applicable to the Funds by virtue of
Future Mergers into Managers Trust, shareholder approval
would still be required to amend the management agreement
(including the Proposed Management Agreements) with
respect to each Fund (including any amendment to raise the
management fee or alter the Expense Commitment) or to enter
into a new management agreement with Managers or any other
adviser or to enter into a new subadvisory agreement with an
affiliate of Managers.
The Trusts are requesting shareholder approval of this
Proposal for several reasons. First, one of the premises of the
funds sponsored by Managers is that Managers, as Adviser, is
responsible for selecting subadvisers for each of the funds in
the complex that, in Managers' view, suit the investment goals
and objectives of each fund. Managers has indicated that it
monitors the performance, personnel, and techniques of each
of its subadvisers, and if Managers determines that a
subadviser no longer satisfies the needs of the fund that it
subadvises, Managers may (except as described above with
respect to an affiliate of Managers) recommend replacement of
that subadviser, subject only to the concurrence of the Trustees
of Managers Trust. The Trusts believe that this situation is
analogous to a situation where an investment adviser of a
mutual fund replaces an employee who manages the fund's
investment portfolio with a different portfolio manager, which
action does not require shareholder approval under the 1940
Act.
Since, by its terms, the SEC Exemption Order applies
only to Managers Trust, if this Proposal is approved by
shareholders, Managers would have the ability to change the
subadviser of each of the Funds (including Smith Breeden)
and/or to assign subadvisory responsibility for a portion of the
Fund without shareholder approval if a Future Merger into
Managers Trust were to be effected pursuant to the power of
the Trustees granted by the Amendment to the Declarations of
Trust of the Trusts described in Proposal 4. In the alternative,
further exemptive relief could be sought for the Funds
themselves or no-load mutual funds sponsored by Managers if
the Future Mergers are effected, allowing Managers to change
subadvisers without shareholder approval. In reaching its
conclusion to recommend the Proposal, the Trustees of the
Trusts took into account (1) the possible interplay between this
Proposal and the Trustees' new powers under such proposed
Amendment to the Declaration of Trust, (2) the fact that
Managers represented that it had no current intention of
changing the Funds' Proposed Subadvisory Agreements with
Smith Breeden, and (3) the fact that if Smith Breeden is
removed without cause during the term of the Proposed
Subadvisory Agreement relating to a Fund (or an Acquiring
Fund), Managers' obligation to pay Smith Breeden the
contingent portion of the purchase price pursuant to the
Purchase Agreement would become fixed.
By approving the Proposal, shareholders would be
agreeing to forgo any benefits associated with shareholder
review of proposed subadvisory agreements, such as the
ability to consider a subadviser's performance record.
In the event that this Proposal is not approved by
shareholders, the shareholder approval requirement under the
1940 Act may cause each Fund's (or an Acquiring Fund's)
shareholders to incur unnecessary expenses, such as the
expenses involved in holding, and soliciting proxies for, a
shareholder meeting, and could hinder the prompt
implementation of subadvisory changes that the Adviser
believes are in the best interests of the shareholders. The
Board believes that without the ability to retain a new
subadviser and/or replace an existing subadviser promptly,
investors' expectations may be frustrated. For instance, a
Fund (or an Acquiring Fund) and its shareholders could be
disadvantaged under the following circumstances: (i) where the
Adviser determines to terminate a subadviser due to
unsatisfactory investment performance or for another
appropriate reason, (ii) where a Fund's (or an Acquiring
Fund's) subadviser resigns, ceases operations or is otherwise
incapable of providing management services on behalf of the
Fund (or Acquiring Fund), or (iii) where there has been an
assignment of a subadvisory agreement with a current
subadviser (for instance, due to a change in control of the
subadviser) or some other event causing the termination of the
subadvisory agreement. In many cases, these events are
beyond the control of the Trust, the Adviser, and the
applicable Fund (or Acquiring Fund). In such circumstances,
the Adviser may determine that the Fund (or the Acquiring
Fund) should retain a new subadviser or reinstate a terminated
subadvisory agreement with a current subadviser. Under
current regulations, such retention or reinstatement could only
be made on a temporary basis (for 150 days) without
shareholder approval. For these reasons, the Board believes
that approval of the Proposal would benefit shareholders.
In reaching this conclusion, the Board considered,
among other matters, that the Proposal could be beneficial to
the Funds by reducing or eliminating the costs of shareholder
meetings and the possible negative impact caused by a delay or
uncertainty in replacing or hiring a new subadviser. The
Board also considered that the Funds (or the Acquiring Funds)
would forgo any benefits associated with shareholder scrutiny
of proposed subadvisory agreements. To this end, the Board
noted that, even in the absence of shareholder scrutiny and
approval, any proposal to add or replace a subadviser, or to
materially amend a subadvisory agreement with an existing
subadviser, should nevertheless receive careful review. First,
the Adviser would assess each Fund's needs and, if it believed
that the Fund would benefit from a new subadviser, the
Adviser would review the relevant universe of available
subadvisers. Second, any recommendations made by the
Adviser would have to be approved by a majority of the
relevant Trust's Board of Trustees, including a majority of the
Independent Trustees. Third, any retention of a new or
replacement subadviser would have to comply with the
conditions contained in the SEC Exemption Order. Fourth, as
described previously, certain economic disincentives for
Managers exist should Managers terminate Smith Breeden
other than for "cause" during the first five years that Smith
Breeden serves as Subadviser to each Fund.
Vote Required
Approval of this Proposal by a Fund will require the
affirmative vote of a "majority of the outstanding voting
securities" of that Fund, as defined in the 1940 Act, which
means the affirmative vote of the lesser of (i) more than 50%
of the outstanding shares of that Fund or (ii) 67% or more of
the shares of that Fund present at the Meeting if more than
50% of the outstanding shares of that Fund are represented at
the Meeting in person or by proxy.
EACH BOARD HAS CAREFULLY REVIEWED
THIS PROPOSAL AND BELIEVES THAT IT IS IN THE
BEST INTERESTS OF THE SHAREHOLDERS OF
EACH FUND. THEREFORE, EACH BOARD
UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE TO
APPROVE THIS PROPOSAL.
VII. ADDITIONAL INFORMATION
Interests and Affiliations of Certain Trustees and Officers
of the Trust and Smith Breeden
Mr. Breeden and Mr. Giarla are both officers and
Trustees of the Trusts and officers of Smith Breeden. Timothy
D. Rowe, John B. Sprow, Daniel C. Dektar, and Marianthe S.
Mewkill are each officers of the Trust and officers,
employees, and shareholders of Smith Breeden. By virtue of
their interest in Smith Breeden, which stands to gain from the
consummation of the Smith Breeden/Managers Transaction,
these persons may be deemed to have a substantial interest in
shareholder approval of the Proposals because such approval is
a condition to the consummation of the Smith
Breeden/Managers Transaction. Mr. Breeden and Mr. Giarla
own in the aggregate approximately 75% of the outstanding
voting securities of Smith Breeden. Messrs. Rowe, Sprow,
and Dektar and Ms. Mewkill own in the aggregate less than
10% of the outstanding voting securities of Smith Breeden.
Mr. Breeden exercised options for 20,000 shares of common
stock of Smith Breeden at a price of $10.00 per share on
January 28, 2000 and purchased 613 shares of common stock
of Smith Breeden at a price of $36.00 on March 30, 2000.
Information regarding the principal executive officer
and directors of Smith Breeden is presented in the table below.
The address of each of these persons is 100 Europa Drive,
Suite 200, Chapel Hill, NC 27514, and all principal
occupations are with Smith Breeden unless otherwise noted.
Name Position with Smith Breeden; Principal Occupation
Douglas T. Breeden Chairman (principal executive officer)
Eugene Flood, Jr. Director, President, CEO
Michael J. Giarla Director,Executive Vice President,
Chief Operating Officer
Stephen A. Eason Director, Executive Vice President
Daniel C. Dektar Director, Senior Vice President
Stanley J. Kon Director, Senior Vice President
Gerald J. Madigan Director, Senior Vice President
Marianthe S. Mewkill Director, Senior Vice President, Secretary,
Treasurer, CFO
William F. Quinn, Jr. Director, Senior Vice President
Timothy D. Rowe Director, Senior Vice President
John B. Sprow Director, Senior Vice President
John C. Appel Director; Vice Chairman of Dain Rauscher
Michael J. Brennan Director; Irwin and Goldyne Hearsh Professor of
Banking and Finance, Anderson Graduate School
of Management, University of California,
Los Angeles and Professor of Finance at
London Business School
Sharon E. Fankhauser Director
Lewis T. Jester, III Director; Manager, Crude Oil Marketing Division,
Chevron Corp.
Eduardo S. Schwartz Director; California Professor of Real Estate and
Professor of Finance, Anderson Graduate School of
Management, University of California, Los Angeles
Principal Underwriter
Provident Distributors, Inc., 3200 Horizon Drive, King
of Prussia, PA 19406, is the principal underwriter and
distributor for the Funds, and in such capacity, is responsible
for distributing shares of the Funds. The Trustees of the
Trusts have approved a change in the principal underwriter
and distributor for the Funds effective upon the consummation
of the Smith Breeden/Managers Transaction. Managers,
which is the distributor for each other fund it sponsors, will
become the principal underwriter and distributor for each Fund
as of such date.
Administrator
Smith Breeden currently serves as administrator of the
Funds pursuant to the Current Management Agreements. The
Trustees of the Trusts have approved the appointment of
Managers as administrator for the Funds effective upon the
consummation of the Smith Breeden/Managers Transaction.
Managers is the administrator for each other fund that it
sponsors. As indicated above, Managers will not charge the
Funds separately for these services.
Solicitation of Proxies
The Trusts have retained Shareholder Communications
Corporation ("SCC"), 17 State Street, 22nd Floor, New York,
NY 10004, to aid in the solicitation of proxies. Services
provided by SCC may include calls to shareholders who have
not yet voted, as described in the following paragraph. The
costs of retaining SCC and other expenses incurred in
connection with the solicitation of proxies, the costs of holding
the Meeting, and other expenses associated with obtaining the
approval of the Funds and their shareholders, will not be
borne by any of the Funds, but rather will be borne in equal
amounts by Smith Breeden and Managers. SCC will be paid
approximately $30,000 for rendering such services.
As the date of the Meeting approaches, shareholders
who have not voted may receive a telephone call asking for
their votes. When a telephonic proxy is solicited by SCC, a
shareholder will be asked to give his or her full name, social
security number or employee identification number, address,
title (if applicable) and the number of shares owned, and to
confirm that he or she has received the proxy materials in the
mail. Within 72 hours, the shareholder will be sent a
confirmation of his or her vote that will ask the shareholder to
call immediately if his or her instructions are not reflected
correctly in the confirmation.
Other Matters
As of the Record Date, the Funds have the following
number of shares outstanding: 3,582,786.240 (Smith Breeden
Short Duration U.S. Government Fund); 3,032,231.397
(Smith Breeden Intermediate Duration U.S. Government
Fund); and 11,994,150.346 (Smith Breeden U.S. Equity
Market Plus Fund). For the SB Trust, 10% of the shares
entitled to vote shall constitute a quorum for the transaction of
business by the shareholders of SB Trust at the Meeting. In
the absence of a quorum, any lesser number shall be sufficient
for adjournments. For the Series Trust, the holders of a
majority of the shares entitled to vote shall constitute a quorum
for the transaction of business by the shareholders of Series
Trust at the Meeting. In the absence of a quorum, a majority
of the outstanding shares entitled to vote and present in person
or by proxy may adjourn the Meeting.
Each whole share of each Fund shall be entitled to one
vote as to any matter on which it is entitled to vote, and each
fractional share shall be entitled to a proportionate fractional
vote. Votes cast by proxy or in person at the Meeting will be
counted by persons appointed by the Trust as tellers for the
Meeting. The tellers will count the total number of votes cast
"for" approval of each Proposal for purposes of determining
whether sufficient affirmative votes have been cast. The
tellers will count all shares represented by proxies that reflect
abstentions and "broker non-votes" (i.e., shares held by
brokers or nominees as to which (a) instructions have not been
received from the beneficial owners or the persons entitled to
vote and (b) the broker or nominee does not have discretionary
voting power on a particular matter) as shares that are present
and entitled to vote for purposes of determining the presence
of a quorum. Assuming the presence of a quorum, abstentions
and broker non-votes have the effect of a negative vote on each
Proposal.
In the event that a quorum is not present for purposes
of acting on a Proposal, or if sufficient votes in favor of a
Proposal are not received by the time of the Meeting, the
persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of
proxies. The persons named as proxies will vote in favor of
such adjournment those proxies which they are entitled to vote
in favor of any Proposal that has not then been adopted. They
will vote against any such adjournment those proxies required
to be voted against each proposal that has not then been
adopted and will not vote any proxies that direct them to
abstain from voting on such Proposals. Any Proposals for
which sufficient favorable votes have been received by the
time of the Meeting will be acted upon, and such action will be
final regardless of whether the Meeting is adjourned to permit
additional solicitation with respect to any other Proposal.
Although the Meeting is called to transact any other
business that may properly come before it, the only business
that management intends to present or knows that others will
present are the Proposals mentioned in the Notice of Special
Meeting and described in this Proxy Statement.
At the time of the preparation of this Proxy Statement,
management has not been informed of any matters that will be
presented for action at the Meeting other than the Proposals
listed in the Notice of Meeting. If other matters are properly
presented to the Meeting for action, the persons named in the
Proxy will vote or refrain from voting in accordance with their
best judgment on those matters.
The Trusts are not required to hold annual or other
periodic meetings of shareholders except as required by the
1940 Act, and do not intend to do so. The next meeting of
shareholders will be held at such time as the Board of Trustees
of the Trusts may determine or at such time as may be legally
required. Any shareholder proposal intended to be presented
at such meeting must be received by the relevant Trust at its
office a reasonable time prior to the meeting, as determined by
the Board of Trustees, to be included in that Trust's Proxy
Statement and form of proxy relating to such meeting, and
must satisfy all other federal and state legal requirements.
A Proxy may be revoked by a shareholder at any time
prior to its use by written notice to the relevant Trust, by
submission of a later dated proxy, or by voting in person at the
Meeting.
PLEASE COMPLETE, DATE, AND SIGN THE
ENCLOSED PROXY CARD(S) AND
RETURN IT/THEM PROMPTLY IN THE ENCLOSED
ENVELOPE, OR CAST YOUR VOTES BY TELEPHONE
OR VIA THE INTERNET ACCORDING TO THE
INSTRUCTIONS ON THE PROXY CARD
APPENDIX A
Information regarding the shareholders of each
Fund that held 5% or more of the Fund's shares as of
May 30, 2000 is presented in the table below.
SMITH BREEDEN SHORT DURATION U.S.
GOVERNMENT FUND
Shareholder and Address Shares Held % of Shares
Charles Schwab & Co., Inc. 1,057,999.711 29.5%
101 Montgomery Street
San Francisco, CA 94104-4122
Harris Regional Hospital 469,080.698 13.1%
59 Hospital Road
Sylva, NC 28779-2732
Pacific Mutual Door Company 342,717.541 9.6%
1525 W. 31st Street
Kansas City, MO 64108-3601
Redland Insurance Company 311,889.068 8.7%
222 S. 15th Street, Suite 600N
Omaha, NE 68102-1680
Harrington Wealth Management 272,758.817 7.6%
7150 E. 116th Street
Fishers, IN 46038-1729
SMITH BREEDEN INTERMEDIATE DURATION U.S.
GOVERNMENT FUND
Shareholder and Address Shares Held % of Shares
Charles Schwab & Co., Inc. 1,860,072.404 61.3%
101 Montgomery Street
San Francisco, CA 94104-4122
National Investor Services Corp. 362,785.889 12.0%
55 Water Street, Floor 32
New York, NY 10041-3299
SMITH BREEDEN U.S. EQUITY MARKET PLUS FUND
Shareholder and Address Shares Held % of Shares
Charles Schwab & Co., Inc. 4,539,803.730 37.9%
101 Montgomery Street
San Francisco, CA 94104-4122
APPENDIX B
CURRENT TRUSTEES AND PRINCIPAL OFFICER OF
SMITH BREEDEN SERIES FUND
SMITH BREEDEN TRUST
The names and ages of the Current Trustees of the Trusts and
their positions and principal occupations during the past five years are
shown below. Trustees whose names are followed by an asterisk (*)
are "interested persons" of the Trusts (as defined by the 1940 Act).
The address of each Current Trustee and officer is the same as that of
the Funds at 100 Europa Drive, Suite 200, Chapel Hill, North
Carolina 27514. In the aggregate, the Current Trustees own less
than 1% of the outstanding shares of each Fund.
NAME, AGE AND POSITION / ADDRESS, PRINCIPAL
OCCUPATION AND OTHER INFORMATION
Douglas T. Breeden (49),* Trustee and Chairman of the Board of
Trustees
Chairman of the Board of Smith Breeden; co-founded Smith Breeden
in 1982. He is Visiting Professor of Finance at the Kenan Flagler
Business School at the University of North Carolina. He has served
on business school faculties at Duke University, Stanford University
and the University of Chicago, and as a visiting professor at Yale
University and at the Massachusetts Institute of Technology. He is
the Editor of The Journal of Fixed Income. He serves as Chairman of
Harrington Financial Group, the holding company for Harrington
Bank, F.S.B., of Richmond, Indiana.
Michael J. Giarla (42),* Trustee
Executive Vice President and Chief Operating Officer of Smith
Breeden. He also serves as a Director of Harrington
Financial Group, the holding company for Harrington Bank, F.S.B.,
of Richmond, Indiana. He has been employed by Smith Breeden
since 1985.
Stephen M. Schaefer (52), Trustee
Tokai Bank Professor of Finance at the London Business School
(Professor since 1985). He is a director of Tokai Bank Europe, a
subsidiary of Tokai Bank. He has served on the editorial board of a
number of professional journals including, currently, The Journal of
Fixed Income, The Review of Derivatives Research, and European
Review of Finance. He consults for a number of leading financial
institutions, including previously for Smith Breeden.
Myron S. Scholes (58), Trustee
Frank E. Buck Professor of Finance, at the Graduate School of
Business at Stanford University (Professor since 1983; Emeritus since
1996). He was formerly a limited partner and principal of Long
Term Capital Management (1993-1998). He was also a Managing
Director and co-head of the fixed income derivatives group at
Salomon Brothers between 1991-1993. He received the Nobel Prize
in Economic Science in 1997. He is a past president of the American
Finance Association (1990).
William F. Sharpe (65), Trustee
STANCO 25 Professor of Finance, at Stanford University's Graduate
School of Business (Professor since 1992; Emeritus since 1999). He
is known as one of the developers of the Capital Asset Pricing Model,
including the beta and alpha concepts used in risk analysis and
performance measurement. He is a past President of the American
Finance Association. He is Trustee of Barr Rosenberg Series Trust
and Barr Rosenberg Variable Insurance Trust, a Director of Stanford
Management Company, and the Chairman of the Board of Financial
Engines, a company that provides electronic portfolio advice. He
received the Nobel Prize in Economic Science in 1990.
EXHIBIT 1
FORM OF FUND MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is
made as of this ___ day of ________, 2000, between The
Managers Trust [I / II], a business trust organized under
the laws of the Commonwealth of Massachusetts
("Company") and The Managers Funds LLC, a limited
liability company organized under the laws of the State of
Delaware ("Manager"). This Agreement shall not become
effective as to any Series unless the shareholders of such
Series approve this Agreement.
WHEREAS, the Company operates as an
investment company registered under the Investment
Company Act of 1940, as amended (the "Investment
Company Act") for the purpose of investing and
reinvesting the assets of its various series (each a "Series",
each of which is listed in Appendix A hereto) in securities
pursuant to investment objectives and policies as set forth
more fully in its Declaration of Trust, its By-Laws and its
Registration Statement under the Investment Company Act
and the Securities Act of 1933, as amended, all as amended
and supplemented from time to time; and the Company
desires to avail itself of the services, information, advice,
assistance and facilities of a fund manager and to have a
fund manager provide or perform for it various
administrative management, statistical, research, portfolio
manager selection and other services;
WHEREAS, the Manager is registered as an
investment adviser under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Manager desires to provide
services to the Company in consideration of and on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, Company and Manager
agree as follows:
1. Employment of the Manager. The Company
hereby employs the Manager to manage the
investment and reinvestment of the assets of the
Company's various Series in the manner set forth in
Section 2 (B) of this Agreement and to administer its
business and administrative operations, subject to the
direction of the Trustees and the officers of the
company, for the period in the manner, and on the
terms hereinafter set forth. The Manager hereby
accepts such employment and agrees during such
period to render the services and to assume the
obligations herein set forth. The Manager shall for
all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or
authorized (whether herein or otherwise) have no
authority to act for or represent the Company in any
way or otherwise be deemed an agent of the
Company.
2. Obligation of and Services to be Provided by the
Manager. The Manager undertakes to provide the
services hereinafter set forth and to assume the
following obligations:
A. Corporate Management and Administrative
Services.
(a) The Manager shall furnish to the Company adequate (i)
office space, which may be space within the offices of the
Manager or in such other place as may be agreed upon from
time to time, (ii) office furnishings, facilities and equipment
as may be reasonably required for managing and
administering the operations and conducting the business of
the Company, including complying with the securities, tax
and other reporting requirements of the United States and
the various states in, which the Company does business,
conducting correspondence and other communications with
the shareholders of the Company, and maintaining or
supervising the maintenance of all internal bookkeeping,
accounting and auditing services and records in connection
with the company to investment and business activities.
Company agrees that its shareholder recordkeeping services,
the computing of net asset value and the preparation of
certain of its records required by Section 31 of the
Investment Company Act and the Rules promulgated
thereunder are to be performed by Company's transfer
agent, custodian or portfolio managers, and that with respect
to these services Manager's obligations under this Section
2(A) are supervisory in nature only.
(b) The Manager shall employ or provide and compensate
the executive, administrative, secretarial and clerical
personnel necessary to supervise the provisions of the
services set forth in subparagraph 2 (A) (a) above, and shall
bear the expense of providing such services, except as may
otherwise be provided in Section 4 of this Agreement. The
Manager shall also compensate all officers and employees of
the Company who are officers or employees of the Manager.
B. Investment Management Services.
(a) The Manager shall have overall
supervisory responsibility for the general management and
investment of the assets and securities portfolio of each of
the company's various Series subject to and in accordance
with the investment objectives, policies and restrictions of
each such Series, and any directions which the Company's
Trustees may issue to the Manager from time to time.
(b) The Manager shall provide overall
investment programs and strategies for the Company, and
more particularly for each Series, shall revise such programs
as necessary and shall monitor and report periodically to the
Trustees concerning the implementation of the programs.
(c) The Company intends to appoint one or more
persons or companies ("Portfolio Managers"), and each Portfolio Manager
shall have full investment discretion and
shall make all determinations with respect to the investment
of the portion of the particular Series' assets assigned to that
Portfolio Manager and the purchase and sale of portfolio
securities with those assets, and take such steps as may be
necessary to implement such appointments. The Manager
shall not be responsible or liable for the investment merits
of any decision by a Portfolio Manager to purchase, hold or
sell a security for the portfolio of the Series for which it acts
as Portfolio Manager.
(d) The Manager shall evaluate Portfolio Managers and shall advise the
Trustees of the Company of the Portfolio Managers which the Manager believes
are best suited to invest the assets of each Series; shall monitor and
evaluate the investment performance of each Portfolio Manager employed by
each Series; shall allocate the portion of each Series' assets to be
managed by each Portfolio Manager; shall recommend
changes of or additional Portfolio Managers when
appropriate; shall coordinate the investment activities of the
Portfolio Managers; and shall compensate the Portfolio
Managers.
(e)The Manager shall render regular reports to the Company, at regular
meetings of the Trustees, of, among other things, the decisions which it
has made with respect to the allocation of assets among Portfolio Managers.
Provision of Information Necessary for Preparation of Securities Registration
Statements, Amendments and Other Materials.
The Manager will make available and provide
financial, accounting and statistical information
required by the Company in the preparation of
registration statements, reports and other documents
required by federal and state securities laws, and
such information as the Company may reasonably
request for use in the preparation of registration
statements, reports and other documents required by
federal and state securities laws and such information
as the Company may reasonably request for use in
the preparation of such documents or of other
materials necessary or helpful for the underwriting
and distribution of the Company's shares.
D. Other Obligations and Services.
The Manager shall make available its officers and
employees to the Trustees and officers of the
Company for consultation and discussion regarding
the administration and management of the Company
and its
investment activities.
3. Execution and Allocation of Portfolio Brokerage
Commissions. Portfolio Managers, subject to and in
accordance with any directions the Company's
Trustees may issue from time to time, shall place, in
the name of the Series of the Company for which
they act as Portfolio Manager, orders for the
execution of that Series' portfolio transactions.
When placing such orders, the primary objective of
the Manager and Portfolio Managers shall be to
obtain the best net price and execution for the series,
but this requirement shall not be deemed to obligate
the Manager or a Portfolio Manager to place any
order solely on the basis of obtaining the lowest
commission rate if the other standards set forth in
this section have been satisfied. The Company
recognizes that there are likely to be many cases in
which different brokers are equally able to provide
such best price and execution and that, in the
selection among such brokers with respect to
particular trades, it is desirable to choose those
brokers who furnish brokerage and research
services, (as defined in Section 28 (e) (3) of the
Securities Exchange Act of 1934) or statistical
quotations and other information to the Company,
the Manager and/or the Portfolio Managers in
accordance with the standards set forth below.
Moreover, to the extent that it continues to be lawful
to do so and so long as the Trustees determine as a
matter of general policy that the Company will
benefit, directly or indirectly, by doing so, the
Manager or a Portfolio Manager may place orders
with a broker who charges a commission for that
transaction which is in excess of the amount of
commission that another broker would have charged
for effecting that transaction, provided that the
excess commission is reasonable in relation to the
value of brokerage and research services provided by
that broker. Accordingly, the Company and the
Manager agree that the Manager and the Portfolio
Managers may select brokers for the execution of the
Company's portfolio transactions from among:
A. Those brokers and dealers who provide
brokerage and research services, or statistical
quotations and other information to the
Company, specifically including the
quotations necessary to determine the value
of the Company's Series' net assets in such
amount of total brokerage as may reasonably
be required in light of such services;
B. Those brokers and dealers who supply
brokerage and research services to the
Manager or the Portfolio Managers which
relate directly to portfolio securities, actual
or potential, of the Series, or which place the
Manager or Portfolio Managers in a better
position to make decisions in connection with
the management of the Series assets and
portfolio, whether or not such data may also
be useful to the Manager and its affiliates, or
the Portfolio Managers and their affiliates, in
managing other portfolios, including other
Series, or advising other clients, in such
amount of total brokerage as may reasonably
be required.
The Manager shall render regular reports to
the Company of the total brokerage business placed and the
manner in which the allocation has been accomplished.
The Manager agrees and each Portfolio
Manager will be required to agree that no investment
decision will be made or influenced by a desire to provide
brokerage for allocation in accordance with the foregoing,
and that the right to make such allocation of brokerage shall
not interfere with the Manager's or Portfolio Managers'
primary duty to obtain the best net price and execution for
the Company.
4. Expenses of the Company. It is understood that
the Company will pay all its expenses other than
those expressly assumed by the Manager herein,
which expenses payable by the company shall
include:
A. Expenses of all audits by independent
public accountants;
B. Expenses of transfer agent, registrars
dividend disbursing agent and shareholder
recordkeeping services;
C. Expenses of custodial services
including recordkeeping services provided by
the Custodian;
D. Expenses of obtaining quotations for
calculating the value of the Company's net
assets;
E. Salaries and other compensation of any
of its executive officers and employees, if
any, who are not officers, directors,
stockholders or employees of the Manager;
F. Taxes levied against the Company;
G. Brokerage fees and commissions in
connection with the purchase and sale of
portfolio
securities for the Company;
H. Costs, including the interest expense, of
borrowing money;
I. Costs and/or fees incident to Trustee and
shareholder meetings of the Company, the
preparation and mailing of prospectuses and
reports of the Company to its shareholders,
the filing of reports with regulatory bodies,
the maintenance of the Company's corporate
existence, and the registration of shares with
federal and state securities authorities;
J. Legal fees, including the legal fees
related to the registration and continued
qualification of the Company's Shares for
sale;
K. Costs of printing stock certificates
representing shares of the Company's various
Series;
L. Trustees' fees and expenses of Trustees
who are not directors, officers, employees or
stockholders of the Manager or any of its
affiliates; and
M. Its pro rata portion of the fidelity bond
required by Section 17(g) of the Investment
Company Act, or other insurance premiums.
The Manager understands that each Series
will be liable for the expenses attributable to
such Series.
5. Activities and Affiliates of the Manager.
A. The services of the Manager to the
Company hereunder are not to be deemed
exclusive, and the Manager and any of its
affiliates shall be free to render similar
services to others. The Manager shall use
the same skill and care in the management of
the Company's assets as it uses in the
administration of other accounts to which it
provides asset management, consulting and
portfolio manager selection services, but
shall not be obligated to give the Company
more favorable or preferential treatment vis-
a-vis its other clients.
B. Subject to and in accordance with the
Declaration of Trust and By-Laws of the
Company and to Section 10(a) of the
Investment Company Act, it is understood
that Trustees, officers, agents and
shareholders of the Company are or may be
interested in the Manager or its affiliates as
directors, officers, agents or stockholders of
the Manager or its affiliates; that directors,
officers, agents and stockholders of the
Manager or its affiliates are or may be
interested in the Company as trustees,
officers, agents, shareholders or otherwise;
that the Manager or its affiliates may be
interested in the Company as shareholders or
otherwise; and that the effect of any such
interests shall be governed by said
Declaration of Trust, By-Laws and the
Investment Company Act.
6. Compensation of the Manager. In consideration
of all of the services provided and obligations
assumed by the Manager pursuant to this Agreement,
each Series shall pay the Manager a management fee
calculated as a specified percentage of the average
daily net asset value of that Series. Such fee, which
shall be accrued daily and paid monthly, shall be
calculated at the annual percentage rate set forth for
the particular Series in Appendix B to this
Agreement. Each Series shall be solely responsible
for the payment of its management fee, and no Series
shall be responsible for the payment of a
management fee calculated for or attributable to any
other Series.
7. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard
of obligations or duties hereunder on the part
of the Manager, the Manager shall not be
subject to liability to the Company or any
Series or to any shareholder of the Company
for any act or omission in the course of, or
connected with, rendering services hereunder
or for any losses that may be sustained in the
purchase, holding or sale of any security.
B. No provision of this Agreement shall be
construed to protect any Trustee or officer of
the Company, or the Manager, from liability
in violation of Sections 17(h) and (i) of the
Investment Company Act.
8. Renewal and Termination.
A. This Agreement shall become effective
on the date written above and shall continue
in effect until the second anniversary of the
date first written above. This Agreement
may be continued annually thereafter for
successive one year periods (a) by a vote of
a majority of the outstanding shares of
beneficial interest of each Series of the
Company or (b) by a vote of a majority of the Trustees of the Company,
and in either case by a majority of the Trustees who are not parties to the
Agreement or interested persons of any parties to the Agreement (other than
as Trustees of the Company) cast
in person at a meeting called for the purpose
of voting on the Agreement. The aforesaid
provision that this Agreement may be
continued "annually" shall be construed in a
manner consistent with the Investment
Company Act and the Rules and Regulations
promulgated thereunder. If continuance of
this Agreement is approved by less than all of
the Series, it shall be deemed terminated as
to those Series not giving their approval, and
Appendix A and Appendix B hereto shall be
appropriately amended to reflect that fact.
B. This Agreement
(a) may at any time be terminated without the
payment of any penalty by (1) vote of the Trustees of the
Company; (ii) by vote of a majority of the outstanding
voting securities of the Company; or (iii) as to any Series by
vote of the outstanding voting securities of such Series, on
sixty (60) days written notice to the Manager;
(b) shall immediately terminate in the event of its
assignment; and
(c) may be terminated by the Manager on sixty
(60) days written notice to the Company.
C. As used in this Section 8, the terms
"assignment," "interested person" and "vote
of a majority of the outstanding voting
securities" shall, have the meanings set forth
in the Investment Company Act.
D. Any notice under this Agreement shall be
given in writing addressed and delivered or
mailed postpaid, to the other party to this
Agreement at its principal place of business.
9. 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.
10. Governing Law. To the extent that state law
has not been 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.
11. Amendments. This Agreement, including the
Appendix hereto, may be amended by an instrument
in writing signed by the parties subject to Investment
Company obtaining such approvals as may be
required by the Investment Company Act.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed, as of the day
and year first written above.
THE MANAGERS TRUST [I / II] ATTEST
By: __________________________ By: ____________________
Name: Name:
Title: Title:
THE MANAGERS FUNDS LLC ATTEST
By: __________________________ By: ___________________
Name: Name:
Peter M. Lebovitz
Title: President
APPENDIX A
Series Covered by Fund Management
Agreement
The Managers Trust I:
Managers 500 Plus Fund
The Managers Trust II:
Managers Short Duration Government Fund
Managers Intermediate Government Fund
EXHIBIT 2
SUB-ADVISORY AGREEMENT
Attention: Smith Breeden Associates, Inc.
RE: Sub-Advisory Agreement
The [Managers 500 Plus / Managers Short Duration
Government / Managers Intermediate Government] Fund
(the "Fund") is a series of The Managers Trust [I / II], 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 LLC (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 Fund's assets. However, pursuant to
the terms of the Management Agreement, specific
portfolio purchases and sales for the Fund's 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 Smith
Breeden Associates, Inc. ("Sub-Adviser") as a discretionary
asset manager, on the terms and conditions set forth herein,
of the assets of the Fund (those assets being referred to as
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 Fund's 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
"Prospectus").
(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 "Advisers Act"), 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 Trust's Custodian, and the
Manager on each business day with information relating to all transactions
concerning the Fund Account. In addition, the Sub-Adviser 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-Adviser agrees to maintain an appropriate level of errors and
omissions or professional liability insurance coverage.
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-Adviser's 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-Adviser's 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
Trust's 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-Adviser's 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 "investment
adviser" 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 Trust's 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-Adviser's 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 ________, 2000 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 LLC
BY:
Its:
DATE:
ACCEPTED:
SMITH BREEDEN ASSOCIATES, INC.
BY:
Its:
DATE:
ACKNOWLEDGED:
THE MANAGERS TRUST [I / II]
BY:
Its:
DATE:
SCHEDULES: A. Fee Schedule.
SCHEDULE A
SUB-ADVISER FEE
[Managers 500 Plus Fund:]
For services provided to the Fund Account, the
Manager will pay within five business days after the end
of each calendar month the Sub-Adviser a base monthly
fee for each calendar month calculated on a daily basis at
an annual rate of .05% of daily net assets in the Fund
Account through ______, 2001 [i.e., first anniversary of
closing date] and an annual rate of .20% of daily net
assets in the Fund Account thereafter; provided, however,
that if on any day after ______, 2001 [i.e., first
anniversary of closing date] the gross annualized fee
received by the Manager under the Management
Agreement between the Trust and the Manager is less than
$1,365,300, then such annual fee rate shall be reduced to
.15% of daily net assets in the Fund for that day.
[Managers Short Duration Government Fund:]
For services provided to the Fund Account, the
Manager will pay within five business days after the end
of each calendar month the Sub-Adviser a base monthly
fee for each calendar month calculated on a daily basis at
an annual rate of .05% of daily net assets in the Fund
Account through ______, 2001 [i.e., first anniversary of
closing date] and an annual rate of .10% of daily net
assets in the Fund Account thereafter; provided, however,
that if on any day after ______, 2001 [i.e., first
anniversary of closing date] the gross annualized fee
received by the Manager under the Management
Agreement between the Trust and the Manager is less than
$403,200, then such annual fee rate shall be reduced to
.05% of daily net assets in the Fund for that day.
[Managers Intermediate Government Fund:]
For services provided to the Fund Account, the
Manager will pay within five business days after the end
of each calendar month the Sub-Adviser a base monthly
fee for each calendar month calculated on a daily basis at
an annual rate of .05% of daily net assets in the Fund
Account through ______, 2001 [i.e., first anniversary of
closing date] and an annual rate of .10% of daily net
assets in the Fund Account thereafter; provided, however,
that if on any day after ______, 2001 [i.e., first
anniversary of closing date] the gross annualized fee
received by the Manager under the Management
Agreement between the Trust and the Manager is less than
$325,800, then such annual fee rate shall be reduced to
.05% of daily net assets in the Fund for that day.
The fee shall be pro-rated for any calendar month
during which the contract is in effect for only a portion of
the month.
The Sub-Adviser agrees that, during any period in
which the Manager has waived all or a portion of the
management fee payable by the Trust to the Manager
under the Management Agreement with respect to the
Fund, if requested by the Manager, the Sub-Adviser will
waive a pro rata share (or such lesser share as the
Manager 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
Manager bears to all fees payable to the Manager under
the Management Agreement with respect to the Fund. In
addition, the Sub-Adviser agrees that, during any period
in which the Manager has agreed to pay or reimburse the
Trust for expenses of the Fund, if requested by the
Manager, the Sub-Adviser shall pay or reimburse the
Trust for a pro rata share (or such lesser share as the
Manager may request) of such expenses, such that the
amount of such excess expenses paid by the Sub-Adviser
shall bear the same ratio to the total amount of excess
expenses payable with respect to the Fund as the sub-
advisory fee hereunder bears to all fees payable to the
Manager under the Management Agreement with respect
to the Fund.
PROXY CARD
SMITH BREEDEN SERIES FUND
100 EUROPA DRIVE, SUITE 200
CHAPEL HILL, NC 27514-2310
SMITH BREEDEN SERIES FUND
FUND NAME HERE
Proxy for a Special Meeting of Shareholders, July 21, 2000
The undersigned hereby appoints Michael J. Giarla and
Marianthe S. Mewkill, and each of them separately, as proxies,with power of
substitution to each,and hereby authorizes them to represent and to vote,
as designed below, at a Special Meeting of
Shareholders of Smith Breeden Series Fund and Smith Breeden
Trust on July 21, 2000, at 10 a.m. Eastern time, and at any
adjournments thereof, all of the shares of Smith Breeden Series
Fund and/or Smith Breeden Trust which the undersigned would
be entitled to vote if personally present. THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR EACH OF THE PROPOSALS AS SET
FORTH IN THE PROXY STATEMENT
This proxy is solicited on behalf of Smith Breeden Series
Fund or Smith Breeden Trust, by the Trusts' Board of
Directors. Please sign this card in the space provided. Your
signature acknowledges receipt of the Notice of the Special
Meeting and the accompanying Proxy Statement.
To vote by Telephone
1)Read the Proxy Statement and have the Proxy card below at hand.
2)Call 1-800-690-6903
3)Enter the 12-digit control number set forth on the Proxy card and
follow the simple instructions.
To vote by Internet
1)Read the Proxy Statement and have the Proxy card below
at hand.
2)Go to Website www.proxyvote.com
3)Enter the 12-digit control number set forth on the Proxy card and
follow the simple instructions.
KEEP THIS PORTION FOR YOUR RECORDS
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
FUND NAME HERE
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting. The
Trustees recommend a vote FOR each of the proposals.
Vote on Trustees
01) Jack W Aber 02) William E. Chapman, II, For Withhold For
03) Sean M. Healey All All All Except
04) EdwardJ. Kaier 05) Madeline H. McWhinney To withhold authority to vote,
06) Steven J. Paggioli, 07) Eric Rakowski, mark "For All Except" and write
08) Thomas R. Schneeweis. the nominee's number on the
line below.
________________________
2. APPROVAL OR DISAPPROVAL OF THE PROPOSED For Against Abstain
MANAGEMENT AGREEMENT
3. APPROVAL OR DISAPPROVAL OF THE PROPOSED For Against Abstain
SUBADVISORY AGREEMENT
4. APPROVAL OR DISAPPROVAL OF AN For Against Abstain
AMENDMENT TO THE TRUST'S
DECLARATIONS OF TRUST
5. APPROVAL OR DISAPPROVAL OF A PROPOSAL
ALLOWING THE ADVISER TO CHANGE THE SUBADVISER For Against Abstain
OF THE FUND WITHOUT SHAREHOLDER APPROVAL
Please sign exactly as name appears to the left. When signing as attorney,
executor administrator trustee, or guardian, please give full title as such.
If signing for a corporation, please sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
