SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
- --------------------------
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12
The Managers Funds
------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 fee 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)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<Page>
-----------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
-----------------------------------------
TO BE HELD ON MARCH 4, 2004
AT 10:00 A.M.
To Shareholders of The Managers Funds:
- --------------------------------------
On March 4, 2004, The Managers Funds (the "Trust") will hold a
special meeting of the shareholders of Managers Special Equity Fund (the
"Fund") at the offices of The Managers Funds LLC (the "Manager"), 40
Richards Avenue, Norwalk, Connecticut 06854. The special meeting will
begin at 10:00 a.m.
The meeting will be held for the following purposes:
1. To approve the use of an affiliated sub-advisor as a new
sub-advisor to Managers Special Equity Fund.
Only those shareholders that owned shares in the Fund at the close
of business on January 14, 2004 can vote at this meeting or any
adjournments that may take place.
By Order of the Board of Trustees,
/s/ Donald S. Rumery
- --------------------
Donald S. Rumery
Secretary
Norwalk, Connecticut
January 30, 2004
- ------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON
OR BY PROXY. IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) IN THE
POSTAGE PAID ENVELOPE OR BY FAX. YOU CAN ALSO VOTE BY TELEPHONE OR ON
THE INTERNET.
- ------------------------------------------------------------------------
<Page>
INSTRUCTIONS FOR EXECUTING PROXY CARD
-------------------------------------
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears on the
proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the name
of the proxy card. For example:
<Table>
Registration Valid Signature
- --------------------------- -----------------------------
Corporate Accounts
==================
(1) ABC Corp. (1) ABC Corp.
John Doe, Treasurer
(2) ABC Corp. (2) John Doe, Treasurer
c/o John Doe, Treasurer
(3) ABC Corp. Profit Sharing Plan (3) John Doe, Trustee
Trust Accounts
==============
(1) ABC Trust (1) Jane Doe, Trustee
(2) Jane Doe, Trustee (2) Jane Doe
u/t/d 12/28/78
Custodial Accounts
==================
(1) John Smith, Custodian (1) John Smith
f/b/o John Smith, Jr. UGMA
(2) John Smith, Jr. (2) John Smith, Jr., Executor
</Table>
2
<Page>
[MANAGERS LOGO]
Managers Special Equity Fund
40 Richards Avenue
Norwalk, Connecticut 06854
800-835-3879
www.managersfunds.com
---------------
PROXY STATEMENT
---------------
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 4, 2004
Introduction
- ------------
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Trustees (the "Trustees") of The
Managers Funds (the "Trust") for use at a special meeting and any
adjournment (the "Meeting") of the shareholders of Managers Special
Equity Fund (the "Fund") to be held at the offices of The Managers Funds
LLC (the "Manager"), 40 Richards Avenue, Norwalk Connecticut, on March
4, 2004 at 10:00 a.m., Eastern Time.
The Trust is comprised of nine mutual funds, but only Managers
Special Equity Fund is the subject of this proxy statement. The Fund is
a separate series of the Trust. The Trust is a registered management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), and is organized as a Massachusetts business trust.
The Manager, a subsidiary of Affiliated Managers Group, Inc. ("AMG")
located at 600 Hale Street, Prides Crossing, MA 01965, serves as
investment manager of the Fund and is responsible for the Fund's overall
administration. Managers Distributors, Inc., a wholly-owned subsidiary
of the Manager, serves as the Fund's distributor.
The principal executive offices of the Trust are located at 40
Richards Avenue, Norwalk, Connecticut 06854. The enclosed proxy and
this proxy statement are being sent to shareholders on or about January
30, 2004.
At the meeting, shareholders will be asked to act on the
following:
* Shareholders of the Fund will be asked to approve the
proposed sub-advisory agreement permitting the Trustees to
hire Essex Investment Management Company, LLC ("Essex") as a
new sub-advisor to the Fund (the Proposal). The proposed
sub-advisory agreement is attached as Exhibit A to this
proxy statement.
3
<Page>
All properly executed proxy cards received prior to the Meeting
will be voted at the Meeting in accordance with the marked instructions.
Unless instructions are marked to the contrary, shares represented by
the proxies will be voted FOR the proposal. Any shareholder may revoke
his or her proxy card(s) at any time prior to the Meeting by (i) sending
written notice of revocation to the Secretary of the Trust, (ii) the
subsequent execution and return of another proxy prior to the Meeting,
(iii) submitting a subsequent telephone vote, (iv) submitting a
subsequent internet vote, or (v) being present and voting in person at
the Meeting and giving oral notice of revocation to the Chairman of the
Meeting. The persons designated as proxies, in their discretion, may
vote upon such other matters as may properly come before the Meeting.
The Board of Trustees of the Trust is not aware of any other matters to
come before the Meeting.
Holders of record of the shares of the Fund at the close of
business on January 14, 2004 (the "Record Date"), as to any matter on
which they are entitled to vote, will be entitled to one vote per share
and a fractional vote on each fractional share on all business presented
at the Meeting.
The Fund had [__________] shares of beneficial interest
outstanding as of the Record Date.
Under the By-Laws of the Trust, shares held by two or more persons
(whether as joint tenants, co-fiduciaries or otherwise) will be voted as
follows: (1) if only one person votes, his or her vote will bind all
others; (2) if more than one person votes and such persons disagree as
to any vote to be cast, the proxy will not be voted as to that item of
business.
In the event that the necessary quorum to transact business or the
vote required to approve the proposal is not obtained at the Meeting,
the individuals named as proxies may propose one or more adjournments of
the Meeting in accordance with the applicable law to permit further
solicitation of proxies. A shareholder vote may be taken on the
proposal in this proxy statement prior to such adjournment if sufficient
votes have been received. Any such adjournment will require the
affirmative vote of a majority of the shares present in person at the
Meeting or represented by proxy.
The proposal requires the affirmative vote of the lesser of
(i) 67% of the voting securities of the Fund present in person at the
Meeting or represented by proxy, if holders of more than 50% of the
shares of the Fund outstanding on the record date are present, in person
or by proxy, or (ii) more than 50% of the outstanding shares of the Fund
on the record date.
4
<Page>
Abstentions and broker non-votes (i.e., proxies sent in by brokers
and other nominees which cannot be voted on the proposal because the
beneficial owners have not given instructions) will be considered to be
shares present at the Meeting, but not voting in favor of the proposal
and will therefore have the effect of a "no" vote.
Shareholders can vote by marking the enclosed proxy card(s) and
returning the card(s) in the postage-paid envelope. Shareholders can
also vote by faxing their proxy card(s) to the Trust at (203) 831-4120
or by calling (800) 690-6903 and recording their vote by telephone or on
the internet at http://www.proxyweb.com. Any shareholder who has given
a proxy has the right to revoke the proxy any time prior to its
exercise:
* By written notice of the proxy's revocation to the Secretary
of the Trust at the above address prior to the Meeting;
* By the subsequent execution and return of another proxy
prior to the Meeting;
* By submitting a subsequent telephone vote;
* By submitting a subsequent internet vote; or
* By being present and voting in person at the Meeting and
giving oral notice of revocation to the Chairman of the
Meeting.
PROPOSAL: To Consider the Approval of a
Sub-Advisory Agreement Between the Manager
and Essex Investment Management Company, LLC ("Essex")
At the Meeting, the shareholders of Managers Special Equity Fund will
consider the approval of a sub-advisory agreement between the Manager
and Essex, a proposed new sub-advisor for Managers Special Equity Fund.
If the Proposal is approved by shareholders, the new sub-advisory
agreement will become effective as soon as practicable thereafter.
The Trust and its Fund Management Agreement
- -------------------------------------------
Managers Special Equity Fund (the "Fund") is an investment portfolio of
the Trust. The Trust has entered into a fund management agreement with
respect to each investment portfolio of the Trust with the Manager dated
April 1, 1999 (the Management Agreement"). Under the terms of the
Management Agreement the Manager selects, subject to review and approval
by the Trustees, one or more sub-advisors (the "Sub-Advisors" and each a
"Sub-Advisor") to manage the investment portfolio of the Fund, to review
and monitor the performance of these Sub-Advisors on an ongoing basis,
and to recommend changes in the roster of Sub-Advisors to the Trustees
as appropriate. The Manager also allocates the Fund's assets among the
Sub-Advisors for the Fund, if the Fund has more than one Sub-Advisor.
The portion of the Fund's assets managed by a Sub-Advisor may be
adjusted from time to time in the sole discretion of the Manager. The
Manager also has general oversight of the Fund's investment program and
administers its overall business operations, among other duties. As
compensation for its services, the Manager receives a management fee
from the Fund, and the Manager is responsible for payment of all fees
payable to the Sub-Advisors of the Fund. The Fund, therefore, pays no
fees directly to the Sub-Advisors.
5
<Page>
The Manager recommends to the Trustees Sub-Advisors for the Fund based
upon the Manager's continuing quantitative and qualitative evaluation of
the Sub-Advisors' skills in managing assets pursuant to specific
investment styles and strategies. Short-term investment performance, by
itself, is not a significant factor in selecting or terminating a Sub-
Advisor, and the Manager does not expect to recommend frequent changes
of Sub-Advisors.
At any given time, each Sub-Advisor serves pursuant to a separate sub-
advisory agreement between the Manager and that Sub-Advisor (each such
agreement, a "Sub-Advisory Agreement"). The Sub-Advisors do not provide
any services to the Fund under the Sub-Advisory Agreement except
portfolio investment management and related record-keeping services.
However, in accordance with procedures adopted by the Trustees, a Sub-
Advisor, or its affiliated broker-dealer, may execute portfolio
transactions for the Fund and receive brokerage commissions or
underwriting fees in connection therewith as permitted by Section 17(e)
and Rule 10f-3 of the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules thereunder.
Under the 1940 Act, a shareholder vote is generally required to approve
a new sub-advisory agreement involving a mutual fund. The Manager and
the Trust have received an exemptive order from the Securities and
Exchange Commission ("SEC") that permits the Trustees to approve sub-
advisory agreements between the Manager and sub-advisors without
obtaining shareholder approval. That order, however, requires
shareholder approval for sub-advisors that have certain affiliations
with the Manager. The Manager has proposed that Essex be appointed as a
new sub-advisor to the Fund. Affiliated Managers Group, Inc. ("AMG")
owns substantially all interests in the Manager, and Essex is a
majority-owned subsidiary of AMG. Accordingly, Essex is an affiliate of
the Manager for purposes of the order. For this reason, shareholders of
the Fund must approve the sub-advisory agreement between the Manager and
Essex if Essex is to serve as a sub-advisor for the Fund.
The Sub-Advisory Agreements
- ---------------------------
Currently, the assets of the Fund are managed by four Sub-Advisors:
Westport Asset Management, Inc. ("Westport"), Donald Smith & Co., Inc.
("Donald Smith"), Skyline Asset Management, L.P. ("Skyline") and Kern
Capital Management LLC (together the "Current Sub-Advisors"). Each
Current Sub-Advisor serves pursuant to a separate sub-advisory agreement
between the Manager and that Current Sub-Advisor (each such agreement, a
"Current Sub-Advisory Agreement"). Prior to December 22, 2003, a
portion of the assets of the Fund was managed by Pilgrim Baxter &
Associates, Ltd. ("Pilgrim"). At a meeting of the Board of Trustees
held on December 19, 2003, the Trustees, including a majority of the
Trustees who are not "interested persons" of the Trust within the
meaning of the 1940 Act (the "Independent Trustees"), discussed the
6
<Page>
actions taken by the Manager to terminate the sub-advisory agreement
with Pilgrim (the "Pilgrim Agreement") and to approve a new Sub-Advisory
Agreement with Essex. At that meeting, the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust
within the meaning of the 1940 Act (the "Independent Trustees"),
approved the recommendation of the Manager to add Essex as a Sub-Advisor
to the Fund and approved a sub-advisory agreement for the Fund with
Essex that would become effective upon approval by shareholders (the
"Essex Agreement").
The decision to terminate the Pilgrim Agreement was made in response to
concerns arising from recent disclosures and regulatory actions
involving Pilgrim and senior management at Pilgrim, which in turn raised
concerns with respect to the adequacy of Pilgrim's compliance programs
and its ability to maintain quality investment personnel going forward.
The Manager's recommendation to hire Essex was made after extensive
research of numerous candidate firms and qualitative and quantitative
analysis of each candidate's organizational structure, investment
process and style, and long-term performance record. The recommendation
to hire Essex as one of the Fund's Sub-Advisors was based on the
Manager's belief that Essex is a high quality investment advisor with a
demonstrated ability to identify small company growth stocks, to analyze
company earnings and to manage overall risk of a portfolio and would be
appropriately suited to co-manage the Fund with the Fund's other Sub-
Advisors. The Manager's recommendation was also based on its belief
that the investment philosophy and strategy of any sub-advisor should be
consistent with the risk profile of the Fund. In this regard, the
Manager determined that it was in the interest of the Fund's
shareholders to add Essex as another small company growth-oriented sub-
advisor. The Manager believes that Essex's small company growth-
oriented investment style is appropriately suited for the Fund and
consistent with the Manager's desire to maintain focus (within a single
Sub-Advisor) and diversification (across Sub-Advisors) for the Fund.
Under the Management Agreement, the Fund pays the Manager a fee equal to
0.90% of the Fund's average daily net assets. From this fee, the Manager
pays Westport, Donald Smith, Skyline and Kern a fee of 0.50% of the
average daily net assets under the Current Sub-Advisor Agreements.
Pursuant to the Essex Agreement, the Manager would pay Essex a lower
fee; i.e., a fee of 0.50% on the first $100 million of the average daily
net assets of the portion of the Fund managed by Essex and 0.40% of the
average daily net assets of the portion of the Fund managed by Essex in
excess of $100 million. The Manager has agreed to waive a portion of
its fee or reimburse expenses of the Fund commensurate with the savings
in the fee payable to Essex, which is 0.10% of the average daily net
assets of the portion of the Fund managed by Essex in excess of $100
million.
For the fiscal year ended December 31, 2003, the Fund paid the Manager
$22,084,470, and the Manager paid $2,458,895 to Pilgrim, $2,620,361 to
Westport, $2,124,390 to Donald Smith, $2,383,211 to Skyline and
$2,411,667 to Kern under their respective Current Sub-Advisory
Agreements. If the Essex Agreement had been in effect for fiscal 2003,
the total management fee payable by the Fund to the Manager would have
been the same. The total amount of the sub-advisory fees payable by the
Manager to the Sub-Advisors would have been lower for the portion of the
Fund's assets managed by Essex. Taking into account the Manager's
undertaking to waive a portion of its fee or reimburse expenses of the
Fund commensurate with the savings in the fee payable to Essex, the
total management fee would have been $21,675,522.
7
<Page>
Apart from the identity of the Sub-Advisor, the effective date, the
renewal period and the lower fee payable to Essex, the Essex Agreement
is substantially similar to the Current Sub-Advisor Agreements. A copy
of the Essex Agreement is attached as Exhibit A.
Information About Essex
- -----------------------
The following is a description of Essex, which is based on information
provided by Essex.
Essex is a registered investment adviser located at 125 High Street,
Boston, Massachusetts. Essex was formed in 1998 and is organized as a
limited liability company. As of December 31, 2003, Essex had
approximately $5.9 billion in assets under management. Essex is a
subsidiary of AMG, a publicly-traded Delaware corporation which acquires
majority interests in investment management firms, including the
Manager. AMG is located at 600 Hale Street, Prides Crossing,
Massachusetts 01965.
The name and principal occupation of the principal executive officers of
Essex are set forth below. The address of each is that of Essex.
Name Position
- ---------------------- ----------------------------------------
Joseph C. McNay Managing Principal and Chairman
Stephen D. Cutler Managing Principal and President
Christopher P. McConnell Managing Principal/CFO/Compliance Officer
Malcolm MacColl Managing Principal
Essex acts as an investment advisor to several funds whose investment
objectives are similar to the Fund's, as shown in the table below.
Size of Fund
Name of Fund (12/31/03) Fee
- ---------------------------- ------------ -------
Essex Aggressive Growth Fund $80.7 million 1.00%
Essex's Investment Philosophy
- -----------------------------
Essex's basic investment philosophy is that a company's revenue growth,
future profitability, and cash flow drive share price performance. In
particular, Essex looks for dynamic growth opportunities, characterized
by new or emerging technologies or services, superior and accelerating
growth, and improving margins and returns. The focus, therefore, is on
fundamental research and the study of macroeconomic/industry trends in
order to identify potential growth opportunities.
Portfolio Manager
- -----------------
If shareholders approve the addition of Essex as a Sub-Advisor to the
Fund, it is expected that Craig Lewis will be the portfolio manager for
the portion of the Fund's assets managed by Essex. Mr. Lewis is a
8
<Page>
Principal of, and a portfolio manager for, Essex, positions he has held
with Essex since 2002. Mr. Lewis was a Senior Vice President of, and a
portfolio manager for, Putnam Investments, from 1998 to 2002.
Board of Trustees Recommendation
- --------------------------------
On December 19, 2003, the Board of Trustees, including all of the
Trustees that are not "interested persons" of the Trust (the
"Independent Trustees"), approved the Essex Agreement. The Independent
Trustees were separately represented by independent counsel in
connection with their consideration of the approval of the Essex
Agreement.
The Trustees reviewed materials relating to Essex's operations,
personnel, investment philosophy, strategies and techniques, including
biographical information on portfolio management and other professional
staff, fee and performance information for other mutual funds managed by
Essex, including another series of the Trust, and descriptions of
investment philosophies, strategies and techniques, organizational and
management structures and brokerage policies and practices. The
Trustees also took into account their deliberations and conclusions with
respect to the most recent continuation of a sub-advisory agreement
between the Trust and the Manager on behalf of another series of the
Trust for which Essex also serves as sub-advisor, which occurred in June
2003. At the meeting on December 19, 2003, the Trustees received a
report from the Manager regarding its due diligence with respect to
Essex covering matters such as compliance, financial condition,
personnel, performance and investment approach (including consistency of
investment approach). At the same meeting, the Trustees also received a
presentation from Essex addressing similar matters. In the course of
their deliberations regarding the Essex Agreement, the Trustees
evaluated, among other things: (i) the services to be rendered by Essex;
(ii) the qualification and experience of personnel at Essex that would
have primary responsibility for managing the assets of the Fund
allocated to Essex; (iii) Essex's compliance programs, including those
related to personal investing; (iv) (a) the particular investment
strategy that Essex would employ in managing Fund assets (its
"Investment Strategy"), and (b) Essex's performance in managing accounts
of its other advisory clients that have hired Essex to employ the
Investment Strategy; (v) the likelihood that Essex would execute its
Investment Strategy consistently over time; (vi) how Essex's Investment
Strategy would complement the Investment Strategies of the Fund's other
Sub-Advisors; (vii) the process by which the Manager considered and
reviewed alternative sub-advisory candidates and ultimately concluded
that Essex was the most appropriate candidate for the Fund; (viii) the
lower fee payable to Essex under the Essex Agreement; and (ix) the
substantial similarity (in all other respects) of the Essex Agreement to
the Pilgrim Agreement. In addition, the Trustees considered that the
Manager has agreed to waive a portion of its fee for the duration of the
Essex Agreement in an amount equal to the difference between the amount
actually payable under the Essex Agreement and the amount that would be
payable if the fee rate for the Essex Agreement were the same as the fee
rate for the Pilgrim Agreement, which in turn is likely to result in a
savings for shareholders of the Fund. The Trustees also considered that
the Manager will bear the cost of obtaining shareholder approval of the
Essex Agreement to the extent such costs exceed the cost of preparing
9
<Page>
and mailing an information statement with respect to an unaffiliated
sub-advisor. The Trustees considered all of the foregoing information
and factors, no one of which was determinative on its own, in reaching
the conclusions below.
The Trustees reached the following conclusions regarding the Essex
Agreement, among others: (a) Essex is qualified to manage its allocation
of the Fund's assets in accordance with its investment objectives and
policies; (b) Essex maintains appropriate compliance programs; (c)
Essex's Investment Strategy is appropriate for pursuing the Fund's
investment objective; (d) Essex's Investment Strategy complements that
of the Fund's other Sub-Advisors; (e) Essex is likely to execute its
Investment Strategy consistently over time; and (f) the Fund's advisory
fees are reasonable in relation to those of similar funds and to the
services to be provided by Essex.
On the basis of the foregoing, the Trustees, including a majority of the
Independent Trustees, determined that approval of the Essex Agreement
would be in the interests of the Fund and its shareholders.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE PROPOSAL.
ADDITIONAL INFORMATION
======================
Solicitation of Proxies
- -----------------------
Representatives of the Manager may solicit proxies by telephone, letter
or personally and will receive no additional compensation for these
services. The Trust may also use one or more proxy solicitation firms to
assist with the mailing and tabulation effort and any special personal
solicitation of proxies. Banks, brokers, fiduciaries and nominees will,
upon request, be reimbursed by the Fund for their reasonable expenses in
sending proxy material to beneficial owners of shares of the Fund. The
cost of the solicitation of proxies will be borne by the Manager. The
cost of preparing, printing and mailing the enclosed proxy card and
proxy statement and all other costs incurred in connection with the
solicitation of proxies, including any additional solicitation made by
letter, telephone or facsimile will be paid by the Fund, except that to
the extent such costs exceed the cost of preparing and mailing an
information statement with respect to a new sub-advisory agreement with
an unaffiliated sub-advisor, the excess costs will be borne by the
Manager.
As the Meeting date approaches, shareholders who have not voted their
proxy may receive a telephone call asking them to vote. In all cases
where a telephonic proxy is solicited, shareholders will be asked to
give their full name, social security number or employer identification
number, address, title (if applicable) and the number of shares owned,
and to confirm that they have received the proxy materials in the mail.
10
<Page>
If a shareholder wishes to participate in the Meeting, and does not wish
to authorize the execution of a proxy by telephone, mail or internet,
the shareholder may vote at the Meeting in person.
If you require additional information regarding the proxy or replacement
proxy cards, please call The Managers Funds toll free at (800) 835-3879.
Any proxy given by a shareholder, whether in writing or by telephone, is
revocable until voted at the Meeting.
Financial Information
- ---------------------
The Fund's most recent Annual Reports and Semi-Annual Reports are
available upon request, without charge, by writing to The Managers
Funds, 40 Richards Avenue, Norwalk, Connecticut 06854, or by calling
(800) 835-3879, or on our website at www.managersfunds.com.
Principal Holders and Management Ownership
- ------------------------------------------
Exhibit B contains information about the record or beneficial ownership
by management and shareholders of five percent (5%) or more of each
Fund's outstanding shares, as of the record date.
Shareholder Proposals
- ---------------------
The Trust does not hold regularly scheduled meetings of the shareholders
of the Fund. Any shareholder desiring to present a proposal for
inclusion at the meeting of shareholders next following this meeting
should submit such proposal to the Trust at a reasonable time before the
solicitation is made.
Other Matters to Come Before the Meeting
- ----------------------------------------
The Board of Trustees knows of no business other than that specifically
mentioned in the Notice of Special Meeting of Shareholders that will be
presented or considered at the Meeting. If any other matters are
properly presented, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment.
THE TRUSTEES RECOMMEND APPROVAL OF THE PROPOSAL. ANY UNMARKED PROXIES
WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL
OF THE PROPOSAL.
January 30, 2004
By Order of the Trustees,
/s/ Donald S. Rumery
- --------------------
Donald S. Rumery
Secretary
11
<Page>
EXHIBIT A
=========
FORM OF SUB-ADVISORY AGREEMENT
------------------------------
Attention: __________________
Re: Sub-Advisory Agreement
Managers Special Equity Fund (the "Fund") is a series of a Massachusetts
business trust (the "Trust") that is registered as an investment company
under the Investment Company Act of 1940, as amended, (the "Act"), and
subject to the rules and regulations promulgated thereunder.
The Managers Funds 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-ADVISOR. The Manager, being duly authorized,
hereby appoints and employs Essex Investment Management Company, LLC
("Sub-Advisor") as a discretionary asset manager, on the terms and
conditions set forth herein, of those assets of the Fund which the
Manager determines to allocate to the Sub-Advisor (those assets being
referred to as the "Fund Account"). The Manager may, from time to time,
with the consent of the Sub-Advisor, make additions to the Fund Account
and may, from time to time, make withdrawals of any or all of the assets
in the Fund Account.
2. PORTFOLIO MANAGEMENT DUTIES.
(a) Subject to the supervision of the Manager and of the
Trustees of the Trust, the Sub-Advisor 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"). The Sub-
Advisor shall exercise voting authority with respect to proxies
that the Fund is entitled to vote by virtue of the ownership of
assets attributable to that portion of the Fund for which the Sub-
Advisor has investment management responsibility, provided that
such authority may be revoked in whole or in part by the Manager
at any time upon notice to the Sub-Advisor and provided further
that the exercise of such authority shall be subject to review by
the Manager and the Trustees of the Trust. The Sub-Advisor shall
exercise its proxy voting authority hereunder in accordance with
such proxy voting policies and procedures as the Manager or the
Trust may designate from time to time. The Sub-Advisor shall
provide such information relating to its exercise of proxy voting
authority hereunder (including the manner in which it has voted
proxies and its resolution of conflicts of interest) as reasonably
requested by the Manager from time to time.
<Page>
(b) The Sub-Advisor 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-Advisor agrees that all records under the Act shall be the
property of the Trust.
(c) The Sub-Advisor 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-
Advisor shall be responsive to requests from the Manager or the
Trust's Custodian for assistance in obtaining price sources for
securities held in the Fund Account, as well as for periodically
reviewing the prices of the securities assigned by the Manager or
the Trust's Custodian for reasonableness and advising the Manager
should any such prices appear to be incorrect.
(d) The Sub-Advisor agrees to maintain adequate compliance
procedures to ensure its compliance with the 1940 Act, the
Advisers Act and other applicable federal and state regulations,
and review information provided by the Manager to assist the
Manager in its compliance review program.
(e) The Sub-Advisor agrees to maintain an appropriate level of
errors and omissions or professional liability insurance coverage.
3. ALLOCATION OF BROKERAGE. The Sub-Advisor shall have authority and
discretion to select brokers, dealers and futures commission merchants
to execute portfolio transactions initiated by the Sub-Advisor, and for
the selection of the markets on or in which the transactions will be
executed.
(a) In doing so, the Sub-Advisor'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-Advisor to solicit competitive bids for each transaction, and
the Sub-Advisor shall have no obligation to seek the lowest
available commission cost to the Fund, so long as the Sub-Advisor
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-
Advisor 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-Advisor 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-Advisor
viewed in terms of either that particular transaction or of the
Sub-Advisor's overall responsibilities with respect to its
clients, including the Fund, as to which the Sub-Advisor 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
<Page>
be agreed upon by the Manager and the Sub-Advisor, 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-Advisor 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-Advisor for the Trust
except in accordance with procedures adopted by the Trustees. The
Manager agrees that it will provide the Sub-Advisor with a list of
brokers and dealers which are "affiliated persons" of the Trust,
the Manager or the Trust's Sub-Advisors.
4. INFORMATION PROVIDED TO THE MANAGER AND THE TRUST AND TO THE SUB-ADVISOR
(a) The Sub-Advisor 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-Advisor 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-Advisor agrees that it will notify the Manager and
the Trust in the event that the Sub-Advisor or any of its
affiliates: (i) becomes subject to a statutory disqualification
that prevents the Sub-Advisor 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-Advisor 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-Advisor respecting or relating to the
Sub-Advisor 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-Advisor represents that it is an investment adviser
registered under the Advisers Act and other applicable laws and
that the statements contained in the Sub-Advisor's registration
<Page>
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-Advisor 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-Advisor 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-Advisor 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-Advisor, and
the Sub-Advisor 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-ADVISOR. The Manager
acknowledges that the Sub-Advisor 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-
Advisor 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-Advisor acts in good faith and provided further, that it is
the Sub-Advisor'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-Advisor 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-Advisor shall exercise its best judgment
in rendering the services provided by it under this Agreement. The Sub-
Advisor 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-Advisor 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-Advisor 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-Advisor'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-Advisor 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-Advisor or such other steps as
the Board of Trustees may deem appropriate.
<Page>
9. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between the Sub-Advisor 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
December 22, 2003 and shall continue in effect until July 1, 2005.
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-Advisor 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-Advisor or (iii) by the Sub-Advisor at any
time without penalty, upon thirty (30) days' written notice to the
Manager and the Trust.
12. INTERIM CONTRACT PROVISIONS. Notwithstanding any other provision
of this Agreement:
(a) Prior to this Agreement being approved by a vote of a majority of
the Fund's outstanding voting securities in accordance with the 1940
Act: (i) in no event shall compensation paid to the Sub-Advisor with
respect to the Fund hereunder exceed the amount permitted by Rule 15a-4
under the 1940 Act; and (ii) all fees payable to the Sub-Advisor with
respect to the Fund hereunder shall be held in an interest-bearing
escrow account with the Fund's custodian or a bank (the "Escrow
Account"). Funds held in the Escrow Account, including interest earned,
shall be paid to the Sub-Advisor promptly after approval of this
Agreement by the vote of a majority of the Fund's outstanding voting
securities in accordance with the 1940 Act, provided that such approval
is obtained no later than 150 days after the date of this Agreement.
(b) If this Agreement is not approved by a vote of a majority of the
Fund's outstanding voting securities within the time period stated above
in (a), (i) this Agreement shall immediately terminate; and (ii) the
Sub-Advisor shall receive from the Escrow Account the lesser of: (a) the
sum of the amount of any costs incurred by the Sub-Advisor in performing
its duties with respect to the Fund under this Agreement prior to such
termination plus any interest earned on that amount, and (b) the sum of
the amount deposited in the Escrow Account plus any interest earned on
that amount.
13. 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.
14. 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.
[Remainder of page left blank intentionally]
<Page>
THE MANAGERS FUNDS LLC
BY: ___________________
Peter M. Lebovitz
President and CEO
DATE: ________________
Accepted:
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
BY: ___________________________________
Name:
Title:
DATE: ______________________
Acknowledged:
THE MANAGERS FUNDS
BY: ___________________
Peter M. Lebovitz
President and CEO
DATE: ________________
SCHEDULES: A. Fee Schedule.
<Page>
SCHEDULE A
SUB-ADVISOR FEE
===============
For services provided to the Fund Account, The Managers Funds LLC will
pay a base quarterly fee for each calendar quarter at an annual rate of
0.50 % of the first $100 million in average net assets in the Fund
account during the quarter and 0.40% on amounts greater than $100
million in average net assets. Average assets shall be determined using
the average daily net assets in the Fund account during the quarter.
The fee shall be pro-rated for any calendar quarter during which the
contract is in effect for only a portion of the quarter.
<Page>
Exhibit B
Principal Holders and Management Ownership
------------------------------------------
Principal Holders of Securities
- -------------------------------
As of January 14, 2004, the following persons or entities owned of record
more than 5% of the outstanding shares of the Fund:
Name and Address No. Shares Percentage
- ---------------- ---------- ----------
Except as noted above, the Trust did not know of any person who, as of
January 14, 2004, beneficially owned more than 5% or more of the outstanding
shares of the Fund.
Management Ownership
- --------------------
As of January 14, 2004, all management personnel (i.e., Trustees and
Officers) as a group owned beneficially less than 1% of the outstanding
shares of the Fund.
Since the beginning of fiscal year 2003, no Trustee has purchased or
sold securities of the Manager, Essex or any of their respective parents
and subsidiaries exceeding 1% of the outstanding securities of any class
of the Manager, Essex or any of their respective parents or
subsidiaries.
<Page>
BALLOT CARD
[THE MANAGERS FUNDS LOGO]
40 Richards Avenue
Norwalk, CT 06854-2325
Managers Special Equity Fund
----------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Galan G. Daukas and Donald S. Rumery,
as proxies, with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote, as designated
on the other side, all the shares of Managers Special Equity Fund, a series
of the Managers Funds, standing in the name of the undersigned with all
powers which the undersigned would possess if present at the Special Meeting
of Shareholders to be held March 4, 2004 at 10:00 a.m. or any adjournment
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREBY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXIES
WILL VOTE SHARES REPRESENTED BY THIS PROXY FOR THE PROPOSAL LISTED ON THE
REVERSE SIDE AND WILL VOTE IN THEIR DISCRETION ON SUCH OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THIS MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF
THE ACCOMPANYING NOTICE OF SPECIAL MEETING AND PROXY STATEMENT.
You can also vote your proxy by faxing it to us at (203) 831-4120, by calling
(800) 690-6903 and recording your vote by telephone, or on the internet at
www.proxyvote.com.
TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK.
KEEP THIS PORTION FOR YOUR RECORDS
<Page>
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
The Board of Trustees recommends a vote FOR the Proposal
Managers Special Equity Fund
- ----------------------------
1. Approving a Sub-Advisory FOR AGAINST ABSTAIN
Agreement between the Managers [ ] [ ] [ ]
Funds LLC and Essex Investment
Management Company, LLC.
Signature: ____________________ Date: __________
Signature: ____________________ Date: __________
Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in corporation name by President or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
<Page>