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:
- --------------------------
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] 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>
TABLE OF CONTENTS
=================
<Table>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 1
INSTRUCTIONS FOR EXECUTING PROXY CARD 2
PROXY STATEMENT 3
ADDITIONAL INFORMATION 13
Appendixes
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Appendix A-Proposed Subadvisory A-1
Appendix B-Principal Owners and Management Ownership B-1
</Table>
<Page>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 4,
2004 AT 10:00 A.M.
- ----------------------------------------------------------------
To Shareholders of Managers Special Equity Fund:
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., Eastern Time.
The meeting will be held for the following purpose:
1. To approve the use of an affiliated subadvisor as a
new subadvisor 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.
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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
MANAGERS
--------
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
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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
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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
subadvisory agreement permitting the Trustees to hire Essex
Investment Management Company, LLC ("Essex") as a new subadvisor
to the Fund (the Proposal). The proposed subadvisory agreement is
attached as Exhibit A to this proxy statement.
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 41,856,794 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.
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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.
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. You can also vote by phone or internet by following the
simple instructions provided on your proxy ballot. 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.
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PROPOSAL: To Consider the Approval of a
Subadvisory 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 subadvisory agreement between the
Manager and Essex, a proposed new subadvisor for Managers Special
Equity Fund. If the Proposal is approved by shareholders, the new
subadvisory 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 subadvisors (the "Subadvisors" and
each a "Subadvisor") to manage the investment portfolio of the
Fund, to review and monitor the performance of these Subadvisors
on an ongoing basis, and to recommend changes in the roster of
Subadvisors to the Trustees as appropriate. The Manager also
allocates the Fund's assets among the Subadvisors for the Fund,
if the Fund has more than one Subadvisor. The portion of the
Fund's assets managed by a Subadvisor 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 Subadvisors of the Fund. The
Fund, therefore, pays no fees directly to the Subadvisors.
The Manager recommends to the Trustees Subadvisors for the Fund
based upon the Manager's continuing quantitative and qualitative
evaluation of the Subadvisors' 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 Subadvisor, and the Manager does not
expect to recommend frequent changes of Subadvisors.
6
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At any given time, each Subadvisor serves pursuant to a separate
subadvisory agreement between the Manager and that Subadvisor
(each such agreement, a "Subadvisory Agreement"). The
Subadvisors do not provide any services to the Fund under the
Subadvisory Agreement except portfolio investment management and
related record-keeping services. However, in accordance with
procedures adopted by the Trustees, a Subadvisor, 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 subadvisory agreement involving a mutual fund. The
Manager and the Trust have received an exemptive order from the
U.S. Securities and Exchange Commission ("SEC") that permits the
Trustees to approve subadvisory agreements between the Manager
and subadvisors without obtaining shareholder approval. That
order, however, requires shareholder approval for subadvisors
that have certain affiliations with the Manager. The Manager has
proposed that Essex be appointed as a new subadvisor 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 subadvisory agreement between the
Manager and Essex if Essex is to serve as a subadvisor for the
Fund.
The Subadvisory Agreements
- --------------------------
Currently, the assets of the Fund are managed by four
Subadvisors: Westport Asset Management, Inc.("Westport"), Donald
Smith & Co., Inc.("Donald Smith"),Skyline Asset Management,
L.P.("Skyline") and Kern Capital Management LLC ("Kern")
(together the "Current Subadvisors"). Each Current Subadvisor
serves pursuant to a separate subadvisory agreement between the
Manager and that Current Subadvisor (each such agreement, a
"Current Subadvisory Agreement"). Prior to December 22, 2003, a
portion of the assets of the Fund was managed by Pilgrim Baxter
& Associates, Ltd.
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("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 actions taken by the Manager to terminate the subadvisory
agreement with Pilgrim (the "Pilgrim Agreement") and to approve
a new Subadvisory 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 Subadvisor to the Fund and approved
a subadvisory 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 Subadvisors 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 Subadvisors, three of which are value managers and
one of which is a growth manager. The Manager's recommendation
was also based on its belief that the investment philosophy and
strategy of any subadvisor 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 subadvisor. 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
Subadvisor) and diversification (across Subadvisors) for the
Fund.
8
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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
Subadvisory Agreements. Pursuant to the Essex Agreement, the
Manager would pay Essex a lower fee with respect to the average
daily net assets of the portion of the Fund managed by Essex in
excess of $100 million; i.e., the Manager will pay Essex 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
Subadvisory 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
subadvisory fees payable by the Manager to the Subadvisors 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.
Apart from the identity of the Subadvisor, the effective date,
the renewal period and the lower fee payable to Essex, the Essex
Agreement is substantially similar to the Current Subadvisory
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.
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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.
<Table>
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
</Table>
Essex acts as an investment advisor to another fund whose
investment objectives are similar to the Fund's, as shown in the
table below.
<Table>
Size of Fund
Name of Fund (12/31/03) Fee
- ------------ ------------ ---
Essex Aggressive Growth Fund $ 80.7 million 1.00%
</Table>
Essex's Investment Philosophy and Operations
- ---------------------------------------------
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. Essex maintains compliance
programs that monitor personal investing by its personnel and
compliance with, among other matters, Fund investment
restrictions
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and policies and procedures.
Portfolio Manager
- -----------------
If shareholders approve the addition of Essex as a Subadvisor 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 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 subadvisory
agreement between the Trust and the Manager on behalf of another
series of the Trust for which Essex also serves as subadvisor,
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
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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 Subadvisors; (vii) the process by which the Manager
considered and reviewed alternative subadvisory 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 and mailing an
information statement with respect to an unaffiliated subadvisor.
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 Subadvisors; (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.
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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 subadvisory agreement with an unaffiliated
subadvisor, 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.
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.
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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 by visiting 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 the 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.
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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
15
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EXHIBIT A
PROPOSED SUBADVISORY AGREEMENT
==============================
Attention: ______________________________
Re: Subadvisory 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 SUBADVISOR
- ------------------------------
The Manager, being duly authorized, hereby appoints and employs
Essex Investment Management Company, LLC ("Subadvisor") 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 Subadvisor (those assets being
referred to as the "Fund Account"). The Manager may, from time
to time, with the consent of the Subadvisor, 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 Subadvisor 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
A-1
<Page>
time to time, being herein called the "Prospectus"). The
Subadvisor 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 Subadvisor 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 Subadvisor and
provided further that the exercise of such authority shall be
subject to review by the Manager and the Trustees of the Trust.
The Subadvisor 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 Subadvisor 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.
(b) The Subadvisor 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 Subadvisor
agrees that all records under the Act shall be the property of
the Trust.
(c) The Subadvisor 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
Subadvisor 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 Subadvisor 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
A-2
<Page>
Manager to assist the Manager in its compliance review program.
(e) The Subadvisor agrees to maintain an appropriate level of
errors and omissions or professional liability insurance
coverage.
3. ALLOCATION OF BROKERAGE. The Subadvisor shall have authority
and discretion to select brokers, dealers and futures commission
merchants to execute portfolio transactions initiated by the
Subadvisor, and for the selection of the markets on or in which
the transactions will be executed.
(a) In doing so, the Subadvisor'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
Subadvisor to solicit competitive bids for each transaction, and
the Subadvisor shall have no obligation to seek the lowest
available commission cost to the Fund, so long as the Subadvisor
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
Subadvisor 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 Subadvisor 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
Subadvisor viewed in terms of either that particular transaction
or of the Subadvisor's overall responsibilities with respect to
its clients, including the Fund, as to which the Subadvisor
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 Subadvisor, shall be
executed by brokers and dealers that provide brokerage or
research services to the Fund or the
A-3
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 Subadvisor 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 Subadvisor for the Trust except
in accordance with procedures adopted by the Trustees. The
Manager agrees that it will provide the Subadvisor with a list of
brokers and dealers which are "affiliated persons" of the Trust,
the Manager or the Trust's Subadvisors.
4. INFORMATION PROVIDED TO THE MANAGER AND THE TRUST AND TO THE
SUBADVISOR
- ---------------------------------------------------------------
(a) The Subadvisor 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 Subadvisor 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 Subadvisor agrees that it will notify the Manager and the
Trust in the event that the Subadvisor or any of its affiliates:
(i) becomes subject to a statutory disqualification that prevents
the Subadvisor from serving as investment adviser pursuant to
this Agreement; or (ii) is or expects
A-4
<Page>
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 Subadvisor 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 Subadvisor
respecting or relating to the Subadvisor 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 Subadvisor represents that it is an investment adviser
registered under the Advisers Act and other applicable laws and
that the statements contained in the Subadvisor'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 Subadvisor 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 Subadvisor 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 Subadvisor 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 Subadvisor, and the Subadvisor 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 SUBADVISOR.
- -------------------------------------------------
The Manager acknowledges that the Subadvisor 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 Subadvisor or its affiliates may
A-5
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
Subadvisor acts in good faith and provided further, that it is
the Subadvisor'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 Subadvisor 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 Subadvisor shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Subadvisor
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 Subadvisor 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
Subadvisor 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 Subadvisor'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 Subadvisor 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
Subadvisor 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 Subadvisor 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.
A-6
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 Subadvisor 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 Subadvisor or (iii) by the
Subadvisor 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 Subadvisor 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 Subadvisor 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 Subadvisor 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 Subadvisor shall receive from the Escrow
Account the lesser of: (a) the sum of the amount of any costs
incurred by the Subadvisor 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.
A-7
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]
A-8
<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
DATE: ________________
SCHEDULES: A. Fee Schedule.
A-9
<Page>
SCHEDULE A
-----------
SUBADVISOR 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.
A-10
<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:
<Table>
Name and Address No. Shares Percentage
- ---------------- ---------- ----------
Charles Schwab &Co., Inc. 10,148,331 24%
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 3,777,114 9%
200 Liberty Street
New York NY 10008-3751
Fidelity Investments Inst. Ops. 3,504,244 8%
100 Magellan Way
Covington, KY 41015-1999
Vanguard Fiduciary Trust Co. 2,778,830 6%
P.O. Box 2600
Valley Forge, PA 19482-2600
</Table>
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.
B-1
<Page>
[BALLOT CARD]
[THE MANAGERS FUNDS LOGO]
40 Richards Avenue
Norwalk, CT 06854-2325
Managers Special Equity Fund
----------------------------
Control Number: 999 999 999 999 99
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.
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>
PLEASE FILL IN ONE OF THE BOXES AS SHOWN USING BLACK OR BLUE INK OR
NUMBER 2 PENCIL. [X]
The Board of Trustees recommends a vote FOR the Proposal.
FOR AGAINST ABSTAIN
---- ------- -------
1. Approve a Sub-Advisory
Agreement between The Managers [ ] [ ] [ ]
Funds LLC and Essex Investment
Management Company, LLC.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
<Page>