As filed with the Securities and Exchange Commission on July 31, 2003
Securities Act File No. 333-105902
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective [ ] Post-Effective
Amendment No. 1 Amendment No. ________
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Managers Trust I
(Exact Name of Registrant as Specified in Charter)
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1-800-835-3879
(Registrant's Telephone Number, Including Area Code)
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40 Richards Avenue, Norwalk, Connecticut 06854
(Address of Principal Executive Offices, Including
Number, Street, State and Zip Code)
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Donald S. Rumery
The Managers Funds LLC
40 Richards Avenue, Norwalk, Connecticut 06854
(Name and Address of Agent for Service)
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Copies of all communications should be sent to:
Philip H. Newman, P.C.
Goodwin Procter LLP
Exchange Place, Boston, Massachusetts 02109
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Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement
becomes effective.
Title of Securities Being Registered:
Shares of Beneficial Interest of First Quadrant Tax-Managed
Equity Fund
a series of Managers Trust I
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No filing fee is required because an indefinite number of
shares of beneficial interest, without par value, of the Registrant
previously have been registered pursuant to Section 24(f) of the
Investment Company Act of 1940, as amended.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
<Page>
THE MANAGERS TRUST I
--------------------
CONTENTS OF REGISTRATION STATEMENT ON FORM N-14
-----------------------------------------------
This Registration Statement consists of the following papers and
documents:
Cover Sheet
Table of Contents
First Quadrant Tax-Managed Equity Fund
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<Page>
MANAGERS TRUST I
40 Richards Avenue,
Norwalk, Connecticut 06854
1-800-835-3879
PROSPECTUS
----------
This Prospectus is being furnished to shareholders of First
Quadrant Tax-Managed Equity Fund ("FQ Fund"), a series of
Managers AMG Funds ("AMG Trust"), in connection with an Agreement
and Plan of Reorganization (the "Plan") by and between The
Managers Trust I on behalf of its sole series also named First
Quadrant Tax-Managed Equity Fund (the "Fund"), and AMG Trust on
behalf of FQ Fund. Under the Plan, FQ Fund shareholders receive
in exchange for their FQ Fund shares, shares of the Fund equal in
total value to their holdings in FQ Fund as of the closing date
of the reorganization to be accomplished by the Plan (the
"Reorganization"). The Fund, which has substantially the same
investment objective and policies as FQ Fund and for which
FQ Fund's sub-advisor First Quadrant, L.P. also serves as
sub-advisor, is designed to be a continuation of FQ Fund. After
the Reorganization is complete, FQ Fund will be dissolved. The
Reorganization is expected to be effective on or about July 31,
2003.
In approving the Plan, the Board of Trustees of AMG Trust
considered, among other things, that the shareholders of FQ Fund
may benefit by becoming shareholders of the Fund because the
larger combined Fund resulting from the Reorganization is
expected to have lower operating expenses than FQ Fund would have
if it continued to operate as a stand-alone fund. The Board of
Trustees of AMG Trust also noted that, as a result of changes to
be made in connection with the Reorganization, at the time of the
Reorganization, the Fund would have substantially the same
investment objective and policies as FQ Fund. The Board of
Trustees of AMG Trust was also advised by legal counsel that the
Reorganization would be treated as a tax-free reorganization for
federal income tax purposes. Shareholders of FQ Fund are not
being asked to vote on the Plan or approve the Reorganization.
The Fund is a series of The Managers Trust I (the "Trust"),
a Massachusetts business trust registered as an open-end,
diversified management investment company that was organized on
December 18, 1991. FQ Fund is a series of AMG Trust, organized
as a Massachusetts business trust on June 18, 1999 and registered
as an open-end, diversified management investment company, which
consists of eight separate series. The principal executive
offices of the Trust and AMG Trust are located at 40 Richards
Avenue, Norwalk, Connecticut 06854. The telephone number of the
Trust and AMG Trust is 1-800-835-3879. The Managers Funds LLC
(the "Manager") serves as the investment manager to both the Fund
and FQ Fund. The investment objective of the Fund and FQ Fund is
to seek to achieve long-term after-tax returns for investors.
This Prospectus, which you should read carefully and retain
for future reference, sets forth concisely the information that
you should know about the Trust and the Fund, and the transaction
contemplated by the Plan. Additional information about the Fund,
FQ Fund and their respective investments is available in the
Fund's and FQ Fund's respective Annual and Semi-Annual Reports.
Copies of (a) the Fund's Annual Report for the fiscal year ended
March 31, 2003 and (b) FQ Fund's Annual Report for the fiscal
year ended October 31, 2002 accompany this prospectus. A
Statement of Additional Information dated July 31, 2003 relating
to the transaction described in this Prospectus has been filed
with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into (is legally part of) and
accompanies this Prospectus. You can obtain free copies of these
documents by calling the Fund at 1-800-835-3879 or by submitting
a written request to the Fund's principal executive offices. The
Trust, AMG Trust and each series thereof, are subject to the
informational requirements of the Exchange Act of 1934, as
amended, and the Investment Company Act of 1940, as amended, and
in accordance therewith, file reports, proxy material and other
information with the SEC. Such reports, proxy material and other
information can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material also can be
obtained at prescribed rates from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities
and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
The SEC maintains a web site (http://www.sec.gov) that
contains the Statement of Additional Information dated July 31,
2003 and other material incorporated by reference, together with
other information regarding the Trust, AMG Trust and each series
thereof.
<Page>
We are not asking you for a proxy and you are requested not
to send us a proxy. These securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the
Securities and Exchange Commission passed upon the accuracy or
adequacy of this Prospectus. Any representation to the contrary
is a criminal offense.
The date of this Prospectus is July 31, 2003.
<Page>
TABLE OF CONTENTS
-----------------
Prospectus
<Table>
PAGE
-----
SYNOPSIS 1
The Reorganization and Related Actions 1
Investment Objectives And Policies 1
Purchases/Redemptions/Exchanges 2
Dividends And Other Distributions 2
PRINCIPAL RISK FACTORS 2
Market Risk 2
Management Risk 2
Tax-Management Risk 2
FEES AND EXPENSES 3
THE REORGANIZATION 4
The Plan 4
Reasons for the Reorganization 5
Federal Income Tax Consequences 6
Description of Shares 6
Capitalization 7
INVESTMENT OBJECTIVES AND PRINCIPAL
INVESTMENT STRATEGIES 7
Investment Objective 7
Principal Investment Strategies 7
Additional Practices/Risks 8
PERFORMANCE SUMMARY 8
Annual Total Returns - Since Inception
on December 18, 2000 10
SHAREHOLDER INFORMATION 12
Pricing of Shares 12
Purchase of Shares 13
HOW TO PURCHASE SHARES 14
Redemption of Shares 15
INVESTOR SERVICES 16
OPERATING POLICIES 16
ACCOUNT STATEMENTS 17
DIVIDENDS AND DISTRIBUTIONS 17
TAX INFORMATION 17
SHARE OWNERSHIP 18
Control Persons 18
Five Percent Holders 18
Shares Held by Officers and Trustees 19
</Table>
(i)
The Managers Trust I
40 Richards Avenue, Norwalk, Connecticut 06854
1-800-835-3879
PROSPECTUS
Dated July 31, 2003
SYNOPSIS
The Reorganization and Related Actions
- --------------------------------------
At a meeting held on March 14, 2003, the Board of Trustees
of AMG Trust unanimously approved the Plan which provides for the
transfer on a tax-free basis of the assets of FQ Fund to the Fund
in exchange for shares of the Fund and the assumption by the Fund
of the stated liabilities, if any, of FQ Fund. The Board of
Trustees of each Trust concluded that the Reorganization is in
the best interests of its shareholders and that the interests of
each Fund's shareholders would not be diluted as a result of the
transaction.
Under the Plan, FQ Fund will transfer substantially all of
its assets to the Fund in exchange for shares of the Fund and the
Fund's assumption of all stated liabilities of FQ Fund. FQ Fund
will then distribute the shares of the Fund it has received to FQ
Fund shareholders in exchange for their shares of FQ Fund, and FQ
Fund will be dissolved. Immediately after the Reorganization,
which is expected to take place on or about July 31, 2003, each
person who held shares in FQ Fund will hold shares in the Fund
with exactly the same total value. The Plan provides that the
costs and expenses of the Reorganization, including the costs and
expenses incurred in the preparation and mailing of this
Prospectus will be borne 40% by the Manager, 48% by the Fund and
12% by FQ Fund.
The implementation of the Reorganization is subject to a
number of conditions set forth in the Plan. Among the
significant conditions (which may not be waived) are the receipt
by the Fund and FQ Fund of an opinion of counsel to the effect
that the Reorganization will be treated as a tax-free
reorganization for federal income tax purposes.
In anticipation of the Reorganization, the Fund, formerly
known as Managers U.S. Stock Market Plus Fund, has amended its
investment objective and policies to be substantially similar to
those of FQ Fund and adopted the name "First Quadrant Tax-Managed
Equity Fund." Through these actions, it is intended that the
Fund serve for all practical purposes as a continuation of
FQ Fund.
Investment Objectives And Policies
- ----------------------------------
The Fund and FQ Fund have substantially the same investment
objective and policies, so that the description below also
applies to FQ Fund.
The Fund's investment objective is to seek to achieve long-
term after-tax returns for investors. The Fund pursues this
objective by investing in a diversified portfolio of U.S. equity
securities (generally common and preferred stocks) that reflect
the characteristics of the Russell 3000 Index (the "Benchmark")
in terms of industry, earnings growth, valuation and similar
measurements. Moreover, the Fund invests at least 80% of its
assets in equity securities, (generally common and preferred
stocks) and in approximately 75 to 250 stocks using quantitative
models that analyze top-down (market and economic) conditions and
bottom-up (company specific) data to enhance long-term returns
through the stock selection process. Consistent with its
investment objective, the Fund applies a variety of tax-sensitive
investment techniques designed to minimize taxable income and
realized capital gains for shareholders.
1
<Page>
Purchases/Redemptions/Exchanges
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Each Fund's procedures to purchase and redeem shares and
exchange privilege are substantially the same. Shareholders
should refer to the "Shareholder Information" section of this
Prospectus for a more detailed discussion of these features of
the Fund.
Dividends And Other Distributions
- ---------------------------------
Each Fund ordinarily declares and pays income dividends and
net capital gain distributions, if any, annually in December.
PRINCIPAL RISK FACTORS
- ----------------------
The Fund has substantially the same risk factors as FQ
Fund, so that the description below of the Fund's Principal Risk
Factors also applies to FQ Fund. Risk is the possibility that an
investor will lose money or not make any additional money by
investing in the Fund or FQ Fund.
Market Risk
- -----------
The Fund is subject to the risks generally of investing in
stocks, commonly referred to as "market risk." Market risk
includes the risk of sudden and unpredictable drops in value of
the market as a whole and periods of lackluster performance.
Despite the unique influences on individual companies, stock
prices in general rise and fall as a result of investors'
perceptions of the market as a whole. The consequences of market
risk are that if the stock market drops in value, the value of
the Fund's portfolio of investments is also likely to decrease in
value. The increase or decrease in the value of the Fund's
investments, in percentage terms, may be more or less than the
increase or decrease in the value of the market.
Management Risk
- ---------------
The Fund is subject to management risk because it is an
actively managed investment portfolio. Management risk is the
chance that poor security selection will cause the Fund to
underperform other funds with similar objectives. The success of
the Fund's investment strategy depends significantly on the skill
of its sub-advisor, First Quadrant, L.P., in assessing the
potential of the securities in which the Fund invests. There can
be no guarantee that First Quadrant, L.P.'s application of its
investment techniques and risk analyses will produce the desired
results.
Tax-Management Risk
- -------------------
First Quadrant, L.P. applies a variety of tax-management
investment strategies designed to minimize taxable income and
capital gains for shareholders. Notwithstanding the use of these
strategies, the Fund may have taxable income and may realize
taxable capital gains. The ability of the Fund to avoid
realizing taxable gains may be affected by the timing of cash
flows into and out of the Fund attributable to the payment of
expenses and daily net sales and redemptions. In addition,
investors who purchase shares when the Fund has large accumulated
capital gains could receive a significant part of the purchase
price of their shares back as a taxable capital gain
distribution. Over time, securities with unrealized gains may
comprise a substantial portion of the Fund's assets.
2
<Page>
FEES AND EXPENSES
- -----------------
This table discloses the fees and expenses that you may pay
if you buy and hold shares of the Fund or FQ Fund and how those
fees and expenses may be affected by the Reorganization and
related actions. As shown by this table, there are no
transaction charges when you buy or sell shares of either Fund,
nor will there be any such charges in connection with or
following the Reorganization.
Shareholder Fees (fees paid directly from your investment)
<Table>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Other Distributions None
Exchange Fees None
Redemption Fees None
Maximum Account Fee None
</Table>
Set forth below is a comparison of operating expenses for
(a) the Fund as it operated prior to the changes to its
investment objective and policies related to the Reorganization
that will cause it to operate in substantially the same manner as
FQ Fund going forward and without giving effect to the
Reorganization (under the heading "The Fund
(Pre-Reorganization)"), (b) FQ Fund and (c) the Fund on a pro
forma (estimated) basis as of April 30, 2003 after giving effect
to the Reorganization (under the heading "The Fund Pro Forma
Combined (Post Reorganization As of April 30, 2003)").
Annual Fund Operating Expenses
------------------------------
(expenses that are deducted from the assets of the Fund and FQ
Fund)
<Table>
The Fund
The Fund Pro Forma Combined
(Pre-Reorganization) FQ Fund (as of 4/30/03)
-------------------- --------- ---------------------
Management Fee 0.70% 0.85% 0.85%
Distribution (12b-1) Fees(1) None 0.00% None
Other Expenses 0.97%(1) 1.38% 0.68%
------- ----- -------
Total Annual Fund Operating Expenses 1.67% 2.23% 1.53%
Fee Waiver and Reimbursement -0.39%(2) -1.23% (3) -0.54% (4)
------- ----- -------
Net Annual Fund Operating Expenses 1.28% (1) 1.00% 0.99%
======= ===== =======
</Table>
(1) Although FQ Fund is subject to a Rule 12b-1 Plan of
Distribution that permits payments of up to 0.25% of their
average daily net assets, no payments have been authorized to
date. The Fund does not have a Rule 12b-1 Plan of
Distribution.
(2) The amount shown reflects the fact that the Manager
contractually agreed through August 1, 2003, to limit the
Fund's Total Annual Fund Operating Expenses (exclusive of
taxes, interest, brokerage and extraordinary items) to 0.88% of
average daily net assets, subject to later reimbursement by the
Fund in certain circumstances. In general, for a period of up
to three years from the time of any waiver or payment pursuant
to a contractual expense limitation, the Manager may recover
from the Fund fees waived and expenses paid to the extent that
the Fund's Total Annual Fund Operating Expenses do not exceed
the contractual expense limitation amount.
3
<Page>
(3) The amount shown reflects the fact that the Manager and First
Quadrant, L.P. have contractually agreed through March 1, 2004
to limit FQ Fund's Net Annual Fund Operating Expenses
(exclusive of taxes, interest, brokerage costs and
extraordinary items) to 1.00% subject to later reimbursement by
the Fund in certain circumstances. In general, for a period of
up to three years from the time of any waiver or payment
pursuant to a contractual expense limitation, the Manager may
recover from FQ Fund fees waived and expenses paid to the
extent that FQ Fund's Total Annual Fund Operating Expenses do
not exceed the contractual expense limitation amount.
(4) The amount shown reflects the fact that the Manager has
indicated that it will contractually agree, commencing with the
Reorganization and continuing until at least August 1, 2004, to
limit the Fund's Total Annual Fund Operating Expenses
(exclusive of taxes, interest, brokerage and extraordinary
items) to 0.99% of average daily net assets, subject to later
reimbursement by the Fund in certain circumstances. In
general, for a period of up to three years from the time of any
waiver or payment pursuant to a contractual expense limitation,
the Manager may recover from the Fund fees waived and expenses
paid to the extent that the Fund's Total Annual Fund Operating
Expenses do not exceed the contractual expense limitation
amount.
Example
- -------
The following Example is intended to help you understand
the various types of costs and expenses associated with your
investment in the Fund acquired as a result of the
Reorganization. The Example makes certain assumptions. It
assumes that you invest $10,000 as an initial investment for the
time periods indicated and then redeem all of your shares at the
end of those periods. It also assumes that your investment has a
5% total return each year, all dividends and distributions are
reinvested, and Fund operating expenses remain as described
above. Although your actual costs may be higher or lower, based
on the above assumptions, you would have to pay the following
amounts of total expenses if you closed your account at the end
of each of the following time periods:
<Table>
1 Year 3 Years 5 Years 10 Years
--------- ---------- --------- ----------
The Fund (Pre-
Reorganization) $170 $528 $909 $1,978
FQ Fund $102 $569 $1,142 $2,703
The Fund Pro
Forma Combined
(as of April 30, 2003) $101 $404 $757 $1,754
</Table>
The Example should not be considered a representation of past or
future expenses or rates of return, as actual expenses or returns
may be greater or lower than those shown and may change.
THE REORGANIZATION
==================
The Plan
- --------
The terms and conditions under which the Reorganization
will be implemented are set forth in the Plan whose significant
provisions are summarized below. The Plan contemplates (i) the
Fund's acquisition of all of the assets of FQ Fund in exchange
solely for shares of the Fund, (ii) the assumption by the Fund of
all of FQ Fund's stated liabilities, if any, as of the closing
date, and (iii) FQ Fund's distribution on the closing date of
shares of the Fund it has acquired to FQ Fund shareholders. The
value of FQ Fund's assets to be acquired and the net asset value
of a share of FQ Fund will be determined immediately after the
close of regular trading on the NYSE and after the declaration of
any dividends on the closing date, using the valuation procedures
described in the Fund's Declaration of Trust ("Declaration of
Trust") and the then-current Prospectus and SAI of the Fund,
together with any other valuation procedures established by the
Trustees of the Trust on behalf of the Fund. In the event that
the NYSE or another primary trading market for portfolio
securities of the Fund or FQ Fund is subject to trading
restrictions or is closed to trading, or trading or the reporting
of trading on the NYSE or elsewhere shall be disrupted so that,
in the judgment of the respective officers of the Trust and AMG
Trust, accurate appraisal of the value of the net assets of the
Fund or FQ Fund is impracticable, the closing date will be
postponed until the first trading day after the day when trading
is fully resumed and reporting is restored. Immediately after
the transfer of its assets for shares of the Fund, FQ Fund will
4
<Page>
distribute pro rata to its shareholders of record the shares of
the Fund it receives in the Reorganization, so that each
shareholder of FQ Fund will receive a number of full and
fractional shares of the Fund equal in value to his or her
holdings in FQ Fund. FQ Fund will then completely liquidate.
The Plan provides that the costs and expenses of the
Reorganization, including the costs and expenses incurred in the
preparation and mailing of this Prospectus will be borne 40% by
the Manager, 48% by the Fund and 12% by FQ Fund. The closing
date is expected to be on or about July 31, 2003. The
implementation of the Reorganization is subject to a number of
conditions set forth in the Plan. For instance, the
Reorganization will not take place if the Fund and FQ Fund do not
receive the opinion of counsel to the effect that the
Reorganization will constitute a tax-free reorganization for
federal income tax purposes.
Reasons for the Reorganization
- ------------------------------
At a meeting held on March 14, 2003, the Board of Trustees
of AMG Trust, including all of the Trustees who are not
"interested persons" of AMG Trust (the "Independent Trustees")
within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), determined that the Reorganization was
in the best interests of the shareholders of FQ Fund, and that
the interests of shareholders of FQ Fund would not be diluted as
a result of the Reorganization. In approving the Reorganization,
the Board of Trustees of the Trust and AMG Trust considered a
number of factors, including the following:
(1) the Fund will constitute for all practical purposes a
continuation of FQ Fund because the Fund will have
substantially the same objective and policies as FQ
Fund;
(2) the Reorganization will permit fixed costs to be
spread over a larger asset base, which over time may
result in lower operating expenses for the Fund then
would be expected for FQ Fund;
(3) the Fund's expense limitation following the
Reorganization will be lower than FQ Fund's current
expense limitation;
(4) the Fund has substantial tax loss carryforwards that
may offer benefits in pursuing a tax-sensitive
investment strategy for FQ Fund shareholders who
become shareholders of the Fund; and
(5) the Reorganization is expected to be treated as a
tax-free reorganization for federal income tax
purposes.
At a meeting of the Board of Trustees of the Trust held on
March 14, 2003, the Trust's Trustees, including all of the
Independent Trustees approved (i) the Plan and (ii) other actions
necessary to effect the combination of the Fund and FQ Fund into
a surviving entity that would operate in substantially the same
manner as FQ Fund going forward (the Plan and such other actions
being referred to collectively as the "Combination"). In
approving the Combination, the Trustees of the Trust considered a
number of factors, including the following: (a) the ongoing
viability of the Fund as it operated at that time (i.e., prior to
any modifications designed to make the Fund operate in the same
manner as FQ Fund) was questionable; (b) the Fund's prospects for
attracting additional assets were expected to improve following
the Combination; (c) consolidating the Fund and FQ Fund into a
single fund could create a more viable fund as a result of a
larger asset base; (d) the Combination would permit fixed costs
to be spread over a larger asset base and, over time, economies
of scale could decrease the Fund's operating expenses; (e) the
investment objective and policies of the Fund (prior to any
changes associated with the Combination) and FQ Fund were
similar; (f) the Combination, unlike a liquidation or the merger
of the Fund into FQ Fund, would not have adverse tax consequences
for the Fund or Fund shareholders; and (g) following the
Combination, the Fund's tax loss carryforwards could offer
additional benefits to Fund shareholders under the Fund's revised
tax-sensitive investment strategy. The Trust's Board of Trustees
also considered the matters related to the approval of a new
investment management agreement with the Manager and a new sub-
advisory agreement with First Quadrant, L.P. The Board of
Trustees of the Trust reviewed alternatives to the Combination,
such as maintaining the status quo or liquidating the Fund, and
determined that the Combination, and specifically the
reorganization contemplated by the Plan, would be in the best
interests of shareholders of the Fund.
5
<Page>
Federal Income Tax Consequences
- -------------------------------
As a condition to the Reorganization, the Trust and AMG
Trust will receive a legal opinion from Goodwin Procter LLP, to
the effect that the Reorganization will be a tax-free transaction
from the standpoint of the Fund and FQ Fund and their
shareholders, which means that: (1) no gain or loss will be
recognized by FQ Fund upon the transfer of its assets and stated
liabilities to the Fund; (2) the tax basis of the assets of FQ
Fund in the hands of the Fund will be the same as the tax basis
of such assets in the hands of the FQ Fund immediately prior to
the transfer; (3) the Fund's holding period of the assets of FQ
Fund will include the period during which such assets were held
by FQ Fund; (4) no gain or loss will be recognized by the Fund
upon the receipt of the assets of FQ Fund in exchange for shares
of the Fund and the assumption by the Fund of the stated
liabilities of the FQ Fund; (5) no gain or loss will be
recognized by the shareholders of FQ Fund upon the receipt of
shares of the Fund in exchange for their shares of FQ Fund; (6)
the basis of the shares of the Fund received by shareholders of
FQ Fund will be the same as the basis of the shares of FQ Fund
for which they were exchanged; and (7) the holding period of the
shares of the Fund received by the shareholders of FQ Fund will
include the holding period of the shares of FQ Fund for which
they were exchanged, provided that, at the time of the exchange,
the shares of FQ Fund were held as capital assets.
The receipt of this an opinion is a condition to the
consummation of the Reorganization. Neither the Trust nor AMG
Trust has obtained an Internal Revenue Service ("IRS") private
letter ruling regarding the federal income tax consequences of
the Reorganization, and the IRS is not bound by advice of
counsel. If the transfer of the assets of FQ Fund in exchange
for shares of the Fund and the assumption by the Fund of all
stated liabilities of FQ Fund do not constitute a tax-free
reorganization, each FQ Fund shareholder generally will recognize
gain or loss equal to the difference between the value of the
shares of the Fund the shareholder acquires and the tax basis of
the shareholder's FQ Fund shares.
Shareholders of FQ Fund should consult their tax advisors
regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Because the foregoing discussion
relates only to certain federal income tax consequences of the
Reorganization, shareholders of FQ Fund should also consult their
tax advisors as to the specific foreign, federal, state and local
tax consequences for them, if any, of the Reorganization.
Description of Shares
- ---------------------
The Trust is an open-end management investment company
organized as Massachusetts business trust in which the Fund
represents a separate series of shares of beneficial interest.
The Trust's Agreement and Declaration of Trust, as amended
("Trust Instrument"), permits the Trustees to issue an unlimited
number of full and fractional shares without par value of one or
more series and to divide or combine the shares of any series, if
applicable, without changing the proportionate beneficial
interest of each shareholder in the Fund or assets of another
series, if applicable. Each share of the Fund represents an
equal proportional interest in the Fund with each other share.
Upon liquidation of the Fund, shareholders are entitled to share
pro rata in the net assets of the Fund available for distribution
to such shareholders. Shares of the Fund have no preemptive or
conversion rights and are fully paid and nonassessable.
The shareholders of the Trust are entitled to one vote for
each which share held (or a proportionate fractional vote in
respect of a fractional share) on matters on which shares of the
Fund shall be entitled to vote. Subject to the 1940 Act, the
Trustees themselves have the power to alter the number and the
terms of office of the Trustees, to lengthen their own terms, or
to make their terms of unlimited duration subject to certain
removal procedures, and appoint their own successors, provided
however, that immediately after such appointment the requisite
majority of the Trustees have been elected by the shareholders of
the Trust. The voting rights of shareholders are not cumulative
so that holders of more than 50% of the shares voting can, if
they choose, elect all Trustees being selected while the
shareholders of the remaining shares would be unable to elect any
Trustees. Shareholders of the Trust have the right, upon the
declaration in writing or vote of more than two-thirds of its
outstanding shares, to remove a Trustee from office. It is the
intention of the Trust not to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for
action by shareholder vote as may be required by either the 1940
Act or by the Declaration of Trust.
6
<Page>
Under Massachusetts law, shareholders of a Massachusetts
business trust may, under certain circumstances, be held
personally liable for the obligations of the trust. However, the
Trust's Trust Instrument provides that shareholders shall not be
subject to any personal liability for the acts or obligations of
the Fund and that every written agreement, obligation, instrument
or undertaking made on behalf of the Fund shall contain a
provision to the effect that the shareholders are not personally
liable thereunder. The Trust's Trust Instrument also provides
that if held liable for an obligation of the Fund a shareholder
will be entitled to reimbursement from the general assets of the
Fund. Thus, the risk of a shareholder incurring a financial loss
on account of its liability as a shareholder of the Fund is
limited to circumstances in which the Fund would be unable to
meet its obligations. The possibility that these circumstances
would occur is remote. The Trustees of the Trust intend to
conduct the operations of the Trust in a way as to avoid, as far
as possible, ultimate liability of the shareholders of the Fund.
The Trust Instrument further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as
individuals or personally, that no Trustee shall be responsible
for any neglect or wrongdoing of any officer, employee or agent
of the Trust or to any other Trustee, and that no Trustee,
officer, employee or agent is liable to any third persons in
connection with the affairs of the Fund, except if the liability
arises from his or its own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall
look solely to the property of the Fund for any satisfaction of
claims arising in connection with the affairs of the Fund. With
the exceptions stated, the Trust's Trust Instrument provides that
a Trustee or officer is entitled to be indemnified against all
liability in connection with the affairs of the Fund. The Trust
shall continue without limitation of time subject to the
provisions in the Trust Instrument concerning termination by
action of the shareholders or by action of the Trustees upon
notice to the shareholders.
Capitalization
- --------------
The following table shows the actual capitalization of the
Fund and FQ Fund as of April 30, 2003, and the pro forma
capitalization of the Fund as if the Reorganization had occurred
on that date.
<Table>
PRO FORMA
COMBINED THE FUND FQ FUND
-------------- -------------- --------------
Net Assets (000) $50,891,304 $39,933,156 $10,958,148
Net Asset Value per
share $8.00 $7.85 $8.00
Shares
Outstanding (000) 6,363,728 5,083,792 1,370,267
</Table>
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
---------------------------------------------------------
Because the Fund and FQ Fund have substantially the same
investment objective and policies, the description of the Fund
below also applies to FQ Fund.
Investment Objective
- --------------------
The Fund's investment objective is to seek to achieve long-
term after-tax returns for investors.
Principal Investment Strategies
- -------------------------------
The Fund invests at least 80% of its assets in equity
securities. This policy may not be changed without providing
shareholders 60 days notice. First Quadrant L.P., the Fund's
sub-advisor, pursues the Fund's objective by investing in a
diversified portfolio of U.S. equity securities (generally common
and preferred stocks) that reflects the characteristics of the
Russell 3000 Index (the "Benchmark") in terms of industry,
earnings growth, valuation and similar measurements. The
Benchmark measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately 98% of the investable U.S. equity market. At March
31, 2003, the Benchmark had a total market capitalization range
of approximately $3 million to $259 billion. The Fund will
7
<Page>
ordinarily invest in approximately 75 to 250 stocks; however, the
number of stocks in which the Fund invests will vary depending on
market conditions and the size of the Fund.
The Fund uses a proprietary quantitative analytical model
to construct its portfolio to reflect the characteristics of the
Benchmark and combine a top-down analysis of market and economic
conditions with a bottom-up stock selection review process to
enhance returns. The top-down analysis consists of a review of
market and economic data such as interest rates, commodity price
changes, market volatility levels, inflation expectations, credit
spreads and foreign exchange rates to identify those industries
and sectors of the U.S. economy that are likely to benefit from
present and future economic conditions. The Fund modifies the
industry weightings in its portfolio relative to the Benchmark
based on the top-down analysis, consistent with maintaining tax
efficiency for investors. In general, these weightings will not
differ from the industry weightings of the Benchmark by more than
5%. In addition, consistent with minimizing taxable gains and
enhancing returns, the Fund's exposure (relative to the
Benchmark) to specific securities within an industry may be
underweighted or overweighted. Individual stocks are selected
based upon a bottom-up review of a variety of security-specific
valuation metrics, such as earnings revisions, earnings surprise
signals, insider trading, corporate actions and changes in
various indices.
For temporary or defensive purposes, the Fund may invest,
without limit, in cash or high quality short-term debt
securities, including repurchase agreements. To the extent that
the Fund is invested in these instruments, it will not be
pursuing its investment objectives. First Quadrant, L.P., the
Fund's sub-advisor, may sell any security when it believes the
sale is in the Fund's interest. This may result in active and
frequent trading or portfolio securities which can increase
portfolio turnover. Higher portfolio turnover may adversely
affect the Fund's performance by increasing the Fund's
transaction costs and may increase shareholder tax liability.
Short-term trading may increase the Fund's transaction costs and
may increase your tax liability.
First Quadrant, L.P. manages the Fund's portfolio to
minimize taxable distributions to shareholders. It applies a
variety of tax-sensitive investment techniques, including the
following: 1) investing in stocks that pay below-average
dividends; 2) employing a buy-and-hold strategy that will avoid
realizing short-term capital gains and defer as long as possible
the realization of long-term capital gains; and 3) realizing
losses on specific securities or specific tax lots of securities
to offset realized gains. The Fund can be expected to distribute
a smaller percentage of its returns each year than other equity
mutual funds that are managed without regard to tax
considerations. There can be no assurance, however, that taxable
distributions can always be avoided.
Additional Practices/Risks
- --------------------------
The Fund may invest in derivatives. Derivatives, a
category that includes options and futures, are financial
instruments whose value derives from another security, an index
or a currency. The Fund may use derivatives to attempt to
maintain exposure to the equity markets while holding cash for
temporary liquidity needs. The principal risk of investing in
derivatives is that the derivatives may not perform as expected
resulting in losses. With some derivatives, there is also the
risk that the counterparty may fail to honor its contract terms,
causing a loss.
PERFORMANCE SUMMARY
-------------------
The following performance information illustrate some of
the risks of investing in the Fund by showing year-by-year total
returns and how the performance of the Fund has varied since the
Fund's inception. The performance shown assumes that all
dividend and capital gain distributions have been reinvested.
Two different presentations of the Fund's performance are shown.
The first, labeled "Performance (Pre-Reorganization)," shows the
Fund's performance without giving effect to the Reorganization
and related changes to the Fund's investment objective and
policies designed to allow it to operate as a continuation of FQ
Fund following the Reorganization (as discussed elsewhere in this
Prospectus). Performance shown under the heading "Performance
(Pre-Reorganization)" is presented solely for the purpose of
meeting applicable regulatory requirements. The second
presentation of performance, labeled "Performance
(Post-Reorganization)," is the performance of FQ Fund, as
sub-advised by First Quadrant, L.P., the Fund's sub-advisor,
which is expected to constitute the Fund's performance record
following the Reorganization. Past performance does not
guarantee future results.
8
<Page>
PERFORMANCE (PRE-REORGANIZATION)
--------------------------------
Annual Total Returns
<Table>
Year Annual Total Return
- -------- -------------------
1993 13.3%
1994 1.8%
1995 36.8%
1996 24.4%
1997 32.3%
1998 26.4%
1999 20.7%
2000 -11.8%
2001 -11.7%
2002 -23.0%
</Table>
Best Quarter: 21.1% (4th Quarter 1998)
Worst Quarter: -15.3% (3rd Quarter 2001)
(January 1, 2003 - June 30, 2003: 13.5%)
The following table compares the Fund's performance to that
of a broadly based securities market index. The table assumes
that dividends and capital gain distributions have been
reinvested for both the Fund and the applicable index. The past
performance of the Fund (before and after taxes) is not an
indication of how the Fund will perform in the future.
<Table>
Average Annual Total Returns(1)
(as of 12/31/02)
-------------------------------
Since Inception
1 Year 5 Years (June 1992)
-------- --------- ---------------
Return Before Taxes -22.99% -1.73% 9.64%
Return After Taxes on
Distributions -24.83% -5.59% N/A
Return After Taxes on
Distributions and Sale
of Fund Shares -14.08% -2.27% N/A
S&P 500 Index (2) -22.10% -0.59% 9.72%
</Table>
(1) After-tax returns are calculated by Lipper. After-tax returns
are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of
state and local taxes. Actual after-tax returns depend on an
investor's tax situation and may differ from those shown, and
after-tax returns are not relevant to investors who hold their
shares of the Fund through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
(2) Reflects no deduction for fees, expenses or taxes. The S&P
500 Index consists of 500 stocks chosen by Standard & Poor's
for market size (generally the largest market value within
their industry), liquidity (trading volume is analyzed to
ensure ample liquidity and efficient share pricing), and
industry group representation (representing important industry
segments within the U.S. economy.). It is a market value
weighted index (stock price times number of shares
outstanding), with each stock's weight in the Index
proportionate to its market value.
9
<Page>
PERFORMANCE (POST REORGANIZATION)
---------------------------------
Annual Total Returns
<Table>
Year Annual Total Return
- ---------- -------------------
2001 -7.4%
2002 -19.5%
</Table>
Best Quarter: -9.89% (4th Quarter 2001)
Worst Quarter: -14.76% (3rd Quarter 2002)
(January 1, 2003 to June 30, 2003: 12.19%)
The following table compares the Fund's performance to that
of a broadly based securities market index. The table assumes
that dividends and capital gain distributions have been
reinvested for both the Fund and the index. As always, past
performance (before and after taxes) is not an indication of how
the Fund will perform in the future.
Average Annual Total Return as of 12/31/02(1)
---------------------------------------------
<Table>
1 Year Since Inception **
----------- ----------
Return Before Taxes -19.52% -12.08%
Return After Taxes on
Distributions -19.78% -12.22%
Return After Taxes on
Distributions and Sale
of Fund Shares -11.98% -9.60%
S&P 500 Index (2)* -22.10% -16.94%
Russell 3000 Index* -21.54% -16.37%
</Table>
The Russell 3000 Index is a market-capitalization weighted index
of 3000 U.S. common stocks.
The S&P 500 Index is a market-capitalization weighted index of
500 U.S. common stocks.
(1) After-tax returns are calculated by Lipper. After-tax returns
are calculated using the historical highest individual federal
marginal income taxes and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on an
investor's tax situation and may differ from those shown, and
after-tax returns are not relevant to investors who hold their
shares of the Fund through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
10
<Page>
(2) The Fund previously provided information for the S&P 500 Index
for comparison with the Fund's returns. In connection with
the Reorganization the Fund has revised its investment
objective and policies to establish the Russell 3000 Index as
a Fund benchmark. Consistent with these changes, the Fund
intends to provide information with respect to the Russell
3000 Index for comparative purposes going forward.
* Reflects no deduction for fees, expenses or taxes.
** December 18, 2000
11
<Page>
MANAGEMENT
----------
The Managers Funds LLC (the "Manager"), located at 40
Richards Avenue, Norwalk, Connecticut 06854, serves as investment
manager to the Fund and is responsible for the Fund's overall
administration. The Manager also monitors the performance,
security holdings and investment strategies of First Quadrant,
L.P., the sub-advisor of the Fund (the "Sub-Advisor or "FQ").
Managers Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Manager, serves as the Fund's distributor.
FQ has day-to-day responsibility for managing the Fund's
portfolio. FQ is located at 800 E. Colorado Boulevard, Suite
900, Pasadena, California 91101. Affiliated Managers Group,
Inc., whose wholly-owned subsidiary serves as manager of the
Manager, indirectly owns a majority interest in FQ. As of
December 31, 2002, FQ had assets under management of
approximately $13.3 billion.
Christopher G. Luck and R. Max Darnell are the lead
portfolio managers for the Fund. Mr. Luck is a Partner of FQ and
a Director of Equity Portfolio Management, positions he has held
since March 1996, and previously was the Director of Equity
Management of its predecessor, First Quadrant Corporation, since
September 1995. Mr. Darnell is a Partner and the Chief
Investment Officer of, and a portfolio manager for, FQ and has
been with the firm since 1991.
The Fund is obligated by its investment management
agreement to pay an annual management fee to the Manager of 0.85%
of the average daily net assets of the Fund. The Manager, in
turn, pays FQ 0.85% of the average daily net assets of the Fund
for its services as Sub-Advisor. Under its investment management
agreement with the Fund, the Manager provides a variety of
administrative services to the Fund. The Manager receives no
additional compensation from the Fund for these services.
Pursuant to a Reimbursement Agreement between the Manager and FQ,
FQ reimburses the Manager for the costs the Manager bears in
providing administrative, shareholder and other additional
services to the Fund. The Fund's arrangements with the Manager
and FQ are substantially the same as FQ Fund's. Prior to the
implementation of the new investment management agreement and
sub-advisory agreement described above, the Fund paid an
investment advisory fee to the Manager at the annual rate of
0.70% of its average daily net assets.
The Manager has contractually agreed, until August 1, 2004,
to waive fees and pay or reimburse the Fund to the extent total
expenses of the Fund (exclusive of taxes, interest, brokerage
costs and extraordinary items) exceed 0.99% of the Fund's average
daily net assets. The Fund is obligated to repay the Investment
Manager such amounts waived, paid or reimbursed in future years
provided that the repayment occurs within three (3) years after
the waiver or reimbursement and that such repayment would not
cause the Fund's expenses in any such future year to exceed 0.99%
of the Fund's average daily net assets.
SHAREHOLDER INFORMATION
-----------------------
Pricing of Shares
- -----------------
The price at which you purchase and redeem your shares is
equal to the net asset value per share (NAV) next determined
after your purchase or redemption order is received on each day
the New York Stock Exchange (the "NYSE") is open for trading.
The NAV is equal to the Fund's net worth (assets minus
liabilities) divided by the number of shares outstanding. The
Fund's NAV is calculated at the close of regular business of the
NYSE, usually 4:00 p.m. New York Time.
The Fund's investments are valued based on market values.
If market quotations are not readily available for any security,
the value of the security will be based on an evaluation of its
fair value, pursuant to procedures established by the Board of
Trustees.
12
<Page>
MANAGERSCHOICE
ManagersChoice (r) Program
- ------------------------
ManagersChoice is a unique, comprehensive asset allocation
program offered exclusively through investment advisors and
consisting of several model portfolios using investments in
various other funds in any of our fund families. Your investment
advisor will work with you to select a portfolio to help achieve
your goals in the context of your tolerance for risk.
For more information on this program, contact your
investment advisor or visit our website at www.managersfunds.com.
Please be aware that an advisor may charge additional fees and
expenses for participation in this program.
Purchase of Shares
- ------------------
Cash investments in the Fund must be in U.S. dollars.
Third-party checks which are under $10,000 and are payable to an
existing shareholder who is a natural person (as opposed to a
corporation or partnership) and endorsed over to the Fund or
State Street Bank and Trust Company will be accepted.
Subject to approval by the Manager and FQ, you may be
permitted to purchase shares of the Fund by means of an in-kind
contribution of securities, which will be valued in accordance
with the Fund's pricing procedures. As with a cash purchase of
shares, an in-kind contribution will also be subject to the
Fund's minimum investment requirements.
The following table provides the minimum initial and
additional investments in the Fund directly or through
ManagersChoice:
<Table>
DIRECT INVESTMENT MANAGERSCHOICE
INITIAL ADDITIONAL INITIAL ADDITIONAL
INVESTMENT INVESTMENT INVESTMENT INVESTMENT
----------- ----------- ----------- ----------
Regular accounts $5,000 $100 $50,000 $500
Traditional IRA $2,000 $100 $50,000 $500
Roth IRA $2,000 $100 $50,000 $500
</Table>
The Fund or the Distributor may, in its discretion, waive
the minimum initial or additional investment amounts at any time.
A Traditional IRA is an individual retirement account.
Contributions may be deductible at certain income levels and
earnings are tax-deferred while your withdrawals and
distributions are taxable in the year that they are made.
A Roth IRA is an IRA with non-deductible contributions and
tax-free growth of assets and distributions. The account must
be held for five years and certain other conditions must be met
in order to qualify.
You should consult your tax professional for more information
on IRA accounts.
If you invest through a third party such as a bank, broker-
dealer or other fund distribution organization, rather than
directly with the Fund, the policies, fees and minimum investment
amounts may be different than those described in this Prospectus.
The Fund may also participate in programs with many national
brokerage firms which limit the transaction fees for the
shareholder and may pay fees to these firms for participation in
these programs.
13
<Page>
HOW TO PURCHASE SHARES
----------------------
<Table>
Initial Purchase Additional Purchases
------------------------ ---------------------------
Through your
Investment Advisor Contact your investment Send any additional
advisor or other investment monies to your
professional. investment professional
at the address appearing
on your account statement.
- ---------------------------------------------------------------------------
All Shareholders:
- -----------------
By Mail Complete the account Write a letter of instruc-
application. Mail the tion and a check
application and a check payable to Managers
payable to Managers AMG AMG Funds to:
Funds to:
Managers AMG Funds Managers AMG Funds
c/o Boston Financial c/o Boston Financial
Data Services, Inc. Data Services, Inc.
P.O. Box 8517 P.O. Box 8517
Boston, MA 02266-8517 Boston, MA 02266-8517
Include your account #
and Fund name on your
check
- ---------------------------------------------------------------------------
By Telephone Not Available If your account has
already been established,
call the Transfer
Agent at (800) 252-0682.
The minimum additional
investment is $1,000
- ---------------------------------------------------------------------------
By Internet Not Available If your account has
already been established,
see our website
at managersamg.com.
The minimum additional
investment is $1,000
- ---------------------------------------------------------------------------
</Table>
HOW TO PURCHASE SHARES (MANAGERSCHOICE Program Only)
- ------------------------------------------------------------
By Mail: To open your account, complete and sign the account
application and make your check payable to The Managers Funds.
Mail the check and account application to:
The Managers Funds
c/o PFPC Brokerage Services, Inc.
P.O. Box 9847
Pawtucket, RI 02940-8047
To purchase additional shares, write a letter of instruction
(or complete your investment stub). Send a check and investment
stub or written instructions to the above address.
By Telephone: After establishing this option on your account,
call a client service representative at (800) 358-7668. The
minimum additional investment is $500.
By Wire: Call the Fund at (800) 358-7668. Instruct your bank
to wire the money to Boston Safe Deposit and Trust; ABA #011-001234;
BFN-The Managers Funds A/C 04-5810, FBO Shareholder name, account
number and Portfolio name. Please be aware that your bank may charge
you a fee for this service.
By Internet: Not available.
- -------------------------------------------------------------------
Note: If you redeem shares following a purchase by check, the
Fund may hold the proceeds of your redemption for up to 15
calendar days to ensure that the check has cleared.
14
<Page>
Redemption of Shares
--------------------
You may sell your shares at any time. Your shares will be
sold at the NAV next calculated after the Fund's Transfer Agent
receives your order in proper form. The Fund's NAV is calculated
at the close of business of the NYSE, usually 4:00 p.m. New York
Time. Orders received after 4:00 p.m. New York Time will receive
the NAV per share determined at the close of trading on the next
NYSE trading day.
<Table>
INSTRUCTIONS
- ------------------------------------------------------------------------------
Through your Investment
Advisor Contact your investment advisor or other
investment professional.
- ------------------------------------------------------------------------------
All Shareholders:
By Mail Write a letter of instruction containing:
* the name of the Fund
* dollar amount or number of shares to be sold
* your name
* your account number
* signatures of all owners on account
Mail letter to:
Managers AMG Funds
c/o Boston Financial Data Services, Inc.
P.O. Box 8517
Boston, MA 02266-8517
- ------------------------------------------------------------------------------
By Telephone If you elected telephone redemption
privileges on your account application, call us
at (800) 252-0682.
- ------------------------------------------------------------------------------
By Internet See our website at www.managersamg.com
- ------------------------------------------------------------------------------
</Table>
HOW TO SELL SHARES (MANAGERSCHOICE Program Only)
- ------------------------------------------------------------
By Mail: Write a letter of instruction containing:
- the name of the portfolio(s)
- dollar amount or number of shares to be redeemed
- your name
- your account number(s)
- signature(s) of all account owners
and send the written instructions to The Managers Funds, c/o
PFPC Brokerage Services, Inc., P.O. Box 9847, Pawtucket, RI
02940-8047
By Telephone: After establishing this option on your account,
call a client service representative at (800) 358-7668.
Telephone redemptions are available only for redemptions which
are below $25,000 per Fund or $100,000 per Portfolio.
By Internet: Not available.
- -------------------------------------------------------------------
Note: If you redeem shares following a purchase by check, the
Fund may hold the proceeds of your redemption for up to 15
calendar days to ensure that the check has cleared.
Redemptions of $25,000 and over require a signature
guarantee. A signature guarantee helps to protect against fraud.
You can obtain one from most banks and/or securities dealers. A
notary public cannot provide a signature guarantee. In joint
accounts, both signatures must be guaranteed.
Telephone redemptions are available only for redemptions
which are below $25,000.
For ManagersChoice(r): All redemptions greater than $100,000
per Portfolio or $25,000 per Fund must be in writing and require
a medallion guarantee. A medallion guarantee is a signature
guarantee by a Guarantor Institution, which is participating in a
Signature Guarantee Program recognized by the Securities Transfer
Associate (STA). A Guarantor Institution is a financial
institution, which guarantees a signature. The financial
15
<Page>
institution may be a bank, broker/dealer, credit union, national
securities exchange, savings association or other type of
financial institution.
INVESTOR SERVICES
-----------------
Automatic Reinvestment Plan allows your dividends and
capital gain distributions to be reinvested in additional shares
of the Fund. You can elect to receive cash.
Automatic Investments allows you to make automatic
deductions from a designated bank account.
Automatic Redemptions allows you to make automatic monthly
redemptions of $100 or more. Redemptions are normally completed
on the 25th day of each month. If the 25th day of any month is a
weekend or a holiday, the redemption will be completed on the
next business day.
Individual Retirement Accounts are available to you at no
additional cost. Call us at (800) 835-3879 for more information
and an IRA kit.
The Fund has an Exchange Privilege which allows you to
exchange your shares of the Fund for shares of other funds in the
Managers Funds Family of Funds. There is no fee associated with
the Exchange Privilege. You can request your exchange in
writing, by telephone (if elected on the application), by
internet or through your investment advisor, bank or investment
professional. The Exchange Privilege is available only if the
account you are exchanging out of and the account you are
exchanging into are registered in the same name with the same
address and taxpayer identification number. Be sure to read the
Prospectus of any fund that you wish to exchange into. When you
purchase a fund's shares by exchange you do so on the same terms
as any new investment in that fund. The Fund reserves the right
to discontinue, alter or limit the Exchange Privilege at any
time. Note: Individual Fund exchanges are not permitted in the
ManagersChoice Program. Please consult your investment advisor
for more details.
An annual fee of $35 will be deducted from any
ManagersChoice account that is less than $250,000. Such fee may
be waived or modified at the sole discretion of The Managers.
OPERATING POLICIES
------------------
The Fund will not be responsible for any losses resulting
from unauthorized transactions (such as purchases, sales or
exchanges) if it follows reasonable security procedures designed
to verify the identity of the investor. You should verify the
accuracy of your confirmation statements immediately after you
receive them. If you do not want the ability to sell and
exchange by telephone or internet, call the Fund for
instructions.
The Fund is a series of a "Massachusetts business trust."
The Board of Trustees may, without the approval of the
shareholders, create additional series at any time. Also at any
time, the Board of Trustees may, without shareholder approval,
divide this series or any other series into two or more classes
of shares with different preferences, privileges, and expenses.
The Fund reserves the right to:
* redeem an account if the value of the account falls
below $2,000 due to redemptions;
* suspend redemptions or postpone payments when the NYSE
is closed for any reason other than its usual weekend or
holiday closings or when trading is restricted by the
Securities and Exchange Commission;
* change the minimum investment amounts;
16
<Page>
* delay sending out redemption proceeds for up to seven
days (this usually applies to very large redemptions
without notice, excessive trading or during unusual
market conditions);
* make a redemption-in-kind (a payment in portfolio
securities instead of in cash);
* refuse a purchase order for any reason;
* refuse any exchange request if we determine that such
request could adversely affect the Fund, including if
such person or group has engaged in excessive trading
(to be determined in our discretion); and
* terminate or change the Exchange Privilege or impose
fees in connection with exchanges or redemptions,
including fees related to excessive trading.
ACCOUNT STATEMENTS
------------------
You will receive quarterly and yearly statements detailing
your account activity. All investors (other than IRA accounts)
will also receive a Form 1099-DIV annually, detailing the tax
characteristics of any dividends and distributions that you have
received with respect to your account. You will also receive a
confirmation after each trade executed in your account.
DIVIDENDS AND DISTRIBUTIONS
---------------------------
Income dividends and net capital gain distributions, if
any, are normally declared and paid in December.
We will automatically reinvest your distributions of
dividends and capital gains unless you tell us otherwise. You
may change your election by writing to us at least 10 days prior
to the scheduled payment date.
TAX INFORMATION
---------------
Please be aware that the following tax information is
general and refers to the provisions of the Internal Revenue Code
of 1986, as amended, which are in effect as of the date of this
Prospectus. You should consult a tax advisor about the status of
your distributions from the Fund.
All short-term capital gains distributions are generally
taxable to you as ordinary income. Under the Jobs and Growth Tax
Relief Reconciliation Act of 2003, dividends from the Fund that
are attributable to corporate dividends received by the Fund
generally are now taxable at long-term capital gain rates,
provided certain requirements are met; non-qualifying dividends
remain taxable as ordinary income. Capital gain dividends will
be taxed as long-term gains regardless of how long you held your
shares of the Fund. These provisions apply whether you receive a
distribution in cash or reinvest it for additional shares. An
exchange of the Fund's shares for shares of another fund will be
treated as a sale of the first Fund's shares and any gain on the
transaction may be subject to federal income tax.
Keep in mind that distributions may be taxable to you at
different rates depending on the length of time the Fund held the
applicable investment and not the length of time that you held
your Fund shares. When you do sell your Fund shares, a capital
gain may be realized, except for certain tax-deferred accounts,
such as IRA accounts.
Federal law requires the Fund to withhold taxes on
distributions and redemption proceeds paid to shareholders who:
* fail to provide a social security number or taxpayer
identification number;
* fail to certify that their social security number or
taxpayer identification number is correct; or
* fail to certify that they are exempt from withholding.
17
<Page>
In addition, the Fund also must withhold taxes on
distributions and redemption proceeds if the IRS notifies the
Fund that the taxpayer identification number or social security
number furnished by the shareholder is incorrect, or the IRS
notifies the Fund that the shareholder has failed to report
properly certain interest and dividend income.
SHARE OWNERSHIP
---------------
Control Persons
- ---------------
As of July 22, 2003, to the Fund's knowledge, no
shareholder "controlled" (within the meaning of the 1940 Act) the
Fund. An entity which controls the Fund could have effective
voting control over the Fund. Similarly, on that date, to FQ
Fund's knowledge, no shareholder "controlled" (within the meaning
of the 1940 Act) FQ Fund.
Five Percent Holders
- --------------------
Except as set forth below no person was known by the Trust
or AMG Trust to own of record 5% or more of the shares of the
Fund or FQ Fund as of July 22, 2003. As of July 22, 2003,
neither Trust knew of any person who beneficially owned 5% or
more of the outstanding shares of the Fund or FQ Fund.
<Table>
THE FUND
--------
Name and Address Percentage Ownership
- ---------------- --------------------
Charles Schwab & Co. Inc. (1)
101 Montgomery Street
San Francisco, CA 94104-4122 47%
National Financial Services Corp. (1)
200 Liberty Street
P.O. Box 3751
Church Street Station
New York, NY 10008-3751 12%
18
<Page>
FQ FUND
-------
Name and Address Percentage Ownership
- ---------------- --------------------
Charles Schwab & Co., Inc. (1)
Special Custody A/C FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122 22%
Citcam Stock Co. (1)
c/o Citizens National Bank
P.O. Box 111
Cameron, TX 76520-0111 18%
Fiduciary Trust Co. Intl.
FBO Marjorie B. Pelino-Large Cap
P.O. Box 3199
Church Street Station
New York, NY 10008-3199 11%
PFPC Brokerage Services (1)
House Account FBO Managers Funds
211 South Gulph Road
King of Prussia, PA 19406-3101 7%
</Table>
(1) Omnibus account holder holding Fund shares on behalf of
its clients.
Shares Held by Officers and Trustees
- ------------------------------------
As of July 22, 2003, all management personnel of the Trust
(i.e., its Trustees and Officers) as a group owned beneficially
less than 1% of the outstanding shares of the Fund. As of July
22, 2003, all management personnel of AMG Trust (i.e., Trustees
and officers) as a group owned beneficially less than 1% of the
outstanding shares of FQ Fund.
FINANCIAL HIGHLIGHTS
--------------------
Shown below are (a) financial highlights for the Fund,
which are provided in order to satisfy certain regulatory
requirements, and (b) financial highlights for FQ Fund, whose
financial statements are expected to constitute the Fund's
financial statements following the Reorganization.
19
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Financial Highlights
For a share outstanding throughout the fiscal years ended March 31,
- -----------------------------------------------------------------
<Table>
2003 2002 2001 2000 1999
------ ------ ------ ------ ------
Net Asset Value,
Beginning of Year $10.37 $11.33 $16.02 $16.78 $16.86
Income from
Investment Operations:
- -----------------------
Net investment income 0.19 0.59 1.00 0.88 0.69
Net realized and
unrealized gain (loss)
on investments (2.83) (0.45) (4.34) 1.38 1.76
Total from investment ------ ---- ------ ---- ----
operations (2.64) 0.14 (3.34) 2.26 2.45
------ ---- ------ ---- ----
Less Distributions to
Shareholders from:
- ---------------------
Net investment income (0.33) (1.10) (0.30) (0.98) (0.62)
Return of capital (0.17) - - - -
Net realized gain on
investments - - (1.05) (2.04) (1.91)
Total distributions to ------ ------ ------ ------ ------
shareholders (0.50) (1.10) (1.35) (3.02) (2.53)
------ ------ ------ ------ ------
Net Asset Value,
End of Year $7.23 $10.37 $11.33 $16.02 $16.78
----- ------ ------ ------ ------
Total Return (a) (25.71)% 0.97% (22.47)% 14.91% 17.17%
Ratio of net operating
expenses to average net
assets (b) 0.88% 0.88% 0.88% 0.88% 0.88%
Ratio of total expenses
to average net assets 1.67%(c)1.54%(c)1.02%(c) 1.01% 1.04%
Ratio of net investment
income to average net
assets (a) 4.08% 5.25% 6.17% 5.47% 4.62%
Portfolio turnover 271% 598% 624% 442% 527%
Net assets at end of year
(000's omitted) $37,321 $72,411 $95,794 $191,375 $185,584
------- ------- ------- -------- --------
</Table>
(a) Total returns and net investment income would have been
lower had certain expenses not been reduced.
(b) After expense offsets. (See Note 1(c) of "Notes to Financial
Statements.")
(c) Includes interest expense for the fiscal years ended March
31, 2003, 2002 and 2001 of 0.43%, 0.46% and 0.04%, respectively.
20
<Page>
- ------------------------------------------------------------------
First Quadrant Tax-Managed Equity Fund
Financial Highlights
For a share of capital stock outstanding throughout each fiscal period
- ------------------------------------------------------------------
<Table>
For the six For the fiscal For the
months ended year ended period* ended
April 30, 2003 October 31, October 31,
(unaudited) 2002 2001
-------------- -------------- ---------------
Net Asset Value, Beginning
of Period $7.74 $8.91 $10.00
----- ----- ------
Income from Investment
Operations:
- ----------------------
Net investment income 0.03 0.06 0.01
Net realized and unrealized
gain (loss) on investments 0.29 (1.23) (1.10)
----- ------ ------
Total from investment operations 0.32 (1.17) (1.09)
----- ------ ------
Less Distributions to
Shareholders from:
- ---------------------
Net investment income (0.06) - -
----- ----- -----
Net Asset Value, End of Period $8.00 $7.74 $8.91
===== ===== =====
- --------------------------------------------------------------------------------
Total Return (a) 4.23% (b) (13.13)% (10.90)% (b)
Ratio of net expenses to
average net assets 1.00% (c) 1.00% 1.00% (c)
Ratio of net investment income
to average net assets 1.10% (c) 0.91% 0.29% (c)
Portfolio turnover 57% (b) 101% 191% (b)
Net assets at end of period
(000's omitted) $10,958 $8,539 $4,322
- --------------------------------------------------------------------------------
Expense Offsets (d)
- -------------------
Ratio of total expenses to
average net assets 1.89% (c) 2.55% 4.49% (c)
Ratio of net investment income
(loss) to average net assets 0.21% (c) (0.63)% (3.20)% (c)
- --------------------------------------------------------------------------------
</Table>
* Commencement of operations was on December 18, 2000.
(a) Total returns and net investment income would have been lower
had certain expenses not been reduced.
(b) Not annualized.
(c) Annualized.
(d) Ratio information assuming no reduction of Fund expenses.
21
<Page>
============================================================================
PART B
======
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
FIRST QUADRANT TAX-MANAGED EQUITY FUND
a series of
Managers AMG Funds
40 Richards Avenue
Norwalk, Connecticut 06854
By and in Exchange for Shares of
FIRST QUADRANT TAX-MANAGED EQUITY FUND
a series of
The Managers Trust I
40 Richards Avenue
Norwalk, Connecticut 06854
This Statement of Additional Information relates specifically to
the proposed transfer of all or substantially all of the assets
and liabilities of First Quadrant Tax-Managed Equity Fund ("FQ
Fund"), a series of Managers AMG Funds, to First Quadrant Tax-
Managed Equity Fund (the "Fund"), a series of The Managers Trust
I, in exchange for shares of the Fund. This Statement of
Additional Information also consists of portions of other
documents which accompany it as follows:
(1) the Financial Statements of the Fund, including the
Report of Independent Accountants, for the fiscal year ended March
31, 2003 included in the Fund's most recent Annual Report are
incorporated by reference into (are legally part of) this
document. The Fund's most recent Annual Report accompanies this
document and is also available without charge by calling The
Managers Funds LLC at (800) 835-3879; and
(2) the Financial Statements of FQ Fund, including the
Report of Independent Accounts, for the fiscal year ended October
31, 2002 included in the Fund's Annual Report, and the Financial
Statements of FQ Fund (unaudited) for the six months ended April
30, 2003 included in FQ Fund's most recent Semi-Annual Report, are
incorporated by reference into (are legally part of) this
document. FQ Fund's most recent Annual and Semi-Annual Reports
accompany this document and are available without charge by
calling The Managers Funds LLC at (800) 835-3879.
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the
Prospectus of the Fund dated July 31, 2003 which this Statement of
Additional Information accompanies. A copy of the Prospectus may
also be obtained without charge by contacting Managers Trust I at
40 Richards Avenue, Norwalk, CT 06854 or by telephoning Managers
Trust I toll free at (800) 835-3879.
The date of this Statement of Additional Information is July 31,
2003.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-----------------
<Table>
PAGE
----
GENERAL INFORMATION 1
INVESTMENT OBJECTIVES AND POLICIES 1
Investment Techniques and Associated Risks 1
Diversification Requirements for the Fund 6
Fundamental Investment Restrictions 6
Temporary Defensive Position 7
Portfolio Turnover 7
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST 9
Trustees' Compensation 13
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 14
Control Persons 14
Management Ownership 14
MANAGEMENT OF THE FUND 14
Investment Manager and Sub-Adviser 14
Compensation of Investment Manager and Sub-Adviser by the
Fund 15
Fee Waivers and Expense Limitations 15
Investment Management and Sub-Advisory Agreements 15
Reimbursement Agreement 17
Reimbursement Agreement 17
Code of Ethics 18
Distribution Arrangements 18
Custodian 18
Transfer Agent 18
Independent Public Accountants 18
BROKERAGE ALLOCATION AND OTHER PRACTICES 18
PURCHASE, REDEMPTION AND PRICING OF SHARES 19
Purchasing Shares 19
Redeeming Shares 20
Exchange of Shares 21
Net Asset Value 21
Dividends and Distributions 21
CERTAIN TAX MATTERS 22
Federal Income Taxation of Fund-in General 22
Taxation of the Fund's Investments 23
Foreign Shareholders 25
Foreign Taxes 25
State and Local Taxes 25
Other Taxation 26
PERFORMANCE DATA 26
Average Annual Total Return 26
Performance Comparisons 29
MASSACHUSETTS BUSINESS TRUST 29
DESCRIPTION OF SHARES 30
APPENDIX A 33
</Table>
GENERAL INFORMATION
-------------------
This Statement of Additional Information relates only to the
First Quadrant Tax-Managed Equity Fund (the "Fund"). The Fund is
a series of shares of beneficial interest of Managers Trust I
formed as a Massachusetts business trust (the "Trust"), and is
part of the Managers Funds Family of Funds. The Trust was
organized on July 20, 2000.
Information provided in this Statement of Additional Information
reflects the Fund's anticipated reorganization with the First
Quadrant Tax-Managed Equity Fund series of Managers AMG Funds
("FQ Fund") (the "Reorganization"). In the Reorganization,
which is expected to take place on July 31, 2002, FQ Fund
transfers substantially all of its assets to the Fund in exchange
for shares of the Fund and the Fund assumes all stated
liabilities of FQ Fund. In anticipation of the Reorganization,
the Fund, formerly known as Managers U.S. Stock Market Plus
Fund, amended its investment objective and policies to be
substantially similar to those of FQ Fund and has adopted the
name "First Quadrant Tax-Managed Equity Fund." Except for
certain financial information for Managers U.S. Stock Market
Plus Fund incorporated by reference into this Statement of
Additional Information in order to satisfy regulatory requirements,
the information provided in this Statement of Additional
Information reflects the fact that as a consequence of the
Reorganization, FQ Fund's financial statements are expected to
constitute the Fund's financial statements following the
Reorganization. This Statement of Additional Information should
be read in conjunction with the accompanying prospectus which
discusses the Reorganization in greater detail. The
Trust's executive office is located at 40 Richards Avenue,
Norwalk, CT 06854.
The Managers Funds LLC, a subsidiary of Affiliated Managers
Group, Inc., serves as investment manager to the Fund and is
responsible for the Fund's overall administration. See
"Management of the Fund."
ADDITIONAL INVESTMENT POLICIES
-----------------------------
The following is additional information regarding the
policies used by the Fund in an attempt to achieve its investment
objective as stated in its Prospectus. The Fund is a diversified
open-end management investment company.
Under normal circumstances, the Fund invests at least 80% of
its net assets, plus the amount of any borrowing for investment
purposes, in equity securities. This policy may not be changed
without providing shareholders 60 days notice.
Investment Techniques and Associated Risks
The following are descriptions of the types of securities
that may be purchased by the Fund.
(1) Cash Equivalents. The Fund may invest in cash
equivalents. Cash equivalents include certificates of deposit,
bankers acceptances, commercial paper, short-term corporate debt
securities and repurchase agreements.
Bankers Acceptances. The Fund may invest in bankers
acceptances. Bankers acceptances are short-term credit
instruments used to finance the import, export, transfer or
storage of goods. These instruments become "accepted" when a bank
guarantees their payment upon maturity.
Eurodollar bankers acceptances are bankers acceptances
denominated in U.S. Dollars and are "accepted" by foreign branches
of major U.S. commercial banks.
Certificates of Deposit. The Fund may invest in certificates
of deposit. Certificates of deposit are issues against money
deposited into a bank (including eligible foreign branches of U.S.
banks) for a definite period of time. They earn a specified rate
of return and are normally negotiable.
Commercial Paper. The Fund may invest in commercial paper.
Commercial paper refers to promissory notes that represent an
unsecured debt of a corporation or finance company. They have a
maturity of less than 9 months. Eurodollar commercial paper
refers to promissory notes payable in U.S. Dollars by European
issuers.
Repurchase Agreements. The Fund may enter into repurchase
agreements with brokers, dealers or banks that meet the credit
guidelines which have been approved by the Fund's Board of
Trustees. In a repurchase agreement, the Fund buys a security
from a bank or a broker-dealer that has agreed to repurchase the
same security at a mutually agreed upon date and price. The
resale price normally is the purchase price plus a mutually agreed
upon interest rate. This interest rate is effective for the
period of time the Fund is invested in the agreement and is not
related to the coupon rate on the underlying security. The period
of these repurchase agreements will be short, and at no time will
the Fund enter into repurchase agreements for more than seven
days.
Repurchase agreements could have certain risks that may
adversely affect the Fund. If a seller defaults, the Fund may
incur a loss if the value of the collateral securing the
repurchase agreement declines and may incur disposition costs in
connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to a seller of
the security, realization of disposition of the collateral by the
Fund may be delayed or limited.
(2) Reverse Repurchase Agreements. The Fund may enter
into reverse repurchase agreements. In a reverse repurchase
agreement, the Fund sells a security and agrees to repurchase the
same security at a mutually agreed upon date and price. The price
reflects the interest rates in effect for the term of the
agreement. For the purposes of the Investment Company Act of
1940, as amended (the "1940 Act"), a reverse repurchase agreement
is also considered as the borrowing of money by the Fund and,
therefore, a form of leverage which may cause any gains or losses
for the Fund to become magnified.
The Fund will invest the proceeds of borrowings under reverse
repurchase agreements. The Fund will not invest the proceeds of a
reverse repurchase agreement for a period that is longer than the
reverse repurchase agreement itself. The Fund will establish and
maintain a separate account with the Custodian that contains a
segregated portfolio of securities in an amount which is at least
equal to the amount of its purchase obligations under the reverse
repurchase agreement.
(3) Emerging Market Securities. The Fund may invest some
of its assets in the securities of emerging market countries.
Investments in securities in emerging market countries may be
considered to be speculative and may have additional risks from
those associated with investing in the securities of U.S. issuers.
There may be limited information available to investors which is
publicly available, and generally emerging market issuers are not
subject to uniform accounting, auditing and financial standards
and requirements like those required by U.S. issuers.
Investors should be aware that the value of the Fund's
investments in emerging markets securities may be adversely
affected by changes in the political, economic or social
conditions, expropriation, nationalization, limitation on the
removal of funds or assets, controls, tax regulations and other
foreign restrictions in emerging market countries. These risks
may be more severe than those experienced in foreign countries.
Emerging market securities trade with less frequency and volume
than domestic securities and therefore may have greater price
volatility and lack liquidity. Furthermore, there is often no
legal structure governing private or foreign investment or private
property in some emerging market countries. This may adversely
affect the Fund's operations and the ability to obtain a judgment
against an issuer in an emerging market country.
(4) Foreign Securities. The Fund may invest in foreign
securities either directly or indirectly in the form of American
Depositary Receipts or similar instruments. Investments in
securities of foreign issuers and in obligations of domestic banks
involve different and additional risks from those associated with
investing in securities of U.S. issuers. There may be limited
information available to investors which is publicly available,
and generally foreign issuers are not subject to uniform
accounting, auditing and financial standards and requirements like
those applicable to U.S. issuers. Any foreign commercial paper
must not be subject to foreign withholding tax at the time of
purchase.
Investors should be aware that the value of the Fund's
investments in foreign securities may be adversely affected by
changes in political or social conditions, confiscatory taxation,
diplomatic relations, expropriation, nationalization, limitation
on the removal of funds or assets, or the establishment of
exchange controls or other foreign restrictions and tax
regulations in foreign countries. In addition, due to the
differences in the economy of these foreign countries compared to
the U.S. economy, whether favorably or unfavorably, portfolio
securities may appreciate or depreciate and could therefore
adversely affect the Fund's operations. It may also be difficult
to obtain a judgment against a foreign creditor. Foreign
securities trade with less frequency and volume than domestic
securities and therefore may have greater price volatility.
Furthermore, changes in foreign exchange rates will have an affect
on those securities that are denominated in currencies other than
the U.S. Dollar.
Forward Foreign Currency Exchange Contracts. The Fund may
purchase or sell equity securities of foreign countries.
Therefore, a portion of the Fund's income may be derived from
foreign currency. A forward foreign currency exchange contract is
an obligation to purchase or sell a specific currency at a
mutually agreed upon date and price. The contract is usually
between a bank and its customers. The contract may be denominated
in U.S. Dollars or may be referred to as a "cross-currency"
contract. A cross-currency contract is a contract which is
denominated in another currency other than in U.S. Dollars.
In such a contract, the Fund's custodian will segregate cash
or marketable securities in an amount not less than the value of
the Fund's total assets committed to these contracts. Generally,
the Fund will not enter into contracts that are greater than 90
days.
Forward foreign currency contracts have additional risks. It
may be difficult to determine the market movements of the
currency. The value of the Fund's assets may be adversely
affected by changes in foreign currency exchange rates and
regulations and controls on currency exchange. Therefore, the
Fund may incur costs in converting foreign currency.
If the Fund engages in an offsetting transaction, the Fund
will experience a gain or a loss determined by the movement in the
contract prices. An "offsetting transaction" is one where the
Fund enters into a transaction with the bank upon maturity of the
original contract. The Fund must sell or purchase on the same
maturity date as the original contract the same amount of foreign
currency as the original contract.
Foreign Currency Considerations. The Fund may invest some of
its assets in securities denominated in foreign currencies. The
Fund will compute and distribute the income earned by the Fund at
the foreign exchange rate in effect on that date. If the value of
the foreign currency declines in relation to the U.S. Dollar
between the time that the Fund earns the income and the time that
the income is converted into U.S. Dollars, the Fund may be
required to sell its securities in order to make its distributions
in U.S. Dollars. As a result, the liquidity of the Fund's
securities may have an adverse affect on the Fund's performance.
(5) Futures Contracts. The Fund may buy and sell futures
contracts and options on future contracts to attempt to maintain
exposure to the equity markets while holding cash for temporary
liquidity needs, or protect the value of the Fund's portfolio
against changes in the prices of the securities in which it
invests. When the Fund buys or sells a futures contract, the Fund
must segregate cash and/or liquid securities equivalent to the
value of the contract.
There are additional risks associated with futures contracts.
It may be impossible to determine the future price of the
securities, and securities may not be marketable enough to close
out the contract when the Fund desires to do so.
Equity Index Futures Contracts. The Fund may enter into
equity index futures contracts. An equity index futures contract
is an agreement for the Fund to buy or sell an index relating to
equity securities at a mutually agreed upon date and price.
Equity index futures contracts are often used to hedge against
anticipated changes in the level of stock prices. When the Fund
enters into this type of contract, the Fund makes a deposit called
an "initial margin." This initial margin must be equal to a
specified percentage of the value of the contract. The rest of
the payment is made when the contract expires.
(6) Illiquid Securities, Private Placements and Certain
Unregistered Securities. The Fund may invest in privately placed,
restricted, Rule 144A or other unregistered securities. The Fund
may not acquire illiquid holdings if, as a result, more than 15%
of the Fund's net assets would be in illiquid investments.
Subject to this Fundamental policy limitation, the Fund may
acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered
under the Securities Act of 1933, as amended (the "1933 Act") and
cannot be offered for public sale in the United States without
first being registered under the 1933 Act. An investment is
considered "illiquid" if it cannot be disposed of within seven (7)
days in the normal course of business at approximately the same
amount at which it was valued in the Fund's portfolio. The price
the Fund's portfolio may pay for illiquid securities or receives
upon resale may be lower than the price paid or received for
similar securities with a more liquid market. Accordingly, the
valuations of these securities will reflect any limitations on
their liquidity.
The Fund may purchase Rule 144A securities eligible for sale
without registration under the 1933 Act. These securities may be
determined to be illiquid in accordance with the guidelines
established by The Managers Funds LLC and approved by the
Trustees. The Trustees will monitor these guidelines on a
periodic basis.
Investors should be aware that the Fund may be subject to a
risk if the Fund should decide to sell these securities when a
buyer is not readily available and at a price which the Fund
believes represents the security's value. In the case where an
illiquid security must be registered under the 1933 Act before it
may be sold, the Fund may be obligated to pay all or part of the
registration expenses. Therefore, a considerable time may elapse
between the time of the decision to sell and the time the Fund may
be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions
develop, the Fund may obtain a less favorable price than was
available when it had first decided to sell the security.
(7) Obligations of Domestic and Foreign Banks. Banks are
subject to extensive governmental regulations. These regulations
place limitations on the amounts and types of loans and other
financial commitments which may be made by the bank and the
interest rates and fees which may be charged on these loans and
commitments. The profitability of the banking industry depends on
the availability and costs of capital funds for the purpose of
financing loans under prevailing money market conditions. General
economic conditions also play a key role in the operations of the
banking industry. Exposure to credit losses arising from
potential financial difficulties of borrowers may affect the
ability of the bank to meet its obligations under a letter of
credit.
(8) Option Contracts.
Covered Call Options. The Fund may write ("sell") covered
call options on individual stocks, equity indices and futures
contracts, including equity index futures contracts. Written call
options must be listed on a national securities exchange or a
futures exchange.
A call option is a short-term contract that is generally for
no more than nine months. This contract gives a buyer of the
option, in return for a paid premium, the right to buy the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can purchase the
underlying security or contract regardless of its market price. A
call option is considered "covered" if the Fund that is writing
the option owns or has a right to immediately acquire the
underlying security or contract.
The Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Fund makes
a closing purchase transaction when it buys a call option on the
same security or contract that has the same price and expiration
date. As a result, the Fund will realize a loss if the amount
paid is less than the amount received from the sale. A closing
purchase transaction may only be made on an exchange that has a
secondary market for the option with the same price and expiration
date. There is no guarantee that the secondary market will have
liquidity for the option.
There are risks associated with writing covered call options.
The Fund is required to pay brokerage fees in order to write
covered call options as well as fees for the purchases and sales
of the underlying securities or contracts. The portfolio turnover
rate of the Fund may increase due to the Fund writing a covered
call option.
Covered Put Options. The Fund may write ("sell") covered put
options on individual stocks, equity indices and futures
contracts, including equity index futures contracts.
A put option is a short-term contract that is generally for
no more than nine months. This contract gives a buyer of the
option, in return for a paid premium, the right to sell the
underlying security or contract at an agreed upon price prior to
the expiration of the option. The buyer can sell the underlying
security or contract at the option price regardless of its market
price. A put option is considered "covered" if the Fund which is
writing the option owns or has a right to immediately acquire the
underlying security or contract. The seller of a put option
assumes the risk of the decrease of the value of the underlying
security. If the underlying security decreases, the buyer could
exercise the option and the underlying security or contract could
be sold to the seller at a price that is higher than its current
market value.
The Fund may terminate an obligation to sell an outstanding
option by making a "closing purchase transaction." The Fund makes
a closing purchase transaction when it buys a put option on the
same security or contract with the same price and expiration date.
As a result, the Fund will realize a loss if the amount paid is
less than the amount received from the sale. A closing purchase
transaction may only be made on an exchange that has a secondary
market for the option with the same price and expiration date.
There is no guarantee that the secondary market will have
liquidity for the option.
There are risks associated with writing covered put options.
The Fund is required to pay brokerage fees in order to write
covered put options as well as fees for the purchases and sales of
the underlying securities or contracts. The portfolio turnover
rate of the Fund may increase due to the Fund writing a covered
put option.
Dealer Options. Dealer Options are also known as
Over-the-Counter options ("OTC"). Dealer options are puts and
calls where the strike price, the expiration date and the premium
payment are privately negotiated. The bank's creditworthiness and
financial strength are judged by the Sub- Advisor and must be
determined to be as good as the creditworthiness and strength of
the banks to whom the Fund lends its portfolio securities.
Puts and Calls. The Fund may buy options on individual
stocks, equity indices and equity futures contracts. The Fund's
purpose in buying these puts and calls is to protect itself
against an adverse affect in changes of the general level of
market prices in which the Fund operates. A put option gives the
buyer the right upon payment to deliver a security or contract at
an agreed upon date and price. A call option gives the buyer the
right upon payment to ask the seller of the option to deliver the
security or contract at an agreed upon date and price.
(9) Rights and Warrants. The Fund may purchase rights and
warrants. Rights are short-term obligations issued in conjunction
with new stock issues. Warrants give the holder the right to buy
an issuer's securities at a stated price for a stated time.
(10) Securities Lending. The Fund may lend its portfolio
securities in order to realize additional income. This lending is
subject to the Fund's investment policies and restrictions. Any
loan of portfolio securities must be secured at all times by
collateral that is equal to or greater than the value of the loan.
If a borrower defaults, the Fund may use the collateral to satisfy
the loan. When cash is received as collateral, the Fund will
invest the cash in a variety of money market instruments and earn
income on such investments. However, the Fund will also bear the
risk of any loss on such investments.
(11) Segregated Accounts. The Fund will establish a
segregated account with its Custodian after it has entered into
either a repurchase agreement or certain options, futures and
forward contracts. The segregated account will maintain cash
and/or liquid securities that are equal in value to the
obligations in the agreement.
(12) Short Sales. The Fund may enter into short sales.
The Fund enters into a short sale when it sells a security that it
does not own. A broker retains the proceeds of the sales until
the Fund replaces the sold security. The Fund arranges with the
broker to borrow the security. The Fund must replace the security
at its market price at the time of the replacement. As a result,
the Fund may have to pay a premium to borrow the security and the
Fund may, but will not necessarily, receive any interest on the
proceeds of the sale. The Fund must pay to the broker any
dividends or interest payable on the security until the security
is replaced. Collateral, consisting of cash, or marketable
securities, is used to secure the Fund's obligation to replace the
security. The collateral is deposited with the broker. If the
price of the security sold increases between the time of the sale
and the time the Fund replaces the security, the Fund will incur a
loss. If the price declines during that period, the Fund will
realize a capital gain. The capital gain will be decreased by the
amount of transaction costs and any premiums, dividends or
interest the Fund will have to pay in connection with the short
sale. The loss will be increased by the amount of transaction
costs and any premiums, dividends or interest the Fund will have
to pay in connection with the short sale. For tax planning
reasons, the Fund may also engage in short sales with respect to a
security that the Fund currently holds or has a right to acquire,
commonly referred to as a "short against the box."
(13) When-Issued Securities. The Fund may purchase
securities on a when-issued basis. The purchase price and the
interest rate payable, if any, on the securities are fixed on the
purchase commitment date or at the time the settlement date is
fixed. The value of these securities is subject to market
fluctuation. For fixed-income securities, no interest accrues to
the Fund until a settlement takes place. At the time the Fund
makes a commitment to purchase securities on a when-issued basis,
the Fund will record the transaction, reflect the daily value of
the securities when determining the net asset value of the Fund,
and if applicable, calculate the maturity for the purposes of
determining the average maturity from the date of the transaction.
At the time of settlement, a when-issued security may be valued
below the amount of the purchase price.
To facilitate these transactions, the Fund will maintain a
segregated account with the Custodian that will include cash, or
marketable securities, in an amount which is at least equal to the
commitments. On the delivery dates of the transactions, the Fund
will meet its obligations from maturities or sales of the
securities held in the segregated account and/or from cash flow.
If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could incur a
loss or a gain due to market fluctuation. Furthermore, the Fund
may be at a disadvantage if the other party to the transaction
defaults. When-issued transactions may allow the Fund to hedge
against unanticipated changes in interest rates.
Diversification Requirements for the Fund
- -----------------------------------------
The Fund intends to meet the diversification requirements of
the 1940 Act as currently in effect. Investments not subject to
the diversification requirements could involve an increased risk
to an investor should an issuer, or a state or its related
entities, be unable to make interest or principal payments or
should the market value of such securities decline.
Fundamental Investment Restrictions
- ----------------------------------
The following investment restrictions have been adopted by
the Trust with respect to the Fund. Except as otherwise stated,
these investment restrictions are "fundamental" policies. A
"fundamental" policy is defined in the 1940 Act to mean that the
restriction cannot be changed without the vote of a "majority of
the outstanding voting securities" of the Fund. A majority of the
outstanding voting securities is defined in the 1940 Act as the
lesser of (a) 67% or more of the voting securities present at a
meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (b) more than
50% of the outstanding voting securities.
The Fund may not:
(1) Issue senior securities. For purposes of this
restriction, borrowing money, making loans, the issuance of shares
of beneficial interest in multiple classes or series, the deferral
of Trustees' fees, the purchase or sale of options, futures
contracts, forward commitments and repurchase agreements entered
into in accordance with the Fund's investment policies, are not
deemed to be senior securities.
(2) Borrow money, except (i) in amounts not to exceed 33
1/3% of the value of the Fund's total assets (including the amount
borrowed) taken at market value from banks or through reverse
repurchase agreements or forward roll transactions, (ii) up to an
additional 5% of its total assets for temporary purposes, (iii) in
connection with short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv)
the Fund may purchase securities on margin to the extent permitted
by applicable law. For purposes of this investment restriction,
investments in short sales, roll transactions, futures contracts,
options on futures contracts, securities or indices and forward
commitments, entered into in accordance with the Fund's investment
policies, shall not constitute borrowing.
(3) Act as underwriter, except to the extent that, in
connection with the disposition of portfolio securities, it may be
deemed to be an underwriter under certain federal securities laws.
(4) Purchase or sell real estate, except that the Fund may
(i) acquire or lease office space for its own use, (ii) invest in
securities of issuers that invest in real estate or interests
therein, (iii) invest in securities that are secured by real
estate or interests therein, (iv) purchase and sell mortgage-
related securities and (v) hold and sell real estate acquired by
the Fund as a result of the ownership of securities.
(5) Purchase or sell commodities or commodity contracts,
except the Fund may purchase and sell options on securities,
securities indices and currency, futures contracts on securities,
securities indices and currency and options on such futures,
forward foreign currency exchange contracts, forward commitments,
securities index put or call warrants and repurchase agreements
entered into in accordance with the Fund's investment policies.
(6) Make loans, except that the Fund may (i) lend
portfolio securities in accordance with the Fund's investment
policies up to 33 1/3% of the Fund's total assets taken at market
value, (ii) enter into repurchase agreements, (iii) purchase all
or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit, bankers'
acceptances, debentures or other securities, whether or not the
purchase is made upon the original issuance of the securities and
(iv) lend portfolio securities and participate in an interfund
lending program with other series of the Trust provided that no
such loan may be made if, as a result, the aggregate of such loans
would exceed 33 1/3% of the value of the Fund's total assets.
(7) Invest in interests in oil, gas, mineral leases or
other mineral exploration or development programs.
(8) Invest in companies for the purpose of exercising
control or management.
(9) Purchase securities of other investment companies,
except to the extent permitted by the 1940 Act.
(10) Purchase securities on margin (but the Fund may obtain
such short-term credits as may be necessary for the clearance of
transactions); provided that the deposit or payment by the Fund of
initial or variation margin in connection with options or futures
contracts is not considered the purchase of a security on margin.
(11) Make short sales of securities or maintain a short
position if, where added together, more than 25% of the value of
the Fund's net assets would be (i) deposited as collateral for the
obligation to replace securities borrowed to effect short sales,
and (ii) allocated to segregated accounts in connection with short
sales. Short sales "against the box" are not subject to this
limitation.
(12) Purchase any security, other than mortgage-backed
securities, obligations of the U.S. Government, its agencies or
instrumentalities, collateralized mortgage obligations, and shares
of other investment companies as permitted pursuant to exemptive
relief granted by the SEC, if as a result the Fund would have
invested more than 5% of its respective total assets in securities
of issuers (including predecessors) having a record of less than
three years of continuous operation.
(13) Purchase any security (other than obligations of the
U.S. Government, its agencies and instrumentalities and shares of
other investment companies as permitted pursuant to exemptive
relief granted by the SEC) if as a result 25% or more of the
Fund's total assets (determined at the time of investment) would
be invested in one or more issuers having their principal business
activities in the same industry.
If any percentage restriction described above for the Fund is
adhered to at the time of investment, a subsequent increase or
decrease in the percentage resulting from a change in the value of
the Fund's assets will not constitute a violation of the
restriction.
Temporary Defensive Position
- ----------------------------
For temporary or defensive purposes, the Fund may invest,
without limit, in cash or quality short-term debt securities
including repurchase agreements. To the extent that the Fund is
invested in these instruments, the Fund will not be pursuing its
investment objective.
Portfolio Turnover
- ------------------
The portfolio turnover rate is computed by dividing the
dollar amount of the securities which are purchased or sold
(whichever amount is smaller) by the average value of the
securities owned during the year. Short-term investments such as
commercial paper, short-term U.S. Government securities and
variable rate securities (those securities with intervals of less
than one-year) are not considered when computing the portfolio
turnover rate.
For the fiscal years ended October 31, 2001 and October 31, 2002,
the Fund had a portfolio turnover rate of 191% and 101%,
respectively.
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST
-------------------------------------------
The Trustees and Officers of the Trust, their business
addresses, principal occupations for the past five years and dates
of birth are listed below. The Trustees provide broad supervision
over the affairs of the Trust and the Fund. The Trustees are
experienced executives who meet periodically throughout the year
to oversee the Fund's activities, review contractual arrangements
with companies that provide services to the Fund, and review the
Fund's performance. Unless otherwise noted, the address of each
Trustee or Officer is the address of the Trust: 40 Richards
Avenue, Norwalk, Connecticut 06854.
The Trustees hold office without limit in time except that
(a) any Trustee may resign; and (b) any Trustee may be removed
with or without cause by action of the Trustees.
The President, Treasurer, and Secretary of the Trust are
elected by the Trustees and hold office until the next annual
election of officers and until their respective successors are
chosen and qualified.
Independent Trustees: The following Trustees are not
interested persons of the Trust within the meaning of the 1940 Act
("Independent Trustees").
<Table>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Jack W.Aber Trustee since Professor of Finance, 22 Trustee of Appleton Growth
DOB: 9/9/37 2000 Boston University Fund (1 portfolio);
School of Management Trustee of Third Avenue
(1972-Present) Trust (4 portfolios);
Trustee of Third Avenue
Variable Trust (1 portfolio)
- ------------- ---------------- --------------------- ------------- ----------------------------
William E. Trustee since President and Owner, 22 Trustee of Third Avenue
Chapman,II 2000 Longboat Retirement Trust (4 portfolios);
DOB: 9/23/41 Planning Solutions Trustee of Third Avenue
(1998-Present); Variable Trust (1 portfolio)
Hewitt Associates,LLC
(part time)(provider
of Retirement and
Investment Education
Seminars); President,
Retirement Plans Group,
Kemper Funds (1990-1998)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Edward J. Trustee since Partner, Hepburn Willcox 22 Trustee of Third Avenue
Kaier 2000 Hamilton & Putnam (1977- Trust (4 portfolios);
DOB: 9/23/45 Present) Trustee of Third Avenue
Variable Trust (1 portfolio)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Madeline H. Trustee since Member,Investment 14 None
McWhinney 2000 Committee, New Jersey
DOB :3/11/22 Supreme Court (1990-
Present); Member,
Advisory Board on
Professional Ethics,
New Jersey Supreme
Court (1983-1998);
President, Dale, Elliott
& Company, Inc.
(Management Consultant)
(1977-1994)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Steven J. Trustee since Executive Vice President, 14 Trustee of Professionally
Paggioli 2000 Secretary and Director, Managed Portfolios
DOB:4/3/50 Investment Company (19 portfolios)
Administration, LLC
(1990-2001); Trustee,
Professionally Managed
Portfolios, (1991-2001);
Consultant, formerly
Executive Vice President
and Director, The
Wadsworth Group (1986-
2001); Vice President,
Secretary and Director,
First Fund Distributors,
Inc.(1991-2001)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Eric Rakowski Trustee since Professor, University of 22 Trustee of Third Avenue
DOB:6/5/58 2000 California at Berkeley Trust (4 portfolios)
School of Law (1990- Director of Third Avenue
Present); Visiting Variable Trust (1 portfolio)
Professor, Harvard Law
School (1998-1999)
- ------------- ---------------- ---------------------- ------------- ---------------------------
9
<Page>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Thomas R. Trustee since Professor of Finance, 14 None
Schneeweis 2000 University of Massa-
DOB :5/10/47 chusetts (1985-Present);
Managing Director,
CISDM at the University
of Massachusetts, (1994-
Present); President and
Chief Executive Officer,
Schneeweis Partners, LLC
(2001-Present)
- ------------- ---------------- ---------------------- ------------- ---------------------------
</Table>
* The Fund complex consists of Managers Trust I, The Managers
Funds, Managers AMG Funds and Managers Trust.
Interested Trustees: The following Trustees are "interested
persons" of the Trust within the meaning of the 1940 Act. Mr.
Healey is an interested person of the Trust within the meaning of
the 1940 Act by virtue of his positions with, and interest in
securities of, Affiliated Managers Group, Inc. Mr. Lebovitz is an
interested person of the Trust within the meaning of the 1940 Act
by virtue of his positions with The Managers Funds LLC and
Managers Distributors, Inc.
<Table>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Sean M.Healey Trustee since President and Chief 22 None
DOB:5/9/61 2000 Operating Officer,
Affiliated Managers
Group,Inc.(1999-Present);
Director,Affiliated
Managers Group,Inc.
(2001-Present);
Executive Vice President,
Affiliated Managers Group,
Inc.(1995-1999); Vice
President, Goldman, Sachs
& Company (1987-1995)
- ------------- ---------------- --------------------- ------------- ---------------------------
Peter M. Trustee since President and Chief 22 None
Lebovitz 2002 and Executive Officer,
DO :1/18/55 President since The Managers Funds
2000 LLC (1999-Present);
President, Managers
Distributors, Inc. (2000-
Present); Director of
Marketing, The Managers
Funds, LP (1994-1999);
Director of Marketing,
Hyperion Capital
Management, Inc. (1993-
1994); Senior Vice
President, Greenwich
Asset Mgmt.,Inc. (1989-
1993)
- ------------- ---------------- --------------------- ------------- ---------------------------
</Table>
* The Fund complex consists of Managers Trust I, The Managers
Funds, Managers AMG Funds and Managers Trust.
Officers
- --------
<Table>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Sean M.Healey Trustee since President and Chief 22 None
DOB:5/9/61 2000 Operating Officer,
Affiliated Managers
Group,Inc.(1999-Present);
Director,Affiliated
Managers Group,Inc.
(2001-Present);
Executive Vice President,
Affiliated Managers Group,
Inc.(1995-1999); Vice
President, Goldman, Sachs
& Company (1987-1995)
- ------------- ---------------- --------------------- ------------- ---------------------------
Peter M. Trustee since President and Chief 22 None
Lebovitz 2002 and Executive Officer,
DO :1/18/55 President since The Managers Funds
2000 LLC (1999-Present);
President, Managers
Distributors, Inc. (2000-
Present); Director of
Marketing, The Managers
Funds, LP (1994-1999);
Director of Marketing,
Hyperion Capital
Management, Inc. (1993-
1994); Senior Vice
President, Greenwich
Asset Mgmt.,Inc. (1989-
1993)
- ------------- ---------------- --------------------- ------------- ---------------------------
</Table>
Trustee Share Ownership
- -----------------------
<Table>
Dollar Range of Aggregate Dollar
Equity Securities in Range of Equity
the Fund Beneficially Securities in
Owned as of All Registered
December 31, 2002 Investment Companies
Overseen by Trustee in
Family of Investment
Companies(1) Beneficially
Owned as of December 31, 2002
---------------------- -----------------------------
Independent Trustees:
- ---------------------
Jack W. Aber None $10,001 to $50,000
William E. Chapman II $1 to $10,000 Over $100,000
Edward J. Kaier None Over $100,000
Madeline H. McWhinney None $50,001 to $100,000
Steven J. Paggioli None $50,001 to $100,000
Eric Rakowski None $50,001 to $100,000
Thomas R. Schneeweis $10,001 to $50,000 $10,001 to $50,000
- ------------------------------
Interested Trustees:
- --------------------
Sean M. Healey None $50,001 to $100,000
Peter M. Lebovitz None Over $100,000
</Table>
(1) The Managers Funds Family of Funds consists of Managers
Trust I, Managers AMG Funds, The Managers Funds and Managers
Trust II
Audit Committee
- ---------------
The Board of Trustees has an Audit Committee consisting of
the Independent Trustees. Under the terms of its charter, the
Committee (a) acts for the Trustees in overseeing the Trust's
financial reporting and auditing processes, (b) reviews and
assesses the performance of the Trust's independent public
accountants, (c) makes recommendations to the full board annually
as to the appointment of independent public accountants, (d) meets
periodically with the independent accountants to review the annual
audits and the services provided by the independent public
accountants and (e) reviews and reports to the full Board with
respect to any material accounting, tax, valuation or record
keeping issues that may affect the Trust, its financial statements
or the amount of any dividend or distribution right, among other
matters. The Audit Committee met twice during the most recent
fiscal year.
Trustees' Compensation
- ----------------------
<Table>
Aggregate Total Compensation
Compensation From from the Fund
Name of Trustee the Fund (a) Complex Paid to Trustees (b)
- --------------------------- ------------------- ----------------------------
Independent Trustees:
- ---------------------
Jack W. Aber $4,068 $32,000
William E. Chapman, II $4,068 $32,500
Edward J. Kaier $4,068 $32,500
Madeline H. McWhinney $4,068 $27,500
Steven J. Paggioli $4,068 $26,500
Eric Rakowski $4,068 $32,000
Thomas R. Schneeweis $4,068 $26,500
Interested Trustees:
- --------------------
Sean M. Healey None None
Peter M. Lebovitz None None
</Table>
(a) Compensation is calculated for the Fund's fiscal year ended
October 31, 2002. The Fund does not provide any pension or
retirement benefits for the Trustees.
(b) Total compensation includes compensation paid during the 12-
month period ending October 31, 2002 for services as a
Trustee of Managers AMG Funds, The Managers Funds, Managers
Trust I and Managers Trust II.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
- ---------------
As of July 30, 2003, Charles Schwab & Co., Inc., located
at 101 Montgomery Street, San Francisco, CA, a corporation
organized under the laws of California, "controlled" (within the
meaning of the 1940 Act) the Fund. An entity or person that
"controls" the Fund could have effective voting control over the
Fund.
Principal Holders
- -----------------
As of July 30, 2003, the following persons or entities owned of
record more than 5% of the outstanding shares of the Fund:
<Table>
Name and Address Percentage Ownership
- ---------------- --------------------
Charles Schwab & Co., Inc. (1)
Special Custody A/C FBO Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122 22%
Citcam Stock Co. (1)
c/o Citizens National Bank
P.O. Box 111
Cameron, TX 76520-0111 18%
Fiduciary Trust Co. Intl.
FBO Marjorie B. Pelino-Large Cap
P.O. Box 3199
Church Street Station
New York, NY 10008-3199 11%
PFPC Brokerage Services (1)
House Account FBO Managers Funds
211 South Gulph Road
King of Prussia, PA 19406-3101 7%
</Table>
(1) This shareholder is an omnibus processing organization
holding Fund shares on behalf of its customers.
The Trust did not know of any person who, as of July 30, 2003,
beneficially owned 5% or more of the outstanding shares of
the Fund.
Management Ownership
- --------------------
As of July 30, 2003, all management personnel (i.e.,
Trustees and Officers) as a group owned beneficially less than 1%
of the outstanding shares of the Fund.
MANAGEMENT OF THE FUND
----------------------
Investment Manager and Sub-Advisor
- ----------------------------------
The Trustees provide broad supervision over the operations
and affairs of the Trust and the Fund. The Managers Funds LLC
(the "Investment Manager") serves as investment manager to the
Fund. The Managers Funds LLC is a subsidiary of AMG, and AMG
serves as the Managing Member of the LLC. AMG is located at 600
Hale Street, Prides Crossing, Massachusetts 01965. Managers
Distributors, Inc. ("MDI"), a wholly-owned subsidiary of The
Managers Funds LLC, serves as distributor to the Fund.
The Investment Manager and its corporate predecessors have
had over 20 years of experience in evaluating sub-advisors for
individuals and institutional investors. As part of its services
to the Fund under an investment management agreement with the
Trust (the "Investment Management Agreement"), the Investment
Manager also carries out the daily administration of the Trust and
Fund. The Investment Manager receives no additional compensation
from the Fund for its administration services. For its investment
management services, the Investment Manager receives an investment
management fee from the Fund. All or a portion of the investment
management fee paid by the Fund to the Investment Manager is used
to pay the advisory fees of First Quadrant, L.P., the sub-advisor
which manages the assets of the Fund (the "Sub-Advisor" or "First
Quadrant. First Quadrant was selected by the Investment Manager,
subject to the review and approval of the Trustees. First
Quadrant is the successor firm to First Quadrant Corporation,
which was formed in 1998. AMG indirectly owns a majority interest
in First Quadrant. As of March 31, 2003, First Quadrant's assets
under management totaled approximately $13 billion. First
Quadrant's address is 800 E. Colorado Boulevard, Suite 900,
Pasadena, California, 91101. Christopher G. Luck and R. Max
Darnell are the lead portfolio managers for the Fund.
The Sub-Advisor has discretion, subject to oversight by the
Trustees and the Investment Manager, to purchase and sell
portfolio assets, consistent with the Fund's investment
objectives, policies and restrictions. Generally, the services
which the Sub-Advisor provides to the Fund are limited to asset
management and related recordkeeping services. The Sub-Advisor
may also serve as a discretionary or non-discretionary investment
advisor to management or advisory accounts which are unrelated in
any manner to the Investment Manager or its affiliates.
Compensation of Investment Manager and Sub-Advisor by the Fund
- --------------------------------------------------------------
As compensation for the investment management services
rendered and related expenses under the Investment Management
Agreement, the Fund has agreed to pay the Investment Manager an
investment management fee, which is computed daily as a percentage
of the average of the value of the net assets of the Fund and may
be paid monthly. As compensation for the investment management
services rendered and related expenses under the Sub-Advisory
Agreement, the Investment Manager has agreed to pay the
Sub-Advisor a fee (net of all mutually agreed upon fee waivers and
reimbursements required by applicable law) for managing the
portfolio, which is also computed daily and paid monthly. The fee
paid to the Sub-Advisor is paid out of the fee the Investment
Manager receives from the Fund and does not increase the expenses
of the Fund.
For the fiscal year ended October 31, 2002 and for the
period December 18, 2000 (commencement of operations) through
October 31, 2001, no fee was paid under the Investment Management
Agreement with respect to the Fund. If the Investment Manager had
not agreed to waive all or a portion of its fees in connection
with a contractual agreement to limit the Fund's total annual
operating expenses to 1.00% of average daily net assets during the
periods, the fee under that agreement would have been $54,658 and
$19, 951, respectively.
Fee Waivers and Expense Limitations
- -----------------------------------
The Investment Manager has contractually agreed, effective
August 1, 2003 through August 1, 2004, to limit total annual fund
operating expenses for the Fund (exclusive of taxes, interest,
brokerage costs and extraordinary items) to 0.99%, subject to
later reimbursement by the Fund in certain circumstances. The
waiver may, at the discretion of the Investment Manager, be
continued beyond such point. See "Managers Trust I" in the
Prospectus for further information.
The Investment Manager has decided to waive all or a portion
of its fee from the Fund or reimburse expenses to the Fund for a
variety of reasons, including attempting to make the Fund's
performance more competitive as compared to similar funds.
Investment Management and Sub-Advisory Agreements
- -------------------------------------------------
The Managers Funds LLC serves as investment manager to the
Fund under the Investment Management Agreement. The Investment
Management Agreement permits the Investment Manager to from time
to time engage one or more sub-advisors to assist in the
performance of its services. Pursuant to the Investment
Management Agreement, the Investment Manager has entered into a
sub-advisory agreement with First Quadrant, dated July 31, 2003
(the "Sub-Advisory Agreement").
The Investment Management Agreement and the Sub-Advisory
Agreement provide for an initial term of two years and thereafter
shall continue in effect from year to year so long as such
continuation is specifically approved at least annually (i) by
either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the
Fund, and (ii) in either event by the vote of a majority of the
Trustees of the Trust who are not parties to the agreements or
"interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of
voting on such continuance. The Investment Management Agreement
and the Sub-Advisory Agreement may be terminated, without penalty,
by the Board of Trustees, by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) by the Investment
Manager or (in the case of the Sub-Advisory Agreement) by the Sub-
Advisor on not more than 60 days' written notice to the other
party and to the Fund. The Investment Management Agreement and
the Sub-Advisory Agreement terminate automatically in the event of
assignment, as defined under the 1940 Act and regulations
thereunder.
The Investment Management Agreement provides that the
Investment Manager is specifically responsible for:
* developing and furnishing continuously an investment
program and strategy for the Fund in compliance with the
Fund's investment objective and policies as set forth in
the Trust's current Registration Statement;
* providing research and analysis relative to the
investment program and investments of the Fund;
* determining (subject to the overall supervision and
review of the Board of Trustees of the Trust) what
investments shall be purchased, held, sold or exchanged
by the Fund and what portion, if any, of the assets of
the Fund shall be held in cash or cash equivalents; and
* making changes on behalf of the Trust in the investments
of the Fund.
Under the Sub-Advisory Agreement, First Quadrant is
responsible for performing substantially these same advisory
services for the Investment Manager and the Fund.
The Investment Management Agreement also provides that the
Investment Manager shall furnish the Fund with office space and
facilities, services of executives and administrative personnel
and certain other administrative services. The Investment Manager
compensates all executive and clerical personnel and Trustees of
the Trust if such persons are employees of the Investment Manager
or its affiliates.
The Fund pays all expenses not borne by its Investment
Manager or Sub-Advisor including, but not limited to, the charges
and expenses of the Fund's custodian and transfer agent,
independent auditors and legal counsel for the Fund and the
Trust's independent Trustees, 12b-1 fees, if any, all brokerage
commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses for
registration or qualification of its shares under federal and
state securities laws, all expenses of shareholders' and Trustees'
meetings and of preparing, printing and mailing reports to
shareholders and the compensation of Trustees who are not
directors, officers or employees of the Investment Manager, Sub-
Advisor or their affiliates, other than affiliated registered
investment companies.
The Sub-Advisory Agreement requires the Sub-Advisor to
provide fair and equitable treatment to the Fund in the selection
of portfolio investments and the allocation of investment
opportunities. However, it does not obligate the Sub-Advisor to
acquire for the Fund a position in any investment which any of the
Sub-Advisor's other clients may acquire. The Fund shall have no
first refusal, co-investment or other rights in respect of any
such investment, either for the Fund or otherwise.
Although the Sub-Advisor makes investment decisions for the
Fund independent of those for its other clients, it is likely that
similar investment decisions will be made from time to time. When
the Fund and another client of a Sub-Advisor are simultaneously
engaged in the purchase or sale of the same security, the
transactions are, to the extent feasible and practicable, averaged
as to price and the amount is allocated between the Fund and the
other client(s) pursuant to a formula considered equitable by the
Sub-Advisor. In specific cases, this system could have an adverse
affect on the price or volume of the security to be purchased or
sold by the Fund. However, the Trustees believe, over time, that
coordination and the ability to participate in volume transactions
should benefit the Fund.
Approval of Investment Management and Sub-Advisory Agreements
- -------------------------------------------------------------
At a meeting of the Board of Trustees held on March 14,
2003, the Trustees, including all of the Independent Trustees,
approved the Investment Management Agreement and the Sub-Advisory
Agreement contingent upon shareholder approval of both agreements
and consummation of the Reorganization. The Independent Trustees
were separately represented by independent counsel in connection
with their consideration of the approval of these agreements. In
considering the Investment Management and Sub-Advisory Agreements,
the Trustees considered a variety of information relating to FQ
Fund, the Investment Manager and First Quadrant, including fee and
expense information for the Fund prior to and after giving effect
to the Combination. The Trustees considered information relating
to First Quadrant's financial condition, operations, personnel,
investment philosophy and investment strategies and techniques as
well as the performance of FQ Fund. The Trustees also considered
the compliance capabilities of the Investment Manager and First
Quadrant, including their personal trading policies and
procedures.
The Trustees also considered the Investment Manager's performance
of similar duties for FQ Fund and other series of Managers AMG
Funds. During the review process, representatives of the
Investment Manager and First Quadrant provided an oral
presentation to the Trustees and answered questions concerning
these and related matters. In approving the agreements, the
Trustees considered, among other things, the manner in which
responsibility for advisory, administrative and distribution
activities would be allocated between the Investment Manager and
First Quadrant. In addition, the Trustees considered the
commitments of the Investment Manager and First Quadrant to
maintain expense limitations for the Fund.
In the course of their deliberations, the Trustees reached the
following conclusions, among others: (A) the Investment Manager
has demonstrated that it possesses the capability and resources to
perform the duties required of it under the Investment Management
Agreement; (B) First Quadrant's personnel are well qualified to
manage the Fund's assets in accordance with the Fund's investment
objectives and policies as amended in connection with the
Combination; (C) the Investment Manager and First Quadrant
maintain appropriate compliance programs; (D) the performance of
FQ Fund is reasonable in relation to the performance of funds with
similar investment objectives and to relevant indices; and (E) the
Fund's advisory expenses under the Investment Management and Sub-
Advisory Agreements are expected to be reasonable in relation to
those of similar funds and to the services provided by the
Investment Manager and First Quadrant. The Trustees noted that
the Investment Management and Sub-Advisory Agreements would result
in higher advisory fees for the Fund. The Trustees concluded that
this additional expense was appropriate in light of the decrease
in overall Fund expenses anticipated to be realized in connection
with First Quadrant's implementation of the Fund's revised
investment strategy following the Combination and (b) the
additional expertise required of First Quadrant to select and
monitor individual equity securities and manage the Fund on a tax
efficient basis under the Fund's revised investment strategy.
Based on their conclusions, the Trustees determined that approval
of the Investment Management and Sub-Advisory Agreements would be
in the interests of the Fund and its shareholders.
Proxy Voting Policies and Procedures
Proxies for the Fund's portfolio securities are voted in
accordance with First Quadrant's proxy voting policies and
procedures, which are set forth in Appendix A to this Statement of
Additional Information, except that for a proxy with respect to
shares of an unaffiliated money market fund used as a cash
management vehicle (a "Cash Sweep Fund"), the Investment Manager
typically votes the proxy as recommended by the Cash Sweep Fund's
directors.
Reimbursement Agreement
- -----------------------
Under the Investment Management Agreement, the Investment
Manager provides a variety of administrative services to the Fund
and, under the distribution agreement between MDI and the Fund,
MDI provides a variety of shareholder and marketing services to
the Fund. MDI receives no additional compensation from the Fund
for these services. Pursuant to a Reimbursement Agreement between
the Investment Manager and First Quadrant, First Quadrant
reimburses the Investment Manager for the costs the Investment
Manager bears in providing such services to the Fund.
Code of Ethics
- --------------
The Trustees have adopted a Code of Ethics under Rule 17j-1
of the 1940 Act on behalf of the Trust. The Code of Ethics of the
Trust incorporates the codes of ethics of the Investment Manager,
the Distributor and the Sub-Advisor, which codes are applicable to
"access persons" of the Trust that are also employees of the
Investment Manager, the Distributor or the Sub-Advisor,
respectively. In combination, these codes of ethics generally
require access persons to preclear any personal securities
investment (with limited exceptions such as government
securities). The preclearance requirement and associated
procedures are designed to identify any substantive prohibition or
limitation applicable to the proposed investment. Subject
compliance with these preclearance procedures, access persons of
the Trust who are also access persons of the Investment Manager,
the Distributor or the Sub-Advisor may invest in securities,
including securities that may be purchased or held by the Fund.
Distribution Arrangements
- -------------------------
MDI acts as the distributor (the "Distributor") in
connection with the offering of the Fund's shares. The
Distributor bears certain expenses associated with the
distribution and sale of shares of the Fund. The Distributor acts
as agent in arranging for the sale of the Fund's shares without
sales commission or other compensation.
The Distribution Agreement between the Trust and the
Distributor may be terminated by either party under certain
specified circumstances and will automatically terminate on
assignment in the same manner as the Investment Management
Agreement. The Distribution Agreement may be continued annually
so long as such continuation is specifically approved at least
annually (i) by either the Trustees of the Trust or by vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, and (ii) in either event by the vote of a
majority of the Trustees of the Trust who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose
of voting on such continuance.
Custodian
- ---------
The Bank of New York ("BNY" or the "Custodian"), 100 Church
Street, New York, New York, is the Custodian for the Fund. It is
responsible for holding all cash assets and all portfolio
securities of the Fund, releasing and delivering such securities
as directed by the Fund, maintaining bank accounts in the names of
the Fund, receiving for deposit into such accounts payments for
shares of the Fund, collecting income and other payments due the
Fund with respect to portfolio securities and paying out monies of
the Fund. In addition, when the Fund trades in futures contracts
and those trades would require the deposit of initial margin with
a futures commission merchant ("FCM"), the Fund will enter into a
separate special custodian agreement with a custodian in the name
of the FCM which agreement will provide that the FCM will be
permitted access to the account only upon the Fund's default under
the contract.
The Custodian is authorized to deposit securities in
securities depositories or to use the services of sub- custodians,
including foreign sub-custodians, to the extent permitted by and
subject to the regulations of the SEC.
Transfer Agent
- --------------
Boston Financial Data Services, Inc., P.O. Box 8517, Boston,
Massachusetts 02266-8517, is the transfer agent (the "Transfer
Agent") for the Fund. PFPC Brokerage Services, P.O. Box 9847,
Pawtucket, Rhode Island 02940-8047, is the sub-transfer agent for
the ManagersChoice asset allocation accounts.
Independent Public Accountants
- -----------------------------
PricewaterhouseCoopers LLP, 160 Federal Street, Boston,
Massachusetts 02110, is the independent public accountant for the
Fund. PricewaterhouseCoopers LLP conducts an annual audit of the
financial statements of the Fund, assists in the preparation
and/or review of the Fund's federal and state income tax returns
and may provide other audit, tax and related services.
BROKERAGE ALLOCATION AND OTHER PRACTICES
----------------------------------------
The Sub-Advisory Agreement provides that the Sub-Advisor
place all orders for the purchase and sale of securities which are
held in the Fund's portfolio. In executing portfolio transactions
and selecting brokers or dealers, it is the policy and principal
objective of the Sub-Advisor to seek best price and execution. It
is expected that securities will ordinarily be purchased in the
primary markets. The Sub-Advisor shall consider all factors that
it deems relevant when assessing best price and execution for the
Fund, including the breadth of the market in the security, the
price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of the
commission, if any (for the specific transaction and on a
continuing basis).
In addition, when selecting brokers to execute transactions
and in evaluating the best available net price and execution, the
Sub-Advisor is authorized by the Trustees to consider the
"brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended),
provided by the broker. The Sub-Advisor is also authorized to
cause the Fund to pay a commission to a broker who provides such
brokerage and research services for executing a portfolio
transaction which is in excess of the amount of commission another
broker would have charged for effecting that transaction. The
Sub-Advisor must determine in good faith, however, that such
commission was reasonable in relation to the value of the
brokerage and research services provided viewed in terms of that
particular transaction or in terms of all the accounts over which
the Sub-Advisor exercises investment discretion. Brokerage and
research services received from such brokers will be in addition
to, and not in lieu of, the services required to be performed by
each Sub-Advisor. The Fund may purchase and sell portfolio
securities through brokers who provide the Fund with research
services.
The Trust may enter into arrangements with various brokers
pursuant to which a portion of the commissions paid by the Fund
may be directed by the Fund to pay expenses of the Fund.
Consistent with its policy and principal objective of seeking best
execution, the Sub-Advisor may consider these brokerage recapture
arrangements in selecting brokers to execute transactions for the
Fund.
The Trustees will periodically review the total amount of
commissions paid by the Fund to determine if the commissions paid
over representative periods of time were reasonable in relation to
commissions being charged by other brokers and the benefits to the
Fund of using particular brokers or dealers. It is possible that
certain of the services received by the Sub-Advisor attributable
to a particular transaction will primarily benefit one or more
other accounts for which investment discretion is exercised by the
Sub-advisor.
The fees of the Sub-Advisor are not reduced by reason of
their receipt of such brokerage and research services. Generally,
the Sub-Advisor does not provide any services to the Fund except
portfolio investment management and related record-keeping
services.
During the period December 18, 2000 (commencement of
operations) through October 31, 2001 and for the fiscal year ended
October 31, 2002, the Fund paid brokerage commissions of $7,552
and $7,194, respectively.
PURCHASE, REDEMPTION AND PRICING OF SHARES
------------------------------------------
Purchasing Shares
- -----------------
Investors may open accounts with the Fund through their
financial planners or investment professionals, or by the Trust in
limited circumstances as described in the Prospectus. Shares may
also be purchased through bank trust departments on behalf of
their clients, other investors such as corporations, endowment
funds and charitable foundations, and tax-exempt employee welfare,
pension and profit-sharing plans. There are no charges by the
Trust for being a customer for this purpose. The Trust reserves
the right to determine which customers and which purchase orders
the Trust will accept.
Certain investors may purchase or sell Fund shares through
broker-dealers or through other processing organizations that may
impose transaction fees or other charges in connection with this
service. Shares purchased in this way may be treated as a single
account for purposes of the minimum initial investment. The Fund
may from time to time make payments to such broker-dealers or
processing organizations for certain recordkeeping services.
Investors who do not wish to receive the services of a
broker-dealer or processing organization may consider investing
directly with the Trust. Shares held through a broker-dealer or
processing organization may be transferred into the investor's
name by contacting the broker-dealer or processing organization or
the Transfer Agent. Certain processing organizations may receive
compensation from the Distributor, the Investment Manager and/or
the Sub-Advisor.
Purchase orders received by the Fund before the close of
regular trading of the New York Stock Exchange (usually 4:00 p.m.
New York Time), c/o Boston Financial Data Services, Inc. at the
address listed in the Prospectus on any Business Day will receive
the net asset value computed that day. Orders received after that
time from certain processing organizations which have entered into
special arrangements with the Investment Manager will also receive
that day's offering price. The broker-dealer, omnibus processor
or investment professional is responsible for promptly
transmitting orders to the Trust. Orders transmitted to the Trust
at the address indicated in the Prospectus will be promptly
forwarded to the Transfer Agent.
Federal Funds or Bank Wires used to pay for purchase orders
must be in U.S. dollars and received in advance, except for
certain processing organizations which have entered into special
arrangements with the Trust. Purchases made by check are effected
when the check is received, but are accepted subject to collection
at full face value in U.S. funds and must be drawn in U.S. Dollars
on a U.S. bank.
To ensure that checks are collected by the Trust, if shares
purchased by check are sold before the check has cleared, the
redemption proceeds will not be processed until the check has
cleared. This may take up to 15 days unless arrangements are made
with the Investment Manager. However, during this 15-day period,
such shareholder may exchange such shares into any series of
Managers Trust I, Managers AMG Funds, The Managers Funds, or
Managers Trust II, subject to applicable restrictions such as
minimum investment amounts. The 15-day holding period for
redemption proceeds would still apply to shares purchased through
such exchanges.
If the check accompanying any purchase order does not clear,
or if there are insufficient funds in your bank account, the
transaction will be canceled and you will be responsible for any
loss the Trust incurs. For current shareholders, the Fund can
redeem shares from any identically registered account in the Fund
as reimbursement for any loss incurred. The Trust has the right
to prohibit or restrict all future purchases in the Trust in the
event of any nonpayment for shares. Third party checks which are
payable to an existing shareholder who is a natural person (as
opposed to a corporation or partnership) and endorsed over to the
Fund or the Custodian will be accepted.
In the interest of economy and convenience, share
certificates will not be issued. All share purchases are
confirmed to the record holder and credited to such holder's
account on the Trust's books maintained by the Transfer Agent.
Redeeming Shares
- ----------------
Any redemption orders received in proper form by the Trust
before the close of regular trading on the New York Stock Exchange
(the "NYSE") (usually 4:00 p.m. New York Time) on any Business
Day will receive the net asset value determined at the close of
trading on that Business Day.
Redemption orders received after 4:00 p.m. will be redeemed
at the net asset value determined at the close of trading on the
next Business Day. Redemption orders transmitted to the Trust at
the address indicated in the Prospectus will be promptly forwarded
to the Transfer Agent. If you are trading through a broker-dealer
or investment advisor, such investment professional is responsible
for promptly transmitting orders. There is no redemption charge.
The Fund reserves the right to redeem shareholder accounts (after
60 days notice) when the value of the Fund shares in the account
falls below $5,000 due to redemptions. Whether the Fund will
exercise its right to redeem shareholder accounts will be
determined by the Investment Manager on a case-by-case basis.
If the Fund determines that it would be detrimental to the
best interest of the remaining shareholders of the Fund to make
payment wholly or partly in cash, payment of the redemption price
may be made in whole or in part by a distribution in kind of
securities from the Fund, in lieu of cash, in conformity with the
applicable rule of the SEC. If shares are redeemed in kind, the
redeeming shareholder might incur transaction costs in converting
the assets to cash. The method of valuing portfolio securities is
described under the "Net Asset Value," and such valuation will be
made as of the same time the redemption price is determined.
Investors should be aware that redemptions from the Fund may
not be processed if a redemption request is not submitted in
proper form. To be in proper form, the request must include the
shareholder's taxpayer identification number, account number, Fund
number and signatures of all account holders. All redemptions
will be mailed to the address of record on the shareholder's
account. In addition, if shares purchased by check are sold
before the check has cleared, the redemption proceeds will not be
sent to the shareholder until the check has cleared. This may
take up to 15 days unless arrangements are made with the
Investment Manager. The Trust reserves the right to suspend the
right of redemption and to postpone the date of payment upon
redemption beyond seven days as follows: (i) during periods when
the NYSE is closed for other than weekends and holidays or when
trading on the NYSE is restricted as determined by the SEC by rule
or regulation, (ii) during periods in which an emergency, as
determined by the SEC, exists that causes disposal by the Fund of,
or evaluation of the net asset value of, portfolio securities to
be unreasonable or impracticable, or (iii) for such other periods
as the SEC may permit.
Exchange of Shares
- -------------------
An investor may exchange shares from the Fund into shares of
any series of Managers Trust I, Managers AMG Funds, The Managers
Funds, or Managers Trust II. Since an exchange is the sale of
shares of the fund exchanged out of and the purchase of shares of
the fund exchanged into, the usual purchase and redemption
procedures, requirements and restrictions apply to each exchange.
Investors may exchange only into accounts that are registered in
the same name with the same address and taxpayer identification
number. In addition, an investor who intends to continue to
maintain an account in the Fund may make an exchange out of the
Fund only if following the exchange the investor would continue to
meet the Fund's minimum investment amount. Settlement on the
purchase of shares of any series of Managers AMG Funds, The
Managers Funds, Managers Trust I or Managers Trust II will occur
when the proceeds from the redemption become available.
Shareholders are subject to federal income tax and may recognize
capital gains or losses on the exchange for federal income tax
purposes. The Trust reserves the right to discontinue, alter or
limit the exchange privilege at any time.
Net Asset Value
- ----------------
The Fund computes its net asset value once daily on Monday
through Friday on each day on which the NYSE is open for trading,
at the close of business of the NYSE, usually 4:00 p.m. New York
Time. The net asset value will not be computed on the day the
following legal holidays are observed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund may close for purchases and redemptions at such other
times as may be determined by the Trustees to the extent permitted
by applicable law. The time at which orders are accepted and
shares are redeemed may be changed in case of an emergency or if
the NYSE closes at a time other than 4:00 p.m. New York Time.
The net asset value of the Fund is equal to the value of the
Fund's assets minus liabilities divided by the number of shares
outstanding. Fund securities listed on an exchange are valued at
the last quoted sale price on the exchange where such securities
are principally traded on the valuation date, prior to the close
of trading on the NYSE, or, lacking any sales, at the last quoted
bid price on such principal exchange prior to the close of trading
on the NYSE. Over-the-counter securities for which market
quotations are readily available are valued at the last sale price
or, lacking any sales, at the last quoted bid price on that date
prior to the close of trading on the NYSE. Securities and other
instruments for which market quotations are not readily available
are valued at fair value, as determined in good faith and pursuant
to procedures established by the Trustees.
Dividends and Distributions
- ---------------------------
The Fund declares and pays dividends and distributions as
described in the Prospectus.
If a shareholder has elected to receive dividends and/or
their distributions in cash and the postal or other delivery
service is unable to deliver the checks to the shareholder's
address of record, the dividends and/or distribution will
automatically be converted to having the dividends and/or
distributions reinvested in additional shares. No interest will
accrue on amounts represented by uncashed dividend or redemption
checks.
CERTAIN TAX MATTERS
-------------------
The following summary of certain federal tax income
considerations is based on current law, is for general information
only and is not tax advice. This discussion does not address all
aspects of taxation that may be relevant to particular
shareholders in light of their own investment or tax
circumstances, or to particular types of shareholders (including
insurance companies, financial institutions or brokerage dealers,
foreign corporations, and persons who are not citizens or
residents of the United States) subject to special treatment under
the federal income tax laws.
EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF AN
INVESTMENT IN THE FUND, INCLUDING THE EFFECT AND APPLICABILITY OF
STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS
OF CHANGES IN FEDERAL OR OTHER TAX LAWS. THIS DISCUSSION IS NOT
INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.
Federal Income Taxation of Funds-in General
- -------------------------------------------
The Fund intends to qualify and elect to be treated each
taxable year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), although it cannot give complete assurance that it will
qualify to do so. Accordingly, the Fund must, among other things,
(a) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock,
securities or foreign currencies, or other income (including, but
not limited to, gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); and (b) invest the
Fund's assets (as of the close of each quarter of the taxable
year) in such a manner that (i) at least 50% of the value of the
Fund's total assets be represented by cash and cash items
(including receivables), Government securities and securities of
other regulated investment companies, and other securities limited
in respect of any one issuer (except with regard to certain
investment companies furnishing capital to development
corporations) to an amount not greater in value than 5% of the
value of the total assets of the Fund and to not more than 10% of
the outstanding voting securities of such issuer, and (ii) no more
than 25% of the value of the Fund's total assets be invested in
the securities (other than Government securities or the securities
of other regulated investment companies) of any one issuer, or two
or more issuers each of which the Fund owns 20% or more of the
total combined voting power of all classes of stock entitled to
vote, and are engaged in the same or similar trades or businesses
or related trades or businesses.
If the Fund should fail to qualify as a regulated investment
company in any year, it would lose the beneficial tax treatment
accorded regulated investment companies under Subchapter M of the
Code and all of its taxable income would be subject to tax at
regular corporate rates without any deduction for distributions to
shareholders, and such distributions will be taxable to
shareholders as corporate dividends to the extent of the Fund's
current or accumulated earnings and profits. Also, the
shareholders, if they received a distribution in excess of current
or accumulated earnings and profits, would receive a return of
capital that would reduce the basis of their shares of the Fund to
the extent thereof. Any distribution in excess of a shareholder's
basis in the shareholder's shares would be taxable as gain
realized from the sale of such shares.
The Fund will be liable for a nondeductible 4% excise tax on
amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement. To avoid the tax, during
each calendar year the Fund must distribute an amount equal to at
least 98% of the sum of its ordinary income (excluding tax-exempt
interest income and not taking into account any capital gains or
losses) for the calendar year, and its net capital gain net income
for the 12-month period ending on October 31, in addition to any
undistributed portion of the respective balances from the prior
year. For that purpose, any income or gain retained by the Fund
that is subject to corporate tax will be considered to have been
distributed by year-end. The Fund intends to make sufficient
distributions to avoid this 4% excise tax.
Taxation of the Fund's Investments
- ----------------------------------
Original Issue Discount; Market Discount. For federal
income tax purposes, debt securities purchased by the Fund may be
treated as having original issue discount. Original issue
discount represents interest for federal income tax purposes and
can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price.
Original issue discount is treated for federal income tax purposes
as income earned by the Fund, whether or not any income is
actually received, and therefore is subject to the distribution
requirements of the Code. Generally, the amount of original issue
discount is determined on the basis of a constant yield to
maturity which takes into account the compounding of accrued
interest. Under Section 1286 of the Code, an investment in a
stripped bond or stripped coupon may result in original issue
discount.
Debt securities may be purchased by the Fund at a discount
that exceeds the original issue discount plus previously accrued
original issue discount remaining on the securities, if any, at
the time the Fund purchases the securities. This additional
discount represents market discount for federal income tax
purposes. In the case of any debt security issued after July 18,
1984 and to obligations issued on or before July 18, 1984 that
were purchased after April 30, 1993, having a fixed maturity date
of more than one year from the date of issue and having market
discount, the gain realized on disposition will be treated as
interest to the extent it does not exceed the accrued market
discount on the security (unless the Fund elects to include such
accrued market discount in income in the tax year to which it is
attributable). Generally, market discount is accrued on a daily
basis. The Fund may be required to capitalize, rather than deduct
currently, part or all of any direct interest expense incurred or
continued to purchase or carry any debt security having market
discount, unless the Fund makes the election to include market
discount currently. Because the Fund must include original issue
discount in income, it will be more difficult for the Fund to make
the distributions required for the Fund to maintain its status as
a regulated investment company under Subchapter M of the Code or
to avoid the 4% excise tax described above.
Options and Futures Transactions. Certain of the Fund's
investments may be subject to provisions of the Code that (i)
require inclusion of unrealized gains or losses in the Fund's
income for purposes of the 90% test, and require inclusion of
unrealized gains in the Fund's income for purposes of the excise
tax and the distribution requirements applicable to regulated
investment companies; (ii) defer recognition of realized losses;
and (iii) characterize both realized and unrealized gain or loss
as short-term and long-term gain, irrespective of the holding
period of the investment. Such provisions generally apply to,
among other investments, options on debt securities, indices on
securities and futures contracts. The Fund will monitor its
transactions and may make certain tax elections available to it in
order to mitigate the impact of these rules and prevent
disqualification of the Fund as a regulated investment company.
Hedging Transactions. The Fund may engage in various hedging
transactions. Under various provisions of the Code, the result of
such investments and transactions may be to change the character
of recognized gains and losses, accelerate the recognition of
certain gains and losses, and defer the recognition of certain
losses. For example, the tax treatment of futures contracts
entered into by a Fund as well as listed non-equity options
written or purchased by a Fund on U.S. exchanges (including
options on debt securities and options on futures contracts) will
be governed by section 1256 of the Code. Absent a tax election for
"mixed straddles" (described below), each such position held by a
Fund on the last business day of each taxable year will be marked
to market (i.e., treated as if it were closed out), and all
resulting gain or loss will be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss, with
subsequent adjustments made to any gain or loss realized upon an
actual disposition of such positions (currently, the 60% long-term
portion will be treated as if held for more than 12 months). When
the Fund holds an option or contract governed by section 1256
which substantially diminishes the Fund's risk of loss with
respect to another position of its Portfolio not governed by
section 1256 (as might occur in some hedging transactions), that
combination of positions generally will be a "mixed straddle" that
is subject to the straddles rules of section 1092 of the Code. The
application of section 1092 might result in deferral of losses,
adjustments in the holding periods of the Fund's securities and
conversion of short-term capital losses into long-term capital
losses. The Fund may make certain tax elections for its "mixed
straddles" that could alter certain effects of section 1256 or
section 1092.
Tax Implications of Certain Investments. Certain of the
Fund's investments, including investments in stripped
securities, will create taxable income in excess of the cash they
generate. In such cases, the Fund may be required to sell
assets (including when it is not advantageous to do so) to
generate the cash necessary to distribute to its shareholders all
of its income and gains and therefore to eliminate any tax
liability at the Fund level. The character of the Fund's taxable
income will, in most cases, be determined on the basis of reports
made to the Fund by the issuers of the securities in which they
invest. The tax treatment of certain securities in which the Fund
may invest is not free from doubt and it is possible that an IRS
examination of the issuers of such securities could result in
adjustments to the income of the Fund. The foregoing discussion is
a general summary of certain of the current federal income tax
laws regarding the Fund and investors in the shares.
Federal Income Taxation of Shareholders
- ---------------------------------------
To the extent of the Fund's accumulated earnings and
profits, ordinary income distributions, and distributions of net
realized short-term capital gains by the Fund to shareholders who
are liable for federal income taxes will generally be taxed as
ordinary income to such shareholders. However, under the Jobs and
Growth Tax Relief Reconciliation Act of 2003 (effective for tax
years 2003 through 2008) (the "Jobs and Growth Act"), such
distributions will generally constitute qualified dividend income
eligible for a maximum rate of 15% to individuals. Under the Jobs
and Growth Act, however, if the aggregate amount of qualified
dividend income received by the Fund during any taxable year is
less than 95% of the Fund's gross income (as specifically defined
for that purpose), such distributions will be eligible for a
maximum rate of 15% to individuals if designated by the Fund as
qualified dividend income. The Fund may designate such
distributions as qualified dividend income only to the extent the
Fund itself has qualified dividend income for the taxable year in
which such distribution are made. Qualified dividend income is
generally dividend income from taxable domestic corporations and
certain foreign corporations (e.g., foreign corporations
incorporated in a possession of the United States or in certain
countries with comprehensive tax treaties with the United States,
or the stock of which is readily tradable on an established
securities market in the United States). Distributions of net
capital gains will be taxed as long-term capital gains regardless
of how long such shareholders have held shares of the Fund. These
provisions apply whether the dividends and distributions are
received in cash or reinvested in additional shares. Any loss
realized upon the redemption of shares within 6 months from the
date of their purchase will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains
during such 6-month period. Losses incurred on the sale of shares
of the Fund may be required to be deferred in the event the
shareholder acquired other Fund shares within 30 days prior to the
sale of the loss shares or 30 days after such sale.
Special rules for the taxation of capital gains on qualified
5-year property were enacted by the Taxpayer Relief Act of 1997 to
take effect in January 2001. In summary, for individuals and
trusts in the 10% and 15% ordinary income tax rate brackets, a new
tax rate of 8% (instead of 10%) will apply to long-term capital
gains from the sale of assets (including mutual funds) held more
than 5 years. For individuals and trusts in higher tax brackets,
the top rate on such gains drops from 20% to 18%. The date that
the 5-year holding period starts, however, is different for the
two groups. For those in the 10% and 15% brackets, the asset may
be acquired at any time, but for others the asset must have been
acquired after December 31, 2000.
Dividends paid by the Fund may be eligible for the 70%
dividends-received deduction for corporations. The percentage of
the Fund's dividends eligible for such tax treatment may be less
than 100% to the extent that less than 100% of the Fund's gross
income may be from qualifying dividends of domestic corporations.
Any dividend declared in October, November or December and made
payable to shareholders of record in any such month is treated as
received by such shareholder on December 31, provided that the
Fund pays the dividend during January of the following calendar
year.
Distributions by the Fund can result in a reduction in the
fair market value of the Fund's shares. Should a distribution
reduce the fair market value below a shareholder's cost basis,
such distribution nevertheless may be taxable to the shareholder
as ordinary income or capital gain, even though, from an
investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider
the tax implications of buying shares just prior to a taxable
distribution. The price of shares purchased at that time includes
the amount of any forthcoming distribution. Those investors
purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will
nevertheless be taxable to them.
Foreign Shareholders
- --------------------
Dividends of net investment income and distributions of net
realized short-term gain in excess of net long-term loss to a
shareholder who is a nonresident alien individual, fiduciary of a
foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) unless
the dividends are effectively connected with a U.S. trade or
business of the shareholder, in which case the dividends will be
subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations.
Distributions treated as long-term capital gains to foreign
shareholders will not be subject to U.S. tax unless the
distributions are effectively connected with the shareholder's
trade or business in the United States or, in the case of a
shareholder who is a nonresident alien individual, the shareholder
was present in the United States for more than 182 days during the
taxable year and certain other conditions are met.
In the case of a foreign shareholder who is a nonresident
alien individual or foreign entity, the Fund may be required to
withhold U.S. federal income tax as "backup withholding" at the
current rate of 28% (for the calendar year 2003) from
distributions treated as long-term capital gains and from the
proceeds of redemptions, exchanges or other dispositions of the
Fund's shares unless an appropriate IRS Form W8-BEN or W8-IMY as
appropriate is provided. Transfers by gift of shares of the Fund
by a foreign shareholder who is a non-resident alien individual
will not be subject to U.S. federal gift tax, but the value of
shares of the Fund held by such shareholder at his or her death
will be includible in his or her gross estate for U.S. federal
estate tax purposes.
Foreign Taxes
- -------------
The Fund may be subject to a tax on dividend or interest
income received from securities of a non-U.S. issuer withheld by a
foreign country at the source. The U.S. has entered into tax
treaties with many foreign countries that entitle the Fund to a
reduced rate of tax or exemption from tax on such income. It is
impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known. If more than 50% of the
Fund's total assets at the close of a taxable year consists of
stocks or securities in foreign corporations, and the Fund
satisfies the holding period requirements, the Fund may elect to
pass through to its shareholders the foreign income taxes paid
thereby. In such case, the shareholders would be treated as
receiving, in addition to the distributions actually received by
the shareholders, their proportionate share of foreign income
taxes paid by the Fund, and will be treated as having paid such
foreign taxes. The shareholders will be entitled to deduct or,
subject to certain limitations, claim a foreign tax credit with
respect to such foreign income taxes. A foreign tax credit will
be allowed for shareholders who hold the Fund for at least 16 days
during the 30-day period beginning on the date that is 15 days
before the ex-dividend date. Shareholders who have been passed
through foreign tax credits of no more than $300 ($600 in the case
of married couples filing jointly) during a tax year can elect to
claim the foreign tax credit for these amounts directly on their
federal income tax returns (IRS Forms 1040) without having to file
a separate Form 1116.
Tax-Exempt Investors
- --------------------
If a shareholder that is a benefit plan investor (e.g., an
individual retirement account, pension plan, 401(k) plan, or Keogh
plan) or charitable organization (a "Tax-Exempt Investor") incurs
debt to finance the acquisition of its shares, a portion of the
income received by the Tax-Exempt Investor with respect to its
shares would constitute unrelated business taxable income
("UBTI"). In that case, the UBTI portion of the Tax-Exempt
Investor's income from its investment in the Fund for the year
would equal the total income from its investment in the Fund
recognized by the Tax-Exempt Investor in that year multiplied by
the ratio of the Tax-Exempt Investor's average acquisition debt
balance to the average tax basis of its shares for the year. A
Tax-Exempt Investor is generally subject to federal income tax to
the extent that its UBTI for a taxable year exceeds its annual
$1,000 exclusion.
State and Local Taxes
- ---------------------
The Fund may also be subject to state and/or local taxes in
jurisdictions in which the Fund is deemed to be doing business.
In addition, the treatment of the Fund and its shareholders in
those states which have income tax laws might differ from
treatment under the federal income tax laws. Shareholders should
consult with their own tax advisors concerning the foregoing state
and local tax consequences of investing in the Fund.
Other Taxation
- --------------
The Fund is a series of a Massachusetts business trust.
Under current law, neither the Trust nor the Fund is liable for
any income or franchise tax in The Commonwealth of Massachusetts,
provided that the Fund continues to qualify as a regulated
investment company under Subchapter M of the Code.
Shareholders should consult their tax advisors about the
application of the provisions of tax law described in this
Statement of Additional Information in light of their particular
tax situations.
PERFORMANCE DATA
----------------
From time to time, the Fund may quote performance in terms
of yield, actual distributions, total return or capital
appreciation in reports, sales literature, and advertisements
published by the Fund. Current performance information for the
Fund may be obtained by calling the number provided on the cover
page of this Statement of Additional Information and in the Fund's
Prospectus.
Average Annual Total Return
- ----------------------------
The Fund may advertise performance in terms of average
annual total return for 1-, 5- and 10-year periods, or for such
lesser periods that the Fund has been in existence. Average
annual total return is computed by finding the average annual
compounded rates of return over the periods that would equate the
initial amount invested to the ending redeemable value, according
to the following formula:
P (1 + T) n = ERV
In the above formula, P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000
payment made at the beginning of the 1-, 5-
or 10-year periods at the end of the year or period
The formula assumes that any charges are deducted from the
initial $1,000 payment and assumes that all dividends and
distributions by the Fund are reinvested at the price stated in
the Prospectus on the reinvestment dates during the period.
The Average Annual Total Returns for the periods ended
October 31, 2002 were as follows:
1 Year: -25.71%
After Tax and Cumulative Returns
- --------------------------------
Average Annual Total Return (after taxes on distributions). The
Fund may also advertise average annual total return (after taxes
on distributions) for 1-, 5-, and 10-year periods or for such
lesser period as the Fund has been in existence. Average annual
total return (after taxes on distributions) is determined by
finding the average annual compounded rates of return over the
relevant periods that would equate the initial amount invested to
the ending value, according to the following formula:
P(1+T)n = ATVD
In the above formula, P = a hypothetical initial payment of $1,000
T = average annual total return (after taxes on
distributions)
n = number of years
ATVD = ending value of a hypothetical $1,000 payment made at
the beginning of the 1-, 5-, or 10-year
periods at the end of the 1-, 5-, or 10-year periods
(or fractional portion), after taxes on fund
distributions but not after taxes on redemption
The calculation of average annual total return (after
taxes on distributions) assumes that any charges are deducted from
the initial $1,000 payment and that all distributions by the Fund,
less the taxes due on such distributions, are reinvested at the
price stated in the prospectus on the reinvestment dates during
the period. Taxes due on any distributions by the Fund are
calculated by applying the tax rates discussed below to each
component of the distributions on the reinvestment date (e.g.,
ordinary income, short-term capital gain, long-term capital gain).
The taxable amount and tax character of each distribution is as
specified by the Fund on the dividend declaration date, but may be
adjusted to reflect subsequent recharacterizations of
distributions. Distributions are adjusted to reflect the federal
tax impact the distribution would have on an individual taxpayer
on the reinvestment date, e.g. the calculation assumes no taxes
are due on the portion of any distribution that would not result
in federal income tax on an individual, such as tax-exempt
interest or non-taxable returns of capital. The effect of
applicable tax credits, such as the foreign tax credit, is taken
into account in accordance with federal tax law.
The tax rate used in calculating average annual return
(after taxes on distributions) is the highest individual marginal
federal income tax rates in effect on the reinvestment date. The
rates used correspond to the tax character of each component of
the distributions (e.g., ordinary income rate for ordinary income
distributions, short- term capital gain rate for short-term
capital gain distributions, long-term capital gain rate for long-
term capital gain distributions). Note that the required tax
rates may vary over the measurement period. The calculation
disregards any potential tax liabilities other than federal tax
liabilities (e.g., state and local taxes); the effect of phaseouts
of certain exemptions, deductions, and credits at various income
levels; and the impact of the federal alternative minimum tax.
The Average Annual Total Returns (after taxes on
distributions) for the periods ended October 31, 2002 were as
follows:
1 Year: -27.49%
Average Annual Total Return (after taxes on distributions and
redemptions). The Fund may also advertise average annual total
return (after taxes on distributions and redemption) for 1-, 5-,
and 10-year periods or for such lesser period as the Fund has been
in existence. Average annual total return (after taxes on
distributions and redemption) is determined by finding the average
annual compounded rates of return over the relevant periods that
would equate the initial amount invested to the ending value,
according to the following formula:
P(1+T)n = ATVDR
In the above formula,
P = a hypothetical initial payment of $1,000
T = average annual total return (after taxes on
distributions and redemption)
n = number of years
ATVDR = ending value of a hypothetical $1,000 payment made at
the beginning of the 1-, 5-, or 10-year
periods at the end of the 1-, 5-, or 10-year periods
(or fractional portion), after taxes on fund
distributions and redemption
The calculation of average annual total return (after taxes
on distributions and redemption) assumes that any charges are
deducted from the initial $1,000 payment and that all
distributions by the Fund, less the taxes due on such
distributions, are reinvested at the price stated in the
prospectus on the reinvestment dates during the period. Taxes due
on any distributions by the Fund are calculated by applying the
tax rates discussed below to each component of the distributions
on the reinvestment date (e.g., ordinary income, short-term
capital gain, long-term capital gain). The taxable amount and tax
character of each distribution is as specified by the Fund on the
dividend declaration date, but may be adjusted to reflect
subsequent recharacterizations of distributions. Distributions
are adjusted to reflect the federal tax impact the distribution
would have on an individual taxpayer on the reinvestment date,
e.g. the calculation assumes no taxes are due on the portion of
any distribution that would not result in federal income tax on an
individual, such as tax-exempt interest or non-taxable returns of
capital. The effect of applicable tax credits, such as the
foreign tax credit, is taken into account in accordance with
federal tax law.
The tax rate used in calculating average annual return
(after taxes on distributions and redemption) is the highest
individual marginal federal income tax rates in effect on the
reinvestment date. The rates used correspond to the tax character
of each component of the distributions (e.g., ordinary income rate
for ordinary income distributions, short- term capital gain rate
for short-term capital gain distributions, long-term capital gain
rate for long-term capital gain distributions). Note that the
required tax rates may vary over the measurement period. The
calculation disregards any potential tax liabilities other than
federal tax liabilities (e.g., state and local taxes); the effect
of phaseouts of certain exemptions, deductions, and credits at
various income levels; and the impact of the federal alternative
minimum tax.
The ending value used in calculating average annual return
(after taxes on distribution and redemption) is determined by
subtracting capital gains taxes resulting from the redemption and
adding the tax benefit from capital losses resulting from the
redemption. Capital gain or loss upon redemption is calculated by
subtracting the tax basis from the redemption proceeds. The basis
of shares acquired through the $1,000 initial investment and each
subsequent purchase through reinvested distribution is separately
tracked. The distribution net of taxes assumed paid from the
distribution is included in determining the basis for a reinvested
distribution. Tax basis is adjusted for any distributions
representing returns of capital and any other tax basis
adjustments that would apply to an individual taxpayer, as
permitted by applicable federal tax law. The amount and character
(e.g., short-term or long-term) of capital gain or loss upon
redemption is separately determined for shares acquired through
the $1,000 initial investment and each subsequent purchase through
reinvested distributions.
The capital gain taxes (or the benefit resulting from tax
losses) used in calculating average annual return (after taxes on
distribution and redemption) are determined using the highest
federal individual capital gains tax rate for gains of the
appropriate character in effect on the redemption date and in
accordance with federal tax law applicable on the redemption date.
The calculation assumes that a shareholder has sufficient capital
gains of the same character from other investments to offset any
capital losses from the redemption so that the taxpayer may deduct
the capital losses in full.
The following table shows the average annual total returns
(after taxes on distributions and redemptions) for the periods
ended October 31, 2002.
1 Year: -15.73%
Cumulative Total Return. The Fund may also advertise cumulative
total return (the actual change in value of an investment in the
Fund assuming reinvestment of dividends and capital gains).
The following table shows the cumulative total returns for the
periods ended October 31, 2002:
1 Year: -25.71%
Performance Comparisons
- ------------------------
The Fund may compare its performance to the performance of
other mutual funds having similar objectives. This comparison
must be expressed as a ranking prepared by independent services or
publications that monitor the performance of various mutual funds
such as Lipper, Inc. ("Lipper") and Morningstar, Inc.,
("Morningstar"). Lipper prepares the "Lipper Composite Index," a
performance benchmark based upon the average performance of
publicly offered stock funds, bond funds, and money market funds
as reported by Lipper. Morningstar, a widely used independent
research firm, also ranks mutual funds by overall performance,
investment objectives and assets. The Fund's performance may also
be compared to the performance of various unmanaged indices such
as the Russell 3000 Index, Wilshire 5000 Equity Index, Russell
3000 Growth Index, Russell 1000 Growth Index, Standard & Poor's
500 Composite Stock Price Index, the Standard & Poor's 400
Composite Stock Price Index or the Dow Jones Industrial Average.
MASSACHUSETTS BUSINESS TRUST
----------------------------
The Fund is a series of a "Massachusetts business trust." A
copy of the Declaration of Trust for the Trust is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The
Declaration of Trust and the By-Laws of the Trust are designed to
make the Trust similar in most respects to a Massachusetts
business corporation. The principal distinction between the two
forms concerns shareholder liability and are described below.
Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners
for the obligations of the trust. This is not the case for a
Massachusetts business corporation. However, the Declaration of
Trust of the Trust provides that the shareholders shall not be
subject to any personal liability for the acts or obligations of
the Fund and that every written agreement, obligation, instrument
or undertaking made on behalf of the Fund shall contain a
provision to the effect that the shareholders are not personally
liable thereunder.
No personal liability will attach to the shareholders under
any undertaking containing such provision when adequate notice of
such provision is given, except possibly in a few jurisdictions.
With respect to all types of claims in the latter jurisdictions,
(i) tort claims, (ii) contract claims where the provision referred
to is omitted from the undertaking, (iii) claims for taxes, and
(iv) certain statutory liabilities in other jurisdictions, a
shareholder may be held personally liable to the extent that
claims are not satisfied by the Fund. However, upon payment of
such liability, the shareholder will be entitled to reimbursement
from the general assets of the Fund. The Trustees of the Trust
intend to conduct the operations of the Trust in a way as to
avoid, as far as possible, ultimate liability of the shareholders
of the Fund.
The Declaration of Trust further provides that the name of
the Trust refers to the Trustees collectively as Trustees, not as
individuals or personally, that no Trustee, officer, employee or
agent of the Fund or to a shareholder, and that no Trustee,
officer, employee or agent is liable to any third persons in
connection with the affairs of the Fund, except if the liability
arises from his or its own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall look
solely to the property of the Fund for any satisfaction of claims
arising in connection with the affairs of the Fund. With the
exceptions stated, the Trust's Declaration of Trust provides that
a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs
of the Fund.
The Trust shall continue without limitation of time subject
to the provisions in the Declaration of Trust concerning
termination by action of the shareholders or by action of the
Trustees upon notice to the shareholders.
DESCRIPTION OF SHARES
---------------------
The Trust is an open-end management investment company
organized as a Massachusetts business trust in which the Fund
represents a separate series of shares of beneficial interest.
See "Massachusetts Business Trust" above.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of one or more
series and to divide or combine the shares of any series, if
applicable, without changing the proportionate beneficial interest
of each shareholder in the Fund or assets of another series, if
applicable. Each share of the Fund represents an equal
proportional interest in the Fund with each other share. Upon
liquidation of the Fund, shareholders are entitled to share pro
rata in the net assets of the Fund available for distribution to
such shareholders. See "Massachusetts Business Trust" above.
Shares of the Fund have no preemptive or conversion rights and are
fully paid and nonassessable. The rights of redemption and
exchange are described in the Prospectus and in this Statement of
Additional Information.
The shareholders of the Trust are entitled to one vote for
each whole share held (or a proportionate fractional vote in
respect of a fractional share), on matters on which shares of the
Fund shall be entitled to vote. Subject to the 1940 Act, the
Trustees themselves have the power to alter the number and the
terms of office of the Trustees, to lengthen their own terms, or
to make their terms of unlimited duration subject to certain
removal procedures, and appoint their own successors, provided
however, that immediately after such appointment the requisite
majority of the Trustees have been elected by the shareholders of
the Trust. The voting rights of shareholders are not cumulative
so that holders of more than 50% of the shares voting can, if they
choose, elect all Trustees being selected while the shareholders
of the remaining shares would be unable to elect any Trustees. It
is the intention of the Trust not to hold meetings of shareholders
annually. The Trustees may call meetings of shareholders for
action by shareholder vote as may be required by either the 1940
Act or by the Declaration of Trust of the Trust.
The Trustees will call a meeting of shareholders to vote on
removal of a Trustee upon the written request of the record
holders of 10% of the shares of the Trust. In addition, whenever
ten or more shareholders of record who have been shareholders of
record for at least six months prior to the date of the
application, and who hold in the aggregate either shares of the
Fund having a net asset value of at least $25,000 or at least 1%
of the Trust's outstanding shares, whichever is less, shall apply
to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to
request a meeting for the purpose of voting upon the question of
removal of any of the Trustees and accompanies by a form of
communication and request which they wish to transmit, the
Trustees shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list
of the names and addresses of all shareholders as recorded on the
books of the Trust; or (2) inform such applicants as to the
approximate number of shareholders of record, and the approximate
cost of mailing to them the proposed shareholder communication and
form of request. If the Trustees elect to follow the latter, the
Trustees, upon the written request of such applicants accompanied
by a tender of the material to be mailed and the reasonable
expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as
recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with
the SEC, together with a copy of the material to be mailed, a
written statement signed by at least a majority of the Trustees to
the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to
make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such
opinion. After opportunity for hearing upon the objections
specified in the written statements filed, the SEC may, and if
demanded by the Trustees or by such applicants shall, enter an
order either sustaining one or more objections or refusing to
sustain any of such objections, or if, after the entry of an order
sustaining one or more objections, the SEC shall find, after
notice and opportunity for a hearing, that all objections so
sustained have been met, and shall enter an order so declaring,
the Trustees shall mail copies of such material to all
shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.
The Trustees have authorized the issuance and sale to the
public of shares of one series of the Trust. The Trustees may
authorize the issuance of additional series of the Trust. The
proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with
distinct investment objectives, policies and restrictions, and
share purchase, redemption and net asset value procedures. All
consideration received by the Trust for shares of any additional
series, and all assets in which such consideration is invested,
would belong to that series, subject only to the rights of
creditors of the Trust and would be subject to the liabilities
related thereto. Shareholders of the additional series will
approve the adoption of any management contract, distribution
agreement and any changes in the investment policies of the Fund,
to the extent required by the 1940 Act.
HISTORICAL FINANCIAL STATEMENTS
--------------------------------
The audited Financial Statements for the fiscal year ended March
31, 2003 and the accompanying Notes to Financial Statements for
the Fund, and the Report of Independent Accountants of
PricewaterhouseCoopers LLP, are incorporated by reference into
this Statement of Additional Information from the Annual Report
filing made with the Securities and Exchange Commission on May 29,
2003. The accession number of that filing was 0000882443-02-
000009. The Annual Report accompanies this Statement of
Additional Information and is available without charge by calling
(800) 835-3879, on our Internet website at
http://www.managersfunds.com or on the SEC's Internet website at
http://www.sec.gov.
The audited Financial Statements for the fiscal year ended October
31, 2002 and the Notes to Financial Statements for FQ Fund, and
the Report of Independent Accountants of PricewaterhouseCoopers
LLP, are incorporated by reference into this Statement of
Additional Information from the annual report filing made with the
Securities and Exchange Commission on December 30, 2002; the
accession number of that filing was 0001089951-02-000054. The
unaudited Financial Statements for the six months ended April 30,
2003 and the accompanying Notes to Financial Statements for FQ
Fund are incorporated by reference into this Statement of
Additional Information from the Semi-Annual Report filing made
with the Securities and Exchange Commission on June 20, 2003; the
accession number of that filing was 0001089951-03-000032. The
Annual and Semi-Annual Reports accompanying this Statement of
Additional Information are available without charge by calling
(800) 835-3879 or on the SEC's Internet website at
http://www.sec.gov.
PRO FORMA FINANCIAL STATEMENTS
------------------------------
=====================================================
PRO FORMA COMBINING STATEMENT OF ASSETS & LIABILITIES
APRIL 30, 2003
UNAUDITED
=====================================================
<Table>
First Quadrant U.S. Stock Pro Pro
Tax-Managed Market Forma Forma
Equity Fund Plus Fund Adjustments Combined
-------------- -------------- ----------- --------------
ASSETS
Investments at cost $9,599,633 $48,443,631 $ - $58,043,264
Net unrealized appreciation 1,364,491 407,350 - 1,771,841
Investments at value 10,964,124 48,850,981 - 59,815,105
Cash - 5,286 - 5,286
Receivable for Fund shares sold - 16,342 - 16,342
Receivables for securities sold - 5,055,734 - 5,055,734
Dividends and interest receivable 8,792 281,142 - 289,934
Variation margin receivable - 80,480 - 80,480
Other receivables 24 - - 24
Other assets 14,924 12,104 - 27,028
-------------- -------------- ----------- --------------
TOTAL ASSETS $10,987,864 $54,302,069 $ - $65,289,933
-------------- -------------- ----------- --------------
LIABILITIES
Payable for securities purchased - 14,070,379 - 14,070,379
Payable for Fund shares redeemed - 89,991 - 89,991
Payable to custodian bank 16,578 24,858 - 41,437
Management fee payable - 13,484 - 13,484
Trustees' fees payable - 242 - 242
Transfer agent fees payable 3,138 10,418 - 13,556
Professional fees payable 9,999 25,338 - 35,337
Variation margin payable - 126,950 - 126,950
Other accrued expenses - 7,251 - 7,251
-------------- -------------- ----------- --------------
TOTAL LIABILITIES 29,715 14,368,913 - 14,398,628
-------------- -------------- ----------- --------------
NET ASSETS $10,958,148 $39,933,156 $ - $50,891,304
============== ============== =========== ==============
NET ASSETS CONSIST OF:
- ----------------------
Paid in capital $11,546,643 $111,063,967 $ - $122,610,610
Undistributed net investment income 36,144 692,495 - 728,639
Accumulated realized loss on investments (1,989,130) (72,230,656) - (74,219,786)
Net unrealized appreciation of investments 1,364,491 407,350 - 1,771,841
-------------- -------------- ----------- --------------
NET ASSETS $10,958,148 $39,933,156 $- $50,891,304
============== ============== =========== ==============
COMPUTATION OF NET ASSET VALUE:
- -------------------------------
Net assets $10,958,148 $39,933,156 $ - $50,891,304
Shares of beneficial interest 1,370,267 5,083,792 (90,331) 6,363,728
Net asset value, offering and
redemption price per share $8.00 $7.85 $- $8.00
======= ====== ====== =======
See accompanying notes to the pro forma financial statements
</Table>
<Table>
============================================
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
April 30, 2003
UNAUDITED
============================================
First Quadrant Tax Managed Fund (b) U.S. Stock Market Plus
- ----------------------------------- ----------------------
Pro Forma Combined
Security Description Shares Value Security Description (a) Shares (a) Value (a) Shares Value
- --------------------- ------- ------------ ---------------------------- -------------- ----------- ------- -------------
COMMONSTOCK:
============
ADVANCED MICRO DEVICES 10,300.00 $76,632.00 10,300 $76,632
AFFILIATED COMPUTER SERV1,000.00 47,700.00 1,000 47,700.00
ALCOA INC 600.00 13,758.00 600 13,758.00
ALEXANDRIA REAL ESTATE 1,200.00 50,760.00 1,200 50,760.00
ALTERA CORPORATION 3,100.00 49,011.00 3,100 49,011.00
AMAZON.COM INC 700.00 20,069.00 700 20,069.00
AMERICAN ELECTRIC POWER 7,000.00 184,660.00 7,000 184,660.00
AMERICAN INT'L GROUP 231.00 13,386.45 231 13,386.45
ANALOG DEVICES INC 500.00 16,560.00 500 16,560.00
ANHEUSER-BUSCH COS INC 900.00 44,892.00 900 44,892.00
ANNALY MORTGAGE MGMT 11,200.00 212,800.00 11,200 212,800.00
ANTHEM INC 2,300.00 157,872.00 2,300 157,872.00
AOL TIME WARNER INC. 2,600.00 35,568.00 2,600 35,568.00
AON CORPORATION 7,000.00 155,120.00 7,000 155,120.00
APPLIED MATERIALS INC. 600.00 8,760.00 600 8,760.00
AT&T WIRELESS GROUP 2,200.00 14,212.00 2,200 14,212.00
AUTOMATIC DATA PROCESSING 500.00 16,815.00 500 16,815.00
AUTOZONE INC 300.00 24,243.00 300 24,243.00
BANK AMERICA CORP. 1,000.00 74,050.00 1,000 74,050.00
BRASCAN CORPORATION-A 1,700.00 38,267.00 1,700 38,267.00
BRINKER INT'L INC 2,500.00 79,375.00 2,500 79,375.00
BRISTOL-MYERS SQUIBB CO 2,550.00 65,127.00 2,550 65,127.00
CAPITAL ONE FINANCIAL 300.00 12,561.00 300 12,561.00
CATELLUS DEVELOPMENT CORP4,700.00 99,546.00 4,700 99,546.00
CHECKFREE CORP. 400.00 11,028.00 400 11,028.00
CHELSEA PROPERTY GROUP 1,300.00 51,558.00 1,300 51,558.00
CHEVRONTEXACO CORPORATION600.00 37,686.00 600 37,686.00
Chicago Bridge & Iron Co3,000.00 60,000.00 3,000 60,000.00
CISCO SYSTEMS, INC. 3,000.00 45,120.00 3,000 45,120.00
CLOROX CO-DEL 200.00 9,044.00 200 9,044.00
COMCAST CORP SPECIAL-CL A5,300.00 159,318.00 5,300 159,318.00
COMCAST CORP. CL-A 5,258.00 167,782.78 5,258 167,782.78
CVS CORPORATION 800.00 19,368.00 800 19,368.00
DELL COMPUTER CORP. 2,400.00 69,384.00 2,400 69,384.00
DELTIC TIMBER CORP 100.00 2,446.00 100 2,446.00
ECHOSTAR COMMUN. CL A 2,000.00 59,920.00 2,000 59,920.00
EMC CORP. 6,600.00 59,994.00 6,600 59,994.00
ENTERTAINMENT PROPERTIES1,700.00 45,815.00 1,700 45,815.00
EXCO RESOURCES INC 2,500.00 44,050.00 2,500 44,050.00
EXPRESS SCRIPTS INC-COMM900.00 53,064.00 900 53,064.00
EXXON MOBIL CORPORATION 4,768.00 167,833.60 4,768 167,833.60
FANNIE MAE 900.00 65,151.00 900 65,151.00
FEDERAL HOME LOAN MRTGAGE700.00 40,530.00 700 40,530.00
FEDEX CORPORATION 5,300.00 317,364.00 5,300 317,364.00
FMC TECHNOLOGIES INC 2,200.00 41,404.00 2,200 41,404.00
FOREST CITY ENTERPRISES 150.00 5,512.50 150 5,512.50
FOREST CITY ENTERPRISES A3,000.00 109,650.00 3,000 109,650.00
GENENTECH INC. 600.00 22,794.00 600 22,794.00
GENERAL ELECTRIC COMPANY3,000.00 88,350.00 3,000 88,350.00
GENERAL MILLS INC 1,800.00 81,198.00 1,800 81,198.00
GENERAL MOTORS CLASS H 15,000.00 177,000.00 15,000 177,000.00
GENERAL MOTORS CORP 3,400.00 122,570.00 3,400 122,570.00
GENLYTE GROUP INC 300.00 11,316.00 300 11,316.00
GOLDEN WEST FINANCIAL 1,200.00 90,504.00 1,200 90,504.00
GREENPOINT FIN'L CORP 2,700.00 128,952.00 2,700 128,952.00
HEALTH NET INC. HNT.N500.00 13,045.00 500 13,045.00
HILTON HOTELS CORP 7,500.00 99,900.00 7,500 99,900.00
HOLLINGER INTL INC 7,600.00 70,680.00 7,600 70,680.00
HOME DEPOT, INC. 5,500.00 154,715.00 5,500 154,715.00
IHOP CORP 2,000.00 52,600.00 2,000 52,600.00
INDIGO N.V. 1,100.00 0.11 1,100 0.11
INTEL CORP 2,700.00 49,680.00 2,700 49,680.00
INTERGRATED DEVICE TECH.900.00 9,297.00 900 9,297.00
ISTAR FINANCIAL INC 900.00 26,937.00 900 26,937.00
JOHNSON & JOHNSON 5,400.00 304,344.00 5,400 304,344.00
JP MORGAN CHASE & CO. 1,300.00 38,155.00 1,300 38,155.00
KINDER MORGAN ENERGY 800.00 31,288.00 800 31,288.00
KLA-TENCOR CORP. 800.00 32,800.00 800 32,800.00
KNIGHT-RIDDER INC 1,500.00 96,825.00 1,500 96,825.00
LEVEL 3 COMMUNICATIONS CP18,500.00105,820.00 18,500 105,820.00
LIBERTY MEDIA CORP 3,000.00 33,000.00 3,000 33,000.00
LOWE'S CORPORATION 900.00 39,501.00 900 39,501.00
M & T BANK CORPORATION 700.00 59,129.00 700 59,129.00
MARRIOTT INTERNATIONAL A4,000.00 143,640.00 4,000 143,640.00
MAXIM INTEGRATED PRODUCTS1,400.00 55,006.00 1,400 55,006.00
MEDTRONIC INC. 700.00 33,418.00 700 33,418.00
MERCK & COMPANY, INC. 2,000.00 116,360.00 2,000 116,360.00
MERRILL LYNCH & CO 2,500.00 102,625.00 2,500 102,625.00
METLIFE INC 700.00 20,111.00 700 20,111.00
MICRON TECHNOLOGY INC 3,400.00 28,900.00 3,400 28,900.00
MICROSOFT CORP 16,940.00 433,155.80 16,940 433,155.80
MONSANTO CO /NEW 409.00 7,116.60 409 7,116.60
MONY GROUP INC 2,200.00 51,106.00 2,200 51,106.00
MOTOROLA, INC. 800.00 6,328.00 800 6,328.00
MYLAN LABORATORIES CORP 4,100.00 115,907.00 4,100 115,907.00
NABORS INDUSTRIES LTD 500.00 19,600.00 500 19,600.00
NCR CORP. 5,100.00 111,792.00 5,100 111,792.00
NCS HEALTHCARE "A" ESCROW10,000.00 3,510.00 10,000 3,510.00
NEIMAN MARCUS GROUP-CL B400.00 12,040.00 400 12,040.00
NEIMAN MARCUS GRP INC - A1,400.00 44,870.00 1,400 44,870.00
NORTH FORK BANCORP. 400.00 12,944.00 400 12,944.00
ORACLE CORP 1,000.00 11,880.00 1,000 11,880.00
PEPSIAMERICAS INC 1,000.00 12,490.00 1,000 12,490.00
PEPSICO INC 1,600.00 69,248.00 1,600 69,248.00
PFIZER INC 10,920.00 335,790.00 10,920 335,790.00
PIONEER NATURAL RESOURCES9,000.00 215,280.00 9,000 215,280.00
PLUM CREEK TIMBER CO INC 4,100.00 95,366.00 4,100 95,366.00
PREMCOR INC 2,000.00 44,580.00 2,000 44,580.00
PROBUSINESS SERVICES INC6,500.00 91,585.00 6,500 91,585.00
PROCTER & GAMBLE CO. 3,900.00 350,415.00 3,900 350,415.00
PRUDENTIAL FINANCIAL CORP 1,500.00 47,955.00 1,500 47,955.00
QUALCOMM INC. 1,500.00 47,835.00 1,500 47,835.00
QUEST DIAGNOSTICS INC 700.00 41,825.00 700 41,825.00
RADIAN GROUP INC 200.00 7,940.00 200 7,940.00
RALCORP HOLDINGS INC 2,800.00 69,720.00 2,800 69,720.00
RAMBUS INC 8,500.00 121,550.00 8,500 121,550.00
RAYONIER INC. 1,800.00 90,648.00 1,800 90,648.00
RUDDICK CORP 4,000.00 53,240.00 4,000 53,240.00
SAFEWAY INC 300.00 4,986.00 300 4,986.00
SANMINA CORP. 2,400.00 11,520.00 2,400 11,520.00
SBC COMMUNICATIONS INC 2,432.00 56,811.52 2,432 56,811.52
Shaw Communications Inc 5,500.00 66,440.00 5,500 66,440.00
SIMON PROPERTY GROUP 8,700.00 319,464.00 8,700 319,464.00
TELEPHONE & DATA SYSTEMS2,800.00 120,652.00 2,800 120,652.00
TEXAS GENCO HLDS-EX DIST8,900.00 154,860.00 8,900 154,860.00
TEXAS INDUSTRIES INC 2,200.00 43,428.00 2,200 43,428.00
TEXAS INSTRUMENTS INC 2,100.00 38,829.00 2,100 38,829.00
THE MACERICH COMPANY 1,000.00 33,000.00 1,000 33,000.00
THE WALT DISNEY COMPANY 22,000.00 410,520.00 22,000 410,520.00
TRAVELERS PROPERTY CAS-B8,600.00 139,750.00 8,600 139,750.00
UNITEDHEALTH GROUP INC. 2,800.00 257,964.00 2,800 257,964.00
US BANCORP 4,308.00 95,422.20 4,308 95,422.20
VERISIGN INC 17,000.00 211,140.00 17,000 211,140.00
VERIZON COMMUNICATIONS 1,754.00 65,564.52 1,754 65,564.52
VIACOM INC-CLASS B 1,000.00 43,410.00 1,000 43,410.00
WACHOVIA CORP 500.00 19,105.00 500 19,105.00
WAL-MART STORES, INC 1,100.00 61,952.00 1,100 61,952.00
WASHINGTON MUTUAL INC. 4,700.00 185,650.00 4,700 185,650.00
WASTE MAGEMENT INC(NEW) 7,200.00 156,384.00 7,200 156,384.00
WELLPOINT HEALTH NETWORKS1,400.00 106,316.00 1,400 106,316.00
WELLS FARGO & CO (NEW) 500.00 24,130.00 500 24,130.00
WESTERN DIGITAL CORP 2,700.00 25,191.00 2,700 25,191.00
YUM BRANDS INC 6,400.00 158,080.00 6,400 158,080.00
-----------
$10,931,513
-----------
</Table>
<Table>
Pro Forma Combined
Par Par Par Par
DEBT SECURITIES: Value Value Value Value Value Value
================ ------ ------- ---------- ---------- ------- -----------
AMER AIRLINE 6.817% 05/23/2011 SERIES 01-1 300,000.00 215,387.43 300,000 215,387
AMER WEST AIRLINES 7.105 04/02/2021 SERIES 01-1 340,623.24 347,161.95 340,623 347,162
BURLINGTON NORTH SANTA FE 8.625% 11/01/2004 280,000.00 302,632.40 280,000 302,632
CFAB 2002-1 2M2 FLOATER 3/25/32 350,000.00 347,757.83 350,000 347,758
CFLAT 2001-AD1 2M2 FLOATER 11/25/30 1,000,000.00 996,673.40 1,000,000 996,673
CFLAT 2002-C1 IIM2 FLOATER 1/25/32 160,000.00 158,551.58 160,000 158,552
CONTINENTAL AIRLINES 7.707% 04/02/2021 760,842.75 660,485.00 760,843 660,485
CSFB 2001-FL1A B FLT 12/5/12 584,083.50 583,785.21 584,084 583,785
CSFB MRTG 97C2-A3 6.55% 11/19/07 600,000.00 674,213.16 600,000 674,213
CWALT 1999 - 1 A4 6.75% 6/25/29 493,594.19 494,719.58 493,594 494,720
CWL 2001-BC1 A6 6.565% 11/25/31 800,000.00 864,894.32 800,000 864,894
ENERGY EAST CORPORATION 7.75% VAR 11/15/2003 150,000.00 154,493.70 150,000 154,494
FANNIE MAE 0% DISCOUNT NOTE 2/06/04 2,000,000.00 1,981,734.00 2,000,000 1,981,734
FGCI 7.5% 10/1/16 #E01070 304,779.68 326,937.51 304,780 326,938
FGLMC TBA 30 YR 7.50% 05/14/2033 3,700,000.00 3,947,437.50 3,700,000 3,947,438
FHLMC GOLD TBA 5.50% 06/17/2018 100,000.00 103,718.80 100,000 103,719
FHLMC GOLD TBA 6.0% 06/17/18 1,800,000.00 1,878,188.40 1,800,000 1,878,188
FNARM FLTR POOL# 110933 9/1/18 126,574.77 130,170.11 126,575 130,170
FNCL 12.5% POOL # 791 09/01/12 21,217.47 24,646.20 21,217 24,646
FNMA 4.25% 7/15/2007 4,600,000.00 4,871,427.60 4,600,000 4,871,428
FNMA TBA 15 YR 5.00% 06/17/2018 3,000,000.00 3,078,750.00 3,000,000 3,078,750
FNR G93-9 IO 8% 3/25/23 1,208,345.16 204,318.96 1,208,345 204,319
FNS 237 2 8% 08/1/23 1,677,540.39 281,376.32 1,677,540 281,376
FNS 251 2 8% 11/1/23 165,314.18 26,899.93 165,314 26,900
FNW 2002-W6 2A 7.5% 6/25/2042 943,839.13 1,035,485.91 943,839 1,035,486
FSPC T-51 2A 7.5% 8/25/42 902,025.50 988,502.68 902,026 988,503
FULB 1997-C1 A3 7.38% 04/18/07 1,800,000.00 2,054,448.90 1,800,000 2,054,449
G2AR 5.375% 2/20/21 POOL # 8749 215,034.30 218,819.07 215,034 218,819
G2AR 5.375% POOL # 8309 01/20/18 173,540.37 178,801.17 173,540 178,801
G2AR 5.375% POOL 8103 02/20/16 757,992.75 779,740.84 757,993 779,741
G2AR 6.375% 6/20/21 POOL # 8797 706,959.81 723,044.27 706,960 723,044
G2AR 6.375% POOL # 8127 05/20/16 272,977.60 280,103.71 272,978 280,104
G2AR 6.375% POOL # 8137 06/20/16 245,821.11 252,237.10 245,821 252,237
G2AR 6.75% 9/20/21 POOL # 8836 253,755.87 259,399.29 253,756 259,399
GATX FINANCIAL CORP 7.75% 12/01/2006 195,000.00 191,214.86 195,000 191,215
GNMA 5.625% 12/2017 900,795.42 925,917.33 900,795 925,917
HCA INC 6.3% 10/1/12 75,000.00 77,101.18 75,000 77,101
HOME OWNERSHIP PFD 2,700.00 1,602,001.80 2,700 1,602,002
HOUSEHOLD FINANCE CORP 6.5% 1/24/2006 275,000.00 305,953.18 275,000 305,953
IMM 2001-3 M2 FLTR 10/25/2031 611,995.21 606,640.25 611,995 606,640
INHEL 2001-C M2 FLTR 12/25/2032 825,000.00 823,451.23 825,000 823,451
INHEL 2002-A M2 FLOATER 5/25/33 550,000.00 541,695.50 550,000 541,696
LBMLT 2001-3 M2 FLTR 9/25/2031 490,000.00 473,659.38 490,000 473,659
LBMT 2001-2 M2 FLTR 7/25/2031 1,000,000.00 982,725.50 1,000,000 982,726
MSDWC 2001-NC2 M2 FLTR 1/25/2032 800,000.00 772,872.00 800,000 772,872
NOMURA ASSET SEC 1998-D6 A1B 6.59% 03/17/28 1,715,000.00 1,954,184.36 1,715,000 1,954,184
OLD NATIONAL BANK 6.75% 10/15/2011 225,000.00 252,302.18 225,000 252,302
OOMLT 2002-3 A1 2.08 8/25/2032 1,074,511.12 1,073,357.00 1,074,511 1,073,357
POTASH CORP SASKATCHEWAN 7.75% 5/31/2011 350,000.00 418,906.60 350,000 418,907
RASC 2000-KS3 AI4 8.035% 9/25/2028 278,417.80 289,953.79 278,418 289,954
RESIDENTIAL ASSET SEC C Floater 7/25/2032 1,588,730.79 1,586,531.51 1,588,731 1,586,532
S&P SWAP 03/23/04 15,327,708.00 537,251.49 15,327,708 537,251
SAFEWAY INC 7.25% 9/15/2004 250,000.00 266,584.50 250,000 266,585
SBM7 1998-AQ1 A7 7.93% 6/25/2028 863,324.78 928,710.24 863,325 928,710
SOUTHTRUST CORP 8.625% 5/15/04 535,000.00 571,751.29 535,000 571,751
SPSAC 1997 1 A1 FLT 4/25/27 94,994.32 95,012.03 94,994 95,012
UNION PACIFIC CORP 7.60% 05/01/05 75,000.00 82,574.10 75,000 82,574
UNION PLANTERS CORP 6.25% 11/01/2003 150,000.00 153,180.75 150,000 153,181
UNITED AIR LINES 6.201% 9/01/2008 400,000.00 284,771.04 400,000 284,771
UNITED AIRLINES 7.032% 10/1/2010 SERIES 00-2 478,256.68 349,658.24 478,257 349,658
WASH MUTUAL BANK FA 6.875% 6/15/11 250,000.00 288,262.75 250,000 288,263
WELLPOINT HEALTH NETWORK 6.375% 6/15/2006 200,000.00 220,924.40 200,000 220,924
SHORT-TERM:
=========== - -
JPM LIQUID ASST MMK 883.19 883.19 883 883
JPM PRIME MONEY MKT32,611.00 32,611.00 JPM PRIME MONEY MARKET 2,766,005.42 2,766,005.42 2,798,616 2,798,616
Total Investments $10,964,124 $48,850,981 $59,815,105
=========== ============ ===========
See accompanying notes to the pro forma financial statements
(a) Certain securities that do not conform to the investment
strategies to be in effect after the reorganization will
be disposed of prior to the reorganization.
(b) No securities will be sold by the Acquired Fund to align
its portfolio with that of the Acquiring Fund.
</Table>
<Table>
============================================
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE 12 MONTHS ENDED APRIL 30, 2003
UNAUDITED
============================================
First Quadrant U.S. Stock Pro Pro
Tax-Managed Market Forma Forma
Equity Fund Plus Fund Adjustments Combined
INVESTMENT INCOME -------------- ----------- ----------- -----------
- -----------------
Dividends $181,744 $355,978 $ - $ 537,722
Interest income 3,358 1,801,626 - 1,804,984
Foreign witholding tax (269) - - (269)
Security lending income 484 - - 484
-------------- ----------- ----------- -----------
185,316 2,157,605 - 2,342,921
-------------- ----------- ----------- -----------
EXPENSES
- --------
Investment advisory and
management fees 73,326 326,904 70,050 (a) 470,280
Interest expense - 184,588 - 184,588
Transfer agent 23,628 134,150 - 157,778
Custodian 45,107 69,218 - 114,325
Professional fees 27,731 27,222 (13,000)(b) 41,953
Registration fees 19,739 20,810 - 40,549
Trustees fees and expenses 1,626 4,026 - 5,652
Insurance - 3,836 - 3,836
Miscellaneous 1,579 9,218 - 10,797
-------------- ----------- ----------- -----------
Total expenses before reductions 192,736 779,971 57,050 1,029,757
Less reimbursement/waiver (105,260) (183,508) (8,064)(b) (296,832)
Less reductions (1,196) (572) - (1,768)
-------------- ----------- ----------- -----------
Net expenses 86,280 595,891 48,986 731,157
-------------- ----------- ----------- -----------
Net investment income 99,037 1,561,713 (48,986) 1,611,764
-------------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------
Realized loss on:
Investments and option contracts (1,232,301) (5,531,931) - (6,764,231)
Futures contracts - (12,202,898) - (12,202,898)
Change in unrealized appreciation
(depreciation) of:
Investments (14,868) 4,125,785 - 4,110,918
Futures and swap contracts - (2,291,217) - (2,291,217)
-------------- ----------- ----------- ------------
Net realized and unrealized loss
on investments (1,247,168) (15,900,260) - (17,147,429)
-------------- ----------- ----------- ------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(1,148,131) $(14,338,547) $27,561 $(15,535,664)
============== =========== =========== ============
</Table>
<Page>
============================================================
Managers U.S. Stock Market Plus Fund/First Quadrant
Tax-Managed Equity Fund
Notes to Pro Forma Combining Financial Statements
April 30, 2003 (Unaudited)
============================================================
1. Basis of Combination
- ------------------------
The Pro Forma Statement of Assets and Liabilities, including
the Pro Forma Schedule of Investments, and the related Pro
Forma Statement of Operations ("Pro Forma Statements") reflect
the accounts of Managers U.S. Stock Market Plus Fund ("SMP
Fund") and Managers AMG Funds - First Quadrant Tax-Managed
Equity Fund ("FQ Fund", collectively the "Funds") as if the
reorganization occurred as of and for the year ended April 30,
2003. These statements have been derived from the books and
records utilized in calculating daily net asset value of each
Fund at April 30, 2003 and for the year then ended.
The Pro Forma Statements give effect to the proposed transfer
of the assets and stated liabilities of FQ Fund in exchange
for shares of SMP Fund. The Managers Funds LLC ("TMF" or the
"Advisor") will bear 40% of the costs and expenses of the
reorganization. The SMP Fund and the FQ Fund will
proportionally share the remaining 60% of the costs and
expenses of the reorganization.
The Pro Forma Statements should be read in conjunction with
the historical financial statements of the Funds incorporated
by reference in the Statement of Additional Information.
Pro Forma Adjustments
- ---------------------
The Pro Forma adjustments below reflect the impact of the
merger between SMP Fund and FQ Fund.
(a) To increase Investment Advisory and Management Fee to
reflect the FQ Fund fee schedule.
(b) Adjustment to increase TMF's waiver and to reduce
other expenses as a result of the merger.
2. Shares of Beneficial Interest
- --------------------------------
Immediately prior to the closing date, the SMP Fund will
effect a reverse stock split to adjust the net asset value per
share to match that of the FQ Fund. The Pro Forma net asset
value per share reflects the effect of the reverse stock
split. Therefore, the pro forma data reflects an exchange
ratio of approximately one for one of each FQ Fund shares
issued for each share of SMP Fund. The Pro Forma Statement of
Assets & Liabilities reflects the combined Pro Forma shares
outstanding.
3. Pro Forma Operations
- -----------------------
Pro Forma operating expenses include the actual expenses of
each Fund and the combined Fund, with certain expenses
adjusted to reflect the expected expenses of the combined
entity. The investment advisory fees have been calculated for
the combined Fund based on the fee schedule in effect for FQ
Fund at the combined level of average net assets for the year
ended April 30, 2003.
4. Portfolio Valuation
- ----------------------
Equity securities are valued at the last sale price, or if
there had been no sale that day, at the last bid price. Debt
securities are valued on the basis of broker quotations or
valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions
in comparable securities, quotations from dealers, and various
relationships between securities in determining value. Short-
term investments having a remaining maturity of 60 days or
less are valued at amortized cost which approximates market.
All other securities and assets are valued at fair value as
determined in good faith by or under the direction of the
Trustees.
<Page>
MISCELLANEOUS
-------------
AVAILABLE INFORMATION
- ---------------------
The Trust and AMG Trust and their respective series are subject to
the informational requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940. Accordingly, they
file reports, proxy material and other information with the SEC
which can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of these materials also can be
obtained at prescribed rates from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities
and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
LEGAL MATTERS
- -------------
Certain legal matters in connection with the issuance of shares as
part of the Reorganization will be passed upon by Goodwin Procter
LLP, counsel to the Trust and AMG Trust.
EXPERTS
- -------
The audited financial statements of the Fund and FQ Fund
incorporated by reference in the Statement of Additional
Information have been audited by PricewaterhouseCoopers LLP, the
Fund's and FQ Fund's independent public accountants, to the extent
indicated in their reports thereon which are included in the
respective Annual Reports to shareholders of the Fund for the
fiscal year ended March 31, 2003 and FQ Fund for the fiscal year
ended October 31, 2002. The financial statements of the Fund and
FQ Fund audited by PricewaterhouseCoopers LLP have been
incorporated by reference into the Statement of Additional
Information in reliance on their reports given on their authority
as experts in auditing and accounting.
APPENDIX A
-----------
First Quadrant, L.P.
Proxy Voting
Policies and Procedures
- -----------------------
Investment Advisers Act of 1940 Rule 206(4)-6 imposes a number of
requirements on investment advisers that have voting authority
with respect to securities held in their clients' portfolios. The
SEC states that the duty of care requires an adviser with proxy
voting authority to monitor corporate actions and to vote the
proxies. To satisfy its duty of loyalty, an adviser must cast the
proxy votes in a manner consistent with the best interests of its
clients, and must never put the adviser's own interest above those
of its clients.
These written policies and procedures are designed to reasonably
ensure that First Quadrant, L.P. ("First Quadrant") votes proxies
in the best interest of clients for whom First Quadrant has voting
authority and describe how the adviser addresses material
conflicts between its interests and those of its clients with
respect to proxy voting.
First Quadrant utilizes the services of an independent outside
proxy service, Institutional Shareholder Services ("ISS"), to act
as agent for the proxy process, to maintain records on proxy
voting for our clients, and to provide independent research on
corporate governance, proxy, and corporate responsibility issues.
First Quadrant maintains a Proxy Committee (the "Committee"), made
up of senior members of management, which is responsible for
deciding what is in the best interests of each client when
determining how proxies are voted. First Quadrant defines the best
interest of a client to mean the best economic interest of the
holders of the same or similar securities of the issuer held in
the client's account. The Committee meets at least annually to
review, approve, and adopt as First Quadrant's own policies, ISS
proxy voting policies (a summary of which is attached). Any
changes to the ISS voting policies must be reviewed, approved, and
adopted by the Committee at the time the changes occur. Because
circumstances differ between clients, some clients contractually
reserve the right to vote their own proxies or contractually may
direct First Quadrant to vote certain of their proxies in a
specific manner, in which case the Committee will assume the
responsibility for voting the proxies in accordance with the
client's desires.
First Quadrant's portfolio management group also monitors
corporate actions, ensuring notifications from custodians and/or
information from Bloomberg or other electronic surveillance
systems is recorded in our portfolio management and accounting
systems.
Voting Client Proxies
- ---------------------
When a new portfolio is opened where First Quadrant is responsible
for voting proxies, a letter is sent to the custodian informing
them that ISS will act as First Quadrant's proxy voting agent and
advising them to forward all proxy material pertaining to the
portfolio to ISS for execution. Additionally, on a quarterly
basis, First Quadrant provides ISS with a list of the portfolios
for which First Quadrant holds voting authority.
ISS, as proxy voting agent for First Quadrant, is responsible for
analyzing and voting each proxy, maintaining records of proxy
statements received and votes cast, and providing reports to First
Quadrant, upon request, concerning how proxies were voted for a
client. First Quadrant's Client Service Dept. is responsible for:
setting up new portfolios; determining which portfolios First
Quadrant has proxy voting responsibilities; ensuring the
custodians and ISS are appropriately notified; receiving and
forwarding to the Committee and ultimately ISS, any direction
received from a client to vote a proxy in a specific manner; and
maintaining client documentation and any communications received
by First Quadrant related to proxy voting, including records of
all communications received from clients requesting information on
how their proxies were voted and First Quadrant's responses.
Conflicts of Interest
- ---------------------
The adoption of the ISS proxy voting policies provides pre-
determined policies for voting proxies and thereby removes any
conflict of interest that could affect the outcome of a vote. The
intent of this policy is to remove any discretion that First
Quadrant may have to interpret what is in the best interest of any
client or how to vote proxies in cases where First Quadrant has a
material conflict of interest or the appearance of a material
conflict of interest. Although, no situation under normal
circumstances is expected where First Quadrant will retain
discretion from ISS, the Committee will monitor any situation
where First Quadrant has any discretion to interpret or vote and
will confirm delegation to ISS if First Quadrant has a material
conflict of interest.
ISS Proxy Voting
ISS Proxy Voting Guidelines Summary
-----------------------------------
The following is a concise summary of ISS's proxy voting policy
guidelines.
1. Auditors
================
Vote FOR proposals to ratify auditors, unless any of the following
apply:
* An auditor has a financial interest in or association with the
company, and is
therefore not independent
* Fees for non-audit services are excessive, or
* There is reason to believe that the independent auditor has
rendered an opinion
which is neither accurate nor indicative of the company's
financial position.
2. Board of Directors
==========================
Voting on Director Nominees in Uncontested Elections
Votes on director nominees should be made on a CASE-BY-CASE basis,
examining the following factors: independence of the board and key
board committees, attendance at board meetings, corporate
governance provisions and takeover activity, long-term company
performance, responsiveness to shareholder proposals, any egregious
board actions, and any excessive non-audit fees or other potential
auditor conflicts.
Classification/Declassification of the Board
- --------------------------------------------
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all
directors annually.
Independent Chairman (Separate Chairman/CEO)
- --------------------------------------------
Vote on a CASE-BY-CASE basis shareholder proposals requiring that
the positions of chairman and CEO be held separately. Because some
companies have governance structures in place that counterbalance
a combined position, certain factors should be taken into account
in determining whether the proposal warrants support. These
factors include the presence of a lead director, board and
committee independence, governance guidelines, company
performance, and annual review by outside directors of
CEO pay.
Majority of Independent Directors/Establishment of Committees
- -------------------------------------------------------------
Vote FOR shareholder proposals asking that a majority or more
of directors be independent unless the board composition already
meets the proposed threshold by ISS's definition of independence.
Vote FOR shareholder proposals asking that board audit,
compensation, and/or nominating committees be composed
exclusively of independent directors if they currently do not
meet that standard.
3. Shareholder Rights
==========================
Shareholder Ability to Act by Written Consent
- ---------------------------------------------
Vote AGAINST proposals to restrict or prohibit shareholder ability
to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by
written consent.
Shareholder Ability to Call Special Meetings
- --------------------------------------------
Vote AGAINST proposals to restrict or prohibit shareholder ability
to call special meetings.
Vote FOR proposals that remove restrictions on the right of
shareholders to act independently of management.
Supermajority Vote Requirements
- -------------------------------
Vote AGAINST proposals to require a supermajority
shareholder vote.
Vote FOR proposals to lower supermajority vote requirements.
Cumulative Voting
- -----------------
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a
CASE-BY-CASE basis relative to the company's other governance
provisions.
Confidential Voting
- -------------------
Vote FOR shareholder proposals requesting that corporations adopt
confidential voting, use independent vote tabulators and use
independent inspectors of election, as long as the proposal
includes a provision for proxy contests as follows: In
the case of a contested election, management should be permitted
to request that the dissident group honor its confidential
voting policy. If the dissidents agree, the policy remains in
place. If the dissidents will not agree, the confidential voting
policy is waived.
Vote FOR management proposals to adopt confidential voting.
4. Proxy Contests
=======================
Voting for Director Nominees in Contested Elections
Votes in a contested election of directors must be evaluated on a
CASE-BY-CASE basis,
considering the factors that include the long-term financial
performance, management's
track record, qualifications of director nominees (both slates),
and an evaluation of what
each side is offering shareholders.
Reimbursing Proxy Solicitation Expenses
Vote CASE-BY-CASE. Where ISS recommends in favor of the
dissidents, we also recommend voting for reimbursing proxy
solicitation
expenses.
5. Poison Pills
====================
Vote FOR shareholder proposals that ask a company to submit its
poison
pill for shareholder ratification. Review on a CASE-BY-CASE basis
shareholder
proposals to redeem a company's poison pill and management
proposals to ratify a
poison pill.
6. Mergers and Corporate Restructurings
============================================
Vote CASE-BY-CASE on mergers and corporate restructurings based on
such features as the fairness opinion, pricing, strategic rationale,
and the negotiating process.
7. Reincorporation Proposals
==================================
Proposals to change a company's state of incorporation should be
evaluated on a CASE BY-CASE basis, giving consideration to both
financial and corporate governance concerns, including the reasons
for reincorporating, a comparison of the governance provisions,
and a comparison of the jurisdictional laws.
Vote FOR reincorporation when the economic factors outweigh any
neutral or negative governance changes.
8. Capital Structure
====================
Common Stock Authorization
- --------------------------
Votes on proposals to increase the number of shares of common
stock authorized for issuance are determined on a CASE-BY-CASE
basis using a model developed by ISS.
Vote AGAINST proposals at companies with dual-class capital
structures to increase the number of authorized shares of the
class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable
increase when a company's shares are in danger of being delisted
or if a company's ability to continue to operate as a going
concern is uncertain.
Dual-class Stock
- ----------------
Vote AGAINST proposals to create a new class of common stock with
superior voting
rights.
Vote FOR proposals to create a new class of nonvoting or subvoting
common stock if:
* It is intended for financing purposes with minimal or no
dilution to current shareholders
* It is not designed to preserve the voting power of an
insider or significant shareholder
9. Executive and Director Compensation
===========================================
Votes with respect to compensation plans should be determined on a
CASE-BY-CASE basis. Our methodology for reviewing compensation plans
primarily focuses on the transfer of shareholder wealth (the dollar
cost of pay plans to shareholders instead of simply focusing on voting
power dilution). Using the expanded compensation datadisclosed under
the SEC's rules, ISS will value every award type. ISS will include
in its analyses an estimated dollar cost for the proposed plan and
all continuing plans. This cost, dilution to shareholders' equity,
will also be expressed as a percentage figure for the transfer of
shareholder wealth, and will be considered long with dilution to
voting power. Once ISS determines the estimated cost of the plan,
we compare it to a company-specific dilution cap.
Vote AGAINST equity plans that explicitly permit repricing or
where the company has a history of repricing without shareholder
approval.
Management Proposals Seeking Approval to Reprice Options
Votes on management proposals seeking approval to reprice options
are evaluated on a CASE-BY-CASE basis giving consideration to
the following:
* Historic trading patterns
* Rationale for the repricing
* Value-for-value exchange
* Option vesting
* Term of the option
* Exercise price
* Participation
Employee Stock Purchase Plans
- -----------------------------
Votes on employee stock purchase plans should be determined on a
CASE-BY-CASE basis.
Vote FOR employee stock purchase plans where all of the following
apply:
* Purchase price is at least 85 percent of fair market value
* Offering period is 27 months or less, and
* Potential voting power dilution (VPD) is ten percent or less.
Vote AGAINST employee stock purchase plans where any of the
opposite conditions
obtain.
Shareholder Proposals on Compensation
- -------------------------------------
Vote on a CASE-BY-CASE basis for all other shareholder proposals
regarding executive and director pay, taking into account company
performance, pay level versus peers, pay level versus industry,
and long term corporate outlook.
10. Social and Environmental Issues
=======================================
These issues cover a wide range of topics, including consumer and
public safety, environment and energy, general corporate issues,
labor standards and human rights, military business, and workplace
diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors
goes into each analysis, the overall principal guiding all vote
recommendations focuses on how the proposal will enhance the
economic value of the company.
<Page>
===============================================================
PART C
------
OTHER INFORMATION
Item 15. INDEMNIFICATION
- ------------ ------------------------------------------
Reference is made to Article VIII, Sections 1, 2 and
3 of Registrant's Declaration of Trust with respect to the
indemnification of the trustees and officers of Registrant
against liabilities which may be incurred by them in such
capacities
Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended, may be
permitted to trustees, officers and controlling persons of
the Registrant pursuant to the Registrant's Declaration of
Trust, or otherwise, the Registrant has been advised that,
in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the
securities being registered, then the Registrant will,
unless in the opinion of its counsel the matter has been
settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question of whether
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
<Table>
Item 16. EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE
- --------------- -----------------------------------------------------
(1) Declaration of Trust dated December 17, 1991. (iii)
(2) By-Laws. (ii)
(3) Not Applicable.
(4) Agreement and Plan of Reorganization. (filed herewith)
(5) Instruments Defining Rights of Security Holders. (i)
(6)(i) Fund Management Agreement between The Managers Funds LLC
and Managers Trust I, dated as of August 1, 2000. (iv)
(6)(ii) Sub-Advisory Agreement between The Managers Funds LLC
and Smith Breeden Associates, Inc., dated
August 1, 2000. (iv)
(7) Distribution Agreement between Managers Distributors, Inc.
and Managers Trust I dated August 1, 2000. (v)
(8) Not Applicable.
(9) Custodian Contract between The Bank of New York and
Managers Trust I dated August 5, 2002. (vi)
(10) Not applicable.
(11) Legal Opinion. (i)
(12) Legal Opinion with respect to tax matters.
(to be filed by amendment)
(13)(i) (h)(i) Administration and Shareholder Servicing Agreement,
dated as of August 1, 2000. (iv)
(13)(ii) Transfer Agency and Service Agreement between Managers
Trust I and State Street Bank and Trust Company, dated as
of August 1, 2000. (iv)
(14) Consents of PricewaterhouseCoopers. (filed herewith)
(15) Not applicable.
(16)(i) Power of Attorney for the Trustees of the Registrant dated
March 14, 2003. (vii)
(16)(ii) Power of Attorney for the Officers of the Registrant dated
March 14, 2003. (vii)
(17) Not applicable.
C-1
<Page>
- ----------- --------------------------------------------------------------
(i) Filed as an exhibit to the Registrant's Registration Statement
on Form N1-A, Registration Nos. 033-44909, 811-6520
(filed April 14, 1992).
(ii) Filed as an exhibit to the Registrant's Registration Statement
on Form N1-A, Registration Nos. 033-44909; 811-6520
(filed August 1, 1995).
(iii) Filed as an exhibit to the Registrant's Registration Statement
on Form N1-A, Registration Nos. 033-44909; 811-6520
(filed July 31, 1998).
(iv) Filed as an exhibit to the Registrant's Registration Statement
on Form N1-A, Registration Nos. 033-44909; 811-6520
(filed August 1, 2000).
(v) Filed as an exhibit to the Registrant's Registration Statement
on Form N1-A, Registration Nos. 033-44909; 811-6520
(filed August 1, 2001).
(vi) Filed as an exhibit to the Registrant's Registration Statement
on Form N1-A, Registration Nos. 033-44909; 811-6520
(filed May 30, 2003).
(vii) Filed as an exhibit to the Registrant's Registration Statement
on Form N-14, Registration Nos. 333-105902
(filed June 6, 2003).
Item 17 UNDERTAKINGS
- ----------- --------------------------------------------------------------
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for the reofferings by persons who
may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
</Table>
C-2
<Page>
=====================================================================
Exhibit No. (4) Agreement and Plan of Reorganization
=====================================================================
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this 14th day of March, 2003, by and between Managers
Trust I (the "Acquiring Trust"), a Massachusetts business trust with
its principal place of business at 40 Richards Ave. Norwalk, CT
06854, on behalf of its series, Managers U.S. Stock Market Plus Fund
(the "Acquiring Fund") and Managers AMG Funds (the "Acquired
Trust"), a Massachusetts business trust with its principal place of
business at 40 Richards Ave. Norwalk, CT 06854, on behalf of its
series, First Quadrant Tax-Managed Equity Fund (the "Acquired
Fund"). All references in this Agreement to action taken by the
Acquiring Fund or the Acquired Fund shall be deemed to refer to
action taken by the Acquiring Trust or the Acquired Trust, as the
case may be.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section
368(a)(1) of the United States Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization (the "Reorganization") will
consist of the transfer of all of the assets of the Acquired Fund to
the Acquiring Fund in exchange solely for voting shares of
beneficial interest of the Acquiring Fund (the "Acquiring Fund
Shares"), the assumption by the Acquiring Fund of the Stated
Liabilities of the Acquired Fund described in paragraph 1.3, and the
distribution of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in complete liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set
forth in this Agreement.
WHEREAS, the Acquiring Fund and the Acquired Fund are open-
end, registered investment companies of the management type or a
series thereof, and the Acquired Fund owns securities which
generally are assets of the character in which the Acquiring Fund is
permitted to invest;
WHEREAS, the Trustees of the Acquiring Trust have determined
that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of the Stated Liabilities
of the Acquired Fund described in paragraph 1.3, by the Acquiring
Fund is in the best interests of the Acquiring Fund and its
shareholders and that the interests of the existing shareholders of
the Acquiring Fund would not be diluted as a result of this
transaction; and
WHEREAS, the Trustees of the Acquired Trust have determined
that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of the Stated Liabilities
of the Acquired Fund described in paragraph 1.3 by the Acquiring
Fund is in the best interests of the Acquired Fund and its
shareholders and that the interests of the existing shareholders of
the Acquired Fund would not be diluted as a result of this
transaction.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND
IN EXCHANGE FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF
THE STATED LIABILITIES OF THE ACQUIRED FUND AND THE
LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund
shareholders and the other terms and conditions herein set
forth and on the basis of the representations and warranties
contained herein,
<Page>
the Acquired Trust, on behalf of the Acquired Fund agrees to
transfer all of the Acquired Fund's assets, as set forth in
paragraph 1.2, to the Acquiring Trust, on behalf Acquiring Fund, and
the Acquiring Fund agrees in exchange therefor: (i) to deliver to
the Acquired Fund the number of full and fractional Acquiring Fund
Shares determined by dividing the value of the Acquired Fund's net
assets, computed in the manner and as of the time and date set forth
in paragraph 2.1, by the net asset value of one Acquiring Fund
Share, computed in the manner and as of the time and date set forth
in paragraph 2.2; and (ii) to assume the Stated Liabilities of the
Acquired Fund described in paragraph 1.3. Such transactions shall
take place at the closing provided for in paragraph 3.1
(the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all assets and property, including,
without limitation, all cash, cash equivalents, securities,
commodities and futures interests and dividends or interest or other
receivables that are owned by the Acquired Fund and any deferred or
prepaid expenses shown as an asset on the books of the Acquired Fund
on the closing date provided for in paragraph 3.1 (the
"Closing Date") (collectively, "Assets").
1.3 The Acquired Fund will endeavor to discharge all of its
known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume only those accrued and unpaid
liabilities of the Acquired Fund set forth in the Acquired Fund's
statement of assets and liabilities as of the Closing Date (as
defined in Section 3.1) delivered by the Trust, on behalf of the
Acquired Fund to the Acquiring Trust, on behalf of the Acquiring
Fund, pursuant to paragraph 7.2 hereof (the "Stated Liabilities").
The Acquiring Fund shall assume only the Stated Liabilities and
shall not assume any other debts, liabilities or obligations of the
Acquired Fund. On or as soon as practicable prior to the Closing
Date, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it
will have distributed substantially all of its investment company
taxable income (computed without regard to any deduction for
dividends paid) and realized net capital gain, if any, for the
current taxable year through the Closing Date.
1.4 Immediately after the transfer of Assets provided for in
paragraph 1.1, the Acquired Fund will distribute to the Acquired
Fund's shareholders of record (the "Acquired Fund Shareholders"), on
a pro rata basis, the Acquiring Fund Shares received by the Acquired
Fund pursuant to paragraph 1.1, and will completely liquidate. Such
distribution and liquidation will be accomplished by the transfer of
the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on
the share records of the Acquiring Fund in the names of the Acquired
Fund Shareholders. The aggregate net asset value of Acquiring Fund
Shares to be so credited to Acquired Fund Shareholders shall be
equal to the aggregate net asset value of the Acquired Fund shares
owned by such shareholders on the Closing Date. All issued and
outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund. Ownership of Acquiring
Fund Shares will be shown on the books of the Acquiring Fund and the
Acquiring Trust will not issue certificates representing the
Acquiring Fund Shares; provided, however, that any share
certificates representing shares of the Acquired Fund that have been
issued by the Acquired Trust and have not been canceled prior to the
Closing shall, from and after the Closing Date, represent a
corresponding number of Acquiring Fund Shares determined in
accordance with Section 2.3.
2
<Page>
1.5 Any reporting responsibility of the Acquired Fund
including, but not limited to, the responsibility for filing of
regulatory reports, tax returns, or other documents with the U.S.
Securities and Exchange Commission (the "Commission"), any state
securities commission, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and shall
remain the responsibility of the Acquired Fund.
1.6 All books and records of the Acquired Fund, including
all books and records required to be maintained under the Investment
Company Act of 1940, as amended (the "1940 Act") and the rules and
regulations thereunder, shall be available to the Acquiring Fund
from and after the Closing Date and shall be transferred to the
Acquiring Fund as soon as practicable following the Closing Date.
2. VALUATION
---------
2.1 The value of the Assets shall be the value of such
assets computed as of immediately after the close of regular trading
of the New York Stock Exchange and after the declaration of any
dividends on the Closing Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set
forth in the Acquiring Trust's Declaration of Trust and the then-
current prospectus and statement of additional information, together
with any other valuation procedures established by the Trustees of
the Acquiring Trust.
2.2 The net asset value of an Acquiring Fund Share shall be
the net asset value per share computed on the Valuation Date, using
the valuation procedures referred to in paragraph 2.1.
2.3 The number of Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired
Fund's Assets shall be determined by dividing the value of the
Acquired Fund's net assets determined using the valuation procedures
referred to in paragraph 2.1, by the net asset value of an Acquiring
Fund Share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by or under the
direction of each Fund's respective record keeping agent, if
applicable, and shall be subject to review by Acquiring Fund's
record keeping agent and by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
------------------------
3.1 The Closing of the transactions contemplated by this
Agreement shall be July 31, 2003, or such other date as the parties
may agree (the "Closing Date"). All acts taking place at the
Closing shall be deemed to take place simultaneously as of 4:00
p.m., Eastern Time on the Closing Date unless otherwise agreed by
the parties. The Closing shall be held at the offices of the
Acquiring Fund or at such other location as the parties may agree.
3.2 The Acquired Fund shall direct The Bank of New York, as
custodian for the Acquired Fund (the "Custodian"), to deliver, at
the Closing, a certificate of an authorized officer stating that (i)
Assets shall have been delivered in proper form to the Acquiring
Fund prior to or on the Closing Date, and (ii) all necessary taxes
in connection with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. The Acquired
Fund's portfolio securities represented by a certificate or other
3
<Page>
written instrument shall be presented for examination by the
Custodian to the custodian for the Acquiring Fund no later than five
business days preceding the Closing Date, and shall be transferred
and delivered by the Acquired Fund as of the Closing Date for the
account of the Acquiring Fund duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof.
The Custodian shall deliver, as of the Closing Date, by book entry,
in accordance with the customary practices of the Custodian and the
securities depositories (as defined in Rule 17f-4 under the 1940
Act) in which the Acquired Fund's Assets are deposited, the Acquired
Fund's Assets deposited with such depositories. The cash to be
transferred by the Acquired Fund shall be delivered by wire transfer
of federal funds on the Closing Date.
3.3 The Acquired Fund shall direct Boston Financial Data
Service, Inc. (the "Transfer Agent"), on behalf of the Acquired
Fund, to deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of
the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Acquired Fund shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund
shall issue and deliver a confirmation evidencing the Acquiring Fund
Shares to be credited on the Closing Date to the Acquired Fund, or
provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing each
party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents
as such other party or its counsel may reasonably request to effect
the transactions contemplated in this Agreement.
3.4 In the event that on the Valuation Date (a) the New York
Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereupon shall be restricted, or (b)
trading or the reporting of trading on such Exchange or elsewhere
shall be disrupted so that, in the judgment of the respective
officers of the Acquired Fund and the Acquiring Fund, accurate
appraisal of the value of the net assets of the Acquiring Fund or
the Acquired Fund is impracticable, the Closing Date shall be
postponed until the first trading day after the day when trading
shall have been fully resumed and reporting shall have been
restored.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Except as has been disclosed to the Acquiring Fund in a
written instrument executed by an officer of the Acquired Trust, the
Acquired Trust, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Trust, on behalf of the Acquiring Fund, as
follows:
(a) The Acquired Fund is duly organized as a series of
the Acquired Trust, a voluntary association of the type commonly
referred to as a Massachusetts business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, with power under its Declaration of
Trust, as amended and/or restated through the date hereof (the
Declaration of Trust of a Massachusetts business trust as amended
and/or restated through the date in question being hereinafter
referred to as its "Declaration of Trust") to own all of its
properties and assets and to carry on its business as it is now
being conducted;
4
<Page>
(b) The Acquired Trust is a registered investment
company classified as a management company of the open-end type, and
its registration with the Commission as an investment company under
the 1940 Act, and such registration is in full force and effect;
(c) No consent, approval, authorization, or order of
any court or governmental authority is required for the consummation
by the Acquired Fund of the transactions contemplated herein, except
such as have been obtained under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the 1940 Act and such as may be
required by state securities laws;
(d) The current prospectus and statement of additional
information of the Acquired Fund and each prospectus and statement
of additional information of the Acquired Fund used at all times
prior to the date of this Agreement conforms or conformed at the
time of its use in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at
the time of its use include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(e) On the Closing Date, the Acquired Trust, on behalf
of the Acquired Fund, will have good and marketable title to the
Assets and full right, power, and authority to sell, assign,
transfer and deliver such Assets hereunder free of any liens or
other encumbrances, and upon delivery and payment for such assets,
the Acquiring Trust, on behalf of the Acquiring Fund, will acquire
good and marketable title thereto, subject to no restrictions on the
full transfer thereof, including such restrictions as might arise
under the 1933 Act, other than as disclosed to the Acquiring Fund;
(f) The Acquired Fund is not, and the execution,
delivery and performance of this Agreement will not result, in a
material violation of the Acquired Trust's Declaration of Trust or
By-Laws or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Trust, on
behalf of the Acquired Fund, is a party or by which it is bound;
(g) The execution, delivery and performance of this
Agreement will not result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture,
instrument, contract, lease, judgment or decree to which the
Acquired Trust, on behalf of the Acquired Fund, is a party or by
which it is bound;
(h) All material contracts or other commitments of the
Acquired Fund (other than this Agreement and certain investment
contracts, including options, futures, and forward contracts) will
terminate without liability to the Acquired Fund on or prior to the
Closing Date;
(i) Except as otherwise disclosed in writing to and
accepted by the Acquiring Trust, on behalf of the Acquiring Fund, no
litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to
its knowledge, threatened against the Acquired Fund or any of its
properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Trust, on behalf of the Acquired Fund, knows
5
<Page>
of no facts which might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability
to consummate the transactions herein contemplated;
(j) The Statement of Assets and Liabilities,
Statements of Operations and Changes in Net Assets, and Portfolio of
Investments of the Acquired Fund at October 31, 2002 have been
audited by PricewaterhouseCoopers LLP, independent accountants, and
are in accordance with generally accepted accounting principles
("GAAP") consistently applied, and such statements (copies of which
have been furnished to the Acquiring Fund) present fairly, in all
material respects, the financial condition of the Acquired Fund as
of such date in accordance with GAAP, and there are no known
contingent liabilities of the Acquired Fund required to be reflected
on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(k) Since October 31, 2002, there has not been any
material adverse change in the Acquired Fund's financial condition,
assets, liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquired Fund
of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund or as may arise under an agreement to
repay amounts reimbursed or fees waived by the Acquired Fund's
investment advisor. For the purposes of this subparagraph (k), a
decline in net asset value per share of the Acquired Fund due to
declines in market values of securities in the Acquired Fund's
portfolio, the discharge of Acquired Fund liabilities, or the
redemption of Acquired Fund shares by shareholders of the Acquired
Fund shall not constitute a material adverse change;
(l) On the Closing Date, all Federal and other tax
returns, dividend reporting forms, and other tax-related reports of
the Acquired Fund required by law to have been filed by such date
(including any extensions) shall have been filed and are or will be
correct in all material respects, and all Federal and other taxes
shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for
the payment thereof, and to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(m) For each taxable year of its operation (including
the taxable year ending on the Closing Date), the Acquired Fund has
met the requirements of Subchapter M of the Code for qualification
as a regulated investment company and has elected to be treated as
such, has been eligible to and has computed (or will compute) its
federal income tax under Section 852 of the Code, and will have
distributed all of its investment company taxable income and net
capital gain (as defined in the Code) that has accrued through the
Closing Date, and before the Closing Date will have declared
dividends sufficient to distribute all of its investment company
taxable income and net capital gain for the period ending on the
Closing Date;
(n) All issued and outstanding shares of the Acquired
Fund are, and on the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable by the Acquired Trust
(recognizing that under Massachusetts law shareholders of the
Acquired Fund could under certain circumstances be held personally
liable for its obligations). All of the issued and outstanding
shares of the Acquired Fund will, at the time of Closing, be held by
6
<Page>
the persons and in the amounts set forth in the records of the
Transfer Agent, on behalf of the Acquired Fund, as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any
of the shares of the Acquired Fund, nor is there outstanding any
security convertible into any of the Acquired Fund shares;
(o) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date
by all necessary action, if any, on the part of the Trustees of the
Acquired Trust, on behalf of the Acquired Fund, this Agreement will
constitute a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject, as to
enforcement, bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general
equity principles; and
(p) The information to be furnished by the Acquired
Fund for use in registration statements, proxy materials and other
documents filed or to be filed with any federal, state or local
regulatory authority (including the National Association of
Securities Dealers, Inc.), which may be necessary in connection with
the transactions contemplated hereby, shall be accurate and complete
in all material respects and shall comply in all material respects
with Federal securities and other laws and regulations thereunder
applicable thereto; and
4.2 Except as has been disclosed to the Acquired Fund in a
written instrument executed by an officer of the Acquiring Trust,
the Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Trust as follows:
(a) The Acquiring Fund is duly organized as a series
of the Acquiring Trust, a voluntary association of the type commonly
referred to as a Massachusetts business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, with power under its Declaration of
Trust to own all of its properties and assets and to carry on its
business as it is now being conducted;
(b) The Acquiring Trust is a registered investment
company classified as a management company of the open-end type, and
its registration with the Commission as an investment company under
the 1940 Act, and such registration is in full force and effect;
(c) No consent, approval, authorization, or order of
any court or governmental authority is required for the consummation
by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act
and the 1940 Act and such as may be required by state securities
laws;
(d) The current prospectus and statement of additional
information of the Acquiring Fund and each prospectus and statement
of additional information of the Acquiring Fund used during the
three years previous to the date of this Agreement conforms or
conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder and does not or
did not at the time of its use include any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not materially
misleading;
(e) On the Closing Date, the Acquiring Trust, on
behalf of the Acquiring Fund, will have good and marketable title to
the Acquiring Fund's assets, free of any liens of other
7
<Page>
encumbrances, except those liens or encumbrances as to which the
Acquired Fund has received notice and necessary documentation at or
prior to the Closing;
(f) The Acquiring Fund is not, and the execution,
delivery and performance of this Agreement will not result, in a
material violation of the Acquiring Trust's Declaration of Trust or
By-Laws or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquiring Trust,
on behalf of the Acquiring Fund, is a party or by which it is bound;
(g) The execution, delivery and performance of this
Agreement will not result, in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture,
instrument, contract, lease, judgment or decree to which the
Acquiring Trust, on behalf of the Acquiring Fund, is a party or by
which it is bound;
(h) Except as otherwise disclosed in writing to and
accepted by the Acquired Trust, on behalf of the Acquired Fund, no
litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to
its knowledge, threatened against the Acquiring Fund or any of its
properties or assets that, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Trust, on behalf of the Acquiring Fund,
knows of no facts which might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability
to consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities,
Statements of Operations and Changes in Net Assets and Portfolio of
Investments of the Acquiring Fund at March 31, 2003 will be audited
by PricewaterhouseCoopers LLP, independent auditors, and will be in
accordance with GAAP consistently applied, and such statements
(copies of which have been furnished to the Acquired Fund) will
present fairly, in all material respects, the financial condition of
the Acquiring Fund as of such date in accordance with GAAP, and
there will be no known contingent liabilities of the Acquiring Fund
required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed
therein;
(j) After March 31, 2003, there will not have been any
material adverse change in the Acquiring Fund's financial condition,
assets, liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring Fund
of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquired Fund or as may arise under an agreement to
repay amounts reimbursed or fees waived by the Acquiring Fund's
investment advisor. For purposes of this subparagraph (j), a
decline in net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's
portfolio, the discharge of Acquiring Fund liabilities, or the
redemption of Acquiring Fund Shares by shareholders of the Acquiring
Fund, shall not constitute a material adverse change;
(k) On the Closing Date, all Federal and other tax
returns, dividend reporting forms, and other tax-related reports of
the Acquiring Fund required by law to have been filed by such date
(including any extensions) shall have been filed and are or will be
correct in all material respects, and all Federal and other taxes
shown as due or required to be shown as due on said returns and
8
<Page>
reports shall have been paid or provision shall have been made for
the payment thereof, and to the best of the Acquiring Fund's
knowledge no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(l) For each taxable year of its operation (including
the taxable year that includes the Closing Date), the Acquiring Fund
has met (or will meet) the requirements of Subchapter M of the Code
for qualification as a regulated investment company and has elected
to be treated as such (or will so elect), has been eligible to and
has computed (or will compute) its federal income tax under Section
852 of the Code and has distributed all of its investment company
taxable income and net capital gain (as defined in the Code) for
periods ending prior to the Closing Date;
(m) All issued and outstanding Acquiring Fund Shares
are, and on the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable by the Acquiring Trust
(recognizing that under Massachusetts law shareholders of the
Acquiring Fund could under certain circumstances be held personally
liable for its obligations). The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for
or purchase any Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares;
(n) The execution, delivery and performance of this
Agreement will have been fully authorized prior to the Closing Date
by all necessary action, if any, on the part of the Trustees of the
Acquiring Trust, on behalf of the Acquiring Fund, and this Agreement
will constitute a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject, as to
enforcement, bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general
equity principles;
(o) The Acquiring Fund Shares to be issued and
delivered to the Acquired Fund, for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, will on the
Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund Shares,
and will be fully paid and non-assessable;
(p) The information to be furnished by the Acquiring
Fund for use in the registration statements, proxy materials and
other documents that may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete in
all material respects and shall comply in all material respects with
Federal securities and other laws and regulations applicable
thereto; and
(q) That (i) from its effective date through the date
of the Closing, Registration Statement on Form N-14 of the Acquiring
Fund relating to the Acquiring Fund Shares issuable hereunder, and
any amendment or supplement thereto (the "Registration Statement"),
and (ii) from the date definitive proxy materials of the Acquiring
Fund related to the matters described in paragraph 5.2 (the "Proxy
Materials") are first distributed to shareholders through the date
of the shareholders meeting contemplated therein (and any
adjournments thereof), the Proxy Materials of the Acquiring Fund,
and any amendment or supplement thereto, shall (A) not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements
9
<Page>
were made, not misleading, provided, however, that the
representations and warranties in this subparagraph (q) shall not
apply to statements in or omissions from the Registration Statement
and Proxy Materials made in reliance upon and in conformity with
information that was furnished by the Acquired Fund for use therein,
and (B) comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
-----------------------------------------------------
5.1 The Acquiring Fund and the Acquired Fund each covenants
to operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary
course of business will include (i) the declaration and payment of
customary dividends and distributions and any other distribution
that may be advisable and (ii) other actions that the Acquiring Fund
or Acquired Fund may deem necessary or advisable to facilitate the
transactions contemplated by this Agreement.
5.2 The Acquiring Fund covenants to call a meeting of its
shareholders to consider and act upon (a) any amendments to the
Acquiring Fund's investment objectives and policies necessary to
cause them to be the same in all material respects as those of the
Acquired Fund provided such amendments require shareholder approval;
and (b) investment management and sub-advisory agreements
substantially similar to those of the Acquired Fund, so as to secure
shareholder approval prior to the Closing Date, and shall prepare
and distribute the Proxy Materials, complying in all material
respects with the requirements of the 1934 Act and 1940 Act
applicable to such solicitation.
5.3 The Acquiring Fund will prepare and distribute the
Registration Statement and deliver the prospectus relating to the
Acquiring Fund Shares to be issued hereunder, complying in all
material respects with the requirements of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations thereunder,
applicable to the distribution of Acquiring Fund Shares in the
Closing.
5.4 The Acquired Fund covenants that the Acquiring Fund
Shares to be issued hereunder are not being acquired for the purpose
of making any distribution thereof, other than in accordance with
the terms of this Agreement.
5.5 The Acquired Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Acquired Fund shares.
5.6 Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund will each take, or cause to be
taken, all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
5.7 The Acquired Fund will provide the Acquiring Fund with
such information regarding the Acquired Fund reasonably necessary to
ensure compliance with the 1933 Act, the 1934 Act and the 1940 Act
in the preparation of (a) the Registration Statement and (b) the
Proxy Materials.
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5.8 If determined by the officers of the Acquiring Fund, in
their sole discretion, to be advisable, the Acquiring Fund will
effect a stock dividend or reverse split such that the net asset
value of the Acquiring Fund equals the net asset value of the
Acquired Fund on the Valuation Date.
5.9 As soon as is reasonably practicable after the Closing,
the Acquired Fund will make a liquidating distribution to its
shareholders consisting of the Acquiring Fund Shares received at the
Closing.
5.10 The Acquiring Fund and the Acquired Fund shall each use
its reasonable best efforts to fulfill or obtain the fulfillment of
the conditions precedent to effect the transactions contemplated by
this Agreement as promptly as practicable.
5.11 The Acquired Trust, on behalf of Acquired Fund,
covenants that the Acquired Trust will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver
or cause to be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further action
as the Acquiring Trust, on behalf of the Acquiring Fund, may
reasonably deem necessary or desirable in order to vest in and
confirm (a) the Acquired Trust's, on behalf of the Acquired Fund's,
title to and possession of the Acquiring Fund Shares to be delivered
hereunder, and (b) the Acquiring Trust's, on behalf of the Acquiring
Fund's, title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.12 The Acquiring Fund will use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act,
the 1940 Act and other applicable law as may be necessary in order
to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
--------------------------------------------------------
The obligations of the Acquired Trust, on behalf of the
Acquired Fund, to consummate the transactions provided for herein
shall be subject, at the Acquired Trust's election, to the
performance by the Acquiring Trust, on behalf of the Acquiring Fund,
of all the obligations to be performed by it hereunder on or before
the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations and warranties of the Acquiring
Trust, on behalf of the Acquiring Fund, contained in this Agreement
shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date;
6.2 The Acquiring Trust shall have delivered to the Acquired
Trust a certificate executed in its name by its President or
Treasurer, in a form reasonably satisfactory to the Acquired Trust
and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Trust, on behalf of
the Acquiring Fund, made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other
matters as the Acquired Trust shall reasonably request;
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6.3 The Acquiring Trust, on behalf of the Acquiring Fund,
shall have performed all of the covenants and complied with all of
the provisions required by this Agreement to be performed or
complied with by the Acquiring Trust, on behalf of the Acquiring
Fund, on or before the Closing Date; and
6.4 The Acquired Fund and the Acquiring Fund shall have
agreed on the number of full and fractional Acquiring Fund Shares to
be issued in connection with the Reorganization after such number
has been calculated in accordance with paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
---------------------------------------------------------
The obligations of the Acquiring Trust, on behalf of the
Acquiring Fund, to complete the transactions provided for herein
shall be subject, at the Acquiring Trust's election to the
performance by the Acquired Trust, on behalf of the Acquired Fund,
all of the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquired
Trust, on behalf of the Acquired Fund, contained in this Agreement
shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date;
7.2 The Acquired Trust shall have delivered to the Acquiring
Fund a statement of the Acquired Fund's assets and liabilities, as
of the Closing Date, certified by the Treasurer of the Acquired
Trust;
7.3 The Acquired Trust shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by its
President or Treasurer, in form and substance satisfactory to the
Acquiring Trust and dated as of the Closing Date, to the effect
that the representations and warranties of the Acquired Trust, on
behalf of the Acquired Fund, made in this Agreement are true and
correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and
as to such other matters as the Acquiring Trust shall reasonably
request;
7.4 The Acquired Trust, on behalf of the Acquired Fund,
shall have performed all of the covenants and complied with all of
the provisions required by this Agreement to be performed or
complied with by the Acquired Trust, on behalf of the Acquired Fund,
on or before the Closing Date;
7.5 The Acquired Fund and the Acquiring Fund shall have
agreed on the number of full and fractional Acquiring Fund Shares to
be issued in connection with the Reorganization after such number
has been calculated in accordance with paragraph 1.1;
7.6 The Acquired Fund shall have declared and paid a
distribution or distributions prior to the Closing that, together
with all previous distributions, shall have the effect of
distributing to its shareholders (i) all of its investment company
taxable income and all of its net realized capital gains, if any,
for the period from the close of its last fiscal year to 4:00 p.m.
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Eastern time on the Closing; and (ii) any undistributed investment
company taxable income and net realized capital gains from any
period to the extent not otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND
------------------------------------------------------------
If any of the conditions set forth below have not been
satisfied on or before the Closing Date with respect to the Acquired
Trust, on behalf of the Acquired Fund, or the Acquiring Trust, on
behalf of the Acquiring Fund, the other party to this Agreement
shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 Approval of the proposals described in paragraph 5.2 by
the requisite vote of the holders of the outstanding shares of the
Acquiring Fund in accordance with the provisions of the Acquiring
Trust's Declaration of Trust, By-Laws, applicable Massachusetts law
and the 1940 Act, and certified copies of the resolutions evidencing
such approval shall have been delivered to the Acquired Fund.
Notwithstanding anything herein to the contrary, neither the
Acquiring Trust nor the Acquired Trust may waive the conditions set
forth in this paragraph 8.1;
8.2 On the Closing Date no action, suit or other proceeding
shall be pending or, to the Acquired Trust's or the Acquiring
Trust's knowledge, threatened before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with, this Agreement or the
transactions contemplated herein;
8.3 All consents of other parties and all other consents,
orders and permits of Federal, state and local regulatory
authorities deemed necessary by the Acquiring Trust or the Acquired
Trust to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that
either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated
under the 1933 Act; and
8.5 The parties shall have received the opinion of Goodwin
Procter LLP addressed to the Acquired Trust and the Acquiring Trust
substantially to the effect that, based upon certain facts,
assumptions, and representations, the transaction contemplated by
this Agreement shall constitute a tax-free reorganization for
federal income tax purposes. The delivery of such opinion is
conditioned upon receipt by Goodwin Procter LLP of representations
it shall request of the Acquiring Trust and the Acquired Trust.
Notwithstanding anything herein to the contrary, neither the
Acquiring Trust nor the Acquired Trust may waive the condition set
forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
---------------------------
9.1 The Acquiring Trust, on behalf of the Acquiring Fund,
and the Acquired Trust, on behalf of the Acquired Fund, represent
and warrant to each other that there are no brokers or finders
entitled to receive any payments in connection with the transactions
provided for herein.
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9.2 The expenses relating to the proposed Reorganization
shall be borne in such manner as may be approved by the Trustees of
the Acquired and Acquiring Trusts.
10. ENTIRE AGREEMENT
----------------
The Acquiring Trust and the Acquired Trust agree that neither
party has made any representation, warranty or covenant not set
forth herein and that this Agreement constitutes the entire
agreement between the parties.
Except for covenants to be performed after the Closing, the
representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall not survive the consummation of the
transactions contemplated hereunder.
11. TERMINATION
-----------
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned by either party by (i) mutual
agreement of the parties, or (ii) by either party if the Closing
shall not have occurred on or before July 31, 2003, unless such date
is extended by mutual agreement of the parties, or (iii) by either
party if the other party shall have materially breached its
obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of
any such termination, this Agreement shall become void and there
shall be no liability hereunder on the part of any party or their
respective trustees or officers, except for any such material breach
or intentional misrepresentation, as to each of which all remedies
at law or in equity of the party adversely affected shall survive.
12. AMENDMENTS
----------
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed in writing by the authorized
officers of the Acquiring Trust and the Acquired Trust.
13. NOTICES
-------
Any notice, report, statement or demand required or permitted
by any provisions of this Agreement shall be in writing and shall be
given by facsimile, personal service or prepaid or certified mail
addressed to the Acquired Trust, 40 Richards Avenue, Norwalk, CT
06854, or to the Acquiring Trust, 40 Richards Avenue, Norwalk, CT
06854, in each case with a copy to Goodwin Procter LLP, Exchange
Place, Boston, Massachusetts 02109, Attn: Philip H. Newman, P.C.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION
OF LIABILITY
-------------------------------------------------------------
14.1 The Article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
14
<Page>
14.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts
without regard to its principles of conflicts of laws.
14.4 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns, but
no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5 References in this Agreement to the Acquiring Trust mean
and refer to the Trustees from time to time serving under the
Declaration of Trust on file with the Secretary of The Commonwealth
of Massachusetts, as the same may be amended from time to time,
pursuant to which the Acquiring Trust conducts its business. It is
expressly agreed that the obligations of the Acquiring Trust
hereunder shall not be binding upon any of its Trustees,
shareholders, nominees, officers, agents, or employees of the
Acquiring Trust personally, but bind only the property of the
Acquiring Fund as provided in the Declaration of Trust of the
Acquiring Trust. Moreover, no series of the Acquiring Trust other
than the Acquiring Fund shall be responsible for the obligations of
the Acquiring Trust hereunder, and all persons shall look only to
the assets of the Acquiring Fund to satisfy the obligations of the
Acquiring Trust hereunder. The execution and the delivery of this
Agreement have been authorized by the Board of Trustees of the
Acquiring Trust, on behalf of the Acquiring Fund, and this Agreement
has been signed by authorized officers of the Acquiring Trust acting
as such, and neither such authorization by such Trustees, nor such
execution and delivery by such officers, shall be deemed to have
been made by any of them individually or to impose any liability on
any of them personally, but shall bind only the property of the
Acquiring Fund as provided in the Agreement and Declaration of Trust
of the Acquiring Trust.
14.6 References in this Agreement to the Acquired Trust mean
and refer to the Trustees from time to time serving under the
Declaration of Trust on file with the Secretary of The Commonwealth
of Massachusetts, as the same may be amended from time to time,
pursuant to which the Acquired Trust conducts its business. It is
expressly agreed that the obligations of the Acquired Trust
hereunder shall not be binding upon any of its Trustees,
shareholders, nominees, officers, agents, or employees of the
Acquired Trust personally, but bind only the property of the
Acquired Fund as provided in the Declaration of Trust of the
Acquired Trust. Moreover, no series of the Acquired Trust other
than the Acquired Fund shall be responsible for the obligations of
the Acquired Trust hereunder, and all persons shall look only to the
assets of the Acquired Fund to satisfy the obligations of the
Acquired Trust hereunder. The execution and the delivery of this
Agreement have been authorized by the Board of Trustees of the
Acquired Trust, on behalf of the Acquired Fund, and this Agreement
has been signed by authorized officers of the Acquired Trust acting
as such, and neither such authorization by such Trustees, nor such
execution and delivery by such officers, shall be deemed to have
been made by any of them individually or to impose any liability on
any of them personally, but shall bind only the property of the
Acquired Fund as provided in the Agreement and Declaration of Trust
of the Acquired Trust.
15
<Page>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President and its seal to be affixed
thereto and attested by its Secretary.
MANAGERS TRUST I, on behalf of its series,
MANAGERS U.S. STOCK MARKET PLUS FUND
By: /s/ Peter M. Lebovitz
-----------------
Title: President
---------
MANAGERS AMG FUNDS, on behalf of its series,
FIRST QUADRANT TAX-MANAGED EQUITY FUND
By: /s/ Peter M. Lebovitz
-----------------
Title: President
---------
16
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=====================================================================
Exhibit No. (14) Consents of PricewaterhouseCoopers LLP
=====================================================================
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-14 of our report dated May 21, 2003, relating to
the financial statements and financial highlights, which appears in
the March 31, 2003 Annual Report to Shareholders of Managers U.S. Stock
Market Plus Fund, which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under
the headings "Financial Highlights", "Independent Public Accountants"
and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 31, 2003
<Page>
=====================================================================
SIGNATURES
=====================================================================
As required by the Securities Act of 1933, this registration
statement has been signed on behalf of the registrant, in the City of
Norwalk and State of Connecticut, on the 31st day of July, 2003.
MANAGERS TRUST I
By: /s/ Donald S. Rumery
------------------------
Name: Donald S. Rumery
Title: Treasurer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
- -------------------- ------------------ -----------
*
- --------------------
Peter M. Lebovitz President and Trustee July 31, 2003
(Principal Executive Officer)
*
- --------------------
Galan G. Daukas Chief Financial Officer July 31, 2003
(Principal Financial Officer)
/s/ Donald S. Rumery
- -------------------- Treasurer, Secretary and
Donald S. Rumery (Principal Accounting Officer) July 31, 2003
*
- --------------------
Jack W. Aber Trustee July 31, 2003
*
- --------------------
William E. Chapman, II Trustee July 31, 2003
*
- --------------------
Sean M. Healey Trustee July 31, 2003
*
- --------------------
Edward J. Kaier Trustee July 31, 2003
*
- --------------------
Madeline H. McWhinney Trustee July 31, 2003
*
- --------------------
Steven J. Paggioli Trustee July 31, 2003
*
- --------------------
Eric Rakowski Trustee July 31, 2003
*
- --------------------
Thomas R. Schneeweis Trustee July 31, 2003
* By /s/ Donald S. Rumery pursuant to Power of Attorney.
--------------------
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