THE MANAGERS FUNDS
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SHORT GOVERNMENT FUND
SHORT & INTERMEDIATE
BOND FUND
INTERMEDIATE MORTGAGE FUND
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ANNUAL REPORT
December 31, 1995
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Where Leading Money Managers Converge
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<PAGE>
THE MANAGERS FUNDS
Dear Fellow Shareholder:
A confluence of economic and financial events in 1995 led to a great year
for stocks, bonds and The Managers Funds. Moderate economic growth with low
inflation allowed the Federal Reserve to ease monetary policy and led to falling
interest rates. Bonds were impressive in reversing their dismal 1994 performance
by returning +18.5% (Lehman Aggregate Bond Index), their best return in a
decade.
When the year began, short-term rates were still on the rise, and the
Federal Reserve implemented its seventh consecutive interest rate hike by
increasing the Fed Funds rate by 0.5% on February 1, 1995. Long rates were
falling, however, having peaked in November 1994, as investors were seeing
evidence of slowing economic growth. As it became clear that inflation was well
in check, below 3.0% and stable, bonds of all types and maturities rallied in
almost a straight line for the remainder of the year. There was a pause in
mid-July, when the market was surprised by strong retail sales and employment
reports, until September.
From the standpoint of bond sectors, U.S. Treasury securities led the market
for the entire year. The 30-year Treasury Bond provided a total return of +33.5%
for the year, and finished with a yield of 5.95%, down 1.93 percentage points
from the year previous. Yields for all other Treasury securities with maturities
longer than one year fell in excess of 2.0 percentage points, and provided total
returns of +8.1% for one year bills, +17.0% for five year notes, and +23.7% for
ten year bonds.
Corporate bonds performed well, with finance and real estate related issues
doing slightly better than industrials. Asset backed securities also performed
well despite an abundance of new supply. As might be expected given the strong
rally, mortgages lagged slightly, particularly in the second quarter, due to
concerns over a rise in prepayments.
Foreign bond markets provided U.S. investors with healthy returns,
particularly in the first half of the year when weakness of the U.S. Dollar
relative to foreign currencies increased U.S. Dollar returns. Although foreign
bonds continued to appreciate throughout the second half of the year, a U.S.
Dollar rebound in the third quarter mitigated some of the returns for U.S.
investors. The Salomon Brothers World Government Bond Index returned +16.9% in
U.S. Dollars for the first six months, and +1.9% for the second six months for a
full year return of +19.1%.
Within this context, The Managers Funds enjoyed an exceptional year. All of
the fixed income portfolio managers performed at or above our expectations for
the year. Congratulations to Dan Fuss in particular, who manages the Managers
Bond Fund, and was recognized by Morningstar as their fixed income manager of
the year. More importantly, all of the investment managers remain invested
appropriately according to their respective disciplines and specialties.
This report provides you with a discussion of our funds' performances, a
listing of the investment portfolios, financial statements and the report of
independent accountants. As always, should you have any questions on this
report, please feel free to contact us or your financial advisor.
We thank you for your continued investment in The Managers Funds.
Sincerely,
/s/ ROBERT P. WATSON
Robert P. Watson
President
1
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THE MANAGERS SHORT GOVERNMENT FUND
Investment Manager's Comments
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MANAGERS SHORT GOVERNMENT FUND seeks current income by investing in fixed
income securities. The Fund is currently managed by Thomas Doyle of Jennison
Associates, who has been managing the Fund since December, 1994.
During the final six months of 1995, MANAGERS SHORT GOVERNMENT FUND provided
a total return of +3.5% which brought the return for the full year to +9.7%. For
the same periods, the Merrill Lynch 1-2.99 Year Treasury Index returned +4.0%
and +11.0%, respectively.
As has been well documented, 1995 was an excellent year for bonds given the
dramatic fall in interest rates across the entire maturity spectrum. Short
duration* bonds participated in the rally, although to a lesser extent. Mr.
Doyle has managed the portfolio's duration so that it closely mirrors that of
the Merrill Lynch 1-2.99 Year Treasury Index, which is currently 1.8 years.
Thus, the Fund's returns have mirrored those of the index, and have only been
held back by the need to maintain high liquidity, a limitation imposed by the
size of the portfolio. As the portfolio grows, this limitation along with the
expense ratio should lessen.
As the Fund's cash flows stabilized throughout the year, Mr. Doyle was able
to reduce the U.S. Treasury position in favor of adjustable rate mortgage pools
(ARMs), short duration CMOs, and an asset-backed position. In the fourth
quarter, ARMs were eliminated, CMOs were reduced, and the proceeds were invested
in Treasuries and cash.
As of December 31, 1995, the Fund is 55% invested in U.S. Treasury
securities, 21% invested in Federal Home Loan CMOs, 5% invested in an
asset-backed pool, with the remainder in cash. While the duration remains in
line with the index, the average coupon, price and yield to maturity are higher
than those of the index.
* Duration is the weighted average time (typically quoted in years) to the
receipt of cash flows (principal+interest) for a bond or portfolio. It is used
to evaluate the interest rate sensitivity of a bond or portfolio. The longer
the duration, the more sensitive the price of the bond is to movements in
interest rates.
2
<PAGE>
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MANAGERS SHORT GOVERNMENT FUND
Cumulative Total Return Performance
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The Managers Short Government Fund cumulative total return is based on the
monthly change in net asset value (NAV), and assumes that all distributions were
reinvested.
The Merrill Lynch 1-2.99 Year Treasury Index consists of 60 U.S. Treasury
securities with maturities between 1 and 3 years. The Index assumes reinvestment
of all dividends.
This chart compares a hypothetical $10,000 investment made in Managers Short
Government Fund at the inception on October 15, 1987, to a $10,000 investment
made in the Merrill Lynch 1-2.99 Year Treasury Index for the same time period.
Past performance is not indicative of future results.
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MANAGERS SHORT GOVERNMENT FUND (CHART)
[GRAPHIC OMITTED]
Plot Points:
Managers Short ML 1-2.99 Year
Government Fund Treasury Index
Inception:
October 1987 $10,000 $10,000
1987 10,108 10,123
1988 10,704 10,753
1989 11,634 11,922
1990 12,456 13,081
1991 13,804 14,609
1992 14,342 15,529
1993 14,889 16,369
1994 13,976 16,462
1995 15,332 18,267
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This table shows the average annual total return for Managers Short Government
Fund for the one-year and five-year periods and since inception, and comparable
returns for the Merrill Lynch 1-2.99 Year Treasury Index.
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
SINCE THE FUND'S
ONE FIVE INCEPTION
YEAR YEARS OCTOBER 15, 1987*
------ ----- -----------------
Managers Short
Government Fund 9.7% 4.2% 5.4%
ML1-2.99 Year Treasury Index* 11.0 6.9 7.7
*Returns since October 31, 1987
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3
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MANAGERS SHORT AND INTERMEDIATE BOND FUND
Investment Manager's Comments
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MANAGERS SHORT AND INTERMEDIATE BOND FUND seeks current income by investing
in fixed income securities while maintaining an average portfolio maturity
between one and five years. On December 1, 1995, the Fund, which had been
multi-managed since its inception, was converted to a single portfolio currently
managed by Howard Rubin of Standish, Ayer & Wood, who has been managing a
portion of the Fund since August, 1991.
During the final six months of 1995, MANAGERS SHORT AND INTERMEDIATE BOND
FUND provided a total return of +6.0% which brought the return for the full year
to +15.6%. For the same periods, the Merrill Lynch 1-5 year Government/Corporate
Bond Index returned +4.5% and +12.9%, respectively.
As has been well documented, 1995 was an excellent year for bonds given the
dramatic fall in interest rates across the entire maturity spectrum. The Fund
outperformed its benchmark primarily because it had been positioned with a
duration* slightly longer than that of the index throughout most of the year.
This positioning was accomplished, in part, through limited investment in FNMA
inverse floating rate, and interest only CMOs, which had very attractive yields
relative to the market. As interest rates fell and demand for these types of
CMOs recovered, their prices outperformed. In early December 1995, as part of
the restructuring to a single managed portfolio, these positions were
liquidated.
Other positions which have contributed positively to performance include
several Green Tree Financial asset-backed bonds, positions in financial
corporation bonds, and U.S. Treasury securities which led the bond rally.
The fund currently has 39% of its assets invested in U.S. Treasury
securities, 16% invested in mortgage securities, and 37% in corporate bonds,
much of which are asset-backed securities. Going forward, the Treasury position
will likely be reduced in favor of corporate and mortgage positions as
attractive bonds become available. Additionally, 4% of net assets are invested
in foreign bonds, and 1% in preferred stocks, with the remainder in cash and
equivalents.
While the bond market is unlikely to duplicate its 1995 performance, the
elements which contributed to the market's rally remain in place: slow economic
growth, low inflation and the Federal Government trying to balance its budget.
With this in mind, Mr. Rubin is currently taking a neutral stance toward the
direction of interest rates. At year end, the portfolio had an average life of
3.5 years, and a duration of 2.5 years, just slightly longer than the Merrill
Lynch 1-5 year Government/Corporate Index, which had a duration of 2.4 years.
* Duration is the weighted average time (typically quoted in years) to the
receipt of cash flows (principal+interest) for a bond or portfolio. It is used
to evaluate the interest rate sensitivity of a bond or portfolio. The longer
the duration, the more sensitive the price of the bond is to movements in
interest rates.
4
<PAGE>
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MANAGERS SHORT AND INTERMEDIATE BOND FUND
Cumulative Total Return Performance
- -------------------------------------------------------------------------------
The Managers Short and Intermediate Bond Fund cumulative total return is
based on the monthly change in net asset value (NAV), and assumes that all
distributions were reinvested.
The Merrill Lynch 1-5 Year Government/Corporate Index consists of over 1,500
government and investment grade corporate bonds with maturities between one and
five years. The index is heavily weighted in U.S. Treasury issues, which make up
over 75% of the index. The index assumes reinvestment of dividends.
This chart compares a hypothetical $10,000 investment made in Managers Short
and Intermediate Bond Fund on December 31, 1985, to a $10,000 investment made in
the Merrill Lynch 1-5 Year Government/Corporate Index for the same time period.
Past performance is not indicative of future results.
MANAGERS SHORT AND INTERMEDIATE BOND FUND (CHART)
[GRAPHIC OMITTED]
Plot Points:
Managers Short And Merrill Lynch 1-5yr
Intermediate Bond Fund Govt./Corp. Index
1985 $10,000 $10,000
1986 11,135 11,152
1987 11,570 11,707
1988 12,240 12,451
1989 13,538 13,899
1990 14,516 15,244
1991 16,372 17,229
1992 18,263 18,415
1993 19,813 19,729
1994 18,153 19,620
1995 20,979 22,155
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This table shows the average annual total return for Managers Short and
Intermediate Bond Fund for the one-year, five-year, and ten-year periods through
December 31, 1995, and comparable returns for the Merrill Lynch 1-5 Year
Government/Corporate Index.
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
ONE FIVE TEN
YEAR YEARS YEARS
------ ------ ------
Managers Short and
Intermediate Bond Fund 15.6% 7.6% 7.7%
Merrill Lynch 1-5 Year
Government/Corporate Index 12.9 7.8 8.3
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5
<PAGE>
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MANAGERS INTERMEDIATE MORTGAGE FUND
Investment Manager's Comments
- --------------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND seeks current income by investing
primarily in mortgage related securities. The Fund is currently managed by John
Feingold and Michael Porreca of Jennison Associates, who have been managing the
Fund since October, 1994.
During the final six months of 1995, MANAGERS INTERMEDIATE MORTGAGE FUND
provided a total return of +5.2% which brought the return for the full year to
+17.3%. For the same periods, the Salomon Brothers Mortgage Index returned +5.3%
and +16.9%, respectively.
The Fund benefited from well timed moves between mortgages and U.S. Treasury
securities both early in the year, and again late in 1995. Constant recycling
into current coupon mortgages helped, as high coupon mortgage prices were
stunted by increasing prepayment rates.
Jennison continues to trade actively in order to maintain duration* closely
in line with the benchmark, and to balance both yield and total return
objectives of the portfolio. This trading includes purchase of TBA mortgage
pools, which are mortgage pools which have yet to be settled. Thus, at times,
including the year end, the Fund owns mortgage pools for which it has yet to
pay, and has invested the future payment in either cash equivalents, or very
short duration CMOs. This has enabled the Fund to remain fully invested while
maintaining high liquidity.
As of December 31, 1995, the Fund is 95% invested in fixed rate mortgage
pools, 13% invested in very short duration CMOs, 3% invested in adjustable rate
mortgage pools, and 3% invested in government agency bonds. At 3.5 years, the
duration is slightly less than that of the index. The average coupon and average
price of the portfolio are 7.4%, and 101.5, respectively, which are also
slightly less than those of the index, and which is generally beneficial in an
environment of increasing prepayments.
* Duration is the weighted average time (typically quoted in years) to the
receipt of cash flows (principal+interest) for a bond or portfolio. It is used
to evaluate the interest rate sensitivity of a bond or portfolio. The longer
the duration, the more sensitive the price of the bond is to movements in
interest rates.
6
<PAGE>
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MANAGERS INTERMEDIATE MORTGAGE FUND
Cumulative Total Return Performance
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The Managers Intermediate Mortgage Fund cumulative total return is based on
the monthly change in net asset value (NAV), and assumes that all distributions
were reinvested.
The Salomon Brothers Mortgage Pass-through Index is designed to cover the
performance of the entire mortgage pass-through market, including single family
pools of GNMA, FHLMC and FNMA mortgage securities.
This chart compares a hypothetical $10,000 investment made in Managers
Intermediate Mortgage Fund at the inception on May 15, 1986, to a $10,000
investment made in the Salomon Brothers Mortgage Pass-through Index for the same
time period. Past performance is not indicative of future results.
MANAGERS INTERMEDIATE MORTGAGE FUND (CHART)
[GRAPHIC OMITTED]
Plot Points:
Managers Intermediate Salomon Brothers Mortgage
Mortgage Fund Pass-through Index
Inception:
May 1986 $10,000 $10,000
1986 11,183 10,960
1987 11,548 11,405
1988 12,401 12,409
1989 14,222 14,291
1990 15,671 15,849
1991 18,520 18,327
1992 20,465 19,678
1993 22,808 21,061
1994 17,098 20,644
1995 20,050 24,124
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This table shows the average annual total returns for Managers Intermediate
Mortgage Fund for the one-year and five-year periods and since inception, and
comparable returns for the Salomon Brothers Mortgage Pass-through Index.
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
SINCE THE FUND'S
ONE FIVE INCEPTION
YEAR YEARS MAY 15, 1986*
---- ----- ----------------
Managers Intermediate
Mortgage Fund 17.3% 5.1% 7.5%
Salomon Brothers
Mortgage Pass-through Index* 16.9 8.8 9.6
*Since May 31, 1986
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7
<PAGE>
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THE MANAGERS FUNDS PERFORMANCE
All periods ending December 31, 1995
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<TABLE>
<CAPTION>
AVERAGE ANNUALIZED TOTAL RETURNS*
-----------------------------------------------------------
SINCE INCEPTION
EQUITY FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C> <C>
Managers Income Equity 34.36% 15.09% 16.70% 12.86% 14.30% Oct. 84
Managers Capital Appreciation 33.39% 15.20% 17.39% 14.25% 15.52% June 84
Managers Special Equity 33.94% 15.39% 21.54% 15.62% 15.64 June 84
Managers International Equity 16.24% 17.89% 15.08% 14.46% 14.46% Dec. 85
FIXED INCOME FUNDS
- -------------------------------------------------------------------------------------------------
Managers Short Government 9.71% 2.25% 4.24% -- 5.37% Oct. 87
Managers Short & Intermediate 15.57% 4.73% 7.64% 7.69% 8.96% June 84
Managers Intermediate Mortgage 17.27% -0.68% 5.05% -- 7.53% May 86
Managers Bond Fund 30.91% 10.64% 11.71% 10.52% 11.94% June 84
Managers Global Bond 19.08% -- -- -- 9.28% Mar. 94
=================================================================================================
<FN>
* Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment has
been made for taxes payable by shareholders on their reinvested dividends and
capital gain distributions.
</FN>
</TABLE>
Past performance is no guarantee of future results. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. For
additional or more recent information on The Managers Funds, including a
prospectus, call (800)835-3879. Please read the prospectus carefully before you
invest or send money.
8
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MANAGERS SHORT GOVERNMENT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1995
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PRINCIPAL
AMOUNT VALUE
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U.S. TREASURY OBLIGATIONS -- 54.8%
U.S. Treasury Notes,
7.500%, 12/31/96 $ 900,000 $ 919,683
7.250%, 02/15/98 800,000 831,872
9.250%, 08/15/98 800,000 877,496
8.875%, 11/15/98 520,000(DAGGER) 569,317
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TOTAL U.S. TREASURY OBLIGATIONS
(cost $3,168,545) 3,198,368
----------
U. S. GOVERNMENT AGENCY
OBLIGATIONS -- 20.6%
FHLMC Series 169,
Class I, PAC,
9.000%, 12/15/2019 572,895 577,828
FHLMC Series 1398,
Class C, PAC,
5.000%, 11/15/2000 309,323 307,572
FHLMC-GNMA Series 32,
Class PA, PAC,
5.150%, 07/25/2006 317,291 315,988
----------
TOTAL U. S. GOVERNMENT
AGENCY OBLIGATIONS
(cost $1,197,661) 1,201,388
----------
CORPORATE OBLIGATIONS -- 5.2%
World Omni Automobile Lease
6.050%, 11/25/2001 300,000 301,779
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TOTAL CORPORATE OBLIGATIONS
(cost $300,000) 301,779
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PRINCIPAL
AMOUNT VALUE
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REPURCHASE AGREEMENT -- 17.9%
State Street Bank, dated 12/29/95, due
01/02/96, 5.000%, total to be received
$1,045,581 (secured by $4,470,000 U.S.
Treasury Bills, due 05/16/1996, market
value $1,069,209), at cost $1,045,000 $1,045,000
----------
TOTAL INVESTMENTS -- 98.5%
(cost $5,711,206) 5,746,535
OTHER ASSETS, LESS LIABILITIES -- 1.5% 89,675
----------
NET ASSETS -- 100.0% $5,836,210
==========
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Note: Based on the cost of investments of $5,711,206 for Federal income tax
purposes at December 31, 1995, the aggregate gross unrealized appreciation
and depreciation was $36,304 and $975, respectively, resulting in net
unrealized appreciation of investments of $35,329.
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(DAGGER)Certain principal amounts held are segregated as collateral against
futures contracts.
- --------------------------------------------------------------------------------
ABBREVIATIONS:
PAC: Planned Amortization Class (PAC) tranches provide investors with
scheduled payments (PAC Schedule) over a range of prepayment speeds (PAC
band or range). PAC tranches typically are combined with companion
tranches that reduce the risk of prepayments varying from a constant
speed or range.
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Futures Contracts Outstanding at December 31, 1995: 10 Two-Year U.S. Treasury
Note contracts, expiring 3/96, face amount $2,500,000, with unrealized
appreciation of $9,281.
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The accompanying notes are an integral part of these financial statements.
9
<PAGE>
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MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE DEBT SECURITIES -- 37.3%
ASSET-BACKED SECURITIES -- 15.3%
Advanta Home Equity Loan
Trust, Series 1992-2,
Class A1, MBIA insured,
7.150%**, 06/25/08 $ 238,641 $ 240,952
Contimortgage Home Equity
Loan Trust, Series 1995-3,
Class A2,
6.860%, 07/15/10 200,000 203,062
EquiCredit Home Equity Loan
Trust, Series 1993-4, Class A,
FGIC insured,
5.725%, 12/15/08 82,149 80,454
Green Tree Financial Corp.,
Series 1994-A, Class A,
6.900%, 02/15/04 535,985 539,667
Green Tree Financial Corp.,
Series 1995-A, Class A,
7.250%, 07/15/05 66,665 67,456
Green Tree Financial Corp.,
Series 1993-2, Class A2,
6.100%, 07/15/18 350,000 352,898
Green Tree Financial Corp.,
Series 1993-4, Class A2,
5.850%, 01/15/19 450,000 450,842
HFC Home Equity Trust,
Series 1992-2A, Class A,
MBIA insured,
6.650%, 11/20/12 76,763 77,026
MBNA Master Credit Card
Trust, Series 1991-1, Class A,
7.750%, 10/15/98 250,000 253,828
Old Stone Credit Corp. Home
Equity Loan Trust, Series
92-4, Class A, FGIC insured,
6.550%, 10/25/07 84,497 84,603
Remodelers Home Improvement
Loan Asset-Backed
Certificates, Series 1995-3,
Class A2,
6.800%, 12/20/07 (a) 125,000 128,735
The Money Store Home Equity
Loan Trust, Series 1992-B,
Class A, MBIA insured,
6.900%, 07/15/07 130,362 131,930
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PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (continued)
The Money Store Home Equity
Loan Trust, Series 1995-C,
Class A3,
6.550%, 06/15/17 $ 475,000 $ 477,593
UCFC Loan Trust, Series
1993-B1, Class A1,
FGIC insured,
6.075%, 07/25/14 484,174 479,332
World Omni Automobile
Lease Securitization Trust,
Series 1994-B,
7.950%, 01/25/01 300,000 307,593
---------
TOTAL ASSET-BACKED SECURITIES 3,875,971
---------
BANKS AND FINANCIAL SERVICES -- 12.5%
Anchor Bancorp Inc.
Senior Notes,
8.937%, 07/09/03 100,000 103,750
Capital One Bank,
6.660%, 08/17/98 100,000 101,868
Caterpillar Financial Services,
Medium-Term Notes,
6.100%, 07/15/99 100,000 100,833
ERP Operating LP, Floating
Rate Notes,
6.625%**, 12/22/97 225,000 226,197
Finova Capital Corp.,
6.450%, 06/01/00 100,000 101,395
First Nationwide Holdings Inc.,
12.250%, 05/15/01 225,000 255,375
Fleet Financial Group, Inc.,
7.250%, 10/15/97 200,000 205,694
Goldman Sachs Group L.P.,
6.200%, 01/15/01 (a) 175,000 175,895
6.375%, 06/15/00 (a) 50,000 50,590
6.200%, 12/15/00 (a) 250,000 251,465
Huntington Bankshares, Inc.,
Medium-Term Notes,
6.150%, 10/15/98 200,000 202,602
Merrill Lynch & Co., Inc. Notes,
6.700%, 08/01/00 225,000 231,990
Midlantic Banks Corp.,
Sub. Notes,
9.875%, 12/01/99 99,000 112,394
NationsBank Corp.,
Senior Notes,
5.375%, 04/15/00 100,000 98,155
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10
<PAGE>
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MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1995
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BANKS AND FINANCIAL SERVICES (continued)
Reliance Group Holdings Inc.,
Senior Notes,
9.000%, 11/15/00 $ 200,000 $ 205,750
Salomon Inc., Medium-Term
Notes,
6.820%, 07/26/99 300,000 303,186
Smith Barney Holdings Inc.,
6.625%, 06/01/00 100,000 102,723
United Companies Financial
Corp., Senior Notes,
7.000%, 07/15/98 100,000 102,032
USF&G Corp., Senior Notes,
7.000%, 05/15/98 225,000 230,513
---------
Total Banks and Financial Services 3,162,407
---------
INDUSTRIALS -- 8.0%
ADT Operations Inc.,
Senior Notes,
8.250%, 08/01/00 146,000 154,030
Continental Cablevision Inc.,
Senior Notes,
8.300%, 05/15/06 (a)300,000 302,073
Hertz Corp.,
9.500%, 05/15/98 200,000 216,022
News American Holdings Inc.,
Senior Notes,
7.500%, 03/01/00 225,000 236,644
Occidental Petroleum Corp.,
Medium-Term Notes,
5.950%, 11/09/98 200,000 201,010
Owens-Illinois, Inc.,
11.000%, 12/01/03 150,000 169,500
Purity Supreme Inc.,
11.750%, 08/01/99 100,000 109,500
Time Warner, Inc.,
7.750%, 06/15/05 500,000 520,515
Viacom Inc., Senior Notes,
7.750%, 06/01/05 100,000 106,197
---------
TOTAL INDUSTRIALS 2,015,491
---------
INDEXED NOTES -- 1.5%
Ford Motor Credit Corp.,
Medium-Term Notes,
5 Year CMT,
4.820%**, 07/12/96 200,000 198,374
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PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Indexed Notes (CONTINUED)
Salomon Inc., 3 Year CMT,
5.767%**, 04/05/99 $ 180,000 $ 169,875
----------
TOTAL INDEXED NOTES 368,249
----------
TOTAL CORPORATE DEBT SECURITIES
(cost $9,335,199) 9,422,118
----------
- --------------------------------------------------------------------------------
FOREIGN CORPORATE
OBLIGATIONS -- 4.4%
Brascan Ltd.,
7.375%, 10/01/02 225,000 232,730
Cott Corp., Senior Notes,
9.375%, 07/01/05 335,000 329,138
Doman Industries Ltd.,
Senior Notes,
8.750%, 03/15/04 125,000 118,438
Domtar Inc., Notes,
12.000%, 04/15/01 100,000 118,250
Malette Inc., Senior Notes,
12.250%, 07/15/04 100,000 112,000
Westpac Bank Corp.,
Eurodollar Notes,
8.000%, 05/28/96 200,000 201,684
---------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(cost $1,129,056) 1,112,240
---------
- --------------------------------------------------------------------------------
U. S. GOVERNMENT AGENCY
OBLIGATIONS -- 15.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) -- 3.9%
FHLMC
7.500%,05/01/00
through 08/01/00 619,573 628,733
8.750%,04/02/01
through 10/01/01 333,930 346,660
-------
TOTAL FHLMC 975,393
-------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 1.5%
FNMA Super Floater
4.820%**, 04/29/96 400,000 394,000
-------
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1995
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) -- 8.0%
GNMA
9.000%, TBA (b) $ 225,000 $ 238,358
9.000%, 01/15/25
through 03/15/25 657,278 728,082
10.500%, 09/15/98
through 12/15/00 184,770 194,989
11.000%, 05/15/98
through 03/20/01 450,965 476,307
11.500%, 01/15/99
through 04/15/00 151,136 159,784
12.000%, 05/15/99
through 10/15/00 200,501 212,531
----------
TOTAL GNMA 2,010,051
----------
RESOLUTION TRUST CORPORATION -- 2.3%
Series 1992-M2, Class A4,
8.465%, 03/25/20 12,159 12,144
Series 1992-12, Class A2A,
7.500%, 08/25/23 63,186 63,759
Series 1992-7, Class A1,
6.833%, 03/25/22 505,641 504,140
----------
TOTAL RESOLUTION TRUST CORPORATION 580,043
----------
TOTAL U. S. GOVERNMENT
AGENCY OBLIGATIONS
(cost $3,955,564) 3,959,487
----------
U.S. TREASURY NOTES -- 39.1%
6.750%, 05/31/97 1,775,000 1,811,600
5.500%, 09/30/97 2,000,000 2,010,320
5.125%, 11/30/98 2,680,000 2,671,210
5.000%, 01/31/99 25,000 24,813
6.875%, 07/31/99 1,450,000 1,522,500
6.875%, 08/31/99 1,175,000 1,234,855
United States Treasury Notes
Principal Strip
0.000%*, 11/15/99 715,000 582,810
----------
TOTAL U.S. TREASURY NOTES
(cost $9,818,433) 9,858,108
----------
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.1%
Bank United Texas FSB,
Houston, Series A,
Rate 10.120% 4,900 $129,850
Conagra Capital LC,
Series B, Adjustable Rate,
Rate 5.985%** 7,000 149,626
--------
TOTAL PREFERRED STOCKS
(cost $305,467) 279,476
--------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.5%
State Street Bank, dated 12/29/95, due
01/02/96, 5.000%, total to be received
$370,206 (secured by $385,000 U.S.
Treasury Bills, due 05/16/96, market
value $377,657), at cost $ 370,000(DAGGER) 370,000
-----------
TOTAL INVESTMENTS -- 99.1%
(cost $24,913,719) 25,001,429
OTHER ASSETS, LESS LIABILITIES -- 0.9% 239,681
-----------
NET ASSETS -- 100.0% $25,241,110
===========
- --------------------------------------------------------------------------------
Note: Based on the cost of investments of $24,913,719 for Federal income tax
purposes at December 31, 1995, the aggregate gross unrealized
appreciation and depreciation was $191,135 and $103,425, respectively,
resulting in net unrealized appreciation of investments of $87,710.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (concluded)
December 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER INFORMATION (UNAUDITED):
The composition of long-term debt holdings as a percentage of total value of
investments in securities is as follows:
S&P's/Moody's Ratings
Gov't/AAA 64%
AA 5
A 8
BBB 15
BB 8
---
100%
===
* Zero coupon security.
** Variable rate security. Coupon or dividend rate disclosed is that in
effect at December 31, 1995.
(DAGGER)Certain principal amounts held are segregated as collateral for
TBA securities.
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December
31, 1995, the value of these securities amounted to $908,759 or 3.60%
of net assets.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) TBA securities are purchased on a forward commitment basis with an
approximate principal amount, interest rate and no definite maturity
date. The actual principal amount, interest rate, and maturity date
will be determined upon settlement. Such securities are subject to
market fluctuations during the period from transaction date to
settlement date. At December 31, 1995, such securities amounted to
$238,358 at value.
ABBREVIATIONS:
CMT: Constant Maturity Treasury Index
FGIC: Insured by Financial Guaranty Insurance Co.
MBIA: Insured by Municipal Bond Investors Assurance Corp.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
U. S. GOVERNMENT AGENCY
OBLIGATIONS -- 113.3%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) -- 82.8%
7.000%, TBA* $ 2,000,000 $ 2,015,624
7.500%, TBA* 5,000,000 5,121,874
6.500%, 07/01/08
through 12/01/25 14,761,605(DAGGER) 14,749,475
7.000%, 09/01/25
through 11/01/25 6,424,405 6,476,571
7.500%, 09/01/09
through 07/01/10 4,666,723(DAGGER) 4,799,398
-----------
TOTAL FNMA 33,162,942
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) -- 15.2%
6.750%**, 12/20/17 641,756 656,896
8.500%**, 01/20/25 506,806 520,034
10.000%, 02/15/20
through 02/15/25 2,639,102 2,910,677
10.000%, 12/15/23
through 02/15/25 1,998,764 1,982,522
-----------
TOTAL GNMA 6,070,129
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS (CMOS) -- 12.7%
FHLMC Series 169,
Class I PAC,
9.000%, 12/15/19 3,142,968 3,170,030
FHLMC Series 1678,
Class PA PAC,
5.000%, 04/15/99 373,203 372,230
FHLMC Series 1694,
Class PB PAC,
4.750%, 08/15/08 1,000,000(DAGGER) 992,920
FNMA Series 93-45,
Class PC PAC,
5.000%, 05/25/11 560,000(DAGGER) 555,918
-----------
TOTAL CMOS 5,091,098
-----------
OTHER AGENCY OBLIGATIONS -- 2.6%
Tennessee Valley Authority
6.235%, 07/15/45 1,000,000 1,035,610
-----------
TOTAL U. S. GOVERNMENT
AGENCY OBLIGATIONS
(cost $44,510,734) 45,359,779
-----------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.3%
State Street Bank, dated 12/29/95, due
01/02/96, 5.000%, total at maturity
$1,700,945 (secured by $1,770.000 U.S.
Treasury Bills, due 05/16/96, market
value $1,736,239), at cost $1,700,000 $ 1,700,000
-----------
TOTAL INVESTMENTS -- 117.6%
(cost $46,210,734) 47,059,779
OTHER ASSETS, LESS LIABILITIES -- (17.6%) (7,037,815)
-----------
NET ASSETS -- 100.0% $40,021,964
===========
- --------------------------------------------------------------------------------
Note: Based on the cost of investments of $46,210,778 for Federal income tax
purposes at December 31, 1995, the aggregate gross unrealized
appreciation and depreciation was $856,645 and $7,644, respectively,
resulting in net unrealized appreciation of investments of $849,001.
- --------------------------------------------------------------------------------
* TBA securities are purchased on a forward commitment basis with an
approximate principal amount, interest rate, and no definite maturity
date. The actual principal amount, interest rate, and maturity date
will be determined upon settlement. Such securities are subject to
market fluctuations during the period from transaction date to
settlement date. At December 31, 1995, such securities amounted to
$7,137,498, at value.
** Variable rate security. Coupon rate disclosed is that in effect at
December 31, 1995.
(DAGGER) Certain principal amounts held are segregated as collateral for TBA
securities or futures contracts.
- --------------------------------------------------------------------------------
ABBREVIATIONS:
PAC: Planned Amortization Class (PAC) tranches provide investors with scheduled
payments (PAC Schedule) over a range of prepayment speeds (PAC band or
range). PAC tranches typically are combined with companion tranches that
reduce the risk of prepayments varying from a constant speed or range.
- --------------------------------------------------------------------------------
Futures Contracts Outstanding at December 31, 1995: 10 30-Year U.S. Treasury
Bond contracts, expiring 3/96, face amount $1,000,000, with unrealized
appreciation of $50,125.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
[This page intentionally left blank]
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS MANAGERS MANAGERS
SHORT SHORT AND INTERMEDIATE
GOVERNMENT INTERMEDIATE MORTGAGE
FUND BOND FUND FUND
------------ ------------ ------------
ASSETS:
<S> <C> <C> <C>
Investments at value* $ 4,701,535 $ 24,631,429 $ 45,359,779
Repurchase agreements at cost and value 1,045,000 370,000 1,700,000
Cash 2,508 1,474 1,047
Foreign currency (cost $378) -- 370 --
Receivable for closed forward foreign
currency contracts -- 6,153 --
Receivable for Fund shares sold 9,152 304,758 76,833
Dividends and interest receivable 99,730 285,302 279,969
Variation margin receivable 1,406 -- 3,438
Prepaid expenses 6,516 11,381 16,020
------------ ------------ ------------
Total assets 5,865,847 25,610,867 47,437,086
------------ ------------ ------------
LIABILITIES:
Payable for Fund shares repurchased 2,569 25,466 197,949
Dividends payable to shareholders 6,492 39,709 111,086
Payable for investments purchased -- 240,539 --
Payable for investments purchased - delayed delivery -- -- 7,038,958
Accrued expenses:
Investment advisory and management fees 982 10,524 15,710
Administrative fees -- 5,262 8,728
Other 19,594 48,257 42,691
------------ ------------ ------------
Total liabilities 29,637 369,757 7,415,122
------------ ------------ ------------
NET ASSETS $ 5,836,210 $25,241,110 $40,021,964
=========== =========== ===========
Shares outstanding 328,526 1,283,462 2,575,402
=========== =========== ===========
Net asset value, offering and redemption
price per share $17.76 $19.67 $15.54
=========== =========== ===========
NET ASSETS REPRESENT:
Paid-in capital $ 19,145,844 $ 39,996,341 $119,239,830
Dividends in excess of net investment income -- (42,324) (19,329)
Accumulated net realized loss from investments,
options, futures transactions, and foreign
currency translations (13,354,244) (14,800,609) (80,097,707)
Net unrealized appreciation of investments,
futures and foreign currency translations 44,610 87,702 899,170
------------ ------------ ------------
NET ASSETS $ 5,836,210 $ 25,241,110 $ 40,021,964
============ ============ ============
* Investments at cost $ 4,666,206 $ 24,543,719 $ 44,510,734
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS MANAGERS MANAGERS
SHORT SHORT AND INTERMEDIATE
GOVERNMENT INTERMEDIATE MORTGAGE
FUND BOND FUND FUND
------------ ------------ ------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Interest income $544,532 $2,031,965 $3,568,569
Dividend income -- 25,150 --
Foreign withholding tax -- (332) --
Other income -- 41 --
-------- ---------- ----------
Total investment income 544,532 2,056,824 3,568,569
-------- ---------- ----------
EXPENSES:
Investment advisory and management fees 35,628 128,254 214,141
Administrative fees 15,835 61,726 114,510
Custodian fees 18,761 85,833 53,660
Audit fees 25,606 42,889 47,760
Transfer agent fees 9,776 25,002 44,318
Registration fees 9,829 11,459 15,354
Insurance 5,409 8,480 18,169
Legal fees 1,429 4,687 9,751
Trustee fees 717 2,277 4,731
Miscellaneous expenses 7,909 14,803 32,891
-------- ---------- ----------
Total expenses 130,899 385,410 555,285
Less: fee waivers (31,715) -- --
-------- ---------- ----------
Net expenses 99,184 385,410 555,285
-------- ---------- ----------
Net investment income 445,348 1,671,414 3,013,284
-------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investment transactions
and futures contracts 193,188 (847,228) 2,258,983
Net realized gain on foreign currency contracts
and translations -- 69,943 --
Net unrealized appreciation of investments and futures 111,540 2,833,306 2,502,951
-------- ---------- ----------
Net realized and unrealized gain on investments 304,728 2,056,021 4,761,934
-------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $750,076 $3,727,435 $7,775,218
======== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS
SHORT GOVERNMENT
FUND
----------------------------
For the For the
year ended year ended
December 31, December 31,
1995 1994
----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 445,348 $ 3,570,920
Net realized gain (loss) on investments, futures
and foreign currency transactions 193,188 (11,783,455)
Net unrealized appreciation (depreciation) of
investments, futures and foreign currency translations 111,540 2,888,059
----------- ------------
Net increase (decrease) in net assets
resulting from operations 750,076 (5,324,476)
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (227,852) (3,441,498)
In excess of net investment income (142,157) (218,932)
----------- ------------
Total distributions to shareholders (370,009) (3,660,430)
----------- ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 3,537,951 18,496,938
Net asset value of shares issued in connection
with reinvestment of dividends 202,898 1,248,892
Cost of shares repurchased (8,548,048) (88,371,151)
----------- ------------
Net decrease from capital share transactions (4,807,199) (68,625,321)
----------- ------------
Total decrease in net assets (4,427,132) (77,610,227)
NET ASSETS:
Beginning of year 10,263,342 87,873,569
----------- ------------
End of year $ 5,836,210 $ 10,263,342
=========== ============
End of year undistributed (overdistributed)
net investment income $ -- $ (218,932)
=========== ============
- ------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Sale of shares 202,248 982,799
Shares issued in connection with reinvestment
of dividends 11,629 69,150
Shares repurchased (490,616) (4,986,854)
----------- ------------
Net decrease in shares (276,739) (3,934,905)
=========== ============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS MANAGERS
SHORT AND INTERMEDIATE INTERMEDIATE MORTGAGE
BOND FUND FUND
---------------------------- ---------------------------
For the For the For the For the
year ended year ended year ended year ended
December 31, December 31, December 31, December 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 1,671,414 $ 6,165,205 $ 3,013,284 $ 14,176,686
Net realized gain (loss) on investments, futures
and foreign currency transactions (777,285) (9,749,616) 2,258,983 (81,283,088)
Net unrealized appreciation (depreciation) of
investments, futures and foreign currency translations 2,833,306 (3,918,984) 2,502,951 6,484,814
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 3,727,435 (7,503,395) 7,775,218 (60,621,588)
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,480,432) (5,642,311) (3,252,564) (13,954,199)
In excess of net investment income (36,365) (328,011) (19,329) --
------------ ------------ ------------ ------------
Total distributions to shareholders (1,516,797) (5,970,322) (3,271,893) (13,954,199)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 9,664,857 30,217,747 3,468,386 69,762,321
Net asset value of shares issued in connection
with reinvestment of dividends 851,710 1,784,218 1,522,227 5,579,776
Cost of shares repurchased (18,441,928) (99,799,969) (25,457,501) (216,642,213)
------------ ------------ ------------ ------------
Net decrease from capital share transactions (7,925,361) (67,798,004) (20,466,888) (141,300,116)
------------ ------------ ------------ ------------
Total decrease in net assets (5,714,723) (81,271,721) (15,963,563) (215,875,903)
NET ASSETS:
Beginning of year 30,955,833 112,227,554 55,985,527 271,861,430
------------ ------------ ------------ ------------
End of year $ 25,241,110 $ 30,955,833 $ 40,021,964 $ 55,985,527
============ ============ ============ ============
End of year undistributed (overdistributed)
net investment income $(42,324) $ (328,011) $ (19,329) $ 419,299
============ ============ ============ ============
- ------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Sale of shares 509,053 1,492,954 230,089 3,696,743
Shares issued in connection with reinvestment
of dividends 45,216 90,765 101,672 325,969
Shares repurchased (985,098) (5,155,346) (1,699,063) (13,245,121)
------------ ------------ ------------ ------------
Net decrease in shares (430,829) (3,571,627) (1,367,302) (9,222,409)
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
- --------------------------------------------------------------------------------
MANAGERS SHORT GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock oustanding throughout each year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995(b) 1994 1993 1992* 1991*
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $16.96 $19.35 $19.86 $20.35 $19.86
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.98 0.86 1.28 1.26 1.58
Net realized and unrealized
gain (loss) on investments 0.63 (2.01) (0.53) (0.49) 0.49
------ ------ ------ ------ ------
Total from investment operations 1.61 (1.15) 0.75 0.77 2.07
------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.50) (1.17) (1.26) (1.26) (1.58)
In excess net investment income (0.31) (0.07) -- -- --
------ ------ ------ ------ ------
Total distributions to shareholders (0.81) (1.24) (1.26) (1.26) (1.58)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $17.76 $16.96 $19.35 $19.86 $20.35
====== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Total Return 9.71%(DAGGER) (6.18)%(DAGGER) 3.81%(DAGGER) 3.90%(DAGGER) 10.82%(DAGGER)
==========================================================================================================================
Ratio of net expenses to average net assets 1.25% 0.97% 0.87% 0.76% 0.58%
Ratio of net investment income to average
net assets 5.62% 7.06% 8.71% 6.24% 6.08%
Portfolio turnover 238% 140% 189% 168% 84%
Net assets at end of year (000's omitted) $5,836 $10,263 $87,874 $142,874 $144,042
==========================================================================================================================
Expense Waiver (a)
- --------------
Ratio of total expenses to average net assets 1.65% 1.03% 0.96% 0.83% 0.59%
Ratio of net investment income to average
net assets 5.22% 7.00% 8.62% 6.17% 8.25%
==========================================================================================================================
<FN>
(a) Ratio information assuming no waiver of investment advisory and management fees and/or
administrative fees in effect for the period presented, if applicable. (See Note 2).
(b) Calculated using the average shares outstanding during the year.
(DAGGER) The total return would have been lower had certain expenses not been reduced during the periods shown.
* Audited by prior auditors.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock oustanding throughout each year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992* 1991*
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $18.06 $21.23 $20.89 $20.33 $19.43
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.28 1.45 1.38 1.69 1.50
Net realized and unrealized
gain (loss) on investments 1.45 (3.17) 0.34 0.57 0.88
------ ------ ------ ------ ------
Total from investment operations 2.73 (1.72) 1.72 2.26 2.38
------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.09) (1.37) (1.38) (1.70) (1.48)
In excess of net investment income (0.03) (0.08) -- -- --
------ ------ ------ ------ ------
Total distributions to shareholders (1.12) (1.45) (1.38) (1.70) (1.48)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $19.67 $18.06 $21.23 $20.89 $20.33
====== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Total Return 15.57% (8.37)% 8.49% 11.55% 12.78%(DAGGER)
==========================================================================================================================
Ratio of net expenses to average net assets 1.50% 1.05% 0.94% 0.86% 0.96%
Ratio of net investment income to average
net assets 6.52% 7.11% 6.58% 8.33% 7.41%
Portfolio turnover 131% 57% 126% 117% 536%
Net assets at end of year (000's omitted) $25,241 $30,956 $112,228 $72,031 $52,168
==========================================================================================================================
Expense Waiver (a)
- --------------
Ratio of total expenses to average net assets N/A N/A N/A N/A 1.00%
Ratio of net investment income to average
net assets N/A N/A N/A N/A 7.37%
- --------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Ratio information assuming no waiver of investment advisory and management fees and/or administrative fees in
effect for the period presented, if applicable. (See Note 2).
(DAGGER) The total return would have been lower had certain expenses not been reduced during the periods shown.
* Audited by prior auditors.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock oustanding throughout each year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992* 1991*
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $14.20 $20.65 $21.13 $21.77 $20.31
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.93 1.52 1.94 2.58 2.03
Net realized and unrealized
gain (loss) on investments 1.45 (6.56) 0.44 (0.40) 1.48
------ ------ ------ ------ ------
Total from investment operations 2.38 (5.04) 2.38 2.18 3.51
------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.03) (1.41) (2.28) (2.40) (2.05)
From net realized gain on
investments -- -- (0.51) (0.42) --
In excess of net realized gain
on investments -- -- (0.07) -- --
In excess of net investment income (0.01) -- -- -- --
------ ------ ------ ------ ------
Total distributions to shareholders (1.04) (1.41) (2.86) (2.82) (2.05)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $15.54 $14.20 $20.65 $21.13 $21.77
====== ====== ====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
Total Return 17.27% (25.00)%(DAGGER) 11.45%(DAGGER) 10.50%(DAGGER) 18.18%
==========================================================================================================================
Ratio of net expenses to average net assets 1.17% 0.85% 0.75% 0.79% 0.69%
Ratio of net investment income to average
net assets 6.33% 8.37% 8.90% 11.30% 9.91%
Portfolio turnover 506% 240% 253% 278% 172%
Net assets at end of year (000's omitted) $40,022 $55,986 $271,861 $115,885 $165,358
==========================================================================================================================
Expense Waiver (a)
- --------------
Ratio of total expenses to average net assets N/A 0.92% 0.82% 0.84% N/A
Ratio of net investment income to average
net assets N/A 8.30% 8.83% 11.25% N/A
==========================================================================================================================
<FN>
(a) Ratio information assuming no waiver of investment advisory and management fees and/or
administrative fees in effect for the period presented, if applicable. (See Note 2).
(DAGGER) The total return would have been lower had certain expenses not been reduced during the periods
shown.
* Audited by prior auditors.
</FN>
</TABLE>
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22
<PAGE>
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MANAGERS SHORT GOVERNMENT FUND, MANAGERS SHORT AND INTERMEDIATE BOND FUND
AND MANAGERS INTERMEDIATE MORTGAGE FUND
NOTES TO FINANCIAL STATEMENTS December 31, 1995
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Managers Funds (the Trust) is a no-load, diversified, open-end, management
investment company, organized as a Massachusetts business trust, registered
under the Investment Company Act of 1940, as amended. Currently the Trust is
comprised of 10 investment series. Included in this report are Managers Short
Government Fund, Managers Short and Intermediate Bond Fund and Managers
Intermediate Mortgage Fund, collectively the "Funds."
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles, which require the use of management's estimates.
The following is a summary of significant accounting policies followed by the
Funds:
(A) VALUATION OF INVESTMENTS
Fixed income securities are valued based upon valuations furnished by
independent pricing services that utilize matrix systems which reflect such
factors as security prices, yields, maturities, and ratings, and are
supplemented by dealer and exchange quotations. Exchange-traded equity
securities are valued at the last quoted sales price, or in the absence of any
sales, on the basis of the last quoted bid price. Over-the-counter securities
for which market quotations are readily available are valued at the last quoted
bid price. Short-term investments, having a remaining maturity of 60 days or
less, are valued at amortized cost which approximates market. Securities 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 Board of
Trustees.
Investments in certain mortgage-backed, stripped mortgage-backed and other debt
securities, including derivative securities, not traded on an organized market,
are valued on the basis of valuations provided by dealers or by a pricing
service which uses information with respect to transactions in such securities,
various relationships between securities and yield to maturity in determining
value.
(B) SECURITY TRANSACTIONS
Security transactions are accounted for as of trade date. Gains and losses on
securities sold are determined on the basis of identified cost.
(C) INVESTMENT INCOME AND EXPENSES
Interest income is determined on the basis of interest accrued. Discounts and
premiums are amortized using the effective interest method when required for
Federal income tax purposes. Other income and expenses are recorded on an
accrual basis. Expenses which cannot be directly attributed to a particular fund
are apportioned among the Funds in the Trust based upon their average net
assets.
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23
<PAGE>
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NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends resulting from net investment income normally will be declared daily
for Managers Short Government Fund and monthly for Managers Short and
Intermediate Bond Fund and Managers Intermediate Mortgage Fund. These dividends
normally will be payable on the third to the last business day of the month.
Distributions of capital gains to shareholders will only be made to the extent
that net capital gains realized for tax purposes exceed the Fund's capital loss
carryovers, if any.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities, option transactions, market discount and losses deferred due to wash
sales. Permanent book and tax basis differences, if any, relating to shareholder
distributions will result in reclassifications to paid-in capital.
(E) REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements provided that the value of the
underlying collateral, including accrued interest, will be equal to or exceed
the value of the repurchase agreement during the term of the agreement. The
underlying collateral for all repurchase agreements is held in safekeeping by
the Funds' custodian or at the Federal Reserve Bank.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings commence with respect to the seller of the security,
realization of the collateral by that Fund may be delayed or limited.
(F) FEDERAL TAXES
Each Fund intends to comply with the requirements under Subchapter M of the
Internal Revenue Code of 1986, as amended, and to distribute substantially all
of its taxable income and gains to its shareholders and to meet certain
diversification and income requirements with respect to investment companies.
Therefore, no provision for federal income or excise tax is included in the
accompanying financial statements.
(G) CAPITAL LOSS CARRYOVER
As of December 31, 1995, the Funds had accumulated net realized capital loss
carryovers from securities transactions for Federal income tax purposes as shown
in the following chart. These amounts may be used to offset realized capital
gains, if any, through December 31, 2003.
CAPITAL LOSS
FUND AMOUNT EXPIRES
- --------------------------- ----------- -------
Managers--
Short Government
Fund $ 1,784,953 2001
11,560,010 2002
Short and Intermediate
Bond Fund 7,662,253 2003
2,344,832 2002
2,885,440 1998
1,241,453 1997
672,784 1996
Intermediate
Mortgage Fund 59,251,205 2002
20,796,333 2003
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24
<PAGE>
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NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(H) CAPITAL STOCK
The Trust's Declaration of Trust authorizes for each series the issuance of an
unlimited number of shares of beneficial interest, without par value. Each Fund
records sales and repurchases of its capital stock on the trade date. Dividends
and distributions to shareholders are recorded on the ex-dividend date.
At December 31, 1995, certain unaffiliated shareholders, including omnibus
accounts, individually held greater than 10% of the outstanding shares of the
following Funds: Managers Short Government Fund- one owns 14%; and Managers
Short and Intermediate Bond Fund- one owns 11%.
(I) DELAYED DELIVERY TRANSACTIONS
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. Payment and delivery may take place a month or more after the date of the
transaction. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated.
The Funds may receive compensation for interest forgone on entering into delayed
delivery transactions. The Funds identify cash or securities as segregated in
its custodial records with a value at least equal to the amount of the forward
purchase commitment.
(J) FOREIGN CURRENCY TRANSLATION
The books and records of the Funds are maintained in U.S. dollars. The value of
investments, assets and liabilities denominated in currencies other than U.S.
dollars are translated into U.S. dollars based upon current foreign exchange
rates. Purchases and sales of foreign investments and income and expenses are
converted into U.S. dollars based on currency exchange rates prevailing on the
respective dates of such transactions. Net realized and unrealized gain (loss)
on foreign currency transactions will represent: (1) foreign exchange gains and
losses from the sale and holdings of foreign currencies; (2) gains and losses
between trade date and settlement date on investment securities transactions and
forward foreign currency exchange contracts; and (3) gains and losses from the
difference between amounts of interest and dividends recorded and the amounts
actually received.
In addition, the Funds do not isolate that portion of the results of operations
resulting from changes in exchange rates from the fluctuations resulting from
changes in market prices of securities held. Such fluctuations are included with
the net realized and unrealized gain or loss on investments.
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25
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(2) AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Managers Funds, L.P. (the Investment Manager) provides or oversees
investment advisory and management services to the Funds under Management
Agreements with each Fund. The Investment Manager selects portfolio managers for
each Fund (subject to Trustee approval), allocates assets among portfolio
managers, if applicable, and monitors the portfolio manager's investment
programs and results. Each Fund's investment portfolio is managed by portfolio
managers who serve pursuant to Portfolio Management Agreements with the
Investment Manager and the Fund. Certain trustees and officers of the Funds are
officers of the Investment Manager.
Investment advisory and management fees are paid directly by each Fund to The
Managers Funds, L.P. based on each Fund's average daily net assets. The annual
investment advisory and management fee rates and waivers as a percentage of
average daily net assets for the year ended December 31, 1995, were as follows:
INVESTMENT ADVISORY AND
MANAGEMENT FEES
-----------------------------------------
MAXIMUM ACTUAL FEE AT
FEE BEFORE FEE WITH DECEMBER 31,
FUND WAIVER WAIVERS(A) 1995
- ------------------ ---------- ---------- ------------
Managers--
Short Government
Fund 0.45% 0.20% 0.20%
Short and
Intermediate
Bond Fund 0.50 -- 0.50
Intermediate
Mortgage Fund 0.45 -- 0.45
(a) Reflects a voluntary fee waiver by the Investment Manager which may be
modified or terminated at any time at the sole discretion of the Investment
Manager.
The Trust has adopted an Administrative and Shareholder Servicing Agreement. The
Managers Funds, L.P. serves as each Fund's administrator (the "Administrator")
and is responsible for all aspects of managing the Funds' operations, including
administration and shareholder services to each Fund, its shareholders, and
certain institutions, such as bank trust departments, broker-dealers and
registered investment advisers, that advise or act as an intermediary with the
Funds' shareholders.
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26
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Since March 1, 1995, Managers Short and Intermediate Bond Fund and Managers
Intermediate Mortgage Fund each paid a fee to the Administrator at the rate of
0.25% per annum of each Fund's average daily net assets. (Prior to March 1,
1995, this fee was at the rate of 0.20% per annum.) For the year ended December
31, 1995, the Administrator was due a fee from Managers Short Government Fund of
0.20% per annum of the Fund's average daily net assets, all of which was waived
since February 1, 1995. This waiver may be modified or terminated at any time at
the sole discretion of the administrator. The fees paid to the Administrator are
established by the Trustees and may not exceed the annual rate of 0.25% of each
Fund's average daily net assets.
An aggregate annual fee of $10,000 is paid to each outside Trustee for serving
as a Trustee of the Trust. In addition, these Trustees receive meeting fees of
$750 for each in-person meeting attended, and $200 for participation in any
telephonic meetings. The Trustee fee expense shown in the financial statements
represents each Fund's allocated portion of the total fees.
(3) PURCHASES AND SALES OF SECURITIES
Portfolio purchases, and sales or maturities, of long-term securities, U.S.
Government securities and futures contracts during the year ended December 31,
1995 were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT
LONG-TERM SECURITIES SECURITIES ONLY
------------------------- -------------------------
FUND PURCHASES SALES PURCHASES SALES
---------------------------------- ------------ ------------ ------------ ------------
Managers--
<S> <C> <C> <C> <C>
Short Government Fund $ 18,539,634 $ 26,671,880 $ 14,113,646 $ 19,961,061
Short and Intermediate Bond Fund 31,722,331 35,927,367 20,487,076 10,744,284
Intermediate Mortgage Fund 281,700,817 322,874,922 89,625,664 97,506,810
LONG FUTURES CONTRACTS SHORT FUTURES CONTRACTS
------------------------- -------------------------
FUND OPENED CLOSED OPENED CLOSED
---------------------------------- ------------ ------------ ------------ ------------
Managers--
Short Government Fund $ 3,744,500 $ 1,668,605 $ -- $ --
Intermediate Mortgage Fund 33,746,375 33,302,459 44,135,219 44,126,072
- ------------------------------------------------------------------------------------------
</TABLE>
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27
<PAGE>
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NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(4) FORWARD COMMITMENTS
Certain transactions, such as futures and forward transactions, dollar roll
agreements, or purchases of when-issued or delayed delivery securities may have
a similar effect on a Fund's net asset value as if the Fund had created a degree
of leverage in its portfolio. However, if a Fund enters into such a transaction,
the Fund will establish a segregated account with its Custodian in which it will
maintain cash, U.S. government securities or other liquid high-grade debt
obligations equal in value to its obligations with respect to such transaction.
Securities and other assets held in the segregated account may not be sold while
the transaction is outstanding, unless other suitable assets are substituted.
(A) FORWARD FOREIGN CURRENCY CONTRACTS
During the year ended December 31, 1995, Managers Short and Intermediate Bond
Fund invested in forward foreign currency exchange contracts. These investments
may involve greater market risk than the amounts disclosed in the Fund's
financial statements.
A forward foreign currency exchange contract is an agreement between a Fund and
another party to buy or sell a currency at a set price at a future date. The
market value of the contract will fluctuate with changes in currency exchange
rates. The contract is marked-to-market daily, and the change in market value is
recorded as an unrealized gain or loss. Gain or loss on the purchase or sale of
contracts having the same settlement date, amount and counterparty is realized
on the date of offset, otherwise gain or loss is realized on settlement date.
The Funds may invest in non-U.S. dollar denominated instruments subject to
limitations, and enter into forward foreign currency exchange contracts to
facilitate transactions in foreign securities and to protect against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar and such foreign currency.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
There were no open forward foreign currency exchange contracts at December 31,
1995.
(B) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract the Fund is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is
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28
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
traded. Pursuant to the contract, the Fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value of the contract at
the time it was closed.
There are several risks in using futures contracts. Futures prices may not
correlate perfectly with the behavior of cash market prices of the instrument
being hedged so that even a correct forecast of general price trends may not
result in a successful transaction, or the Fund's portfolio manager may be
incorrect in its expectation of future prices. There is also a risk that a
secondary market in the instruments that the Fund holds may not exist or may not
be adequately liquid to permit the Fund to close out positions when it desires
to do so.
A Fund may use futures contracts as a hedge to protect the value of its
portfolio against changes in prices of the financial instruments in which it may
invest. During the year ended December 31, 1995, Managers Intermediate Mortgage
Fund and Managers Short Government Fund each entered into futures contracts to
manage the Funds' durations to those of their respective benchmark indices.
(C) DOLLAR ROLL AGREEMENTS
Managers Short Government Fund and Managers Intermediate Mortgage Fund have
entered into dollar roll agreements whereby the Fund sells securities and agrees
to repurchase them or substantially similar securities, at a mutually agreed
upon date and price. Dollar roll agreements involve the risk that the market
value of the securities retained in lieu of sale by the Fund may decline below
the price of the securities the Fund has sold but is obligated to repurchase.
In the event the buyer of the securities under a dollar roll agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the dollar roll agreement may effectively be restricted pending such decision.
(5) RISKS ASSOCIATED WITH COLLATERAL MORTGAGE OBLIGATIONS ("CMOS")
AND INDEXED SECURITIES
The net asset values of the Funds may be sensitive to interest rate fluctuations
because the Funds may hold several instruments, including CMOs, inverse
floaters, super floaters and other derivatives, whose values can be
significantly impacted by interest
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
rate movements. CMOs are obligations collateralized by a portfolio of mortgages
or mortgage-related securities. Payments of principal and interest on the
mortgage are passed through to the holder of the CMOs on the same schedule as
they are received from mortgagees, although certain classes of CMOs have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, the investment in CMOs may be subject to a greater or
lesser risk of prepayment than other types of mortgage-related securities. In
another version of mortgage-related securities, all interest payments go to one
class of holders--"Interest Only" or "IO"--and all of the principal goes to a
second class of holders--"Principal Only" or "PO." The yield to maturity on an
IO is extremely sensitive to the rate of principal prepayments on the related
underlying mortgage assets and a rapid rate of principal prepayments may have an
adverse effect on yield to maturity. If greater than anticipated prepayments of
principal are experienced, the Fund may fail to fully recoup its investment.
Conversely, if less than anticipated prepayments of principal occur, the yield
on a PO class could be materially affected.
CMOs may have a fixed or variable rate of interest, including inverse floating
rate securities on which the interest rates typically decline as market rates
increase and increase as market values decline. Accordingly, such instruments
can be expected to be more volatile than fixed rate or other variable rate
securities.
The Funds may also invest in indexed securities whose value is linked either
directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(6) CONTINGENCIES
Two purported class action lawsuits have been filed in the federal district
courts of Connecticut and Minnesota against Managers Intermediate Mortgage Fund
and Managers Short Government Fund; the Investment Manager; the former portfolio
manager; and certain other affiliates and affiliated individuals. The plaintiffs
allege that, from May 1, 1992 to June 13, 1994 and from May 10, 1993 to
September 12, 1994, for the two Funds, respectively, defendants violated the
Securities Act of 1933, the Securities Exchange Act of 1934, the Investment
Company Act of 1940, and common law by, among other things, failing to disclose
adequately the Funds' investment strategies and risks associated with an
investment in the Funds. Plaintiffs allege that they suffered unspecified
damages based on losses incurred over the course of the respective class
periods.
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
The Managers Funds, its affiliates and affiliated individuals, as well as
certain of the other defendants, have filed motions to dismiss these actions, on
the basis that, among other grounds, the relevant prospectus fully disclosed the
Funds' respective investment strategies and all material risks related to an
investment in these Funds, including, but not limited to, the risk of loss of
principal. There has been no decision yet from the court relating to the
Managers Intermediate Mortgage Fund motion. On November 24, 1995, the
defendant's motion to dismiss the suit against Managers Short Government Fund
was granted, in part and denied, in part, and the plaintiff was granted leave to
file an amended complaint.
Another non-class action lawsuit and an arbitration have been filed against
certain of the defendants, among others, and Managers Short and Intermediate
Bond Fund based on similar allegations. Certain individual customers, who are
potentially members of the class of plaintiffs in the two class action lawsuits
referred to above, have asserted that they may file similar lawsuits against
certain of the defendants based on similar claims, but have not done so.
Management believes that the cases are without merit and intends to defend
vigorously against these actions.
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of The Managers Funds and the Shareholders of Managers Short
Government Fund, Managers Short and Intermediate Bond Fund and Managers
Intermediate Mortgage Fund:
We have audited the accompanying statements of assets and liabilities of
Managers Short Government Fund, Managers Short and Intermediate Bond Fund and
Managers Intermediate Mortgage Fund, including the schedules of portfolio
investments, as of December 31, 1995, and the related statements of operations
for the year then ended, and the statements of changes in net assets for each of
the two years in the period then ended and the financial highlights for each of
the three years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the years
ended December 31, 1991 and 1992, presented herein, were audited by other
auditors whose report dated February 26, 1993, expressed an unqualified opinion
on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Managers Short Government Fund, Managers Short and Intermediate Bond Fund and
Managers Intermediate Mortgage Fund as of December 31, 1995, the results of
their operations for the year then ended, and the changes in their net assets
for each of the two years in the period then ended, and the financial highlights
for each of the three years in the period then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 16, 1996
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32
<PAGE>
THE MANAGERS FUNDS (LOGO)
Where Leading Money Managers Converge
FUND DISTRIBUTOR
THE MANAGERS FUNDS, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
CUSTODIAN
State Street Bank and Trust
Company
1776 Heritage Drive A2N
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Shereff, Friedman, Hoffman &
Goodman, LLP
919 Third Avenue
New York, New York 10022
TRANSFER AGENT
Boston Financial Data
Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800)252-0682
The Managers Funds
EQUITY FUNDS:
INCOME EQUITY FUND
Scudder, Stevens & Clark, Inc.
Spare, Kaplan, Bischel & Associates
CAPITAL APPRECIATION FUND
Dietche & Field Advisers, Inc.
Hudson Capital Advisers
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates
Westport Asset Management, Inc.
INTERNATIONAL EQUITY FUND
Scudder, Stevens & Clark, Inc.
Lazard, Freres & Co.
FIXED INCOME FUNDS:
MONEY MARKET FUND
Morgan Guaranty Trust Company of New York
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE FUND
Jennison Associates Capital Corp.
BOND FUND
Loomis, Sayles & Company, Inc.
GLOBAL BOND FUND
Rogge Global Partners
