MANAGERS SHORT GOVERNMENT FUND
MANAGERS SHORT & INTERMEDIATE BOND FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
_______________________________________
SEMI- ANNUAL REPORT
JUNE 30, 1996
________________________________
Where Leading Money Managers Converge
MANAGERS SHORT GOVERNMENT FUND
MANAGERS SHORT & INTERMEDIATE BOND FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996 (UNAUDITED)
TABLE OF CONTENTS
Page
President's Message 1
The Managers Funds Performance 3
Schedule of Portfolio Investments:
Managers Short Government Fund 4
Managers Short & Intermediate Bond Fund 5
Managers Intermediate Mortgage Fund 10
Statements of Assets and Liabilities 11
Statements of Operations 12
Statements of Changes in Net Assets 13
Financial Highlights:
Managers Short Government Fund 14
Managers Short & Intermediate Bond Fund 15
Managers Intermediate Mortgage Fund 16
Notes to Financial Statements 17
Investments in The Managers Funds are not deposits or obligations of,
or guaranteed or endorsed by, any bank. Shares of the funds are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other governmental agency.
President's Message
Dear Fellow Shareholder:
As the U.S. economy continued to show strength in the first half of 1996,
stocks again climbed higher while bonds traded lower (and interest rates
rose) due to fears that inflation would follow closely behind strong
economic growth. International stock markets also moved higher in general
while foreign bond markets were mixed, and the U.S. Dollar appreciated
versus most foreign currencies.
Gross Domestic Product (GDP) adjusted for inflation grew at a 2.2% rate
in the first quarter, up from 0.5% in the fourth quarter of 1995. Although
the consensus clearly was that second quarter growth was even stronger,
signals of continued growth are mixed, particularly as corporations begin
to announce their quarterly earnings. Although fiscal expenditures, real
capital spending, residential construction and most notably consumer
spending, which accounts for two-thirds of GDP, all continued to increase
in the first half, consumer debt has reached record levels. Interest
payments as a percentage of disposable personal income and loan
delinquencies are high and rising, and personal bankruptcies are also near
record highs, suggesting that consumers must soon take a pause. In
addition, it is clearly the Federal Reserve Bank's (the "Fed") priority to
maintain price stability rather than to induce economic growth.
Interest rates rose aggressively during the first five months of the year
before stabilizing somewhat in June. In aggregate, domestic bonds lost
value for the six month period, although shorter term issues provided
slightly positive returns. After falling 2.25 percentage points in 1995,
the yield on 10-year Treasury notes quickly rebounded, rising
1.14 percentage points despite the Fed's lowering of the Fed Funds and
Discount rates by 0.25% on January 31st. Shorter term rates rose less, and
three-month rates remained virtually the same.
On average, corporate bonds, government bonds and mortgage-backed bonds
all performed similarly, however there were notable differences within
sectors. Given the steepening yield curve, short-term securities performed
much better than long-term bonds, even on a duration adjusted basis. High
yield bond returns far exceeded those of investment grade bonds, with the
lowest credit quality bonds performing the best on average. In the
mortgage arena, high- coupon mortgage pools outperformed the lower coupon
securities. Asset-backed bonds, which typically have relatively short
durations, performed well on average. For the first six months, the Lehman
Brothers Aggregate Bond Index returned -1.21%.
The U.S. Dollar (USD) rose against most foreign currencies, continuing a
trend started in mid-1995. Over the past twelve months, the USD has
appreciated +28.2% versus the Yen from 85 to 109, and +9.3% versus the
Deutsche Mark. This is especially impressive given the very low level of
inflation abroad, and partly diminishes reasons for a Fed rate hike.
With a few exceptions, foreign bonds provided meager returns which were
diminished by the strength of the USD. The Salomon Brothers World
Government Bond Index returned -1.5% in USD for the year to date. Latin
American government bonds, however, performed very well as measured by the
Lehman Brothers Emerging Americas Index, which rose +13.3% for the
six-month period.
Looking forward, we expect the markets to continue to be volatile and
short-term oriented as investors react to the daily flow of news and
statistics about the economy, inflation, and political events. As the
financial markets become ever more complex and fast-paced, we believe that
The Managers Funds philosophy of selecting some of the best investment
managers, each with a specific, well-defined investment discipline, becomes
ever more advantageous.
This report provides you with a listing of the investment portfolios and
financial statements for Managers Bond Fund and Managers Global Bond Fund,
as well as the performance results of all the funds in The Managers Funds
family as of June 30, 1996.
We are pleased to announce that The Managers Funds, L.P. has recently
retained the services of Towers Perrin as our consultant to assist us in
the selection and monitoring of the portfolio managers utilized by The
Managers Funds. As always, should you have any questions on this report,
please feel free to contact us at (800) 835-3879, or your financial
advisor.
We thank you for your continued investment in The Managers Funds.
Sincerely,
Robert P. Watson
President
THE MANAGERS FUNDS PERFORMANCE (UNAUDITED)
All periods ending June 30, 1996
Total Returns*
Since Inception Morningstar
6 Months 1 Year 3 Years 5 Years 10 Years Inception Date Rating**
Equity Funds:
Income
Equity Fund 5.89% 22.27% 15.00% 14.93% 11.57% 14.26% Oct. '84 ####
Capital Appreciation
Fund 6.74 19.59 15.84 15.95 13.05 15.56 Jun. '84 ####
Special
Equity Fund 17.97 39.91 19.49 20.77 15.21 16.67 Jun. '84 #####
International
Equity Fund 6.55 14.97 15.42 14.97 11.70 14.41 Dec. '85 ###
Income Funds:
Short Government
Fund 0.78 4.38 1.81 3.45 _ 5.14 Oct. '87 #
Short & Intermediate
Bond Fund 0.41 6.46 3.17 6.99 7.07 8.60 Jun. '84 ####
Intermediate Mortgage
Fund -1.16 3.99 -4.29 3.76 6.77 7.02 May '86 ##
Bond Fund -3.69 4.98 6.91 9.54 9.11 11.07 Jun. '84 ####
Global
Bond Fund -1.56 -0.11 _ _ _ 6.40 Mar. '94 NA
Money
Market Fund 2.72 5.22 4.20 3.86 5.50 5.93 Jun. '84 NA
Past performance is no guarantee of future results. Investment returns and
share price will fluctuate. The redemption price of a mutual fund may be
more or less than the purchase price. For additional or more recent
information on the Managers Funds, or for a current prospectus, call The
Managers Funds at (800) 835-3879.
* 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. Returns for
periods greater than one year are annualized.
** Morningstar proprietary ratings reflect historical risk-adjusted
performance through 6/30/96 and are subject to change every month. The
ratings are by asset class and are calculated from the funds' three-,
five-, and ten-year returns (with fee adjustments) in excess of 90-day
Treasury bill returns, and a risk factor that reflects fund
performance below 90-day T-bill returns. For the three-, five-, and
ten-year periods, respectively, each of the Equity Funds was rated
against 1,583, 997 and 539 equity funds, and each of the Income Funds
was rated against 889, 464 and 176 fixed income funds. Ten percent of
the funds in each asset class receive five stars, 22.5% receive 4
stars, 35% receive 3 stars, 22.5% receive 2 stars and 10% receive 1
star.
MANAGERS SHORT GOVERNMENT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1996 (unaudited)
Principal
Amount Value
U.S. TREASURY OBLIGATIONS_ 71.6%
U.S. TREASURY NOTES - 59.1%
9.250%, 08/15/98 $1,100,000 $1,166,176
8.875%, 11/15/98 760,000 803,578
7.500%, 01/31/97 530,000 535,628
7.250%, 02/15/98 800,000 814,128
TOTAL U.S. TREASURY NOTES 3,319,510
U.S. TREASURY NOTE PRINCIPAL STRIP - 12.5%
0.000%*, 05/15/99 835,000 698,052
TOTAL U.S. TREASURY OBLIGATIONS
(cost $4,071,325) 4,017,562
U.S. GOVERNMENT AGENCY OBLIGATIONS - 18.0%
Federal Home Loan Mortgage
Corporation (FHLMC),
Series 165, Class I, PAC,
9.000%, 12/15/19 238,995 239,521
Series 1398, Class C, PAC,
5.000%, 11/15/00 121,246 120,831
Financing Corporation Coupon
Strips, Series E,
0.000%**, 11/02/98 300,000 259,119
0.000%**, 11/02/99 486,000 392,353
Total U.S. Government Agency Obligations
(cost $1,003,894) 1,011,824
CORPORATE OBLIGATION - 5.3%
World Omni Automobile Lease
Securitization Trust, Series 1996-A,
Class A1, 6.300%, 06/25/02
(cost $299,719) 300,000 298,740
REPURCHASE AGREEMENT - 3.7%
State Street Bank & Trust Co.,
dated 06/28/96, due 07/01/96,
4.900%, total to be received $210,086
(secured by $210,000 U.S.
Treasury Bonds, 7.125%, due
02/15/23, market value $215,334),
at cost $210,000 $210,000
TOTAL INVESTMENTS - 98.6%
(cost $5,584,938) 5,538,126
OTHER ASSETS, LESS
LIABILITIES - 1.4% 76,174
NET ASSETS - 100.0% $5,614,300
Note:Based on the cost of investments of
$5,584,938 for federal income tax purposes at June 30, 1996, the
aggregate gross unrealized appreciation and depreciation of
investments was $9,868 and $56,680, respectively, resulting in net
unrealized depreciation of investments of $46,812.
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.
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1996 (unaudited)
Principal
Amount Value
CORPORATE DEBT SECURITIES - 65.1%
Asset-Backed Securities - 19.6%
Advanta Home Equity Loan
Trust, Series 1992-2, Class A1,
MBIA insured, 7.15%**, 06/25/08 $204,438 $203,927
Contimortgage Home Equity
Loan Trust, Series 1994-3,
Class A4, MBIA insured,
7.850%, 07/15/24 348,026 349,056
Contimortgage Home Equity
Loan Trust, Series 1994-4,
Class A6, MBIA insured,
8.270%, 12/15/24 240,692 242,562
Contimortgage Home Equity
Loan Trust, Series 1995-3,
Class A2, FGIC insured,
6.860%, 07/15/10 200,000 198,530
Equicon Home Equity Loan
Trust, Series 1995-2,
Class A2, FGIC insured,
6.500%, 07/18/10 250,000 244,960
EquiCredit Home Equity Loan
Trust, Series 1993-4,
Class A, FGIC insured,
5.725%, 12/15/08 68,082 65,083
Green Tree Financial Corp.,
Series 1993-2, Class A2,
6.100%, 07/15/18 350,000 346,336
Green Tree Financial Corp.,
Series 1993-4, Class A2,
5.850%, 01/15/19 450,000 444,389
Green Tree Financial Corp.,
Series 1994-A, Class A,
6.900%, 02/15/04 687,008 679,059
Green Tree Financial Corp.,
Series 1995-A, Class A,
7.250%, 07/15/05 $59,095 $58,978
HFC Home Equity Trust,
Series 1992-2A, Class A,
MBIA insured, 6.650%, 11/20/12 63,215 62,103
MBNA Master Credit Card Trust,
Series 1991-1, Class A,
7.750%, 10/15/98 208,333 209,504
Old Stone Credit Corp. Home
Equity Loan Trust,
Series 1992-4, Class A,
FGIC insured, 6.550%, 11/25/07 70,083 68,046
Remodelers Home
Improvement Loan
Asset-Backed Certificates,
Series 1995-3, Class A2,
6.800%, 12/20/07(a) 125,000 123,945
The Money Store Home Equity
Loan Trust, Series 1992-B,
Class A, MBIA insured,
6.900%, 07/15/07 113,097 112,158
The Money Store Home Equity
Loan Trust, Series 1995-C,
Class A3, MBIA insured,
6.550%, 06/15/17 475,000 460,156
UCFC Loan Trust,
Series 1993-B1, Class A1,
FGIC insured,
6.075%, 07/25/14 386,108 372,972
World Omni Automobile Lease
Securitization Trust,
Series 1994-B, Class A,
7.950%, 01/25/01 249,750 253,339
TOTAL ASSET-BACKED
SECURITIES 4,495,103
BANKS AND FINANCIAL SERVICES - 32.9%
Banks and Financial Services
Advanta National Bank,
Senior Notes, 6.440%, 05/01/98 $425,000 $427,877
Anchor Bancorp Inc.,
Senior Notes,
8.937%, 07/09/03 100,000 99,936
BankAmerica Corp.,
Sub. Notes, 9.700%, 08/01/00 275,000 302,365
Capital One Bank, Notes,
6.660%, 08/17/98 100,000 99,799
Capital One Bank,
Medium-Term Notes,
6.740%, 05/31/99 375,000 373,144
Caterpillar Financial Services,
Medium-Term Notes,
6.100%, 07/15/99 100,000 98,576
Centura Banks, Notes,
6.000%, 04/07/97 425,000 425,000
ERP Operating LP,
Floating Rate Notes,
6.250%**, 12/22/97 225,000 227,072
Finova Capital Corp., Notes,
6.450%, 06/01/00 100,000 98,438
First Nationwide Holdings Inc.,
Senior Notes, 12.250%, 05/15/01 225,000 246,375
First USA Bank, Deposit Notes,
6.375%, 10/23/00 475,000 461,691
Fleet Financial Group, Inc., Senior Notes,
7.250%, 10/15/97 200,000 202,540
7.125%, 05/01/00 225,000 226,849
Ford Motor Credit Corp.,
Senior Notes, 6.375%, 09/15/99 450,000 445,586
Franchise Finance Corp. of
America, Senior Notes,
7.000%, 11/30/00 $200,000 $194,312
General Motors Acceptance Corp.,
Medium-Term Notes,
7.500%, 07/22/99 475,000 485,863
Goldman Sachs Group L.P., Notes,
6.375%, 06/15/00(a) 50,000 48,719
6.200%, 12/15/00(a) 250,000 242,660
6.200%, 01/15/01(a) 175,000 169,740
Greyhound Financial Corp., Notes,
6.750%, 03/25/99 125,000 124,131
Hanson America Inc., Convertible,
Senior Discount Notes,
2.390%, 03/01/01(a) 225,000 191,250
Huntington Bankshares, Inc.,
Medium-Term Notes,
6.150%, 10/15/98 200,000 198,478
International Lease Financial
Corp., Notes, 5.750%, 12/15/99 200,000 193,096
Kern River Funding Corp.,
Series B, Senior Notes,
6.720%, 09/30/01(a) 200,000 197,222
Merrill Lynch & Co., Inc.,
Notes, 6.700%, 08/01/00 225,000 223,873
Midatlantic Banks Corp., Sub.
Notes, 9.875%, 12/01/99 99,000 107,544
NationsBank Corp., Senior Notes,
5.375%, 04/15/00 100,000 94,839
Reliance Group Holdings Inc.,
Senior Notes, 9.000%, 11/15/00 $200,000 $198,000
Salomon Inc., Medium-Term
Notes, 6.820%, 07/26/99 300,000 298,113
Sears Roebuck & Co., Medium
Term Notes, Series 7, 7.940%, 02/06/98 400,000 410,228
Smith Barney Holdings Inc.,
Notes, 6.625%, 06/01/00 100,000 99,096
United Companies Financial
Corp., Senior Notes,
7.000%, 07/15/98 100,000 99,959
USF&G Corp., Senior Notes,
7.000%, 05/15/98 225,000 226,492
TOTAL BANKS AND FINANCIAL SERVICES 7,538,863
INDEXED NOTES - 0.8%
Salomon Inc., 3 Year CMT,
5.708%**, 04/05/99 180,000 177,525
INDUSTRIALS - 1.8%
ADT Operations Inc., Senior
Notes, 8.250%, 08/01/00 146,000 148,190
Comdisco Inc., Notes,
6.500%, 06/15/00 475,000 468,502
Hertz Corp., Senior Notes,
9.500%, 05/15/98 200,000 210,540
6.500%, 04/01/00 275,000 271,395
News American Holdings Inc.,
Senior Notes, 7.500%, 03/01/00 225,000 228,121
Occidental Petroleum Corp.,
Medium-Term Notes,
5.950%, 11/09/98 200,000 196,946
Purity Supreme Inc., Notes,
11.750%, 08/01/99 $225,000 $243,000
Time Warner, Inc., Notes,
7.750%, 06/15/05 500,000 488,110
Viacom Inc., Senior Notes,
7.750%, 06/01/05 100,000 97,502
WMX Technologies, Inc., Notes,
6.250%, 04/01/99 350,000 347,288
TOTAL INDUSTRIALS 2,699,594
TOTAL CORPORATE DEBT SECURITIES
(cost $15,154,965) 14,911,085
U.S. TREASURY OBLIGATIONS - 15.5%
U.S. TREASURY NOTES - 13.0%
5.000%, 01/31/99 25,000 24,262
5.125%, 11/30/98 1,560,000 1,522,217
5.375%, 11/30/97 500,000 495,898
5.625%, 01/31/98 175,000 173,934
6.875%, 07/31/99 200,000 202,844
7.875%, 08/15/01 525,000 556,169
TOTAL U.S. TREASURY NOTES 2,975,324
U.S. TREASURY NOTE PRINCIPAL STRIP - 2.5%
0.000%*, 11/15/99 715,000 587,342
TOTAL U.S. TREASURY OBLIGATIONS
(cost $3,597,734) 3,553,666
U.S. GOVERNMENT AGENCY OBLIGATIONS - 13.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 3.5%
8.750%, 04/01/01 through 10/01/01 262,258 269,879
7.500%, 05/01/00 through 10/01/00 537,594 540,197
TOTAL FHLMC 810,076
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 1.1%
FNMA, Series 1994-85, Class E,
6.000%, 11/25/06 $250,000 $242,655
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 7.4%\
12.000%, 05/15/99 through 10/15/00 165,143 174,121
11.500%, 01/15/99 through 04/15/00 134,185 141,375
11.000%, 05/15/98 through 03/20/01 383,144 403,680
10.500%, 09/15/98 through 12/15/00 162,791 172,354
9.000%, 10/15/16 through 03/15/25 774,367 812,824
TOTAL GNMA 1,704,354
RESOLUTION TRUST CORPORATION - 1.9%
Series 1992-7, Class A-1,
6.825%**, 03/25/22 440,604 434,545
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost $3,212,449) 3,191,630
FOREIGN CORPORATE OBLIGATIONS - 2.4%
Brascan Ltd., 7.375%, 10/01/02 225,000 220,453
Doman Industries Ltd., Senior
Notes, 8.750%, 03/15/04 125,000 112,500
Domtar Inc., Notes,
12.000%, 04/15/01 100,000 116,500
Malette Inc., Senior Notes,
12.250%, 07/15/04 100,000 105,000
TOTAL FOREIGN CORPORATE OBLIGATIONS
(cost $582,103) 554,453
Shares Value
PREFERRED STOCKS - 1.2%
Bank United Texas FSB,
Houston, Series A, 10.120% 4,900 $126,787
Conagra Capital LC, Series B,
Adjustable Rate 6.603%** 7,000 150,500
TOTAL PREFERRED STOCKS
(cost $305,467) 277,287
Principal
Amount Value
REPURCHASE AGREEMENT - 2.7%
State Street Bank & Trust Co., dated
06/28/96, due 07/01/96, 4.900%, total
to be received $605,247 (secured by
$605,000 U.S. Treasury Bonds,
7.125%, due 02/15/23, market value
$620,367), at cost $605,000 605,000
TOTAL INVESTMENTS - 100.8%
(cost $23,457,718) 23,093,121
OTHER ASSETS, LESS
LIABILITIES - (0.8%) (192,428)
NET ASSETS - 100.0% $22,900,693
Note: Based on the cost of investments of
$23,457,718 for federal income tax purposes at June 30, 1996, the
aggregate gross unrealized appreciation and depreciation of
investments was $54,441 and $419,038, respectively, resulting in net
unrealized depreciation of investments of $364,597.
OTHER INFORMATION (unaudited):
The composition of long-term debt holdings as a percentage of the total
value of investments in securities is as follows:
S&P's/Moody's Ratings
Gov't/AAA 42%
AA 6
A 21
BBB 25
BB 6
100%
** Zero coupon security.
* Variable rate security. Coupon or dividend rate disclosed is that
in effect at June 30, 1996.
(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
buyers. At June 30, 1996, the value of these securities amounted
to $973,536, or 4.25% of net assets.
Abbreviations:
CMT:Constant Maturity Treasury Index
FGIC: Insured by Financial Guaranty Insurance
Co.
MBIA: Insured by Municipal Bond Investors
Assurance Corp.
MANAGERS INTERMEDIATE MORTGAGE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1996 (unaudited)
Principal
Amount Value
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) - 84.4%
8.000%, 06/01/26 $7,070,000 $7,127,444
7.500%, 09/01/09 through
02/01/26 6,615,778 6,567,535
7.000%, TBA* 4,000,000 3,946,250
6.500%, 07/01/08 through
09/01/10 8,892,975 8,608,806
Total FNMA(cost $26,437,391) 26,250,035
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION (GNMA) - 17.6%
10.000%, 02/15/20 through
02/15/25 2,286,366 2,493,126
10.500%, 12/15/20 870,622 960,549
7.500%, 01/20/25 389,496 395,825
7.000%, 12/20/17 609,110 618,344
6.000%, TBA* 1,000,000 990,938
TOTAL GNMA(cost $5,422,481) 5,458,782
COLLATERIZED MORTGAGE OBLIGATIONS - 10.3%
Federal Home Loan Mortgage
Corporation (FHLMC),
Series 1694, Class PB PAC,
4.750%, 08/15/08 934,923 931,725
Series 165, Class I PAC,
9.000%, 12/15/19 1,311,152 1,314,037
FNMA,
Series 1989-29, Class Z,
10.000%, 06/25/19 512,020 559,038
Series 1993-45, Class PC PAC,
5.000%, 05/25/11 408,533 405,919
Total CMOs(cost $3,178,866) 3,210,719
OTHER U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.2%
Tennessee Valley Authority,
6.235%, 07/15/45
(cost $1,000,000) $1,000,000 $984,630
TOTAL INVESTMENTS - 115.5%
(cost $36,038,738) 35,904,166
OTHER ASSETS, LESS
LIABILITIES - (15.5%) (4,816,879)
NET ASSETS - 100.0% $31,087,287
Note: Based on the cost of investments of $36,038,738 for federal
income tax purposes at June 30, 1996, the aggregate gross unrealized
appreciation and depreciation of investments was $154,271 and
$288,843, respectively, resulting in net unrealized depreciation of
investments of $134,572.
* 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 will be determined upon settlement. Such securities are
subject to market fluctuations during the period from transaction date
to settlement date. At June 30, 1996, such securities amounted to
$4,937,188, or 15.9% of net assets, at value.
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 JUNE 30, 1996: Five 10-Year U.S. Treasury
Bond contracts and five 30-Year U.S. Treasury Bond contracts, expiring
9/30/96, face amount $500,000, with unrealized appreciation of $313.
THE MANAGERS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1996 (unaudited)
MANAGERS MANAGERS MANAGERS
SHORT SHORT AND INTERMEDIATE
GOVERNMENT INTERMEDIATE MORTGAGE
FUND BOND FUND FUND
ASSETS:
Investments
at value* $5,328,126 $22,488,121 $35,904,166
Repurchase
agreements
at cost and value 210,000 605,000 _
Cash 969 2,792 _
Foreign currency
(cost $380) _ 373 _
Receivable for Fund
shares sold 4,187 113,776 4,482
Dividends and interest
receivable 89,552 253,312 242,153
Variation margin
receivable _ _ 9,219
Prepaid expenses 5,841 9,454 11,732
Total assets 5,638,675 23,472,828 36,171,752
LIABILITIES:
Payable to
Custodian _ _ 74,539
Payable for Fund shares
repurchased 1,568 32,568 26,987
Dividends payable
to shareholders 4,831 _ _
Payable for investments
purchased _ 498,322 4,928,465
Accrued expenses:
Investment advisory and
management fees 850 9,200 11,612
Administrative
fees _ 4,600 6,451
Other 13,513 27,445 36,411
Total liabilities 20,762 572,135 5,084,465
NET ASSETS $5,617,913 $22,900,693 $31,087,287
Shares outstanding 321,154 1,187,941 2,083,206
Net asset value, offering
and redemption
price per share $17.49 $19.28 $14.92
NET ASSETS REPRESENT:
Paid-in capital $19,015,145 $38,112,926 $111,811,074
Undistributed net
investment
income 29,264 28,868 _
Distributions in excess
of net investment
income _ _ (30,851)
Accumulated net realized
loss from investments,
futures, and foreign
currency
translations (13,379,684) (14,876,497) (80,558,677)
Net unrealized
depreciation of
investments, futures
and foreign currency
translations (46,812) (364,604) (134,259)
NET ASSETS $5,617,913 $22,900,693 $31,087,287
*Investments
at cost $5,374,938 $22,852,718 $36,038,738
The accompanying notes are an integral part of these financial statements.
THE MANAGERS FUNDS
STATEMENTS OF OPERATIONS
For the six months ended June 30, 1996 (unaudited)
MANAGERS MANAGERS MANAGERS
SHORT SHORT AND INTERMEDIATE
GOVERNMENT INTERMEDIATE MORTGAGE
FUND BOND FUND FUND
INVESTMENT
INCOME:
Interest income $195,771 $790,057 $1,240,087
Dividend income _ 11,442 _
Other income _ 1,032 _
Total investment
income 195,771 802,531 1,240,087
EXPENSES:
Investment advisory and
management fees 12,742 58,296 80,206
Administrative fees5,663 29,148 44,559
Custodian fees 6,893 32,252 28,955
Transfer agent fees7,002 17,284 24,716
Audit fees 8,161 14,432 18,908
Registration fees 6,093 9,769 12,697
Insurance 773 3,033 5,005
Legal fees 212 1,891 3,010
Trustee fees 264 1,210 1,917
Miscellaneous
expenses 1,391 3,092 4,977
Total expenses 49,194 170,407 224,950
Less: fee waivers (12,772) _ _
Net expenses 36,422 170,407 224,950
Net investment
income 159,349 632,124 1,015,137
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized loss on
investment transactions and
futures contracts (25,440) (75,888) (460,970)
Net unrealized depreciation
of investments, futures and
foreign currency
translations (91,422) (452,306) (1,033,429)
Net realized and
unrealized loss (116,862) (528,194) (1,494,399)
NET INCREASE (DECREASE)
IN NET ASSETS
RESULTING FROM
OPERATIONS $42,487 $103,930 $(479,262)
The accompanying notes are an integral part of these
financial statements.
The Managers Funds
Statements of Changes in Net Assets
Managers Short Managers Short and Managers Intermediate
Government Fund Intermediate Bond Fund Mortgage Fund
For the For the For the
six months For the six months For the six months For the
ended year ended year ended year
June 30, ended June 30, ended June 30, ended
1996 Dec. 31, 1996 Dec. 31, 1996 Dec. 31,
(unaudited) 1995 (unaudited) 1995 (unaudited) 1995
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment
income $159,349 $445,348 $632,124 $1,671,414 $1,015,137 $3,013,284
Net realized gain
(loss) on investments,
futures and foreign
currency
transactions(25,440) 193,188 (75,888) (777,285) (460,970) 2,258,983
Net unrealized
appreciation
(depreciation)
of investments,
futures and
foreign currency
translations (91,422) 111,540 (452,306) 2,833,306 (1,033,429) 2,502,951
Net increase
(decrease) in net
assets resulting
from operations 42,487 750,076 103,930 3,727,435 (479,262) 7,775,218
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (130,085) (227,852) (560,932) (1,480,432) (1,015,137) (3,252,564)
In excess of net
investment
income _ (142,157) _ (36,365) (11,522) (19,329)
Total distributions to
shareholders(130,085) (370,009) (560,932) (1,516,797) (1,026,659) (3,271,893)
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale
of shares 1,809,460 3,537,951 4,728,441 9,664,857 2,965,073 3,468,386
Net asset value of
shares issued in
connection with
reinvestment of
dividends 91,731 202,898 365,763 851,710 593,782 1,522,227
Cost of shares
repur
chased(2,031,890)(8,548,048)(6,977,619)(18,441,928)(10,987,611)(25,457,501)
Net decrease from
capital share
transactions(130,699)(4,807,199)(1,883,415)(7,925,361)(7,428,756)(20,466,888)
Total decrease in
net assets(218,297)(4,427,132)(2,340,417)(5,714,723)(8,934,677) (15,963,563)
NET ASSETS:
Beginning of
period 5,836,210 10,263,342 25,241,110 30,955,833 40,021,964 55,985,527
End of
period $5,617,913 $5,836,210 $22,900,693 $25,241,110$31,087,287$40,021,964
End of period
undistributed
(overdistributed)
net investment
income $29,264 _ $28,868 $(42,324) $(30,851) $(19,329)
SHARE
TRANSACTIONS:
Sale of
shares 102,918 202,248 242,453 509,053 195,209 230,089
Shares issued in
connection with
reinvestment of
dividends 5,213 11,629 18,842 45,216 39,227 101,672
Shares
repurchased(115,503) (490,616) (356,816) (985,098) (726,632) (1,699,063)
Net decrease in
shares (7,372) (276,739) (95,521) (430,829) (492,196) (1,367,302)
The accompanying notes are an integral part of these financial statements.
MANAGERS SHORT GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each period
For the
six months
ended
June 30,
1996 Year ended December 31,
(unaudited) 1995(b) 1994 1993 1992* 1991*
NET ASSET VALUE,
BEGINNING OF
PERIOD $17.76 $16.96 $19.35 $19.86 $20.35 $19.86
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income 0.50 0.98 0.86 1.28 1.26 1.58
Net realized and unrealized gain
(loss) on investments(0.36) 0.63 (2.01)(0.53) (0.49) 0.49
Total from investment
operations 0.14 1.61 (1.15) 0.75 0.77 2.07
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (0.41) (0.50) (1.17) (1.26) (1.26) (1.58)
In excess net investment
income _ (0.31) (0.07) _ _ _
Total distributions to
shareholders (0.41) (0.81) (1.24) (1.26) (1.26) (1.58)
NET ASSET VALUE,
END OF PERIOD $17.49 $17.76 $16.96 $19.35 $19.86 $20.35
Total Return 0.78%(c) 9.71% (6.18)% 3.81% 3.90% 10.82%
Ratio of net expenses
to average net assets1.29%(d) 1.25% 0.97% 0.87% 0.76% 0.58%
Ratio of net investment income
to average net assets5.63%(d) 5.62% 7.06% 8.71% 6.24% 6.08%
Portfolio turnover 69%(c) 238% 140% 189% 168% 84%
Net assets at end of period
(000's omitted) $5,618 $5,836 $10,263 $87,874 $142,874 $144,042
Expense Waiver (a)
Ratio of total expenses
to average net assets 1.73%(d)1.65% 1.03% 0.96% 0.83% 0.59%
Ratio of net investment income
to average net assets 5.16%(d)5.22% 7.00% 8.62% 6.17% 8.25%
(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.
(c) Not annualized.
(d) Annualized.
The total return would have been lower had certain expenses not be
reduced during the periods shown.
MANAGERS SHORT AND INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout the period
For the
six months
ended
June 30,
1996 Year ended December 31,
(unaudited) 1995(b) 1994 1993 1992* 1991*
NET ASSET VALUE,
BEGINNING OF
PERIOD $19.67 $18.06 $21.23 $20.89 $20.33 $19.43
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income 0.53 1.28 1.45 1.38 1.69 1.50
Net realized and unrealized gain
(loss) on investments (0.45) 1.45 (3.17) 0.34 0.57 0.88
Total from investment
operations 0.08 2.73 (1.72) 1.72 2.26 2.38
LESS DISTRIBUTIONS
TO SHAREHOLDERS:
From net investment
income (0.47) (1.09) (1.37) (1.38) (1.70) (1.48)
In excess of net investment
income _ (0.03) (0.08) _ _ _
Total distributions to
shareholders (0.47) (1.12) (1.45) (1.38) (1.70) (1.48)
NET ASSET VALUE,
END OF PERIOD $19.28 $19.67 $18.06 $21.23 $20.89 $20.33
Total Return 0.41%(a) 15.57% (8.37)% 8.49% 11.55% 12.78%
Ratio of net expenses
to average
net assets 1.45%(b) 1.50% 1.05% 0.94% 0.86% 0.96%
Ratio of net investment income
to average
net assets 5.39%(b) 6.52% 7.11% 6.58% 8.33% 7.41%
Portfolio turnover 56%(a) 131% 57% 126% 117% 536%
Net assets at end of period
(000's omitted) $22,901 $25,241 $30,956 $112,228 $72,031 $52,168
Expense Waiver (c)
Ratio of total expenses
to average net assets N/A 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 N/A 7.37%
(a) Not annualized.
(b) Annualized.
(c) 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).
The total return would have been lower had certain expenses not be
reduced during the periods shown.
* Audited by prior auditors.
Managers Intermediate Mortgage Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
For the
six months
ended
June 30,
1996 Year ended December 31,
(unaudited) 1995(b) 1994 1993 1992* 1991*
NET ASSET VALUE,
BEGINNING OF
PERIOD $15.54 $14.20 $20.65 $21.13 $21.77 $20.31
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment income 0.43 0.93 1.52 1.94 2.58 2.03
Net realized and unrealized
gain (loss) on
investments (0.61) 1.45 (6.56) 0.44 (0.40) 0.48
Total from investment
operations (0.18) 2.38 (5.04) 2.38 2.18 3.51
LESS DISTRIBUTIONS
TO SHAREHOLDERS:
From net investment
income (0.43) (1.03) (1.41) (2.28) (2.40) (2.05)
From net realized gain
on investment _ _ _ (0.51) (0.42) _
In excess of net realized gain
on investments _ _ _ (0.07) _ _
In excess of net investment
income (0.01) (0.01) _ _ _ _
Total distributions to
shareholders (0.44) (1.04) (1.41) (2.86) (2.82) (2.05)
NET ASSET VALUE,
END OF PERIOD $14.92 $15.54 $14.20 $20.65 $21.13 $21.77
Total Return (1.16)%(b) 17.27% (25.00)% 11.45% 10.50% 18.18%
Ratio of net expenses
to average net
assets 1.26%(c) 1.17% 0.85% 0.75% 0.79% 0.69%
Ratio of net investment income
to average
net assets 5.66%(c) 6.33% 8.37% 8.90% 11.30% 9.91%
Portfolio turnover124%(b) 506% 240% 253% 276% 172%
Net assets at end of period
(000's omitted) $31,087 $40,022 $55,986 $271,861 $115,885 $165,358
Expense Waiver (a)
Ratio of total expenses
to average net assets N/A N/A 0.92% 0.82% 0.84% N/A
Ratio of net investment income
to average net assets N/A N/A 8.30% 8.83% 11.25% N/A
(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) Not annualized.
(c) Annualized.
The total return would have been lower had certain expenses not be
reduced during the periods shown.
* Audited by prior auditors.
MANAGERS SHORT GOVERNMENT FUND, MANAGERS SHORT AND
INTERMEDIATE BOND FUND AND MANAGERS INTERMEDIATE MORTGAGE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
(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.
(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 Fund's 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, as shown below.
Fund Capital Loss
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
(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 June 30, 1996, one unaffiliated shareholder, which is an omnibus
account, individually held greater than 10% of the outstanding shares of
Managers Short Government Fund.
(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.
(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 six months ended June 30,
1996, were as follows:
Investment Advisory and Management Fees
Maximum fee Actual Fee at
before fee with June 30
Fund waivers waivers(a) 1996
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.
For the six months ended June 30, 1996, 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. For this period, 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. 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 six months ended
June 30, 1996 were as follows:
Long-term Securities U.S. Government Securities Only
Fund Purchases Sales Purchases Sales
Managers-
Short Government
Fund $5,247,005 $3,318,725 $4,947,286 $3,318,725
Short and Intermediate
Bond Fund 12,826,492 13,798,376 4,217,118 10,320,388
Intermediate
Mortgage Fund51,272,294 54,872,428 51,272,294 54,872,428
Long Futures Contracts
Opened Closed
Short Government Fund $1,051,094 $3,140,275
Intermediate Mortgage Fund 1,084,844 1,203,444
(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
in 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 six months ended June 30, 1996, 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 June 30,
1996.
(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 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 six months ended June 30, 1996, Managers
Intermediate Mortgage Fund entered into futures contracts to manage the
Fund's duration to that of its benchmark index.
(c) Dollar Roll Agreements
Managers Short Government Fund and Managers Intermediate Mortgage Fund may
enter 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 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.
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 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.
The plaintiff has since filed an amended complaint and the defendants have
moved to dismiss the amended complaint.
Another non-class action lawsuit and an arbitration have been filed against
certain of the defendants mentioned above, among others, and Managers Short
and Intermediate Bond Fund based on similar allegations. Certain individual
customers, who are potentially members of the 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.
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
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
This report is prepared for the information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by an effective prospectus.
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, Fr<*>eres & 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
