INCOME EQUITY FUND
CAPITAL APPRECIATION FUND
SPECIAL EQUITY FUND
INTERNATIONAL EQUITY FUND
ANNUAL REPORT
DECEMBER 31, 1996
W'here Leading Money Managers Converge
MANAGERS INCOME EQUITY FUND
MANAGERS CAPITAL APPRECIATION FUND
MANAGERS SPECIAL EQUITY FUND
MANAGERS INTERNATIONAL EQUITY FUND
Annual Report
December 31, 1996
TABLE OF CONTENTS
Begins
on Page
President's Message 1
The Managers Funds Performance 4
Complete performance table for all of The Managers Funds as of
December 31, 1996
Investment Manager's Comments 5
Discussion of Funds' investment results during the year and
cumulative total return graphs versus relevant index
Summary of Major Sectors and Country Allocations 24
Side by side comparison of the Funds' industry breakdown
Schedules of Portfolio Investments 25
Detailed portfolio listings by security type and industry
sector, as
valued at December 31, 1996
Statements of Assets and Liabilities 42
Fund balance sheets, Net Asset Value (NAV) per share
computation
and cumulative undistributed amounts
Statements of Operations 43
Detail of sources of income, fund expenses, and realized and
unrealized
gains (losses) during the year
Statements of Changes in Net Assets 44
Detail of changes in fund assets and distributions to
shareholders for
the past two years
Financial Highlights 46
Historical net asset values, distributions, total returns,
expense ratios,
turnover ratios and net assets
Notes to Financial Statements 50
Accounting and distribution policies, details of agreements
and
transactions with fund management and description of certain
investment risks
Report of Independent Accountants 57
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 Corp.,
the Federal Reserve Board, or any governmental agency.
President's Message
Dear Fellow Shareholder:
1996 was another monumental year for the stock market. For the
second year in a row the S&P 500 and the Dow Jones Industrial
Average (DJIA) raced to new heights fueled by record cash flows
into equity mutual funds. Most responsible for the market's
continued success, however, has been an economic environment of
growth with low inflation accomplished through productivity
increases driven by a technological revolution as important today
as the industrial revolution was in the late 1800s.
Perhaps signaling that 1996 was to be another strong year, the
markets got off to a quick start, with the DJIA rising almost 10%
by mid-February. Small capitalization stocks led the way in the
second quarter with the technology sector surging ahead, before
peaking in June. In July the markets corrected with small
capitalization stocks in particular moving sharply lower. As
measured by the Russell 2000, small caps lost in July all they
had gained in the first six months of the year. Large
capitalization stocks held up much better as investors turned to
large, liquid holdings to fill up their portfolios. The downturn
was short-lived, as solid earnings, moderate economic growth and
low inflation again encouraged investors. Strong cash flows into
mutual funds resumed, and interest rates remained stable leading
up to election day in November. The markets applauded the
election results with a sharp rally. Interest rates dropped, and
the S&P 500 gained 7.5% in November, its best one-month return
since December 1991. Cautionary statements by Federal Reserve
Chairman Alan Greenspan had only a temporary effect as the major
averages were hitting all time highs in late December. Despite a
100 point drop on the final day of the year, the DJIA finished at
6,448, gaining 1,331 points for the year, or 26.0%. The S&P 500
returned 23.0% for the year, while the Russell 2000 returned
"only" 16.5%. Although most of the major foreign markets, except
Japan performed well for the year, U.S. stocks were again the
dominant movers.
The S&P 500's return is especially striking given its 37.6%,
return in the previous year, and the fact that it again
outperformed a vast majority of professional investment managers
such as mutual fund and institutional portfolio managers. Just
as the economy and financial markets tend to move in cycles,
history has shown that passive investing (investment in a static
portfolio which mirrors an index such as the S&P 500) and active
investing (the act of choosing and swapping investments based on
their perceived merit) go through cycles of outperforming each
other. As with many trends, the relative performance of an index
can be somewhat self-perpetuating. As index mutual funds perform
well, they gain in popularity and gather additional assets which
must be put to work in the very same investments which have
already performed well. This drives the price up further, which
boosts the returns and the trend continues.
In the case of a capitalization weighted index, such as the S&P
500, this results in new inflows being allocated such that higher
proportions are invested in the stocks which have recently
performed the best, while less is invested in those that have
performed poorly, regardless of the future prospects. The theory
is that the active market is efficient, and correctly values all
investments based on all available information. If and when
index portfolios are only a minor proportion of the investment
landscape, they have little or no effect on the valuations of
investments, but as they have become a larger component of the
financial marketplace, they have the potential to distort
valuations. This could be one of the reasons why large
capitalization stocks have far outperformed small capitalization
stocks over the past few years, as well as one of the reasons
that large caps have higher market valuations relative to small
caps than they have had historically. just as the trend can be
self-perpetuating on the way up, so can it also be self-
perpetuating on the downside.
We at The Managers Funds continue to believe that active
portfolio management by experienced investment professionals with
the resources to research and evaluate individual issues is the
best strategy in the long run. Common sense suggests that stocks
should be owned based on their individual merit and prospective
returns rather than their group membership or historical returns.
We also believe, as do most investment organizations, that there
are many different, yet successful, approaches to equity
investing, and that there are benefits to diversifying across
investment approaches.
Where we differ, however, is in our method of diversification.
We believe that it is difficult, if not impossible for any
individual or organization to achieve the highest proficiency in
multiple styles of investing. The most effective way to achieve
both excellence and diversification is to first seek excellence
by searching for the best portfolio managers, within outside
investment organizations, who focus their resources in
specialized areas of the market, and who have demonstrated their
expertise with successful investment results. Then, achieve
diversification by combining the portfolios of complementary
investment managers in order to take advantage of their
strengths, while diversifying their risks.
Within the four equity mutual funds that we review in the
following report, we have combined the talents of nine different
portfolio managers and their investment teams at eight different
investment organizations. In order to help describe why we
believe that these individuals and organizations work well in
combination, and are the best in their field, we have outlined
each of the various investment philosophies of the portfolio
managers who are managing your assets. Also we have reviewed the
key events and drivers of the Funds' performances throughout the
year. Finally, through the portfolio listings, financial
statements and a few charts we have outlined how the portfolios
are positioned going into 1997.
Looking forward, it is important to note that the strength of the
financial markets has been the result of a near perfect
environment; low inflation, high employment, an extended although
weak economic recovery, strong corporate earnings driven by
structural and technological improvements along with low interest
rates. Low interest rates have also provided liquidity which, in
turn, has been used for additional investment. This favorable,
yet delicately balanced, environment will not last forever, but
could very well continue for awhile.
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
The Managers Funds Performance (unaudited)
All periods ending December 31, 1996
Average Annualized Total Returns*
---------------------------------------------
- -----------
Since Inception
Morningstar
1 Year 3 Years 5 Years 10 Years Inception
Date Rating**
Equity Funds:
Income Equity Fund 17.08% 16.67% 14.45% 12.46% 14.57% Oct.
'84 ****
Capital Appreciation Fund13.73% 14.32% 14.04% 14.66% 15.48%
Jun. '84 ****
Special Equity Fund 24.75% 17.87% 17.42% 17.60% 16.47% Jun.
'84 *****
International Equity Fund12,77% 10.17% 14.02% 10.62% 14.30%
Dec. '85 ****
Income Funds:
Short Government Fund 3.89% 2.27% 2.90% - 5.21% Oct.
'87 **
Short & Intermediate Bond Fund4.15% 3.32% 5.94% 6.97%
8.56% Jun. '84 ***
Intermediate Mortgage Fund 3.33% -3.15% 2.27% 6.36% 7.13%
May '86 *
Bond Fund 4.97% 8.42% 8.94%9.36% 11.37% Jun.
'84 ****
Global Bond Fund 4.39% - - -
7.48% Mar. '94NA
Money Market Fund 5.47%4.70% 3.93% 5.48% 5.91% Jun. '84
NA
Past performance is no guarantee offuture 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 Equity
Funds, or for a prospectus for the Income Funds or the Money
Market Fund, please call The Managers Funds at (800) 835-3879, or
your investment adviser.
* 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 risk-adjusted
performance through December 31, 1996 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 other than the
International Equity Fund was rated against 1,826, 1,058 and 598
equity funds, the International Equity Fund was rated against
383, 185 and 60 international equity funds, and each of the
Income Funds was rated against 1,104, 597 and 2,42 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 Income Equity Fund
Investment Manager's Comments
Managers Income Equity Fund is an income oriented stock fund
managed by The Managers Funds, L.P since its inception in 1984.
The Managers Funds currently utilizes two independent sub-
advisors who each manage approximately half of the total
portfolio: Anthony Spare, of Spare, Kaplan, Bischel & Associates
(SKB&A), hired in August 1990, and Robert Hoffman, of Scudder,
Stevens & Clark, Inc. (SS&C), hired in August 1991.
The Portfolio Managers
Tony Spare can be described as a contrarian investor who uses the
relative dividend yields of stocks to help identify issues which
are severely undervalued by the market. He seeks to obtain
excess returns from both the dividend income stream of the
portfolio, along with the appreciation of stocks from depressed
levels. Because the income stream provides a positive return,
and the level of the dividend provides somewhat of a floor for
the price of each stock, the returns from this type of strategy
are intended to be less volatile than the market in general.
Tony's process is such that he only considers stocks which are
yielding at least 30% more than the average dividend yield of the
S&P 500. He and a team of analysts at SKB&A analyze each
potential holding looking for strong balance sheets, ample cash
flows and strong management with a dividend paying culture.
Candidates for addition to the portfolio are those which are not
only selling at high dividend yields (low prices) relative to the
market, but also relative to their own historical levels. Each
stock has a pre-determined buy and sell price based on the
historic pattern of the relative dividend yield. Stocks are also
sold when their prices rise to a level in which the dividend
yield is below that of the S&P 500, or if the fundamentals
deteriorate, signaling the possibility of a dividend cut.
While the discipline provides that stocks must yield at least
30,Yo more than the market for consideration, the reality is that
Tony typically holds stocks which are yielding 50% or more than
the market. At year end, Tony's portfolio had an average
dividend yield of 4.27% while the average yield for the S&P 500
was 1.97%. As a rule, Tony invests only in domestic common
stocks.
Robert Hoffman's philosophy is similar in the belief that stocks
with high relative dividend yields provide above average returns
with below average volatility in the long run. Hoffman, however,
is more of a growth investor who uses relative dividend yields to
identify stocks which are well valued and to avoid those which
are overvalued. He seeks to obtain excess returns from the
dividend income stream of the portfolio, appreciation of stocks
from depressed levels, and appreciation of stocks as a result of
earnings and dividend growth.
Similar to Spare, he invests only in stocks with a yield higher
than that of the S&P 500 (in this case at least a 20% premium is
required), and prefers stocks which have yields which are high
relative to their own historical levels. After screening for
yield, Robert and the team of analysts at SS&C analyze potential
holdings in search of strong or improving fundamentals, earnings
and dividend growth and strong management. Stocks are sold when
the price rises to a point where the yield is more than 25% below
that of the S&P 500. In addition, positions are sold if the
fundamentals deteriorate, or merely to provide liquidity for
other purchases.
As a rule, Robert generally stays fully invested with a majority
of the portfolio in domestic common stocks, however, he will
often purchase American Depositary Receipts (ADRS) of foreign
companies' stocks, as well as Real Estate Investment Trusts
(REITS). Occasionally, he will invest in preferred stock or
convertible bonds. Given the pursuit of growth as well as yield,
the portfolio's yield, while at a premium to the S&P 500, is less
than that of the SKB&A portfolio. At year end, SS&C's portfolio
had an average dividend yield of 3.32%.
The Year in Review
During the final six months of 1996, Managers Income Equity Fund
provided a total return of 10.6% which brought the return for the
full year to 17.1%. For the same periods, the Standard & Poors
500 Stock Index (S&P 500) returned 11.7% and 23.0%, respectively.
Top Ten Holdings
as of December 31, 1996
% Fund
Philip Morris Cos., Inc.* 2.46
J.P Morgan & Co., Inc.* 2.08
GTE Corp.* 2.06
J.C. Penney Co., Inc. 1.98
NYNEX 1.77
Bristol Myers Squibb Co.* 1.66
Exxon Corp.* 1.63
Bell Atlantic Corp. 1.67
Lincoln National Corp. 1.58
Dow Chemical Co.* 1.58
*A top ten holding December 1995
Since the yield oriented style of the Fund is partly intended to
reduce volatility, it is typical for the Fund to lag the market
in strong upturns, and it is expected to outperform the market
during moderate, flat and down markets. Thus, it is not
surprising that the Fund did not keep up with the strong upswing
in 1996, although it did perform rather well in the second half
due to strong performances from some of its larger capitalization
holdings, along with the strong performance of large
capitalization stocks in general.
Financials, which make up a large portion of the Fund performed
well throughout the year, and particularly in the second half as
it became clear that the rate inflation was not rising. Regional
banking companies such as CoreStates Financial, First Bank
Systems, Mellon Bank and Lincoln National performed well and are
now being trimmed back as they are reaching full valuation. One
of the strongest of the financial holdings throughout the year
was Student Loan Marketing (Sallie Mae) which rose 41%, on 37%
earnings growth and a steadily increasing dividend. Because the
yield is now below that of the S&P 500 it is on hold and will
likely be trimmed back.
Investments in the health care sector also performed well and the
portfolio benefited from a concentration in pharmaceuticals, and
avoidance of HMOs. In particular, Warner Lambert returned 57%
for the year due to strong earnings and potential revenue growth
from two new drugs to treat diabetes and cholesterol. Other
strong performers included Bristol Myers Squibb, Eli Lilly, and
Zeneca Group, a UK pharmaceutical holding company. As the
valuations of these stocks have approached the high side of their
historic ranges, these positions are being reduced.
The primary drag on the portfolio's performance in 1996 was a
heavy position in electric utility stocks, which, as a group
barely broke even for the year. A rise in interest rates during
the first quarter combined with the shutdown of several nuclear
power plants hurt the prices of the sector in general, and
portfolio holdings Peco Energy, Unicom and Northeast Utilities,
in particular. Patience helped, however, as the utilities kept
pace with the market in the fourth quarter. The Fund's positions
in British utilities, such as National Power and Powergen
performed well, due in part to restructuring efforts, and also
partly due to the strength of the British Pound. Valuations in
the electric utilities are becoming more compelling on a relative
basis, and thus, both portfolio managers have recently been
adding exposure in this area.
Patience and fortitude also paid off in the case of tobacco
companies which bounced back strongly in the fourth quarter after
third quarter weakness caused by concerns about tobacco
litigation. Philip Morris, the Fund's largest holding, rose 25%
in the fourth quarter, and was the largest single influence on
the Fund's performance during the quarter. Philip Morris raised
its dividend by 20% in the third quarter, and despite its recent
rise continues to yield close to 4% which is double the yield of
the S&P 500. Other tobacco holdings include American Brands, RJR
Nabisco, and UST.
From a relative standpoint, one of the key constraints on the
Fund's performance during the year was a lack of technology
holdings. Because of the high dividend yield levels which both
portfolios managers require, the technology stocks that the Fund
owns are mostly aerospace/defense companies as opposed to the
computer related industries, such as semiconductors, computers,
and software, which were among the best performing industries for
the year. These holdings, such as United Technologies, Lockheed
Martin and Boeing, a recent addition, nevertheless performed
well, and were incremental contributors to performance.
Looking Forward
As previously mentioned, the portfolio managers, who both select
stocks on an individual basis as opposed to rotating sectors or
following themes, currently find themselves trimming in the areas
of pharmaceuticals, financials, and consumer basics due to high
valuations. With the proceeds, they are adding in the areas of
electric utilities and telephones, specifically the regional
"Bell" operating companies, which underperformed for the year,
and despite a strong performance in December, offer interesting
valuations.
Relative to the market, the valuations of the stocks in the
portfolio remain attractive. At year-end, the weighted average
price to earnings ratio for the total portfolio was 16.7, and the
weighted average dividend yield was 3.74%. The 30-day annualized
SEC yield for the Fund on December 31, 1996, was 2.67%.
Managers Income Equity Fund
Cumulative Total Return Performance
The Managers Income Equity Fund's cumulative total return is
based on the monthly change in net asset value (NAV), and assumes
that all distributions were reinvested.
The S&P 500 Index is an unmanaged capitalization weighted index
of 500 commonly traded stocks designed to measure performance of
the broad domestic economy through changes in the aggregate
market value of those stocks. The index assumes reinvestment of
dividends.
This chart compares a hypothetical $10,000 investment made in
Managers Income Equity Fund on December 31, 1986, to a $10,000
investment made in the S&P 500 for the same time period. Past
performance is not indicative of future results.
This table shows the average annual total returns for Managers
Income Equity Fund for the one-year, five-year and ten-year
periods through December 31, 1996, and comparable returns for the
S&P 500 Index.
Average Annual Total Returns Annualized
One Five Te n
Year Years Years
Managers Income Equity Fund 17.1% 14.5% 12.5%
S&P 500 Index 23.0 15.2 15.3
Managers Capital Appreciation Fund
Investment Manager's Comments
Managers Capital Appreciation Fund is a growth oriented stock
fund managed by The Managers Funds, L.P since its inception in
1984. The Managers Funds currently utilizes two independent sub-
advisors who each manage approximately half of the total
porffolio: Linc Field at Dietche & Field Advisors, Inc., hired in
December, 1986, and Frank Husic at Husic Capital Management,
hired in September, 1996.
The Portfolio Managers
Linc Field's investment philosophy involves finding companies in
which there is some catalyst which will cause the earnings growth
rate to rise. Catalysts can be in the form of a new product or
technology, an acquisition divestiture or restructuring,
significant management changes, or outside forces such as
industry events or changes in demand. Since the events that can
drive a catalyst are usually known in the marketplace, the key
challenge is correctly evaluating the timing and results of the
event, and determining whether or not the price of the stock
sufficiently reflects the forecast outcome.
The analysts at Dietche & Field create cash flow and earnings
models to set a price target and a target horizon one to two
years forward. A smooth trendhne is set toward the price target.
Positions are established and increased when the stock is trading
below the trendhne, and reduced or eliminated when trading above
the trendline. Trading around the trendline is intended not only
to add value over time, but also to reduce portfolio volatility.
Stocks are also liquidated if the fundamentals deteriorate, or if
the catalyst fails.
Linc typically invests a majority of the portfolio in domestic
mid-capitahzation companies with some exposure in large
capitalization companies and occasionally purchases American
Depositary Receipts (ADRS) of foreign companies' stocks. Linc
generally stays fully invested with a portfolio of between 80 and
100 positions.
On September 10, 1996, we replaced one of the Fund's sub-
advisors, Hudson Capital Advisers, with Husic Capital Management,
headed by Frank Husic. Frank's investment philosophy depends
upon early recognition of change that leads to high expected
earnings growth and altered investor perceptions. Further, he
believes in concentrating his portfolio in the greatest expected
beneficiaries of those changes. Concentration comes in the form
of investing within a limited number of investment themes, and
then limiting the number of holdings to approximately 35
positions.
Frank begins by developing investment themes and then identifying
a universe of candidates which will potentiauy benefit from the
effects of the themes. Themes are typically long lived, two or
more years, and are developed through the course of business,-
discussions with company managements or other investors,
fundamental analysis, and the tracking of economic, financial and
demographic trends.
Portfolio concentration enables Frank and his investment team to
focus on the details of each company in which he invests,
speaking with management as well as the managements of
competitors, clients and suppliers. If there is any drawback to
concentration it is that it tends to be volatile, since each
holding has a meaningful effect on the portfolio.
To limit negative effects, Frank has developed a strict
discipline which involves setting short-term fundamental hurdles
for each holding in the portfoho. Hurdles can be earnings
targets, sales goals, margin improvements, store openings,
acquisitions, divestitures, or any event relating to the
operations of the company. If the hurdle is achieved, the
position is held or increased and a new hurdle is set. If the
hurdle is not achieved, the position is reduced and a new hurdle
is set. If a hurdle is missed twice, the position is eliminated.
This discipline has three purposes. First, it serves as a strict
and unemotional sell signal. Second, it naturally concentrates
the portfolio into those companies which are achieving
fundamental success, while de-emphasizing those that are not.
Third, it serves to confirm or disprove the efficacy of each
investment theme.
The Year in Review
During the final six months of 1996, Managers Capital
Appreciation Fund provided a total return of 6.5% which brought
the return for the full year to 13.7%. For the same periods, the
Standard & Poor's 500 Stock Index (S&P 500) returned 11.7% and
23.0%, respectively.
Top Ten Holdings
as of December 31, 1996
% Fund
Intel Corp. 4.39
Household International Inc. 2.73
Nike, Inc., Class B 2.36
Bankers Trust New York Corp. 2.21
3Com Corp. 2.17
Republic Industries, Inc. 2.13
Cisco Systems, Inc. 2.01
Extended Stay America, Inc. 1.97
Peoplesoft, Inc. 1.89
Pride Petroleum Serivces, Inc. 1.84
Although a one year return of 13.7% is respectable from an
absolute perspective, the return is disappointing when compared
to that of the S&P 500. Part of the underperformance is a result
of not sufficiently owning the largest capitalization companies
in the U.S. market. In 1996 the difference in performance
between large and small capitahzation companies was the widest in
recent memory. For example, the largest 50 stocks in the S&P 500
appreciated 24.3% on average, while the remaining 450 stocks
returned only 10.1'7o on average. In fact, 25 of the largest
companies accounted for more than 50% of the return of the index.
This is not an excuse, but an observation of how well the large
caps performed in 1996. There were plenty of opportunities
during the year and the Fund capitalized on many of them.
Among the Fund's best performing positions was Consolidated
Stores, which and appreciated 93% for the year by steadily
increasing its earnings and completing a favorable acquisition of
Kay Bee Stores. Financial holdings also performed well
throughout the year, benefiting from stable interest rates,
consolidations and increasing fee based services. AFLAC rose 44%
on solid earnings growth and strong product demand. Countrywide
Credit grew 32% from growth in demand for mortgages as well as
expansion of their product line. Bank of Boston rose 39% with a
successful acquisition of Bay Banks.
The technology sector provided mixed results for the Fund.
Intel, the Fund's largest position during the fourth quarter, had
the largest dollar gain for the Fund as it appreciated 58% from
its purchase price. Cisco Systems and third quarter additions
Microsoft and 3Com also added value. Conversely, Bay Networks
traded down due to an extended product transition which was
detrimental to earnings. Micro Warehouse dropped more than 70%
due to systems problems and a slowing of Apple Macintosh sales.
Other disappointments included Informix, Computer Associates and
America Online.
The most detrimental sector for the Fund during 1996 was
communications. The portfoho's emphasis on cellular
communications, and equipment companies was ill fimed. Octel
Communications, Paging Network, Tele-
Communications and Glenayre Technologies were among the laggards.
Except for Paging Network, these have been liquidated. There
were, however, bright spots in this sector, including L.M.
Ericsson, a Swedish telecommunications company which rose 52% for
the year, and Ascend Communications, which rose 53% and was
reduced as it was peaking in December.
Looking Forward
Looking forward, Linc Field is encouraged by the fundamentals and
valuations in his portfolio relative to those of the large
capitalization stocks in the index. He is concerned, however,
that with unemployment at such low levels, labor rates along with
a worldwide economic recovery may induce an increase in
inflation.
Frank Husic expects continued strong liquidity into mutual funds
from both domestic and foreign investors, continued positive
earnings surprises and continued consolidation in a number of
industries. He is also bullish on the relative performance of
small and mid-capitahzation companies. One note of caution is
that the prosperous environment we have experienced lately is
partly a result of political stability across the globe.
Unforeseen political or mflitary unrest in any number of regions
could have adverse effects on continued economic expansion.
Currently Frank is investing based on four major themes.
Corporate Renaissance is a theme focusing on companies which are
restructuring. Frank expects 1997 to offer a number of new
opportunities in this theme.
The Power of Growth theme is premised on Frank's expectation of
steady growth in the U.S. economy, and is buoyed by his
enthusiasm for rapid growth in California and the West Coast
economies which, in his view, should benefit from the troika of
trade, technology and tourism over the next two to five years.
Riding the Information Superhighway is a theme based on Frank's
belief that corporations will continue to upgrade their computer
systems, which should drive demand growth for addon goods and
services such as software, networks and memory.
Finally, Frank has a focus on Super Secular Growers, which are
companies that are able to maintain high growth rates, and will
thus be rewarded with increased valuations by investors.
Managers Capital Appreciation Fund
Cumulative Total Return Performance
The Managers Capital Appreciation Fund's cumulative total return
is based on the monthly change in net asset value (NAV), and
assumes that all distributions were reinvested.
The S&P 500 Index is an unmanaged capitalization weighted index
of 500 commonly traded stocks designed to measure performance of
the broad domestic economy through changes in the aggregate
market value of those stocks. The index assumes reinvestment of
dividends.
The S&P Midcap 400 Index is a capitalization-weighted index that
measures the performance of the mid-range sector of the U.S.
stock market where the median market capitalization is
approximately $700 million. The S&P 400 was developed on
December 31, 1990. S&P 400 returns previous to 1991 are based on
a pro forma index of stocks similar to the S&P 400.
This chart compares a hypothetical $10,000 investment made in
Managers Capital Appreciation Fund on December 31, 1986, to a
$10,000 investment made in the S&P 500 and the S&P 400 for the
same time period. Past performance is not indicative of future
results.
This table shows the average annual total returns for Managers
Capital Appreciation Fund for the one-year, five-year and ten-
year periods through December 31, 1996, and comparable returns
for the S&P 500 Index and the S&P 400 Index.
Average Annual Total Returns
Annualized
One Five Ten
Year Years Years
Managers Capital Appreciation Fund 13.7% 14.0% 14.7%
S&P 500 Index 23.0 15.2 15.3
S&P 400 Index 19.2 13.0 15.3
Managers Special Equity Fund
Investment Manager's Comments
Managers Special Equity Fund, managed by The Managers Funds, L.P
since its inception in 1984, is a growth oriented equity fund
which primarily invests in the stocks of small capitahzation
companies. The Managers Funds currently utilizes three
independent sub-advisors who each manage approximately one third
of the total portfolio: Andrew Knuth of Westport Asset
Management, and Timothy Ebright of Liberty Investment Management,
each of whom has been managing a portion of the Fund since
December, 1985, and Gary Pilgrim of Pilgrim Baxter & Associates,
who has been managing a portion of the Fund since October, 1994.
The Portfolio Managers
Andy Knuth's investment philosophy entails investing in small
capitabzation companies which he perceives as having significant
upside potential in earnings and return on equity over the next
twelve to eighteen months. Although he is investing for growth,
Andy will purchase stocks only if they are selling at or below
the market's price/earnings multiple, or below valuations of
other companies in the same industry. Thus, he must discover and
invest in companies very early in their growth cycle.
Implicit in the strategy, is that Andy and his partner focus on a
small number of issues, and tend to hold them for a long time.
The concentration and low turnover enable Andy to heavily
research and monitor each position. He is focused on future
profits only, and, in fact, prefers to find businesses which are
inherently good but which have gone through a troubling period.
Factors which may improve earnings and investor perceptions
include acquisitions or divestitures, management shake-ups,
changes in the business cycle, or the development of a
proprietary product in a strong industry. He searches, in
particular, for companies with good managers who are finding ways
to substantially improve the company.
The result is that Andy will typicahy have a portfolio of
approximately 30 stocks, and any significant industry
concentrations are merely an outcome of bottom up selection.
Because some of the companies in which he invests may not yet
have earnings, the price to traihng earnings ratio may be high,
although the price to forward earnings will be well below
average. Andy is a patient investor, usually turning over less
than 20% of his portfolio per year.
While similar in some respects, Tim Ebright of Liberty Investment
Management searches for a different kind of value and growth.
Tim searches for companies which have very predictable earnings,
positive operational cash flow and a defensible market position,
which are selling for less than the intrinsic value of the
business. In addition, Tim prefers companies in which the
managers own a substantial portion of the stock.
Typically this combination can only be found in companies that
have not been "discovered" by institutional investors, or have
been "orphaned" since their initial public offerings. Companies
such as this tend to be very small, thus, Tim is what many
consider a micro-cap manager. That is, he typically invests only
in companies with market capitalizations under $300 million,
sometimes far smaller. If his analysis is correct, the portfolio
makes money in one of three ways: First, the company may continue
to churn out steady earnings growth for an indefinite period.
Second, the stock may be discovered by institutional investors
and enjoy an expansion of its valuation. Third, the company may
be acquired at or above its intrinsic value.
Because of the size of the companies, Tim must build a portfolio
of close to 100 positions. These stocks tend to be less
susceptible to market swings, and exhibit less price volatility
merely because they trade much less than larger companies. Their
added risk is in their lower liquidity.
Gary Pilgrim, of Pilgrim Baxter & Associates focuses only on
companies with high and accelerating earnings growth. First, he
screens for stocks which are exhibiting at least 20% or greater
earnings growth. He then ranks these stocks using a proprietary
quantitative ranking system (QRS) which focuses on recent
earnings growth, earnings acceleration, prospective earnings
growth and potential for earnings surprise. A team of analysts
at Pilgrim Baxter speak with managements and analyze the
businesses to confirm and refine earnings expectations, and
stocks are purchased and sold based on their relative rankings.
Typically the portfolio will have an average historical and
expected earnings growth rate of near 50%. Because such a high
priority is placed on high growth, the companies in the portfolio
tend to be very visible, and possess very high price to earnings
multiples. While successful growers move up in price quickly,
companies posting disappointing earnings move down dramaticaby as
well. High multiples also make the prices very sensitive to
industry and economic news and events. The result is a portfolio
which exhibits a high level of price volatility.
In addition, the QRS's focus on short-term periods results in a
high amount of portfolio turnover. This is a necessary
circumstance since companies with high price multiples whose
growth is slowing need to be identified and replaced immediately
Gary typically holds around 80 positions and has an annual
turnover ratio in excess of 200%. His portfolios are also
typically heavily weighted in a few business sectors.
Risk is a necessary part of investing, and is particularly
inherent in investing in small capitalization companies. In this
Fund we have combined three managers, who each specialize in a
different type of risk. Andy Knuth takes on extra specific (or
company) risk by concentrating his portfolio in a small number of
stocks. Meanwhile he is trying to decrease price risk by
purchasing undervalued companies. Tim Ebright is taking on added
liquidity risk while decreasing specific and price risks. Gary
Pilgrim is taking on added price risk while lowering specific
risk.
The Year in Review
During the final six months of 1996, Managers Special Equity Fund
provided a total return of 5.8% which brought the return for the
full year to 24.8%. For the same periods, the Russell 2000, a
broad index of small capitalization stocks, returned 5.5% and
16.5%, respectively.
Top Ten Holdings
as of December 31, 1996
% Fund
National Education Corp.* 2.10
El Paso Electric Co. 1.44
Charter Power Systems Inc. 1.42
Harper Group, Inc.* 1.42
Air Express International Corp. 1.39
Charter One Financial Inc.* 1.32
Sensormatic Electronics Corp. 1.22
MacFrugals Bargains Close-
Outs, Inc. 1.21
Airborne Freight Corp.* 1.15
Roosevelt Financial Group, Inc. 1.11
* A top ten holding December 1995
The Fund's diversity was its greatest asset in 1996, as strong
performance came from a variety of areas, and enabled the Fund to
hold up well during the sharp early summer downturn in prices,
which particularly effected small capitalization issues.
The Fund's largest holding, National Education, an educational
book and software publisher, was also one of its best performers.
Despite a fourth quarter correction, the stock appreciated 88%
for the year as it improved its operations, increased revenues
and moved earnings into positive territory. The Fund's other
publishing holdings also performed well,- Houghton Mifflin rose
32%, while Steck Vaughn Publishing rose 49% for the year.
The Fund also owns a large group of business services firms,
which, along with the publishing companies, makes up the bulk of
the general business sector, the Fund's largest sector weighting.
Although these are categorized together, this is a diverse group
of companies, which benefited from the productive economy and the
continuing trend toward outsourcing. Volt Information Sciences,
which helps businesses with a wide array of consulting and
computer and communication instaflation services, rose 42%.
Kinder Care Learning Centers, a chain of day care centers
appreciated 49% for the year. Iron Mountain, a firm which
transports and archives business records, rose 93%.
Financial companies make up the next largest sector in the
portfolio, and these continued to benefit from low interest rates
and consolidation. Among the Fund's takeover targets were
American Travellers, up 95%, and Home Financial, up 17%. The
Fund's largest financial position at year end was Charter One
Financial, a mid-western bank holding company which rose 38% on
steady earnings growth. AT&T Capital began the year as the
Fund's largest financial holding and was sold mid-year after a
gain of 18%. Other important contributors included The Money
Store, which rose 77% in the first quarter on strong revenues and
earnings, and First Savings Bank of Washington, which appreciated
41% on strong earnings gains and a share buyback program,
Health care companies, another area of concentration for the
Fund, provided lackluster performance for the year, especially in
the second half. Transportation holdings were mixed overall for
the year. Technology company stocks, although volatile, provided
meaningful gains for the year. Cornverse Technology rose 88% as
a result of strong earnings, Pomeroy Computer rose 108% in the
third quarter alone and was liquidated, and Uniphase Corp.
appreciated 60% during the final six months as a result of strong
earnings growth. Software companies Remedy Corporation and
McAfee Associates rose 172% and 125%, respectively, for the year.
The greatest area of weakness for the Fund was in communications
stocks which started the year well but traded down in the summer
and never forced their way back up. While there were some
gainers, such as Aspect Telecommunications which appreciated 90%
for the year, cellular communications companies in particular
were weak during the second half.
Looking Forward
Given the relative underperformance of small capitalization
stocks in general, along with the current valuations of their
stocks relative to the broad market, the portfolio managers are
encouraged by the prospects for the coming year. While cautious
about the ability of the economy to sustain its delicate balance
of steady growth with low inflation, they note that it is very
beneficial to small companies.
Andy Knuth and Tim Ebright have both been relatively active in
recycling their gains as some of their holdings have been
acquired, or have grown to full valuation. Andy continues to
focus on banks where he sees continued prospects for
consolidation, and transportation where he sees compelling values
and growth.
Tim Ebright is finding fresh candidates among some of the 700
companies which went public in 1996 and which have since dropped
in price as the institutions which originally supported them
focus their energies elsewhere. He continues to add business
services companies which have steady, predicable growth, and are
benefiting from the continued trend toward outsourcing of labor.
In addition, Tim has recently been adding some communications
companies as their prices come back below intrinsic values.
Finally, Gary Pilgrim continues to focus on the fastest growing
segments of the market and thus remains heavily invested in
technology and health care companies. While these have recently
been extremely volatile, reacting to each item of news, the
earnings growth of the holdings have, on average, been healthy.
Thus, the volatility has provided opportunities to adjust
positions. Within the technology sector, Gary has been adding
hardware manufacturers while reducing exposure to software
companies. In addition, Gary has added some petroleum services
holdings, capital goods companies and retailing positions.
Managers Special Equity Fund
Cumulative Total Return Performance
The Managers Special Equity Fund's cumulative total return is
based on the monthly change in net asset value (NAV), and assumes
that all distributions were reinvested.
The Russell 2000 Index is comprised of the smallest 2000
companies in the Russell 3000 Index, representing approximately
11% of the Russell 3000 total market capitalization.
The Russell 3000 Index is composed of 3000 large U.S. companies,
as determined by market capitalization. This portfolio of
securities represents approximately 98% of the investable U.S.
equity market.
This chart compares a hypothetical $10,000 investment made in
Managers Special Equity Fund on December 31, 1986, to a $10,000
investment made in the Russell 2000 for the same time period.
Past performance is not indicative of future results.
This table shows the average annual total returns for Managers
Special Equity Fund for the one-year, five-year and ten-year
periods through December 31, 1996, and comparable returns for the
Russell 2000 Index.
Average Annual Total Returns
Annualized
One Five Ten
Year Years Years
Managers Special Equity Fund 24.8% 17.4% 17.6%
Russell 2000 Index 16.5 15.7 12.4
Managers International Equity Fund
Investment Manager's Comments
Managers International Equity Fund, managed by The Managers
Funds, L.P since its inception in 1985, seeks long-term capital
appreciation through investment in non-U.S. equity securities.
The Managers Funds currently utilizes two independent subadvisors
who each manage approximately half of the total portfolio: Wilham
Holzer of Scudder, Stevens & Clark, Inc., hired in December 1989,
and John Reinsberg, of Lazard Fr&res Asset Management, who was
hired in January 1995.
The Portfolio Managers
William (Willie) Holzer can be described as a "top down" thematic
investor. He views the world as a single global economy as
opposed to a couection of separate country economies. Willie
focuses his efforts by first developing global investment themes
which target the fastest growing or most profitable segments of
the global economy. Themes are typically long lived, three or
more years, and are developed through the course of business;
discussions with company managements or government officials,
fundamental and economic analysis, and the tracking of economic,
financial and demographic trends. Willie then works with the
large group of global securities analysts at Scudder to identify
the companies which will potentially benefit from the effects of
the themes. These companies will necessarily have attractive
fundamentals and reasonable valuations, along with strong company
management.
Willie also believes that it is important to distinguish between
three types of companies. Domestic companies are those which
produce, sell and raise capital all in their home country
International companies are those which produce at home, but sell
their products and raise capital anywhere in the world. Global
companies are those which produce, sell and raise capital
anywhere. Willie will invest in any of these types in order to
capitalize on a theme, however, he prefers global companies which
generally have the flexibdity and resources to exploit global
trends. Thus, his porffoho tends to be heavily weighted in large
capitalization, multi-national companies. In addition, his
porffoho will tend to be concentrated in the developed markets,
with only a small portion invested in companies domiciled in less
developed or 11 emerging" markets. However, companies in the
portfolio, while domiciled in developed markets, may have
operations or distribution in the emerging markets. Given the
long-term nature of the themes, his rate of turnover is
relatively low and typically in the 40% to 50% annual range.
John Reinsberg, of Lazard Fr&res Asset Management, pursues what
is referred to as a "bottom up" value approach. The portfolio
managers and analysts at Lazard Fr&res focus on individual stocks
that they believe are financially productive and inexpensively
priced. In order to correctly determine what is inexpensive,
they analyze the financial statements in the local language, and
refigure the accounting in order to make comparisons across
countries and industries. This rigorous accounting validation,
performed by a large staff of multi-lingual analysts is one of
the keys to Lazard's approach.
John and his team visit and analyze the management and operations
of the worthwhile candidates. In purchasing undervalued
securities its important to distinguish companies which will
improve their valuation from those which are likely to stay at
low valuations. John's goal is to find and invest in companies
which are creating value. Value creation can come from improving
operations or distribution channels, restructuring management,
acquisitions, divestitures, or exploiting new markets.
Country and industry allocation are the result of stock
selection, although John manages the structure in order to
maintain a reasonable diversification. Given his preference for
full and accurate financial disclosure, John tends to have only
minimal investments in emerging markets. Although it is
improving, financial recording and accounting practices in less
developed countries are erratic. As is typical of a value
oriented investor, John's portfolio turnover rate is also
relatively low and tends to be in a range of 20% to 30% annually.
Some thoughts about currencies.
One of the additional risks of investing in foreign companies is
the risk that foreign currency devaluations will decrease the
value of your investment when translated back to U.S. Dollars.
This risk can also work in reverse and increase the value of your
investment. Currency movements are no less difficult to predict
than the direction of interest rates; in fact they are related.
One of the benefits of international investing is the
diversification benefit gained from the difference in return
patterns (lower correlation of returns) that foreign stock
markets have with U.S. stocks. Much of this differentiation
comes from currency movements. This is a long way of saying that
much of the diversification benefit of international investing is
a result of currency fluctuations.
For this reason, the portfolio managers of the Fund do not, as a
policy, hedge all foreign currency exposure in the portfolio back
to U.S. Dollars. In fact, both managers use currency hedges
sparingly. Here's why: First, as previously mentioned, it is
difficult to predict currency movements, and neither manager
believes he can consistently add value by timing currencies.
Secondly, the currency exposure of the portfolio is not
necessarily reflected in the country allocation. Most of the
companies in the portfolio are global companies that may have
assets in, and certainly derive revenues from a variety of
countries in a variety of currencies. Hence, determining the
appropriate hedge ratio would be extremely difficult. We and the
managers together believe that the portfolio is well diversified
in currencies, and would not benefit from a policy of active
hedging or currency management. That said, there are periods
when, if the managers believe there is particular risk of
volatility in a certain currency, they will use forward foreign
exchange contracts to hedge all or a portion of the currency
exposure.
The Year in Review
During the final six months of 1996, Managers International
Equity Fund provided a total return of 5.8% which brought the
return for the full year to 12.8%. For the same periods, the
Morgan Stanley Capital International - Europe Australia Far East
Index (EAFE) returned 1.5% and 6.1%, respectively.
Top Ten Holdings
as of December 31, 1996
% Fund
Hoechst AG* 2.69
Daimler-Benz AG 2.23
Novartis AG 2.05
Sony Corp. 1.83
Mannesmann AG* 1.72
Veba AG* 1.57
British Aerospace PLC1.52
Nestle SA, Reg. ADR* 1.46
General Electric Co. PLC 1.39
Grand Metropolitan PLC 1.38
*A top ten holding December 1995
While the S&P 500 was a difficult index for domestic equity
managers to beat in 1996, the EAFE was an easy index for foreign
equity managers to beat, for related reasons. Both indices are
capitalization weighted, and just as the largest capitalization
stocks which dominate the S&P 500 performed extremely well in
1996, the EAFE index is heavily weighted in Japanese stocks (32%)
which performed poorly in 1996. This is demonstrated by the fact
that the EAFE index without any Japanese exposure (EASEA)
returned 21.0% for the year. As this Fund, along with most
international equity funds, is underweighted in Japanese stocks,
it easily ouperformed the EAFE index.
Thus, the selection and amount of Japanese securities in the
portfolio was a key driver in the Fund's performance this past
year, as it will be in 1997. The Fund began the year with 18%
invested in Japanese securities and finished the year with a 16%
allocation. Since neither manager allocates based on countries,
the investments were based on individual security decisions,
which were mixed. Holdings in the large global consumer products
companies such as Honda, Toyota, Sony, Canon and Bridgestone,
performed well, rising between 10% and 30% for the year.
Holdings in Japanese basic industries, and capital goods
companies, such as Sekisui Chemical, Sumitomo Metal & Mining,
Omron, Nisshin Steel, and NKK, traded down between 7% and 33% for
the year. Underweighting the Japanese financial sector,
particularly the major banks, was beneficial, as these traded
down on concerns over the quality of their loan portfolios.
Sumitomo Trust, and Mitsui Marine & Fire Insurance were the only
portfolio holdings which were effected.
German stocks, which were, by year end, the heaviest portion of
the portfolio were also its best performers. The common thread
to these holdings is that the companies are productively
restructuring their business, which not only continues to be an
important investment theme for Willie Holzer, but also an
attractive form of value creation for John Reinsberg. For
example, Hoechst, the Fund's largest holding, outlined plans to
create a strategic holding company in order to create
transparency, separate businesses into operating units and
motivate its managers. Then it sold its non-core specialty
chemicals business and finally purchased the remaining portion of
Roussel Uclaf to solidify its pharmaceutical business. Hoechst
rose 74% during the year, and was by far the largest single
contributor for the year. Other German companies which are
accomplishing similar improvements through consolidation,
restructuring and allying include Daimler Benz, Mannesmann, BASF,
Veba and RWE.
In fact, consolidation was a key driver to the Fund's performance
throughout its European holdings. Gnral des Eaux added British
Telecommunications to its telecom joint venture, and Lloyds Abbey
Life was purchased by Lloyds TSB. In Sweden, Svenska
Handelsbanken consolidated its superior positio with an offer to
buy Stadshypotek.
The porffoho's utilities holdings also benefited from corporate
actions. In the U.K., Midlands Electric accepted a bid from two
U.S. utilities, National Power returned cash to shareholders
through a large special dividend, and Powergen completed its
gradually paid public offering. In Switzerland, Electrowatt
broke into two entities and has received bids for both.
The Fund's small investment in companies in emerging markets had
little effect because of mixed results. South American energy
holdings, YPF Sociedad Anonima, and Companhia Energetica de Sao
Paolo, rose 17% and 35%, respectively, while a 1.7% position in
Korean stocks lost 36% on average. A small position in Huaneng
Power Intl of China, rose 56% for the year.
Looking Forward
Looking forward, both portfolio managers are encouraged by the
prospects for foreign stocks, both nominally and relative to the
U.S. market. On a relative basis, they see very low valuations
for companies compared to U.S. companies. Continued low interest
rates bode well for corporate profits and liquidity The team at
SS&C believes that we have already entered what could be an
extended period of global growth with disinflation similar to the
growth experienced during the industrial revolution of the late
1800s. Continued corporate restructuring, particularly in
Europe, along with an emerging equity culture, whereby companies
focus on increasing shareholder value, should continue to unlock
values in European stocks.
Wille Holzer's themes going into 1997 focus on life insurers
which are providing individuals with private pension savings;
companies which cater to and profit from an aging population;
companies which are restructuring and joining the global capital
markets; companies with new technologies which set standards to
which their competitors must conform; companies which are the
world's cheapest producers of their respecfive products.
John Reinsberg will continue to concentrate on finding value
within individual stocks, but with a particular focus on a few
important developments during 1997. The development of the
common European Currency has been progressing slowly, but will be
a large benefit when complete. If Japanese banks formally
recognize and write off their bad debts, they could become
worthwhile for investment. Finally, Hong Kong's transition to
China will obviously have important ramifications for companies
in the region.
Managers International Equity Fund
Cumulative Total Return Performance
The Managers International Equity Fund's cumulative total return
is based on the monthly change in net asset value (NAV), and
assumes that all distributions were reinvested.
The MSCI EAFE Index (EAFE) is compiled by Morgan Stanley Capital
International. It consists of over 1000 large, publicly traded
stocks from 20 countries of Europe, Australia and the Far East.
The index assumes reinvestment of dividends.
This chart compares a hypothetical $10,000 investment made in
Managers International Equity Fund on December 31, 1986, to a
$10,000 investment made in the EAFE for the same time period.
Past performance is not indicative of future results.
This table shows the average annual total returns for Managers
International Equity Fund for the one-year, five-year and ten-
year periods through December 31, 1996, and comparable returns
for EAFE Index.
Average Annual Total Returns
Annualized
One Five Ten
Year Years Years
Managers International Equity Fund 12.8% 14.0% 10.6%
EAFE Index 5.5 8.2 8.6
The Managers Funds
Summary of Industry Weightings and Managers International Equity
Fund
Country Allocations Relative to MSCI EAFE Index
Major Sectors Managers Managers Managers Managers
Income Capital Special International
Equity Fund Appreciation Fund Equity Fund
Equity Fund
Basic Industries 11.8% 5.8% 2.9% 15.0%
Capital Goods 2.1 4.1 7.6 10.0
Communication Services 11.0 7.2 4.6 1.3
Computer Software 0.0 3.7 6.1 0.0
Consumer Basics 9.7 0.0 0.6 8.1
Consumer Durable Goods 3.2 0.8 0.6 9.4
Consumer Non-Durables3.7 9.4 4.5 2.9
Consumer Services 0.0 3.0 2.6 0.0
Energy 10.1 11.4 2.8 6.9
Entertainment & Leisure 0.0 4.9 3.6 3.5
Environmental Controls 0.1 3.2 2.6 0.0
Finance and Insurance17.3 17.5 12.0 15.7
General Business 0.6 2.9 12.7 3.5
Health Care 5.0 4.6 9.7 3.7
Real Estate 3.2 0.0 2.0 0.4
Technology 3.7 15.3 6.8 3.7
Transportation 0.9 3.4 6.4 0.9
Utilities 10.5 0.0 1.4 5.8
Other 7.1 2.8 10.5 9.2
Country Allocation Managers Country Allocation
Managers
International International
Equity Fund EAFE Index
Equity Fund EAFE Index
Germany 17.8% 8.2% Canada 1.2% 0.0%
United ICngdom16.8 19.2 Spain 1.2 2.3
Japan 15.5 32.3 South Korea 1.1 0.0
France 9.3 6.9 Bermuda 0.9 0.9
Switzerland 8.5 5.6 Denmark 0.9 0.9
United States 8.1 0.0 New Zealand 0.6 0.4
Sweden 5.1 2.3 South Africa 0.5 0.0
Australia 3.2 3.0 Finland 0.5 0.7
Netherlands 2.8 4.7 Austria 0.4 0.4
Brazil 1.7 0.0 China 0.3 0.0
Italy 1.7 3.1 Ghana 0.3 0.0
Hong Kong 1.5 3.8 Argentina 0.1 0.0
Managers Income Equity Fund
Schedule of Portfolio Investments
December 31, 1996
Shares Value
Common Stocks - 93.5%
Basic Industries - 11.8%
Allegheny Teledyne, Inc. 13,017 $299,391
Betz Laboratories, Inc. 7,600 444,600
Bowater, Inc. 3,500 131,687
Dow Chemical Co. 10,700 838,613
DSM NV, SponsoredADR 5,000 119,375
Eastman Chemical Co. 5,900 325,975
E.I. dupont deNemours & Co., Inc.4,400 415,250
Freeport, McMoRan Copper & Gold, Inc.,
Class A 8,400 236,250
Georgia Pacific Corp. 3,500 252,000
Imperial Chemical
Industries PLC,
Sponsored ADR 5,200 270,400
Kimberly-Clark Corp. 4,200 400,050
Louisiana-Pacific Corp. 8,300 175,337
Lubrizol Corp. 7,000 217,000
Olin Corp. 4,600 173,075
Oregon Steel Mills, Inc. 13,300 222,775
Phelps Dodge Corp. 1,800 121,500
Potlatch Corp. 4,900 210,700
Stone Container Corp. 9,300 138,338
Union Camp Corp. 6,900 329,475
Westvaco Corp. 6,200 178,250
Weyerhaeuser Co. 10,400 492,700
Witco Corp. 9,700 295,850
Total Basic Industries 6,288,591
Capital Goods - 2.l%
Cooper Industries, Inc. 1,400 58,975
Martin Marietta
Materials, Inc. 3,851 89,536
PACCAR, Inc. 3,200 216,800
Philips Electronics NV
ADR 9,200 368,000
Rockwell International
Corp. 6,700 407,862
Total Cavital Goods 1,141,173
Shares Value
Communication Services - 11.0%
ALLTEL Corp. 7,400 $232,175
Ameritech Corp. 1,100 66,687
AT&T Corp. 6,400 278,400
Bell Atlantic Corp. 13,700 887,075
BellSouth Corp. 3,400 137,275
Frontier Corp. 6,700 151,588
GTE Corp. 24,000 1,092,000
NYNEX Corp. 19,500 938,437
Pacific Telesis Group 16,200 595,350
RoyalPTT Nederland
NV Sponsored ADR 6,300 238,612
Southern New England
Telecommunications
Corp. 6,700 260,463
Sprint Corp. 7,400 295,075
U.S. West
Communications
Group, Inc. 20,700 667,575
Total Communication Services 5,840,712
Consumer Basics - 9.7%
American Brands, Inc. 9,300 461,512
Anheuser-Busch
Cos., Inc. 7,400 296,000
General Mills, Inc. 9,300 589,388
Heinz (H.J.) Co. 13,000 464,750
Philip Morris Cos., Inc. 11,600 1,306,450
RJR Nabisco Holdings
Corp. 5,440 184,960
Tambrands, Inc. 15,600 637,650
Unilever NV, New York
registered shares 2,200 385,550
UST, Inc. 13,200 427,350
Warner Lambert Co. 5,300 397,500
Total Consumer Basics 5,151,110
Consumer Durable Goods - 3.2%
Dana Corp. 7,100 231,637
Eaton Corp. 500 34,875
Ford Motor Co. 14,500 462,187
Genuine Parts Co. 3,000 133,500
TRW, Inc. 11,200 554,400
Whirlpool Corp. 5,900 275,088
Total Consumer Durable Goods 1,691,687
Managers Income Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Consumer Non-Durables - 3.7% Finance and
Insurance (continued)
Avon Products, Inc.1,500 $85,687CoreStates Financial
J.C. Penney Co., Inc.21,600 1,053,000 Corp.13,800 $
715,87,@
May Department Stores EXEL Ltd. 7,200 272,700
Co. 4,000187,000 Federal National
Rite Aid Corp.10,100401,475 Mortgage Association7,000 260,750
Sears, Roebuck & Co.5,300 244,463First Bank Systems, Inc. 3,900
266,175
Total Consumer Non-Durables 1,971,625First Union Corp.
6,000 444,000
Great Western Financial
Energy - 10.0% Corp. 7,800226,200
Amoco Corp. 5,000402,500 Hartford Steam Boiler
Atlantic Richfield Co.6,000 795,000Inspection &
Chevron Corp.5,200338,000 Insurance Co.2,200102,025
Compagnie Francaise de J.P Morgan & Co., Inc.11,300
1,103,163
Petroleum Total, KeyCorp 7,500 378,750
Sponsored ADR7,100285,775 Lincoln National Corp.16,000
840,000
Dresser Industries, Inc. 5,700 176,700Marsh and McLennan
Elf Aquitaine, Companies, Inc.4,000416,000
Sponsored ADR6,941314,080 Mellon Bank Corp.9,550678,050
Exxon Corp. 8,800862,400 Mid Ocean Ltd.4,100215,250
Lyondell Petrochemical National City Corp.1,300 58,337
Co. 10,400228,800 PNC Bank Corp.14,300538,038
Murphy Oil Corp.5,000278,125 Safeco Corp. 3,700 145,225
PanEnergy Corp.1,40063,000 Student Loan Marketing
Pennzoil Co.3,000169,500 Association 6,100568,063
Repsol SA, Sponsored Transamerica Corp. 300 23,700
ADR 3,700141,062 U.S. Bancorp 1,40062,825
Royal Dutch Petroleum Total Finance and Insurance
9,172,838
Co., ADR 1,800307,350 General Business - 0.6%
Texaco, Inc.6,300618,188 Deluxe Corp. 8,500278,375
Union Pacific Resources Dun & Bradstreet Corp.2,400 57,000
Group, Inc.1,778 52,007 Total General Business 335,375
YPF Sociedad Anonima, Health Care - 5.0%
Class D, Sponsored American Home
ADR 12,100305,525 Products Corp.5,000293,125
Total Energy 5,338,012 Baxter International, Inc. 8,900
364,900
Bristol-Myers Squibb Co. 8,100
880,875
Environmental Controls - 0.1% Eli Lilly & Co. 2,900 211,700
Browning-Ferris Schering-Plough Corp.6,100 394,975
Industries, Inc. 1,500 39,375 SmithKline Beecham
Finance and Insurance - 17.3%
PLC, Sponsored ADR 2,800 190,400
American General Corp.10,300 421,012Zeneca Group PLC,
Banc One Corp.14,250612,750 Sponsored ADR3,500294,000
Bankers Trust New York Total Health Care 2,629,975
Corp. 5,000431,250 Real Estate - 3.2%
Chase Manhattan Corp.4,400 392,700Developers Diversified
Realty Corp.1,60059,400
Managers Income Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Real Estate (continued) Utilities (continued)
Equity Residential National Power PLC,
Properties Trust5,900 $243,375 Sponsored ADR 6,600 $223,575
Health Care Property NICOR, Inc. 7,200 257,400
Investors, Inc.7,400259,000Northeast Utilities22,000 291,500
Meditrust 7,700308,000 Oklahoma Gas &
Nationwide Health Electric Co.5,000208,750
Properties, Inc.13,200 320,100Pacific Gas & Electric
OMEGA Healthcare Co. 11,900249,900
Investors, Inc.6,700222,775 Pacificorp 4,900 100,450
Security Capital PECO Energy Co.6,600166,650
Industrial Trust 5,958 127,352PowerGen PLC,
Simon De Bartolo Sponsored ADR6,300248,850
Group, Inc.5,712177,072 PP&L Resources, Inc.9,900 227,700
Total Real Estate 1,717,074Public Service
Technology - 3.7% Enterprise Group13,700373,325
Boeing Co. 28129,891 Public Services
Lockheed Martin Corp.3,726 340,929Company of Colorado 2,300
89,412
Northrop Grumman Southern Co. 4,10092,763
Corp. 50041,375 Texas Utilities Co.9,600 391,200
Thomas & Betts Corp.6,400 284,000Unicom Corp.7,300 198,012
United Technologies Union Electric Corp.11,700 450,450
Corp. 7,400488,400 Western Resources, Inc.5,100
157,463
Xerox Corp. 14,400757,800 Wisconsin Energy Corp.18,200
489,125
Total Technology 1,942,395Total Utilities
5,550,700
Transportation - 0.9% Miscellaneous - 0.7%
Canadian National S&P 500 Depositary
Railway Co. 5,300201,400 Receipt 369,688
CSX Corp. 3,000126,750 Total Common Stocks
Union Pacific Corp.2,100 126,263(cost $39,198,957)
49,634,743
Total Transportation454,413 Preferred Stocks - 0.6%
Utilities - 10.5% Basic Industries - 0.4%
Baltimore Gas & Electric Boise Cascade Corp.,
Co. 17,300462,775 Series G, $1.587,600198,550
Boston Edison Co.1,10029,562
Central & South West Consumer Non-Durable - 0.2%
Corp. 18,000461,250 Kmart Financing 1,
Cinergy Corp.3,700123,488 Convertible, $3.88**2,700 131,625
Consolidated Natural Total Preferred Stocks
Gas Co. 3,900215,475 (cost $374,213) 330,175
Duke Power Co. 90041,625
Managers Income Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Principal
Amount Value
Repurchase Agreement - 3.5% Note: Based on the cost of
investments of
State Street Bank & $41,473,224 for federal income
tax purposes
Trust Co., dated at December 31, 1996, the
aggregate gross
12/31/96, due 01/02/97, unrealized appreciation and
depreciation
6.000%, total to be was $10,707,959 and $346,265,
respectively,
received $1,870,623 resulting in net unrealized
appreciation of
(secured by $1,950,000 investments of $10,361,694.
FNMA 6.750%, due
(04/25/19), at cost $1,870,000 $ 1,870,000 Some or
all of these shares, amounting to
$132,919, or 0.3% of net assets,
were out on
Total Investments - 97.7% loan to various brokers as of
December 31,
(cost $41,443,170)51,834,918 1996.
Other Assets, less
Liabilities - 2.3%1,228,111 Stated rate is annualized based on
the last
Net Assets - 100.0%.$53,063,029 quarterly dividend paid.
Investment Abbreviations:
ADR: Securities whose value is
determined or significantly influenced by trading on exchanges
not located in the United States or Canada. ADR after the name
of a holding stands for American Depositary Receipt,
representing ownership of foreign securities on deposit with a
domestic custodian bank.
Managers Capital Appreciation Fund
Schedule of Portfolio Investments
December 31, 1996
Shares Value
Common Stocks - 97.2%
Basic Industries - 5.8%
Allegheny Teledyne, Inc. 45,792$ 1,053,216
Avery Dennison Corp. 9,600 339,600
Ferro Corp. 9,100 258,212
Georgia Pacific Corp. 3,600 259,200
James River Corporation
of Virginia 25,900 857,937
Minerals
Technologies, Inc. 13,600 557,600
Monsanto Co. 39,900 1,551,113
Schulman (A.), Inc. 22,000 539,000
Texas Industries, Inc. 9,000 455,625
Total Basic Industries 5,871,503
Capital Goods - 4.1%
Anixter
International, Inc.* 73,300 1,181,962
Cooper Cameron Corp.* 17,000 1,300,500
Mark IV Industries, Inc. 13,300 300,913
Martin Marietta
Materials, Inc. 22,887 532,123
USG Corp.* 25,100 850,262
Total Capital Goods 4,165,760
Communication Services - 7.2%
ACC Corp.* 30,000 903,750
Ascend Conununications,
Inc. * 28,300 1,754,600
AT&T Corp. 25,800 1,122,300
Cascade
Communications
Corp.* 20,000 1,102,500
Deutsche Telekom AG,
Sponsored ADR* 5,600 114,100
Lucent
Technologies, Inc. 5,723 264,689
Paging Network, Inc.* 30,700 468,175
PairGain
Technologies, Inc.* 38,600 1,172,475
Telefonaktiebolaget LM
Ericsson, ADR 11,900 358,487
Total Communication Services 7,261,076
Computer Software - 3.7%
Computer Sciences
Corp. * 8,200 673,425
Microsoft Corp.* 14,600 1,206,325
Peoplesoft, Inc.* 40,000 1,915,000
Total Computer Software 3,794,750
Shares Value
Consumer Durable Goods - 0.8%
Lear Corp.' 24,400 $832,650
Consumer Non-Durables - 9.4%
Consolidated Stores
Corp.' 27,625 887,453
Eastman Kodak Co. 15,700 1,259,925
Finish Line, Inc.,
Class A* 38,000 798,000
Micro Warehouse, Inc.* 4,200 48,300
Nike, Inc., Class B 40,000 2,390,000
Pep Boys (Manny,
Moe & Jack) 30,200 928,650
Rite Aid Corp. 7,400 294,150
Warnaco Group, Inc.,
Class A 34,500 1,022,062
Williams Sonoma, Inc.* 37,900 1,369,138
Zale Corp.* 26,100 499,163
Total Consumer Non-Durables 9,496,841
Consumer Services - 3.0%
Extended Stay
America, Inc.* 100,000 2,000,000
ITT Corp.* 23,100 1,001,963
Total Consumer Services 3,001,963
Energy - 11.4%
British Petroleum
Company PLC,
Sponsored ADR 7,500 1,060,312
Burlington
Resources, Inc. 19,000 957,125
Compagnie Francaise de
Petroleum Total, ADR 26,619 1,071,415
Enron Corp. 19,500 840,938
Halliburton Co. 8,600 518,150
MAPCO, Inc. 13,000 442,000
Petro-Canada 36,000 504,000
Pride Petroleum
Services, Inc.* 80,900" 1,860,700
Schlumberger, Ltd. 10,500 1,048,687
Triton Energy Ltd.,
Class A* 23,300 1,130,050
Union Texas Petroleum
Holdings, Inc. 42,700 955,413
United Meridian Corp.* 22,300 1,154,025
Total Energy 11,542,815
Entertainment and Leisure - 4.9%
Brunswick Corp. 37,200 892,800
Carnival Corp., Class A 25,300 834,900
Infinity Broadcasting
Corp. * 21,850 734,706
Managers Capital Appreciation Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Entertainment and Leisure (continued) General
Business (continued)
Metromedia R.R. Donnelley & Sons
International Group Co.16,500 $517,687
Inc.* 39,900 $394,013 Staples, Inc.*
26,850** 483,300
Tele-Communications, Total General Business
2,888,031
Inc. Liberty Media
Group, Class A* 37,950 1,081,575 Health Care - 4.6%
U.S. West Media Group*54,500 1,008,250 Bausch &
Lomb, Inc. 31,0001,085,000
Dura Pharmaceuticals,
Total Entertainment and Leisure 4,946,244 Inc.* 18,400
867,726
Environmental Controls - 3.2% Johnson & Johnson
14,100 701,475
Republic SmithYJine Beecham
Industries, Inc.*69,300** 2,156,962Unit PLC, ADR13,800
938,400
WMX Technologies, Inc.32,300 1,053,788St. Jude Medical,
Inc.* 12,200520,025
Total Environmental Controls 3,210,750Wellpoint Health
Networks, Inc.,
Finance and Insurance - 17.5% Class A* 16,937
582,209
Advanta Corp., Class B18,000** 733,500
Aetna Inc. 13,2241,057,920 Total Health Care 4,694,835
AFLAC, Inc. 22,500961,875 Technology - 15.3%
Bank of Boston Corp.11,500 738,8753Com Corp.*30,000 2,197,500
BankAmerica Corp.16,0001,596,000Advanced Micro
Bankers Trust New York Devices, Inc.*41,000 1,055,750
Corp. 26,0002,242,500 Boeing Co.12,900 1,372,237
Chase Manhattan Corp.2,400 214,200Cisco Systems, Inc.* 32,000
2,036,000
Citicorp 17,6001,812,800 Intel Corp.34,000 4,449,750
Countrywide Credit Lockheed Martin Corp.8,989 822,493
Industries, Inc.24,000687,000 Motorola, Inc. 6,200 380,525
Equitable Companies National Semiconductor
Inc. 44,9001,10-D,663 Corp.*41,000 999,375
Household International Tellabs, Inc.*40,000 1,505,000
Inc. 30,0002,767,500Thomas & Betts Corp.16,100 714,438
NationsBank Corp.10,000977,500Total Technology 15,533,068
Travelers/Aetna Property -
Casualty Corp., Transportation - 3.4%
Class A 28,6001,011,725Federal Express Corp.*28,800
1,281,600
Washington Mutual, Inc.28,000 1,211,000Kirby Corp.*
11,600 229,100
Western National Corp.29,600 569,800Ryder System, Inc.
28,000 787,500
Total Finance and Insurance 17,687,858UAL Corp.'
18,800 1,175,000
General Business - 2.9% Total Transportation 3,473,200
CUC International, Inc.* 42,725 1,014,719 Total
Common Stocks
First Data Corp.22,100806,650 (cost $86,883,367) 98,401,344
Office Depot, Inc.*31700 65,675
Managers Capital Appreciation Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Principal
Amount Value
Repurchase Agreement - 4.5% Note: Based on the cost of
investments of
State Street Bank & $91,689,806 for federal income
tax purposes
Trust Co., dated at December 31, 1996, the
aggregate gross
12/31/96, due 01/02/97, unrealized appreciation and
depreciation
6.000%, total to be was $13,230,128 and
$1,908,590,
received $4,611,537 respectively, resulting in net
unrealized
(secured by $1,490,000 appreciation of investments of
$11,321,538.
FHLMC 6.700%, due Non-income-producing security.
01/15/15, and
$3,310,000 FNMA Some or all of these shares,
amounting to
6.750%, due 04/25/19), $2,509,995, or 2.5% of net
assets, were out
at cost$4,610,000$ 4,610,000 on loan to various brokers as of
Total Investirnents - 101.7% December 31, 1996.
(cost $91,493,367)103,011,344 Investment Abbreviations:
Other Assets, less ADR: Securities whose value is
determined or
Liabilities - (1.7)%(1,729,043) significantly influenced by
trading on
Net Assets - 100.0%$101,282,301 exchanges not located in the
United States
or Canada. ADR after the name of a
holding stands for American
Depositary
Receipt, representing ownership of
foreign
securities on deposit with a
domestic
custodian bank.
The accompanying notes are an integral part of these financial
statements.
Managers Special Equity Fund
Schedule of Portfolio Investments
December 31, 1996
Shares Value
Common Stocks - 89.5%
Basic Industries - 2.9%
Chase Brass
Industries, Inc.* 29,700 $590,287
Donnelly Corp. 26,700 654,150
Fibreboard Corp.* 22,800 769,500
Lydall, Inc.* 100,000 2,250,000
Oregon Metallurgical
Corp.* 45,200 1,435,100
Pittston Burlington
Corp. 70,000 1,400,000
RMI Titanium Co.* 31,800 894,375
Total Basic Industries 7,993,412
Capital Goods - 7.6%
AAR Corp. 84,800 2,565,200
Cable Design
Technologies Corp.* 63,150 1,941,862
Charter Power
Systems, Inc. 126,300 3,852,150
DT Industries, Inc. 35,500 1,224,750
Flow International
Corp.* 34,700 316,638
Fluke Corp. 11,500 513,187
Furon Co. 28,400 603,500
Jaco Electronics, Inc.* 51,100 434,350
K-Tron International
Inc.* 64,700 663,175
Perceptron, Inc.* 20,200 681,750
Rogers Corp.* 68,700 1,863,488
Sanmina Corp.* 26,400 1,485,000
Sawtek Inc.* 30,000 1,170,000
Scotsman
Industries, Inc. 29,200 689,850
Ultrak, Inc.* 35,900 1,094,950
Wolverine Tube, Inc.* 20,900 736,725
Zoltek
Companies, Inc.* 18,300** 663,375
Total Capital Goods 20,499,950
Communication Services - 4.6%
ACC Corp.* 18,700 563,337
Arch Communications
Group, Inc.* 81,900 747,338
Aspect
Telecommunications
Corp.* 37,300 2,349,900
Associated
Group, Inc., Class A* 4,900 145,775
Associated
Group, Inc., Class B* 15,500 $449,500
Cellular
Communications
Puerto Rico, Inc.* 13,700 267,150
Centennial Cellular
Corp., Class A* 82,150 985,800
CFW Communications
Co. 23,000 503,125
Communications
Central, Inc.* 68,000 527,000
Davel
Communications
Group, Inc.* 42,500 743,750
DSP Communications,
Inc.* 40,300 775,775
MIDCOM
Communications,
Inc.* 51,000** 433,500
Palmer Wireless, Inc.,
Class A* 39,000 409,500
P-COM, Inc.* 36,400 1,073,800
Premisys
Communications,
Inc. * 34,600 1,163,425
Sitel Corp.* 54,500 769,812
Wireless Telecom
Group, Inc. 54,700 567,513
Total Communication Services 12,476,000
Computer Software - 6.1%
Applix, Inc.* 18,200 391,300
Ciber Inc.* 21,800 643,100
Documentum, Inc.* 12,800 435,200
Inso Corp.* 18,400** 717,600
JDA Software
Group, Inc.* 36,800 1,025,800
National Data Corp. 38,900 1,692,150
Project Software &
Development, Inc.* 34,400 1,427,600
Pure Atria Corp.* 23,600 575,250
Rational Software
Corp. * 59,100 2,319,675
Remedy Corp.* 26,200 1,395,150
Renaissance
Solutions, Inc.* 16,400 733,900
Sapient Corp.* 20,800 852,800
Managers Special Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Computer Software (continued) Consumer Non-
Durables (continued)
Scopus TJX Companies, Inc. 20,000
$947,500
Technology, Inc.*11,000 $510,125Total Consumer Non-Durables
12,322,638
Veritas Software
Corp. 19,650967,762Consumer Services - 2.6%
Visio Corp.* 21,2001,028,200 Carriage
Wind River Systems*36,700 1,724,900Services, Inc.,
Class A* 28,600629,200
Total Computer Software 16,440,512Landry's Seafood
Consumer Basics - 0.6% Restaurants, Inc.*30,700 656,21@-,
Glacier Water Pittston Brinks Group102,200
2,759@400
Services, Inc.*31,800** 727,425Protection One, Inc.*
90,200 879,450
National Sanitary Ruby Tuesday, Inc.111,000 2,053,500
Supply Co. 8,300107,900 Total Consumer Services
6,977,763
Sylvan, Inc.*39,700506,175 -
Uni-Marts, Inc.52,600302,450 Energy - 2.8%
Berry Petroleum Co.,
Total Consumer Basics 1,643,950 Class A53,700 771,937
Consumer Durable Goods - 0.6% Input/Output, Inc.*
31,000 573,500
Aaron Rents, Inc., Newpark
Class B 68,000782,000 Resources, Inc.'25,100934,975
Craftmade Pool Energy Services
International, Inc.18,500 113,313 Co.*45,100 693,412
Gentex Corp.*36,900738,000 Pride Petroleum
Total Consumer DurableGoods 1,633,313Services, Inc.*
38,500" 885,500
Seacor Holdings, Inc.'11,800
743,400
Consumer Non-Durables -4.5% Tosco Corp.
25,000 1,978,125
Alrenco, Inc.*41,000420,250 Varco
American Safety international, Inc.*42,700 987,438
Razor Co.* 59,200799,200 Total Energy 7,568,287
Blyth Industries, Inc.*36500 1,665,313
Cash America Entertainment and Leisure - 3.6%
International, Inc.96,900 823,650CKE Restaurants, Inc.
35,600 1,281,600
Catherine's Stores Dover Downs
Corp.* 50,300264,075 Entertainment, Inc.*31,100 555,912
Dollar Tree Emmis Broadcasting
Stores, Inc.*19,400737,200 Corp., Class A*20,900668,800
Duckwall-ALCO Golden Books Family
Stores, Inc.*1,00014,000 Entertainment, Inc.*52,000 565,500
Freds, Inc., Class A53,600 462,300Granite Broadcasting
Gadzooks, Inc.*35,800653,350 Corp.*80,300 843,150
Helen of Troy Ltd.*58,200 1,265,850Harveys Casino
MacFrugals Bargains Resorts48,100 811,688
Close-Outs, Inc.*125,800 3,286,525Houghton Mifflin Co.
43,200 2,446,200
Michael Anthony Jones Intercable, Inc.,
jewelers, Inc.*127,200389,550 Class A*66,900 685,725
Parlux Osborn
Fragrances, Inc.*43,000 177,375Communications
Service Merchandise Corp.27,600 407,100
Co. * 98,000*'416,500
Managers Special Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Entertainment and Leisure (continued) Finance and
Insurance (continued)
Platinum Money Store, Inc.
Entertainment, Inc.*27,000 $195,750(The) 56,050
$1,548,381
Premiere Radio National Western Life
Networks, Inc.*9,500116,375 Insurance Co.,
Premiere Radio Class A* 12,0001,044,000
Networks, Inc., Norwalk Savings
Class A* 39,100478,975 Society 94,5002,185,312
Saga Penn-America
Communications, Group, Inc. 34,700559,538
Inc., Class A*34,000663,000 Penn Treaty American
Total Entertairunent and Leisure 9,719,775 orp. * 38,500
981,750
Phoenix Duff & Phelp
Environmental Controls - 2.6% Corp. 21,000
149,625
American Disposal Roosevelt Financial
Services, Inc.* 43,600** 773,900 Group, Inc. 145,000*-
3,008,750
,,Nl Group, Inc.* 52,100 319,112 Sterling Financial
\4et-Pro Corp. 24,800 331,700 Corp.*141,600 1,982,400
5uperior Washington
Services, Inc.' 19,000 380,000 Mutual, Inc. 22,500
973,125
Tetra Tech, Inc.* 44,218 862,251 Western National
United Waste Corp. 46,100**887,425
Systems, Inc.* 61,500 2,106,375Total Finance and Insurance
32,532,467
URS Corp.* 77,000693,000
U.S. Filter Corp.*48,550** 1,541,463General Business - 12.7%
Total Environmental Controls 7,007,801BM Industries, Inc.
74,800 1,383,800
AccuStaff, Inc.41,400874,575
Finance and Insurance - 12.0% Alternative Resources
Alabama National Corp.* 37,500637,500
Bancorporation64,4001,143,100 American Business
Allied Capital Information* 40,000870,000
Advisers, Inc.*106,581612,841 Amplicon, Inc.
34,300 677,425
Allied Capital Baker, Michael Corp.*66,000 420,750
Lending Corp.59,291889,365 Catalina Marketing
Andover Bancorp, Inc.28,800 738,000 Corp. *12,000 661,500
Charter One Chicago Miniature
Financial, Inc.85,0503,572,100 Lamp, Inc.* 25,850
1,053,387
ContiFinancial Corp.*47,900 1,730,387Concord EFS,
Inc.* 31,175865,106
First Republic COREStaff, Inc.* 39,300 923,550
Bancorp, Inc.*53,056**888,688 CSS Industries, Inc.*
21,000 546,000
First Savings Bank of Data Transmission
Washington Network Corp.' 19,000 408,500
Bancorp, Inc.127,0002,333,625 Electro Rent Corp.*
70,350 1,688,400
First Union Corp.37,5562,779,144 EYI. Inc.* 24,900
519,788
HCC Insurance Gray Communications
Holdings, Inc.52,0501,249,200 System, Inc. 30,900"
583,237
Hilb, Rogal & Greenwich Air
Hamilton Co.128,0001,696,000 Services, Inc.,
HUBCO, Inc. 64,4781,579,711 Class B* 28,800626,400
Managers Special Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
General Business (continued) Health Care
(continued)
HA-LO Omnicare, Inc. 54,200 $1,741,175
Industries, Inc.*53,062 $1,459,205 OrNda Healthcorp.*
30,500 892,125
Iron Mountain, Inc.*27,000 816,750 Orthodontic Centers
Kinder Care Learning of America, Inc.*
44,700 692,850
Centers, Inc.* 112,5002,095,313 Owens & Minor, Inc.
Labor Ready, Inc.*56,300 731,900 Holding Co. 213,300
2,186,325
Learning Tree Parexel International
International, Inc.*21,300 623,025 Corp.*13,200 676,500
LSI Industries, Inc.28,000 371,000 Physician Sales &
Manpower, Inc. 46,5001,511,250 Services, Inc.*
34,200 491,625
May & Speh, Inc.* 61,800 757,050 Protocol
National Computer Systems, Inc.*
155,400 1,981,350
Systems, Inc. 28,500712,500 Quintiles
National Education Transnational Corp.*
17,100 1,120,050
Corp. * 374,2005,706,550 Quorum Health
Steck Vaughn Group, Inc.* 29,500870,250
Publishing Corp.*125,000 1,375,000 Regency Health
U.S. Office Products Services, Inc.*
47,300 455,262
Co.* 62,100*' 2,095,875 Renal Treatment
Volt Information Centers, Inc.* 61,300 1,563,150
Sciences, Inc.' 40,9001,758,700 Retirement Care
Whittman-Hart, Inc.*35,800 899,475 Associates, Inc.*
43,718** 360,674
World Fuel Services Summit Care Corp.*
21,900 344,925
Corp. 32,000** 712,000 Universal Health
Total General Business 34,365,511 Services,
Inc.,
Class B* 60,0001,717,500
Health Care - 9.7% Vitalink Pharmacy
Advocat, Inc.* 70,700512,575 Services, Inc.*
44,000** 1,012,000
Applied Analytical Total Health Care
26,415,448
Industries, Inc.*35,600 680,850 -
Chemed Corp. 26,800978,200 Real Estate - 2.0%
Community Care of Allied Capital
America, Inc.' 44,500189,125 Commerical Corp.
73,832 1,698,136
Dura Pharmaceuticals, Equity Inns, Inc.
83,100 1,080,300
Inc.* 47,1002,243,137 Health Care Property
Gulf South Medical Investors, Inc.
22,200 777,000
Supply, Inc.* 40,3001,022,613 Presidential Realty
Hologic, Inc.* 25,000615,625 Corp., Class B
64,458 410,920
Jones Medical RFS Hotel
Industries, Inc. 16,000 580,000 Investors, Inc.
42,000 829,500
Lifeline Systems, Inc.*35,800 622,025ROC
Living Centers of Communities, Inc.
26,900 746,475
America, Inc.* 29,000804,750 Total Real Estate
5,542,331
Lunar Corp.* 18,600637,050 -
Morrison Health Technology - 6.8%
Care, Inc. 54,033796,987 Act Networks, Inc.*
25,100 916,150
NCS HealthCare, Inc., Alpha Industries, Inc.*
61,200 481,950
Class A* 21,800626,750
Managers Special Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Technology (continued) Other Investment Companies -
0.5%
Aspen Finance and Insurance - 0.5%
Technologies, Inc.* 27,800 $2,210,100 Allied Capital Corp.
CACI 11, Closed-End Fund32,500 $674,375
International, Inc., Sir,om Capital Corp.,
Class A* 22,000462,000 Closed-End Fund 23,600 843,700
Cambridge Total Other Investment
Technology Partners*73,800 2,463,075 Companies
Comverse (cost $1,280,935) 1,518,075
Technology, Inc.*26,800 1,008,350
Davox Corp.* 19,000**783,750 Principal
Encad, Inc.* 19,300786,475 Amount
ILC Technology, Inc.*75,600 982,800 Repurchase Agreement -
9.3%
Inter-Tel, Inc.*51,700982,300 State Street Bank &
Network Trust Co., dated
Appliance, Inc.* 26,300 1,328,150 12/31/96, due 01/02/97,
Richardson 6.000%, total to be
Electronics, Ltd.42,400 339,200 received $25,143,378
Sensormatic (secured by $5,800,000
Electronics Corp.197,300 3,304,775 FHLMC 6.700%, due
Target 01/15/15, $10,075,000
Therapeutics, Inc.*15,900 665,813 USTB 11.250%, due
Uniphase Corp.*18,600976,500 02/15/15 and,
Vitesse Semiconductor $4,600,000 FNMA
Corp. * 17,900814,450 6.750%, due 04/25/19),
Total Technology 18,505,838at cost $25,135,000
25,135,000
Total Investments - 99.3%
Transportation - 6.4% (cost $223,329,521)
269,564,290
Air Express Other Assets, less
International Corp.117,900 3,772,800Liabilities - 0.7%
1,868,924
Airborne Freight Net Assets - 100.0%$271,433,214
Corp. 134,1003,134,588
Atlas Air, Inc.*19,600931,000 Note: Based on the cost of
investments of
Consolidated $224,105,428 for federal income
tax
Freightways, Inc.68,100 1,515,225 purposes at December
31, 1996, the
Fritz Companies, Inc.*183,600 2,272,050 aggregate gross
unrealized appreciation
Harper Group, Inc.163,900 3,851,650 and depreciation was
$53,271,243 and
Sea Containers, Ltd., $7,812,381, respectively,
resulting in net
Class A 107,0001,671,875 unrealized appreciation of
investments of
Sea Containers, Ltd., $45,458,862.
Class B 13,890217,031 Non-income-producing security.
Total Transportation 17,366,219 Some or all of these
shares, amounting to
Utilities - 1.4% $8,805,454, or 3.2% of net
assets, were out
El Paso Electric Co.*600,000 3,900,000 on loan to
various brokers as of
December 31, 1996.
Total Common Stocks
(cost $196,913,586) 242,911,215
The accompanying notes are an integral part of these
financial statements.
Managers International Equity Fund
Schedule of Portfolio Investments
December 31, 1996
Shares Value
Common Stocks - 91.2%
Basic Industries - 15.0%
AGA AB, Series B,
Switzerland
Certificate (Sweden) 88,200$ 1,319,140
Aracruz Celulose SA,
Sponsored ADR
(Brazil) 157,600 1,300,200
Ashanti Goldfields Co.
Ltd., Sponsored GDR
(Ghana) 62,400 772,200
Barrick Gold Corp.
(Canada) 12,900 369,769
Barrick Gold Corp. -
U.S. Registered Shares
(Canada) 9,300 267,375
BASF AG (Germany) 54,350 2,093,754
Bayer AG (Germany) 61,853 2,524,284
BOC Group PLC (U.K.) 134,000 2,006,442
Cambior, Inc. (Canada) 18,600 273,030
Clariant AG -
Registered
(Switzerland) 1,601 685,374
Compagnie De Saint-
Gobain (France) 18,100 2,560,547
Companhia Vale do
Rio Doce, Sponsored
ADR (Brazil) 31,200 604,987
Hoechst AG (Germany) 153,348 7,244,866
Holderbank Financiere
Glaris AG - Bearer
Shares (Switzerland) 1,718 1,227,051
Impala Platinum
Holdings, ADR (South
Africa) 24,300 242,869
Kymmene OY
(Finland)* 62,640 1,314,078
Lonrho PLC (U.K.) 139,000 297,670
Nisshin Steel Co.
(Japan) 92,000 247,060
NKK Corp. (Japan)* 509,000 1,147,129
Redland PLC (U.K) 157,200 993,778
Rhone Poulenc SA,
Class A (France) 87,082 2,969,029
RTZ Corp. PLC (U.K.) 78,490 1,261,326
Rustenburg Platinum
Holdings Ltd., ADR
(South Aftica)* 31,915 436,674
Sasol Ltd., SDonsored
ADR (South Africa) 56,134 $652,558
Sekisui Chemical Co.
(Japan) 151,000 1,525,516
Stillwater Mining Co.
(U.S.A)' 39,200 700,700
Sumitomo Metal
Industries (Japan) 406,000 999,136
Sumitomo Metal
Mining Co. (Japan) 192,000 1,294,810
Thyssen AG (Germany) 6,9001,22,4,136
Usinas Siderurgicas de
Minas Gerais,
Sponsored ADR
(Brazil)* 64,500 659,513
Viag AG (Germany) 2,810 1,102,963
Viag AG, New Shares
(Germany)* 202 76,794
Total Basic Industries 40,394,758
Capital Goods - 10.0%
ABB AG - Bearer
Shares (Switzerland) 1,5941,982,82,4
Alcatel Alsthom
(France) 38,400 3,084,730
FLS Industries, Series B
(Denmark) 7,000 897,162
General Electric Co.
PLC (U.K.) 572,200 3,754,542
Hitachi Oapan) 75,000 699,421
Lafarge SA (France) 19,444 1,166,602
Mannesmann AG
(Germany) 10,707 4,640,999
Mitsubishi Heavy
Industries Ltd. (Japan) 318,000 2,526,207
Omron Corp. Uapan) 63,000 1,185,908
Samsung Electronics
Ltd. GDR, (a) (South
Korea)' 236 8,496
Samsung Electronics
Ltd. Non-Voting GDR,
(a) (South Korea)* 6,318 101,088
Samsung Electronics
Ltd., GDRs
representing 1/2
non-voting Shares,
(a) (South Korea) 20,963 386,767
Managers International Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Capital Goods (continued) Consumer Basics
(continued)
Samsung Electronics Cheil Foods &
Ltd., GDR Chemicals, Inc.,
representing 1/2 non- Preferred
(South
voting Shares, Korea) 16,000 $284,024
(a) (South Korea)* 685 $28,342Coca Cola Amatil Ltd.
Schindler Holding AG (Australia)53,310 569,923
PC (Switzerland) 616 669,615Fosters Brewing Group
Schneider SA (France)38,079 1,760,654Ltd. (Australia) 712,160
1,443,453
Siemens AG (Germany)27,950 1,316,854Grand Metropolitan
SKF AB, Series B PLC (U.K.)472,8483,710,200
(Sweden)* 85,3002,019,964 Heineken NV
SMC Corp. (Japan) 12,000 807,184(Netherlands)7,560 1,339,037
Total Capital Goods 27,037,359Lion Nathan Ltd.
(New Zealand)232,800562,867
Communication Services - 1.3%
Nestle SA - Registered
Deutsche Telekom AG (Switzerland) 3,667 3,936,854
(Germany)*34,483727,173 Spar Handels AG
Deutsche Telekom AG, (Germany) 68,000 832,987
Sponsored ADR Unilever PLC (U.K.)112,200 2,719,942
(Germany) 77,4731,578,512 Total Consumer Basics 21,763,228
Telecom Corporation of
New Zealand (New Consumer Durable Goods- 9.4%
Zealand) 226,5001,149,714 Autoliv AB (Sweden)*32,000 1,402,953
Total CommunicationServices 3,455,399Bridgestone Corp.
(Japan) 73,0001,386,754
Conglomerates - 2.2% Daimler-Benz AG
BTR PLC (U.K.)472,9002,309,003 (Germany) 87,158 6,003,865
Hutchison Whampoa Electrolux AB, Series B
Ltd. (Hong Kong)189,000 1,484,485(Sweden)22,600 1,312,277
Jardine Matheson Fiat SpA (Italy)324,500981,843
Holdings Ltd. Honda Motor Co.
(Singapore)83,435550,671 Capan) 79,0002,257,922
Sumitomo Corp. Matsushita Electric
Uapan) 37,000291,694 Industries (Japan)208,000 3,394,526
Swire Pacific Ltd. Michelin, Class B -
(Hong Kong)123,5001,177,597Registered (France)31,204 1,684,541
Total Conglomerates 5,813,450Sony Corp. Uapan) 75,300
4,935,040
Consumer Basics - 8.1% Toyota Motor Corp.
Allied Domecq PLC (Japan) 55,000 1,581,470
Volvo AB, Series B
(U.K.) 199,4001,564,591 (Sweden) 20,800459,010
B.A.T Industries PLC,
Sponsored ADR (U.K.)254,900 2,113,613Total Consumer
Durable Goods25,400,201
Cadbury Schweppes Consumer Non-Durables
- - 2.9%
PLC (U.K.)303,7932,565,872Canon Inc. (Japan)102,000 2,254,727
Cheil Foods & Coles Myer Ltd.
Chemicals, Inc. (South (Australia)237,647 978,469
Korea) 2,979119,865 Kingfisher PLC (U.K.)113,480
1,224,814
Managers International Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Consumer Non-Durables (continued) Entertainment
and Leisure (continued)
Metro AG (Germany)*15,800 $1,273,200Television Broadcasts
Pang Rim Spinning Ltd. (Hong Kong)164,000 $655,194
(South Korea)*11,200563,314Total Entertainment and Leisure
9,366,766
Sears PLC (U.K.)1,016,400 1,636,827Finance and Insurance - 15.7%
Total Consumer Non-Durables 7,931,351Aegon NV
Energy - 5.7% (Netherlands)27,8321,774,864
Broken Hill Proprietary Assurances Generales
Co. Ltd. (Australia)85,927 1,223,919de France (France)
33,200 1,071,793
CESP CIA Energy Sao Baloise Holdings
Paulo, Sponsored (Switzerland) 624 1,254,060
ADR (Brazil)*31,600369,581Banque Nationale de
CESP CIA Energy Sao Paris (France) 54,500 2,109,203
Paulo, ADR, (a) Bayerische Vereinsbank
(Brazil)* 14,000163,739 AG (Germany)55,9802,299,153
Elf Aquitaine SA Commerzbank AG
(France) 30,5002,776,361 (Germany) 25,137638,716
Ente Nazionate Compagnie Financiere
Idrocarburi SPA (Italy) 251,3001,289,631de Paribas, Class A
Royal Dutch Petroleum (France) 11,684 790,193
Co., ADR CS Holding AG
(Netherlands)18,7003,193,025
Shell Transport & (Switerland) 19,190 1,971,330
Trading Co. - Deutsche Bank AG
Registered (U.K.)113,400 1,966,092(Germany)51,500 2,406,323
Total Francaise EXEL Ltd. (U.S.A.)39,900 1,511,213
Petroleum (France), HSBC Holding PLC,
Class B 14,2311,157,460 registered (Hong
Woodside Petroleum Kong)150,461 3,219,509
Ltd. (Australia)268,650 1,962,399International
YPF Sociedad Nederlanden Groep
Anonima, Class D, NV (Netherlands) 36,560 1,317,134
Sponsored ADR Istituto Nazionale delle
(Argentina)13,700345,925 Assicurazioni (Italy)540,100
703,519
Yukong Ltd. (South Mitsui Marine & Fire
Korea) 52,9691,002,963 Insurance Co. Uapan)91,000 489,535
Total Energy 15,451,095 Munchener
Entertainment and Leisure - 3.5% Rueckvericherungs-
Accor SA (France) 10,257 1,298,805Gesellschaft -
Carlton Registered
Communications PLC (Germany)* 805 2,011,454
(U.K.) 212,7001,864,268 Nichiei Co. Oapan)10,000 738,278
Nintendo Corp. Ltd. Orix Corp. Ltd. (Japan)47,000
1,956,135
Gapan) 31,4002,247,699 Promise Co. Oapan)21,800 1,072,964
Rank Group PLC Schweizerische
(U.K.) 170,9001,282,409 Rueckversicherungs -
Reuters Holdings PLC Registered
(U.K.) 156,9802,018,391 (Switzerland)1,5641,669,747
Shohkoh Fund Oapan)2,200 478,715
Managers International Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Shares Value Shares Value
Finance and Insurance (continued) Real Estate - 0.4%
Skandia Foersaekrings Diligentia AB
AB (Sweden)49,770$1,408,468 (Sweden)*12,577 $198,248
Skandinaviska Enskilda Kerry Properties Ltd.
Banken, Class A (a) (Hong Kong)*319,000 874,368
(Sweden) 116,1751,192,430 Total Real Estate 1,072,616
Sumitomo Trust and
Banking Co. Uapan)195,000 1,953,199Technology - 3.7%
Svenska British Aerospace PLC
Handelsbanken, (U.K.) 187,3514,102,014
Class A (Sweden) 59,900 1,721,492Ricoh Company Ltd.
Unidanmark A/S, (Japan) 250,0002,871,082
Class A (Denmark)28,200 1,460,073Rohm Company
Westpac Banking (Japan) 45,0002,953,113
Corporation Ltd. Samsung Display
(Australia)477,5002,717,511Devices Co. (South
Zurich Versicherun Korea) 1,000 57,160
Registered Total Technology 9,983,369
(Switzerland)8,9102,476,294Transportation - 0.9%
Total Finance and Insurance 42,413,305Canadian Pacific,
Ltd.
General Business - 3.5% (Canada) 74,4001,969,620
CIE Generale Des Eaux London & Overseas
(France) 24,4003,023,841 Freighters, ADR
Dai Nippon Printing (U.K.)' 34,400 412,800
Co. Ltd. Gapan)64,0001,121,838Total Transportation
2,382,420
Flughafen Wien AG Utilities - 5.2%
(a) (Austria)20,5551,047,824Elektrowatt AG,
Mirror Group PLC
(U.K.) 268,700989,729 Class B (Switzerland)1,700 676,952
SAP AG (Germany)13,8001,928,126Empresa Nacional de
Societe Generale de Electricidad SA
Surveillance Holding (Spain) 44,400 3,160,070
SA (Switzerland) 536 1,317,475Huaneng Power
International, Inc.,
Total General Business 9,428,833ADR (China)*42,000
945,000
Health Care - 3.7% Korea Electric Power
Astra AB, Series A Corp., ADR (South
(Sweden) 34,2301,691,449 Korea) 20,000410,000
Astra AB, Series B National Power PLC
(Sweden) 28,2001,360,401 (U.K.) 291,3002,435,402
Novartis AG - Bearer Powergen PLC (U.K,)210,326 2,061,101
(Switzerland)*1,3861,583,261Veba AG (Germany)73,000 4,222,121
Novartis AG - Total Utilities 13,910,646
Registered Total Common Stocks
(Switzerland)3,4503,951,326(cost $208,457,811)
245,711,336
Schering AG
(Germany) 15,6381,320,104
Total Health Care 9,906,541
Managers International Equity Fund
Schedule of Portfolio Investments (continued)
December 31, 1996
Principal
Shares Value Amount Value
Preferred Stocks - 2.4% Repurchase
Agreement - 3.5%
Consumer Durable Goods - 0.6% Donaldson,
Lufkin,
Fiat SpA (Italy)956,100$1,578,794Jenrette, dated
Energy - 1.2% 12/31/96, due
PWE AG (Germany)97,2003,2,84,63701/02/97, 6.700%,
total to be received
Utilities - 0.6% $9,317,467 (secured
Itentrais Electricas by $9,267,000 U.S.
Brasiteiras, ADR Treasury Notes,
(Brazil) 86,1001,599,204 5.875%, due
Total Preferred Stocks 03/31/99), at cost$9,314,000 $
9,314,000
(cost $6,264,221) 6,462,635Total Investments - 101.8%
Principal (cost $236,751,381)274,336,572
Amount Other Assets, less
Liabilities - (1.8%)(4,768,156)
Foreign Corporate Obligation 0.2% Net Assets - 100.0%
$269,568,416
Teck Corp., (Canada)
Convertible Bonds, Note: Based on the cost of
investments of
3.750%, 07/15/06 $237,2Z4,445 for federal
income tax
(cost $393,200)$469,000 526,452 purposes at December 31,
1996, the
aggregate gross unrealized
appreciation
Commercial Paper - 4.4% and depreciation was $44,083,248
and
Federal Home Loan $6,971,121, respectively, resulting
in net
Bank, Discount unrealized appreciation of
investments of
Notes, 6.500%, $37,112,127.
01/02/977,000,0006,998,736 Non-income-producing security.
Federal Home Loan (a) Security exempt from
registration under
Bank, Discount Rule 144A of the Securities Act
of 1933.
Notes, 5.420%, These securities may be resold in
01/2Z/975,000,0004,984,192 transactions exempt from
registration,
Total Commercial Paper normally to qualified
buyers. At
(cost $11,982,928)11,982,928 December 31, 1996, the value of
these
securities amounted to $2,610,624,
or 10%
U.S. Treasury Bills - 0.1% of net assets.
5.040%, 02/06/97140,000139,294 Investment Abbreviations:
4.890%, 02/06/97102,000101,501 ADR/GDR: Securities whose
value is determined
4.850%, 02/13/9799,00098,426 or significantly
influenced by trading
Treasury Bills on exchanges not located in
the
(cost $339,221) 339,221 United States or Canada. ADR
after
the name of a holding stands
for
American Depositary Receipt,
representing ownership of
foreign securities on deposit
with a domestic custodian bank;
a GDR (Global Depositary
Receipt) is comparable, but
foreign securities are held on
deposit in a non-U.S. Bank.
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Assets and Liabilities
December 31, 1996
ManagersManagersManagersManagers
IncomeCapitalSpecialInternational
EquityAppreciationEquityEquity
Fund Fund Fund Fund
Assets:
Investments at value*$ 49,964,918$ 98,401,344$2,44,429,290
$265,022,572
Repurchase agreements at cost and
value 1,870,0004,610,00025,135,0009,314,000
Cash 48,600 2,162 4,432 7,742
Foreign currency (cost $189,606) - - - 191,562
Collateral from brokers on securities
loaned 136,8002,589,5909,223,942 -
Receivable for investments sold774,160692,793183,660 2,946,611
Unrealized gain on foreign currency
contracts, net - - - 66,377
Receivable for Fund shares sold362,451947,1143,290,670
1,760,570
Dividends, interest and other
receivables 156,052 96,596113,064334,041
Foreign withholding tax receivable 2,077 1,828 - 119,137
Prepaid expenses 23,385 34,455 63,161 67,786
Total assets 53,338,443107,375,882282,443,219
279,830,398
Liabilities:
Payable for Fund shares repurchased40,894 47,617 497,324
1,119,620
Payable upon return of securities
loaned 136,8002,589,5909,223,942 -
Payable for investments purchased2,8823,296,517934,171
8,750,203
Accrued expenses:
Investment advisory and
management fees 33,505 68,699196,133198,550
Administrative fees11,168 21,468 54,481 55,153
Other 50,165 69,690103,954138,456
Total liabilities275,4146,093,58111,010,00510,261,982
Net Assets $ 53,063,029101,282,301$271,433,214
$269,568,416
Shares outstanding 1,740,1303,845,0765,327,3556,169,959
Net asset value, offering and
redemption price per share $30.49 $26.34 $50.95 $43.69
Net Assets Represent:
Paid-in capital$ 41,714,962$ 89,154,213$220,574,767
$232,320,674
Undistributed net investment income
(loss) 61,866 - -(99,109)
Accumulated net realized gain (loss)
from investments 894,453610,1114,623,678(240,663)
Net unrealized appreciation of
investments and foreign currency
contracts and translations10,391,74811,517,97746,234,769
37,587,514
Net Assets $53,063,029$101,282,301271,433,214
$269,568,416
Investments at cost$39,573,170$ 86,883,367$198,194,521
$227,437,381
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Operations
For the year ended December 31, 1996
ManagersManagersManagersManagers
IncomeCapitalSpecialInternational
EquiAppreciationEquityEquity
Funy Fund Fund Fund
Investment Income:
Dividend income $1,743,107$1,016,807$ 1,357,099 $4,598,915
Interest income 174,647575,019926,8401,184,953
Foreign withholding tax(21,485)(13,266)-(641,667)
Stock loan fees 3,102 14,22636,842 -
Total investment income1,899,3711,592,7862,320,781 5,142,201
Expenses:
Investment advisory and management
fees 349,821761,9251,572,1321,856,193
Administrative fees 116,607238,101436,703515,609
Custodian fees 83,021119,222190,496408,775
Transfer agent fees 50,643 90,366143,648181,666
Audit fees 30,278 33,31135,695 44,495
Registration fees 18,774 24,79534,028 42,382
Insurance 9,225 20,67130,460 34,714
Trustee fees 4,131 8,57313,26,516,786
Legal fees 3,809 7,70513,788 16,250
Miscellaneous expenses7,222 13,79823,459 33,281
Total expenses before reductions673,5311,318,467 2,493,674
3,1-00,151
Expense reductions (2,304)(49,691) - -
Net Expenses 671,2271,268,7762,493,6743,150,151
Net investment income (loss)1,228,144324,010(172,893)
1,992,050
Net Realized and Unrealized Gain (Loss):
Net realized gain on investment
transactions 3,059,69012,474,07816,533,528 5,805,861
Net realized loss on foreign currency
contracts and translations - - - (156,798)
Net unrealized appreciation
(depreciation) of investments3,401,883(239,860) 21,777,123
18,275,031
Net unrealized appreciation from foreign
currency translations - - - 5,128
Net realized and unrealized gain6,461,57312,234,218 38,310,651
23,929,222
Net Increase in Net Assets Resulting
from Operations $7,689,717$12,558,228$38,137,758
$25,921,272
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Changes in Net Assets
Managers Income Equity Fund Manages Capital
Appreciation Fund
For the For the For the For the
year endedyear endedyear ended year ended
December 31, 1996 December 31, 1995 December 31,
1996 December 31, 1995
Increase (Decrease) in Net Assets From
Operations
Net investment income (loss)$ 1,228,144$ 1,138,269 $324,010
$2,45,949
Net realized gain on investments
and foreign currency transactions3,059,6905,081,595 12,474,078
13,170,596
Net unrealized appreciation
(depreciation) of investments and
foreign currency translations3,401,8835,771,575 (239,860)
8,969,556
Net increase in net assets
resulting from operations7,689,71711,991,43912,558,228
22,386,101
Distributions to Shareholders:
From net investment income(1,207,927)(1,143,791) (330,477)
(224,395)
From net realized gain on
investments (3,147,241)(4,742,480)(14,706,217) (10,213,381)
Total distributions to
shareholders(4,355,168)(5,886,271)(15,036,694) (10,437,776)
From Capital Share Transactions:
Proceeds from sale of shares34,882,43912,024,698 47,104,779
36,618,267
Net asset value of shares issued in
connection with reinvestment of
dividends and distributions3,705,6684,310,68113,914,902
8,380,359
Cost of shares repurchased(26,667,124)(33,508,044)
(40,611,675) (59,635,994)
Net increase (decrease) from
capital share transactions11,920,983(17,172,665) 20,408,006
(14,637,368)
Total increase (decrease) in net
assets 15,255,532(11,067,497)17,929,540 (2,689,043)
Net Assets:
Beginning of year37,807,49748,874,99483,352,761 86,041,804
End of year $53,063,029$37,807,497$101,282,301 $ 83,352,761
End of year undistributed
(overdistributed) net investment
income $61,866$41,649 -$43,118
Share Transactions:
Sale of shares 1,177,997429,9901,667,9661,353,077
Shares issued in connection with
reinvestment of dividends and
distributions 123,222152,259 525,476312,566
Shares repurchased(890,919)(1,215,109)(1,419,363)
(2,295,146)
Net increase (decrease) in shares410,300(632,860) 774,079
(629,503)
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Changes in Net Assets
Managers Special Equity Fund Manages
International Equity Fund
For the For the For the For the
year endedyear endedyear ended year ended
December 31, 1996 December 31, 1995 December 31,
1996 December 31, 1995
Increase (Decrease) in Net Assets From
Operations
Net investment income (loss)$ (172,893)$ (177,366) $1,992,050
$839,813
Net realized gain on investments
and foreign currency transactions16,533,52812,656,992
5,649,063 7,272,925
Net unrealized appreciation
(depreciation) of investments and
foreign currency translations21,777,12318,943,704 18,280,159
7,272,709
Net increase in net assets
resulting from operations38,137,75831,423,330 25,921,272
15,385,447
Distributions to Shareholders:
From net investment income -- --(1,972,418) (435,148)
From net realized gain on
investments (15,417,452)(14,466,123)(6,154,840) (7,196,327)
Total distributions to
shareholders(15,417,452)(14,466,123)(8,127,258)
(7,631,475)
From Capital Share Transactions:
Proceeds from sale of shares200,247,84547,782,220
162,992,914 89559295
Net asset value of shares issued in
connection with reinvestment of
dividends and distributions12,045,5898,768,064 6,457,243
5,331,247
Cost of shares repurchased(81,942,114)(66,729,768)
(58,163,660) (49,080,381)
Net increase (decrease) from
capital share transactions130,351,320(10,179,504)
111,286,497 (45,810,161)
Total increase (decrease) in net
assets 153,071,6266,777,703129,080,51153,564,133
Net Assets:
Beginning of year118,361,588111,583,885140,487,905 86,923,772
End of year $271,433,214$118,361,588$269,568,416
$140,487,905
End of year undistributed
(overdistributed) net investment
income - -$ (99,109)$(26,468)
Share Transactions:
Sale of shares 3,994,5461,148,9163,879,3812,289,835
Shares issued in connection with
reinvestment of dividends and
distributions 240,100205,619 150,567133,582
Shares repurchased(1,638,391)(1,656,412)(1,374,547)
(1,300,117)
Net increase (decrease) in shares2,596,255(301,877) 2,655,401
1,123,300
The accompanying notes are an integral part of these financial
statements.
Managers Income Equity Fund
Financial Highlights
For a share of capital stock outstanding throughout each year
Year ended December 31,
19961995 1994 1993 1992*
Net Asset Value, Beginning of Year$28.43$24.90$27.89 $27.38
$28.62
Income from Investment Operations:
Net investment income 0.760.87 0.80 0.81 0.99
Net realized and unrealized gain (loss)
on investments 3.977.47(0.50)2.54 1.72
Total from investment operations4.73 8.34 0.30 3.35 2.71
Less Distributions to Shareholders:
From net investment income(0.76)(0.86)(0.83)(0.76) (0.98)
From net realized gain on investments(1.91)(3.95) (2.46)
(2.08) (2.97)
Total distributions to shareholders(2.67)(4.81) (3.29)
(2.84) (3.95)
Net Asset Value, End of Year$30.49$28.43$24.90$27.89 $27.38
Total Return 17.08%34.36%0.99%12.40%9.80%
Ratio of expenses to average
net assets 1.44%(a)1.45%1.33%1.32%1.20%
Ratio of net investment income to average
net assets 2.63%2.85%3.06%2.75%3.52%
Portfolio turnover 33% 36% 46% 41% 41%
Average commission rate(b)$0.06 - - - -
Net assets at end of year (000's omitted)$53,063$37,807
$48,875 $40,965$49,648
(a) The Fund has entered into an arrangement with one or more
third-party broker-dealers who have paid a portion of the Fund's
expenses. Absent this expense reduction, the ratio of expenses
to average net assets for the year ended December 31, 1996 would
have been 1.44%. (See Note Ic of Notes to Financial Statements.)
(b) All funds are now required to disclose their average
commission rate per share for security trades on which
commissions are charged. The amount may vary from period to
period and from fund to fund depending on the mix of trades
executed in various markets where trading practices and
commissions rate structures may differ.
Audited by prior auditors.
Managers Capital Appreciation Fund
Financial Highlights
For a share of capital stock outstanding throughout each year
Year ended December 31,
19961995 1994- 19931992*-
Net Asset Value, Beginning of Year$27.14$23.25$25.17 $24.67
$23.46
Income from Investment Operations:
Net investment income 0.090.09 0.12 0.19 0.08
Net realized and unrealized gain (loss)
on investments 3.667.62(0.49)3.80 2.39
Total from investment operations3.75 7.71(0.37) 3.99 2.47
Less Distributions to Shareholders:
From net investment income(0.10)(0.08)(0.12)(0.19) (0.07)
From net realized gain on investments(4.45)(3.74) (1.39)
(3.30) (1.19)
In excess of net realized gain on
investments (0.04)
Total distributions to shareholders(4.55)(3.82) (1.55)
(3.49) (1.26)
Net Asset Value, End of Year$26.34$27.14$23.25$25.17 $24.67
Total Return 13.73%33.39%(1.50)%16.38%10.50%
Ratio of expenses to average net assets1.33%(a)1.36% 1.29%
1.18% 1.05%
Ratio of net investment income to average
net assets 0.34%0.31%0.53%0.74%0.33%
Portfolio turnover 172%134% 122% 131% 175%
Average commission rate(b)$0.06 - - - -
Net assets at end of year (000's omitted)$101,282 $83,353
$86,042 $69,358$56,196
(a) The Fund has entered into an arrangement with one or more
third-party broker-dealers who have paid a portion of the Fund's
expenses. Absent this expense reduction, the ratio of expenses
to average net assets for the year ended December 31, 1996 would
have been 1.38%. (See Note lc of N-otes to Financial
Stat'ements.)
(b) All funds are now required to disclose their average
commission rate per share for security trades on which
commissions are charged. The amount may vary from period to
period and from fund to fund depending on the mix of trades
executed in various markets where trading practices and
commissions rate structures may differ.
Audited by prior auditors.
Managers Special Equity Fund
Financial Highlights
For a share of capital stock outstanding throughout each year
Year ended December 31,
19961995(a)1994 1993 1992*
Net Asset Value, Beginning of Year$43-34$36.79$38.90 $36.14
$34.49
Income from Investment Operations:
Net investment income (loss)(0.00)(0.07)(0.01)0.02 0.05
Net realized and unrealized gain (loss)
on investments 10.68 12.28(0.76)6.12 5.35
Total from investment operations10.6812.21(0.77) 6.14 5.40
Less Distributions to Shareholders:
From net investment income - - -(0.01) (0.05)
From net realized gain on investments(3.07)(5.66) (1,34)
(3.37) (3.70)
Total distributions to shareholders(3.07)(5.66) (1.34)
(3.38) (3.75)
Net Asset Value, End of Year$50.95$43.34$36.79$38.90 $36.14
Total Return 24.75%33.94%(1.99)%17.05%15.64%
Ratio of expenses to average net assets1.43%1.44% 1.37% 1.26%
1.29%
Ratio of net investment income (loss) to
average net assets (0.10)%(0.16)%(0.06)%0.07%0.14%
Portfolio turnover 56% 65% 667045'70 54%
Average commission rate(b)$0.05 - - - -
Net assets at end of year (000's omitted)$271,433 $118,362
$111,584 $99,032$53,641
(a) Calculated using the weighted average shares outstanding
during the year
(b) All funds are now required to disclose their average
commission rate per share for security trades on which
commissions are charged. The amount may vary from period to
period and from fund to fund depending on the mix of trades
executed in various markets where trading practices and
commissions rate structures may differ.
Audited by prior auditors.
Managers International Equity Fund
Financial Highlights
For a share of capital stock outstanding throughout each year
Year ended December 31,
19961995(a)1994 19931992*
Net Asset Value, Beginning of Year$39.97$36.35$35.92 $26.52
$25.66
Income from Investment Operations:
Net investment income 0.32 0.31 0.16 0.22 0.23
Net realized and unrealized gain on
investments 4.76 5.59 0.56 9.88 0.85
Total from investment operations5.08 5.90 0.72 10.10 1.08
Less Distributions to Shareholders:
From net investment income(0.33)(0.13)(0.08)(0.29) (0.22)
In excess of net investment income - (0.11) -
From net realized gain on investments(1.03)(2.15) -
(0.30) -
In excess of net realized gain on
investments (0.21) -
Total distributions to shareholders(1.36)(2.28) (0.29)
(0.70) (0.22)
Net Asset Value, End of Year$43.69$39.97$36.35$35.92 $26.52
Total Return 12.77%16.24%2.00%38.20%4.25%
Ratio of expenses to average net assets1.53%1.58% 1.49% 1.47%
1.45%
Ratio of net investment income to average
net assets 0.97% 0.80%0.60%0.78%0.97%
Portfolio turnover 30% 73% 22% 46% 51%
Average commission rate(b)$0.03 - - - -
Net assets at end of year (000's omitted)$269,568 $140,488
$86,924 $62,273$23,129
(a) Calculated using the weighted average shares outstandng
during the year
(b) All funds are now required to disclose their average
comission rate per share for security trades on which commissions
are charged The amount may vary from period to period and from
fund o fund depending on the mix of trades execu ted in various
markets where trading practices and commissions rate structures
may differ.
*Audited by prior auditors.
The Managers Funds
Notes to Financial Statements
December 31, 1996
(1) Summary of Significant Accounting Policies
The Managers Funds (the "Trust") is a no-load, open-end,
management investment company, organized as a Massachusetts
business trust, and registered under the Investment Company Act
of 1940, as amended (the "1940 Act"). Currently the Trust is
comprised of 10 investment series. Included in this report are
Managers Income Equity Fund ("Income Equity"), Managers Capital
Appreciation Fund ("Capital Appreciation"), Managers Special
Equity Fund ("Special Equity") and Managers International Equity
Fund ("International Equity"), 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
Equity securities traded on a domestic or international
securities exchange are valued at the last quoted sales price,
or, lacking 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. Fixed
income securities are valued based on 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.
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.
(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
Dividend income is recorded on the ex-dividend date, except
certain dividends from foreign securities where the ex-dividend
date may have passed are recorded as soon as the Trust is
informed of the exdividend date. Dividend income on foreign
securities is recorded net of withholding tax. Interest income
is recorded on the accrual basis and includes amortization of
discounts and premiums 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.
Capital Appreciation and Income Equity each had certain portfolio
trades directed to brokers who paid a portion of such Fund's
custody and/or transfer agent expense. For the fiscal year ended
December 31, 1996, Capital Appreciation's and Income Equity's
expenses were reduced by $49,691 and $2,304, respectively, under
this arrangement.
(d) Dividends and Distributions
Dividends resulting from net investment income, if any, normally
will be declared and paid monthly for Income Equity and annually
for Capital Appreciation, Special Equity and International
Equity. Distributions of capital gains, if any, will be made on
an annual basis and when required for federal excise tax
purposes. Income and capital gain distributions are determined
in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These
differences are primarily due to differing treatments for foreign
currency related transactions, losses deferred due to wash sales
and equalization accounting for tax purposes. 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 the 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 Stock
The Trust's Declaration of Trust authorizes for each series of
the Trust 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, 1996, certain unaffiliated shareholders,
including omnibus accounts, individually held greater than 10% of
the outstanding shares of the Funds: Managers Income Equity Fund-
two own 27%; Managers Capital Appreciation Fund- one owns 30%;
Managers Special Equity Fund- three own 51%; and Managers
International Equity Fund- two own 33%.
(h) 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 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 operation 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 and
monitors the portfolio managers' 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 average daily net
assets. The annual investment advisory and management fee rates,
as a percentage of average daily net assets for the fiscal year
ended December 31, 1996, were as follows:
Investment Advisory
Fund and Management Fee
Managers-
Income Equity 0.75%
Capital
Appreciation 0.80
Special Equity 0.90
International
Equity 0.90
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, brokerdealers and registered investment advisers,
that advise or act as an intermediary with the Funds'
shareholders. During the fiscal year ended December 31, 1996,
each of the Funds paid a fee to the Administrator at the rate of
0.25% per annum of the 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 inperson 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
Purchases and sales of securities, excluding short-term
securities, for the fiscal year ended December 31, 1996 were as
follows:
FundPurchases Sales
Managers-
Income Equity$22,999,125 $14,124,806
Capital
Appreciation .160,426,800 149,694,258
Special Equity184,864,874 89,206,026
International
Equity153,296,70855,373,364
There were no purchases or sales of U.S. Government securities.
(4) Portfolio Securities Loaned
Certain of the Funds may participate in a securities lending
program providing for the lending of corporate bonds, equity and
government securities to qualified brokers. Collateral on all
securities loaned except for government securities loaned is
accepted only in cash. Collateral on government securities
loaned is in the form of other similar securities. Collateral is
maintained at a minimum level of 1007o of the market value, plus
interest, if applicable, of investments on loan. Collateral
received in the form of cash is invested temporarily in money
market funds by the custodian. Earnings of such temporary cash
investments are divided between the custodian, as a fee for its
services under the program, and the Fund, according to agreed-
upon rates.
(5) Forward Foreign Currency Contracts (Managers International
Equity Fund only)
During the fiscal year ended December 31, 1996, Managers
International Equity 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 the 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 Fund 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 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.
Open foreign currency contracts for International Equity at
December 31, 1996 were as follows:
Settlement Current Unrealized
Date Value Gains/(Losses)
BuyContracts
CHF1,385,392 01/06/97 $ 1,035,033 $ 8,539
CHF 300,341 01/07/97 224,386 368
CHF 797,318 01/08/97 595,680 4,855
DEM 554,302 01/03/97 360,217 3,753
DEM3,049,623 01/06/97 1,981,819 21,403
FRF1,612,008 01/31/97 310,689 3,494
GPB1,152,929 01/07/97 1,975,209 24,107
JPY89,325,692 01/08/97 771,312 1,230
SEK 49,397 01/02/97 7,243 38
SEK5,679,576 01/06/97 832,795 6,795
TotalBuy Contracts
(Payable Amount $8,019,801) $8,094,383 $74,582
SellContracts
JPY 886,374 01/07/97 $7,654 $21
CAD 749,213 01/06/97 547,151 (599)
DKK 299,100 01/02/97 50,774 (555)
DKK 149,550 01/06/97 25,387 (280)
SEK5,293,690 01/07/97 776,212 (6,792)
TotalSell Contracts
(Receivable Amount $1,398,973)$1,407,178 $ (8,205)
CAD - Canadian Dollar CHF - Swiss Franc DEM - German Deutschemark
DKK - Danish Krone
FRF - French Franc
GBP - British Pound
JPY -Japanese Yen
SEK - Swedish Krona
(6) Contingency
Two lawsuits seeking class action status have been filed against
Managers Intermediate Mortgage Fund, Managers Short Government
Fund, the Investment Manager and the Trust, among other
defendants. In both of these cases, the plaintiffs seek
unspecified damages based upon losses alleged in the two funds
named above. After plaintiff amended the complaint, a second
motion to dismiss was filed in the suit relating to Managers
Short Government Fund. In that action, the parties have now
entered into a preliminary agreement to settle all claims by the
purported class. However, the parties have not finalized their
settlement nor have they obtained the required court approvals.
For these and other reasons, there can be no assurance that the
settlement will be consummated. In addition, a non-class action
lawsuit based on similar allegations has been filed by a customer
against certain of the defendants named in the class action
lawsuits as well as Managers Short and Intermediate Bond Fund.
Certain other customers, who are potentially members of the
plaintiff class in each of the two class action lawsuits referred
to above, have asserted that they may file similar lawsuits based
on similar claims, but have not done so. Management continues to
believe that it has meritorious defenses and, if the cases are
not settled, Management intends to defend vigorously against
these actions.
Important Tax Information
(unaudited)
For its fiscal year ended December 31, 1996, the total amount of
income received by Managers International Equity Fund from
foreign sources was $0.81 per share (representing a total of
$4,904,446). The total amount of taxes paid by the Fund to such
countries was $0.11 per share (representing a total of $641,667).
Managers Income Equity Fund, Capital Appreciation Fund, Special
Equity Fund and International Equity Fund hereby designate
$2,514,498, $9,034,114, $11,499,765 and $3,822,852, respectively,
of the amounts distributed on December 27, 1996 as being from
longterm capital gains.
As permitted by tax regulations, Managers International Equity
Fund has elected to defer $148,186 of net realized currency
losses incurred between November 1, 1996 and December 31, 1996,
and treat them as arising in the fiscal year ended December 31,
1997.
Report of Independent Accountants
To the Trustees of The Managers Funds and the Shareholders of
Managers Income Equity Fund, Managers Capital Appreciation Fund,
Managers Special Equity Fund and Managers International Equity
Fund:
We have audited the accompanying statements of assets and
liabilities of Managers Income Equity Fund, Managers Capital
Appreciation Fund, Managers Special Equity Fund and Managers
International Equity Fund, including the schedules of portfolio
investments, as of December 31, 1996 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 four
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 year ended December 31,
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, 1996, 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 Income Equity Fund, Managers
Capital Appreciation Fund, Managers Special Equity Fund and
Managers International Equity Fund as of December 31, 1996, 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
four years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 14, 1997
The Managers Funds
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
PO. 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 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.
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates
Westport Asset Management, Inc.
INTERNATIONAL EQUITY FUND
Scudder, Stevens & Clark, Inc.
Lazard, Freres Asset Management Co.
Fixed Income Funds:
MONEY MARKET FUND
Morgan Guaranty Trust Company of New York
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.
SHORT AND INTERMEDIATE BONDFUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE FUND
Jennison Associates Capital Corp.
BONDFUND
Looniis, Sayles & Company, Inc.
GLOBAL BOND FUND
Rogge Global Partners
