MANAGERS SHORT GOVERNMENT FUND
MANAGERS SHORT & INTERMEDIATE BOND FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
Where Leading Money Managers Converge
MANAGERS SHORT GOVERNMENT FUND
MANAGERS SHORT AND INTERMEDIATE BOND FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
Semi-Annual Report
June 30, 1997 (unaudited)
TABLE OF CONTENTS
Begins
on Page
-----
President's Message 1
The Managers Funds Performance 2
Complete performance table for all of
The Managers Funds as of June 30, 1997
Schedules of Portfolio Investments 3
Detailed portfolio listings by security type
and industry sector, as valued at June 30, 1997
Statements of Assets and Liabilities 8
Fund balance sheets, Net Asset Value (NAV) per share
computation and cumulative undistributed amounts
Statements of Operations 9
Detail of sources of income, fund expenses, and
realized and unrealized gains (losses)during the period
Statements of Changes in Net Assets 10
Detail of changes in fund assets and distributions
to shareholders for the past two periods
Financial Highlights 11
Historical net asset values, distributions, total
returns, expense ratios, turnover ratios and net assets
Notes to Financial Statements 14
Accounting and distribution policies, details
of agreements and transactions with fund management
and description of certain investment risks
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:
Despite a brief pause in late March and early April, the financial
markets charged to record levels in the first half of 1997. The
primary driver continues to be strong economic growth without evidence
of inflation. Domestic stocks turned in an extremely strong
performance, with most of the broad domestic stock indices hitting all
time highs during the second quarter.
The economy continues to accelerate with Gross Domestic Product rising
at an annualized rate of 5.9% during the first quarter, up from 3.8%
during the previous quarter. Second quarter growth appears to have
been strong as industrial output, manufacturing, durable goods
produced and capacity utilization each rose through May. The key
concern during such strong growth continues to be inflationary
pressures, however, they have yet to make any real impact. The
Consumer Price Index, which measures retail prices, rose only slightly
(0.69%) for the first six months of the year, while the Producer Price
Index, which measures wholesale prices, dropped for six consecutive
months for the first time ever. Business leaders have been reluctant
to raise prices for fear of losing market share, and they are not
likely to increase prices until their true capacity is stretched.
Labor rates have risen only slightly, probably due to the current
expansion of the labor force and the proven willingness of businesses
to slash jobs which has made labor groups reluctant to demand higher
fees.
Domestic bonds offered more stability than stocks during the first
quarter, but no meaningful returns as bond yields rose across all
maturities and the first quarter culminated with the Federal Reserve
Board raising the discount rate by 25 basis points (1/4%).
The healthy economic environment served the domestic bond markets well
during the second quarter as the Fed held rates steady. Rates dropped
moderately across all maturity ranges, and corporate bond and mortgage
spreads continued to tighten slightly toward Treasury yields during
the second quarter. The Lehman Brothers Government/ Corporate Index
returned 2.7% for the first half of 1997.
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.
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 June 30, 1997
Average Annual Total Returns*
- ----------------------------------------------------------------------
Since Inception Morningstar
6Months 1Year 3Years 5Years 10Years Inception Date Rating**
------- ----- ------ ------ ------- --------- ---- -----------
Equity Funds:
Income
Equity15.06%27.21%23.00%17.10% 12.22% 15.23% Oct. '84 ****
Capital Appreciation
Fund 5.09% 11.97% 18.28%15.22% 12.79% 15.28% Jun. '84 ***
Special Equity
Fund 9.93% 16.25% 24.57%20.27% 15.84% 16.63% Jun. '84 ****
International Equity
Fund12.79% 19.38% 14.70%15.64% 10.47% 14.83% Dec. '85 ****
Income Funds:
Short Government
Fund 2.34% 5.55% 5.62% 2.86% - 5.18% Oct. '87 **
Short & Intermediate
Bond
Fund 2.35% 6.22% 6.41% 5.31% 7.19% 8.42% Jun. '84 ****
Intermediate Mortgage
Fund 3.09% 7.78% 6.41% 2.23% 6.68% 7.09% May '86 *
Bond
Fund 3.96% 13.31% 12.26% 9.15% 9.88% 11.24% Jun. '84 *****
Global Bond
Fund-1.64% 4.31% 6.27% - - 5.75% Mar. '94 *
Money Market
Fund 2.61% 5.35% 5.11% 4.11% 5.45% 5.89% Jun. '84 NA
Past performance is no guarantee of future results. Investment returns
and share price will fluctuate. The redemption price of a mutual fund
may be more or less than the purchase price. For additional or more
recent information, or for a current prospectus for any Fund(s),
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 6/30/97 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 2,016, 1,153 and 637 equity funds, the
International Equity Fund was rated against 535, 245 and 94
international equity funds, and each of the Income Funds was rated
against 1,258, 687 and 293 fixed-income funds. Ten percent of the
funds in each asset class receive five stars, 22.5% receive 4 stars,
35% receive 3 stars, 22.5% receive 2 stars and 10% receive 1 star.
Managers Short Government Fund
Schedule of Portfolio Investments
June 30, 1997(unaudited)
Principal Value
Amount
U.S. Treasury Obligations - 68.1%
U.S. Treasury Notes
9.250%, 08/15/98 $865,000 $895,950
7.125%, 09/30/99 1,690,000 + 1,724,594
U.S. Treasury Note Principal Strip
0.000%*, 05/15/99 930,000 831,345
Total U.S. Treasury Obligations
(cost $3,485,517) 3,451,889
U.S. Government Agency Obligations - 25.5%
Federal Home Loan Mortgage Corporation,
Series 1295, Class E, PAC, 7.250%, 03/15/04 126,448 126,638
Series 1319, Class E, PAC, 7.000%, 11/15/04 167,809 167,857
Series 30, Class C, PAC, GNMA, 5.950%, 71,446 71,249
06/25/13
Series 1542, Class D, PAC, 5.250%, 03/15/12 7,919 7,902
Federal National Mortgage Corporation,
Series G92-42, Class C, 7.000%, 09/25/19 162,020 161,555
Series 1993-10, Class PD, PAC, 6.000%, 63,181 63,035
06/25/02
Financing Corporation Coupon Strips, Series
E,
0.000%*, 11/02/98 300,000 276,678
0.000%*, 11/02/99 486,000 419,729
Total U.S. Government Agency Obligations
(cost $1,287,966) 1,294,643
Asset-Backed Securities - 5.3%
Green Tree Home Improvement Loan Trust, 95,555 95,630
Series 96-F, Class HIA1, 6.100%, 11/15/27
Ford Credit Grantor Trust, Series 94-B, 169,384 170,812
Class A, 7.300%, 10/15/99
Total Asset-Backed Securities
(cost $266,935) 266,442
Total Investments - 98.9%
(cost $5,040,418) 5,012,974
Other Assets, less Liabilities - 1.1% 56,884
Net Assets - 100.0% $5,069,858
Note: Based on the cost of investments of $5,040,418 for federal
income tax purposes at June 30, 1997, the
aggregate gross unrealized appreciation and depreciation was $7,535
and $34,979, respectively, resulting
in net unrealized depreciation of investments of $27,444.
+ Certain principal amounts held are segregated as collateral against
futures contracts.
* Zero coupon security.
Abbreviations:
PAC: Planned Amortization Class (PAC) tranches provide investors with
scheduled payments (PAC Schedule)
over a range of prepayment speeds (PAC band or range). PAC tranches
typically are combined with
companion tranches that reduce the risk of prepayments varying from a
constant speed or range.
Long Futures Contracts Outstanding at June 30, 1997:
3 Two-Year U.S. Treasury Note contracts, expiring 9/97, face
amount 600,000, with unrealized appreciation of $2,203
The accompanying notes are an integral part of these financial
statements.
Managers Short and Intermediate Bond Fund
Schedule of Portfolio Investments
June 30, 1997 (unaudited)
Principal Value
Amount
Corporate Debt Securities - 76.1%
Asset-Backed Securities - 32.0%
Advanta Home Equity Loan Trust, Series 92-2, $384,074 $385,726
Class A1, MBIA insured, 7.150% , 06/25/08
AFC Home Equity Loan Trust, Series 93-1, 87,607 84,759
Class A, 5.900%, 05/20/08
AFC Home Equity Loan Trust, Series 96-3, 150,000 151,359
Class 1A2, 7.220%, 02/25/27
Contimortgage Home Equity Loan Trust, Series 252,207 257,092
94-3, Class A4, MBIA insured, 7.850%,
07/15/24
Contimortgage Home Equity Loan Trust, Series 172,437 176,292
94-4, Class A6, MBIA insured, 8.270%,
12/15/24
Equicon Home Equity Loan Trust, Series 95-2, 250,000 247,812
Class A2, FGIC insured, 6.500%, 07/18/10
EquiCredit Home Equity Loan Trust, Series 93- 74,523 72,177
4, Class A, FGIC insured, 5.725%, 12/15/08
First Sierra Equipment Lease, Series 96-2, 225,000 224,235
Class A, 6.290%, 11/10/04
HFC Home Equity Trust, Series 92-2A, Class 43,857 43,495
A, MBIA insured, 6.650%, 11/20/12
Independent National Mortgage Corp., Series 450,000 450,981
96-A, Class A3, 6.960%, 09/25/26
Newcourt Receivables Asset Trust, Series 96- 285,416 286,720
2, Class A, 6.870%, 06/20/04
Old Stone Credit Corp. Home Equity Loan 46,649 46,255
Trust, Series 92-4, Class A, FGIC insured,
6.550%, 11/25/07
Premier Auto Trust, Series 97-1, Class B, 300,000 298,686
Sub. Notes, 6.550%, 09/06/03
Remodelers Home Improvement Loan Asset- 249,964 250,264
Backed Certificates, Series 95-3, Class A2,
6.800%, 12/20/07
Standard Credit Card Master Trust, Series 94- 325,000 327,945
3, Class B, 7.000%, 04/07/01
The Money Store Home Equity Loan Trust, 82,963 83,385
Series 92-B, Class A, MBIA insured, 6.900%,
07/15/07
The Money Store Home Equity Loan Trust, 475,000 472,179
Series 95-C, Class A3, MBIA insured, 6.550%,
06/15/17
TLFC Equipment Lease Trust, Series 96-1, 280,782 280,167
Class A, 5.98%, 11/20/02
UCFC Home Equity Loan, Series 96-D1, Class 400,000 398,624
A3, MBIA insured, 6.541%, 11/15/13
UCFC Loan Trust, Series 93-B1, Class A1, 251,639 247,776
FGIC insured, 6.075%, 07/25/14
World Omni Automobile Lease Securitization 250,000 249,453
Trust, Series 96-B, Class B, 6.850%,
11/15/02
World Omni Automobile Lease Securitization 250,000 252,578
Trust, Series 97-A, Class B, 0.000%*,
06/25/03
Total Asset-Backed Securities 5,287,960
Banks and Finance - 34.0%
Aames Financial Corp., Senior Notes, 9.125%, 50,000 50,500
11/01/03
Advanta National Bank, Senior Notes, 6.440%, 425,000 425,404
05/01/98
American Health Properties, Inc., Notes, 100,000 99,652
7.050%, 01/15/02
Anchor Bancorp, Inc., Senior Notes, 8.937%, 100,000 102,000
07/09/03
ERP Operating LP, Floating Rate Notes, 225,000 225,664
6.590% , 12/22/97**
First Interstate Bancorp., Sub. Notes, 225,000 250,535
9.900%, 11/15/01
First Nationwide Holdings, Inc., Senior 225,000 249,750
Notes, 12.250%, 05/15/01
Franchise Finance Corp. of America, Senior 200,000 199,062
Notes, 7.000%, 11/30/00
Homeside Lending, Inc., Medium-Term Notes, 375,000 373,357
6.875%, 06/30/02
Lehman Brothers Holdings, Inc., Medium-Term 425,000 429,569
Notes, Series B, 7.110%, 09/27/99
Merrill Lynch & Co., Inc. Medium-Term Notes, 525,000 529,063
Series B, Adjustable Rate, 7.260%,
03/25/02**
Reliance Group Holdings, Inc., Senior Notes, 200,000 208,000
9.000%, 11/15/00
Salomon Inc., Senior Notes, 7.300%, 05/15/02 325,000 327,928
Salomon, Inc., 3 Year CMT, Adjustable Rate, 180,000 179,388
6.299% , 04/05/99**
St. George Bank Ltd., Notes, 6.875%, 300,000 301,401
04/01/99 (a)
United Companies Financial Corp., Senior 100,000 100,391
Notes, 7.000%, 07/15/98
United Companies Financial Corp., Senior 475,000 496,133
Notes, 9.350%, 11/01/99
USF&G Corp., Senior Notes, 7.000%, 05/15/98 225,000 226,665
Wellsford Residential Property Trust, Medium- 400,000 400,480
Term Notes, Adjustable Rate, 6.133%,
11/24/99**
Westpac Banking Corp., Yankee, Sub. Deb., 425,000 444,805
7.875%, 10/15/02
Total Banks and Finance 5,619,747
Industrials - 10.1%
ADT Operations, Inc., Senior Notes, 8.250%, 146,000 151,840
08/01/00
Building Materials Corp. of America, Series 75,000 68,063
B, Senior Notes, 11.750%, 07/01/04
ITT Corp., Notes, 6.250%, 11/15/00 275,000 268,892
Kern River Funding Corp., Series B, Senior 200,000 199,312
Notes, 6.720%, 09/30/01 (a)
MFS Communications, Step-up, Senior Notes, 300,000 279,240
0.000%**, 01/15/04
News Corp., Ltd., Series B, Senior Discount 225,000 197,829
Notes, 0.000%*, 06/15/99
Time Warner, Inc., Notes, 7.750%, 06/15/05 500,000 + 508,125
Total Industrials 1,673,301
Total Corporate Debt Securities
(cost $12,552,170) 12,581,008
U.S. Treasury Obligations - 11.6%
U.S. Treasury Notes
6.375%, 03/31/01 250,000 250,352
5.625%, 11/30/98 1,055,000 1,050,221
U.S. Treasury Note Principal Strip
0.000%*, 11/15/99 715,000 618,940
Total U.S. Treasury Obligations
(cost $1,930,313) 1,919,513
U.S. Government Agency Obligations - 4.5%
Federal Home Loan Mortgage Corporation
8.750%, 04/01/01 through 10/01/01 154,502 161,841
Federal National Mortgage Association
Series 94-85, Class E, 6.000%, 11/25/06 250,000 245,390
Resolution Trust Corporation
Series 92-7, Class A1, 6.825%**, 03/25/22 334,265 333,011
Total U.S. Government Agency Obligations
(cost $747,414) 740,242
Foreign Corporate Obligations - 2.0%
Brascan Ltd., 7.375%, 10/01/02 225,000 226,462
Malette, Inc., Senior Notes, 12.250%, 100,000 112,000
07/15/04
Total Foreign Corporate Obligations
(cost $342,413) 338,462
Short-Term Investments - 6.2%
Federal Home Loan Mortgage Corporation
Discount Note - 1.5%
0.000%*, 9/30/97 250,000 246,474
Other Investment Companies - 4.7%
SSgA Money Market Fund 783,088 783,088
Total Short-Term Investments
(cost $1,027,467) 1,029,562
Total Investments - 100.4%
(cost $16,599,777) 16,608,787
Other Assets, less Liabilities - (0.4%) (68,651)
Net Assets - 100.0% $16,540,136
Note: Based on the cost of investments of $16,602,614 for Federal
income tax purposes at June 30, 1997, the aggregate
gross unrealized appreciation and depreciation was $80,035 and
$73,862, respectively, resulting in net unrealized
appreciation of investments of $6,173.
Other Information (unaudited):
The composition of long-term debt holdings as a percentage of
the total value of investments in securities is as follows:
S&P's/Moody's Ratings
Gov't/AAA 45%
AA 5
A 19
BBB 26
BB 5
* Zero coupon security.
** Variable rate security. Coupon or dividend rate disclosed
is that in effect at June 30, 1997.
+ Some or all of these shares, amounting to $177,427, or 1.1%
of net assets, were
out on loan to various brokers as of June 30, 1997.
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933.
These securities may be resold in transactions exempt from
registrations, normally
to qualified buyers. At June 30, 1997, the value of theses
securities amounted to
$500,713, or 3.0% of net assets.
Abbreviations:
CMT: Constant Maturity Treasury Index
FGIC: Insured by Financial Guaranty Insurance Co.
MBIA: Insured by Municipal Bond Investors Assurance Corp.
The accompanying notes are an integral part of these financial
statements.
Managers Intermediate Mortgage Fund
Schedule of Portfolio Investments
June 30, 1997(unaudited)
Principal Value
Amount
Federal National Mortgage Association (FNMA)
- - 63.6%
8.000%, 06/01/26 $1,937,015 + $1,981,799
7.500%, 02/01/26 3,449,035 + 3,461,969
7.500%, TBA* 4,000,000 4,007,500
7.000%, 05/01/27 449,585 440,449
6.500%, 09/01/10 4,233,262 + 4,169,763
Total FNMAs
(cost $14,040,953) 14,061,480
Government National Mortgage Association
(GNMA) - 30.2%
10.500%, 12/15/20 676,943 751,894
10.000%, 07/15/22 through 02/15/25 837,310 921,114
7.500%, TBA* 4,000,000 4,015,000
6.000%, 07/20/26 968,753 988,583
Total GNMAs
(cost $6,631,044) 6,676,591
U.S. Treasury Notes - 13.8%
9.125%, 05/15/99 1,450,000 1,526,806
8.750%, 10/15/97 1,500,000 + 1,513,830
Total U.S. Treasury Notes
(cost $3,055,352) 3,040,636
Collateralized Mortgage Obligations (CMOs) -
4.9%
FNMA,
Series 89-29, Class Z, 10.000%, 546,927 588,597
06/25/19
Series 94-85, Class K, 6.000%, 525,662 489,849
06/25/09
Total CMOs
(cost $1,083,249) 1,078,446
Asset-Backed Securities - 1.8%
Green Tree Home Improvement Loan Trust,
Series 96-F, Class HIA1, 6.10%, 11/15/27
(cost $396,857) 396,919 397,233
Shares
Short-Term Investments - 22.1%
Other Investment Companies - 12.4%
Calvert Cash Reserves Institutional Prime 921,702 921,702
Fund
Landmark Institutional Liquid Reserves 1,001,085 1,001,085
SSgA Money Market Fund 814,585 814,585
Total Other Investment Companies 2,737,372
Repurchase Agreement - 9.7%
State Street Bank & Trust Co., dated
6/30/97, due 07/01/97,
5.000%, total to be received
$2,142,298 (secured by
$2,230,000 FNMA 5.125%, due 10/25/13
market value $2,185,400),
at cost $2,142,000 2,142,000
Total Short-Term Investments
(cost $4,879,372) 4,879,372
Total Investments - 136.4%
(cost $30,086,827) 30,133,758
Other Assets, less Liabilities - (36.4%) (8,036,993
)
Net Assets - 100.0% $22,096,76
5
Note: Based on the cost of investments of $30,104,405 for federal
income tax purposes at June 30, 1997, the aggregate
gross unrealized appreciation and depreciation was $135,405 and
$106,052, respectively, resulting in net unrealized
appreciation of investments of $36,853.
* TBA securities are purchased on a forward commitment basis with an
approximate principal amount, interest rate,
and no definite maturity date. The actual principal amount, interest
rate, and maturity will be determined upon
settlement. Such securities are subject to market fluctuations
during the period from transaction date to settlement
date. At June 30, 1997, such securities amounted to $8,022,500, or
36.3% of net assets.
+ Certain principal amounts held are segregated as collateral for TBA
securities or futures contracts.
Abbreviations:
PAC: Planned Amortization Class (PAC) tranches provide investors with
scheduled payments (PAC Schedule)
over a range of prepayment speeds (PAC band or range). PAC tranches
typically are combined with
companion tranches that reduce the risk of prepayments varying from a
constant speed or range.
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Assets and Liabilities
June 30, 1997 (unaudited)
Managers Managers Managers
Short Short and Intermediat
e
Government Intermediate Mortgage
Fund Bond Fund Fund
Assets:
Investments at value* $ 5,012,974 $ 15,579,225 $ 25,254,386
Short-term investments at -- 1,029,562 4,879,372
cost and value
Cash 11,096 -- 354
Foreign currency (cost -- 402 --
$382)
Collateral from brokers on -- 182,700 --
securities loaned
Receivable for Fund shares 1,670 12,707 10,178
sold
Receivable for delayed -- -- 4,023,021
delivery investments sold
Dividends and interest 64,529 146,755 161,623
receivable
Prepaid expenses 5,531 7,558 9,324
Total assets 5,095,800 16,958,909 34,338,258
Liabilities:
Payable for Fund shares 2,108 3,820 116,630
repurchased
Payable upon return of -- 182,700 --
securities loaned
Dividends payable to 4,671 -- --
shareholders
Payable for investments -- 175,373 --
purchased
Payable for delayed -- -- 12,071,250
delivery investments
purchased
Variation margin payable 656 -- --
Accrued expenses:
Investment advisory 811 6,796 8,235
and management fees
Administrative fees -- 3,398 4,755
Other 17,696 46,686 40,623
Total liabilities 25,942 418,773 12,241,493
Net Assets $ 5,069,858 $ 16,540,136 $ 22,096,765
Shares outstanding 293,266 851,995 1,452,562
Net asset value, offering
and redemption
price per share $17.29 $19.41 $15.21
Net Assets Represent:
Paid-in capital $ 18,535,152 $ 30,942,522 $ 102,294,824
Undistributed net 1,354 24,753 21,091
investment income
Distributions in excess of -- --
net investment income
Accumulated net realized
loss from investments,
futures, and foreign (13,441,408) (14,434,074) (80,266,081
currency translations )
Net unrealized
appreciation
(depreciation) of
investments,
futures and foreign (25,240) 6,935 46,931
currency translations
Net Assets $ 5,069,858 $ 16,540,136 $ 22,096,765
* Investments at cost $ 5,040,418 $ 15,572,310 $ 25,207,455
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Operations
For the six months ended June 30, 1997 (unaudited)
Managers Managers Managers
Short Short and Intermediat
e
Government Intermediat Mortgage
e
Fund Bond Fund Fund
Investment Income:
Interest income $ 190,402 $ 669,466 $ 801,685
Dividend income -- 787 --
Total investment income 190,402 670,253 801,685
Expenses:
Investment advisory and 12,353 47,552 51,538
management fees
Administrative fees 5,490 23,776 28,632
Custodian fees 6,123 24,715 14,586
Transfer agent fees 5,697 9,250 10,601
Audit fees 7,649 16,673 13,797
Registration fees 4,603 6,257 6,725
Reports to shareholders 140 5,085 10,223
Insurance 603 2,326 2,749
Trustee fees 147 595 602
Miscellaneous expenses 572 1,780 2,268
Total expenses 43,377 138,009 141,721
Less: fee waivers (12,353) -- --
Net expenses 31,024 138,009 141,721
Net investment income 159,378 532,244 659,964
Net Realized and
Unrealized Gain (Loss):
Net realized gain (loss)
on investment
transactions
and futures contracts (49,291) (217,996) 8,694
Net unrealized
appreciation of
investments, futures and
and foreign currency 10,295 104,460 32,011
translations
Net realized and (38,996) (113,536) 40,705
unrealized gain (loss)
Net Increase in Net
Assets Resulting
$ 120,382 $ 418,708 $ 700,669
The accompanying notes are an integral part of these financial
statements.
The Managers Funds
Statements of Changes in Net Assets
Managers
Short
Government
Bond Fund
For the
six months For the
ended
June 30, 1997 year ended
(unaudited) December 31,
1996
Increase (Decrease) in Net Assets
From Operations:
Net investment income $159,378 $333,857
Net realized gain (loss) on
investments, futures
and foreign currency transactions (49,291) (34,469)
Net unrealized appreciation
(depreciation) of
investments, futures and foreign 10,295 (80,145)
currency translations
Net increase in net assets
resulting from operations 120,382 219,243
Distributions to Shareholders:
From net investment income (160,471) (334,814)
From Capital Share Transactions:
Proceeds from sale of shares 1,266,847 4,423,184
Net asset value of shares issued in
connection
with reinvestment of dividends 145,127 270,219
Cost of shares repurchased (2,414,750) (4,301,319)
Net increase (decrease) from capital
share transactions (1,002,776) 392,084
Total increase (decrease) in net assets (1,042,865) 276,513
Net Assets:
Beginning of period 6,112,723 5,836,210
End of period $5,069,858 $6,112,723
End of period undistributed
(overdistributed)
net investment income $1,354 --
Share Transactions:
Sale of shares 73,100 202,248
Shares issued in connection with
reinvestment
of dividends 8,389 11,629
Shares repurchased (139,484) (490,616)
Net decrease in shares (57,995) (276,739)
The accompanying notes are an integral part of these financial
statements.
Managers
Short and
Intermediate
Fund
For the
six months For the
ended
June 30, 1997 year ended
(unaudited) December 31,
1996
Increase (Decrease) in Net Assets
From Operations:
Net investment income $532,244 $1,260,301
Net realized gain (loss) on
investments, futures
and foreign currency transactions (217,996) (122,043)
Net unrealized appreciation
(depreciation) of
investments, futures and foreign 104,460 (185,227)
currency translations
Net increase in net
assets
resulting from 418,708 953,031
operations
Distributions to Shareholders:
From net investment income (495,450) (1,196,229)
From Capital Share Transactions:
Proceeds from sale of shares 3,233,213 8,757,123
Net asset value of shares issued in
connection
with reinvestment of dividends 406,293 872,417
Cost of shares repurchased (9,402,231) (12,247,849)
Net increase (decrease)
from capital
share transactions (5,762,725) (2,618,309)
Total increase (decrease) in net assets (5,839,467) (2,861,507)
Net Assets:
Beginning of period 22,379,603 25,241,110
End of period $16,540,136 $22,379,603
End of period undistributed
(overdistributed)
net investment income $24,753 ($42,324)
Share Transactions:
Sale of shares 166,669 509,053
Shares issued in connection with
reinvestment
of dividends 21,014 45,216
Shares repurchased (486,123) (985,098)
Net decrease in shares (298,440) (430,829)
The accompanying notes are an integral part of these financial
statements.
Managers
Intermediate
Mortgage
Fund
For the
six months For the
ended
June 30, 1997 year ended
(unaudited) December 31,
1996
Increase (Decrease) in Net Assets
From Operations:
Net investment income $659,964 $1,846,805
Net realized gain (loss) on investments,
futures
and foreign currency transactions 8,694 (210,231)
Net unrealized appreciation
(depreciation) of
investments, futures and foreign 32,011 (884,250)
currency translations
Net increase in net
assets
resulting from 700,669 752,324
operations
Distributions to Shareholders:
From net investment income (635,634) (1,797,552)
From Capital Share Transactions:
Proceeds from sale of shares 2,583,998 5,181,660
Net asset value of shares issued in
connection
with reinvestment of dividends 459,655 1,102,190
Cost of shares repurchased (5,857,689) (20,414,820)
Net increase (decrease)
from capital
share transactions (2,814,036) (14,130,970)
Total increase (decrease) in net assets (2,749,001) (15,176,198)
Net Assets:
Beginning of period 24,845,766 40,021,964
End of period $22,096,765 $24,845,766
End of period undistributed
(overdistributed)
net investment income $21,091 ($3,239)
Share Transactions:
Sale of shares 170,662 342,073
Shares issued in connection with
reinvestment
of dividends 30,497 73,023
Shares repurchased (386,951) (1,352,144)
Net decrease in shares (185,792) (937,048)
The accompanying notes are an integral part of these financial
statements.
Managers Short Government Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
For the
six months
ended
June 30, 1997 Year
ended
Decemb
er 31,
(unaudited) 1996 1995(d) 1994 1993 1992*
Net Asset $17.40 $17.76 $16.96 $19.35 $19.86 $20.35
Value,
Beginning of
Period
Income from
Investment
Operations:
Net investment 0.51 1.02 0.98 0.86 1.28 1.26
income
Net realized
and unrealized
gain (loss)
on investments (0.11) (0.37) 0.63 (2.01) (0.53) (0.49)
Total from 0.40 0.65 1.61 (1.15) 0.75 0.77
investment
operations
Less
Distributions
to
Shareholders:
From net (0.51) (1.01) (0.50) (1.17) (1.26) (1.26)
investment
income
In excess of --- --- (0.31) (0.07) --- ---
net investment
income
Total (0.51) (1.01) (0.81) (1.24) (1.26) (1.26)
distributions
to shareholders
Net Asset $17.29 $17.40 $17.76 $16.96 $19.35 $19.86
Value, End of
Period
Total Return + 2.34% (b) 3.89% 9.71% (6.18)% 3.81% 3.90%
Ratio of net 1.13% (a) 1.17% 1.25% 0.97% 0.87% 0.76%
expenses to
average net
assets
Ratio of net
investment
income to
average
net assets 5.81% (a) 5.85% 5.62% 7.06% 8.71% 6.24%
Portfolio 34% (b) 169% 238% 140% 189% 168%
turnover
Net assets at $5,070 $6,113 $5,836 $10,263 $87,874 $142,874
end of period
(000's omitted)
Expense Waiver
(c)
Ratio of total 1.58% (a) 1.62% 1.65% 1.03% 0.96% 0.83%
expenses to
average net
assets
Ratio of net
investment
income to
average
net assets 5.36% (a) 5.40% 5.22% 7.00% 8.62% 6.17%
(a) Annualized.
(b) Not annualized.
(c) Ratio information assuming no waiver of investment advisory and
management fees and/or administrative fees in effect for the
periods presented (See Note 2).
(d) Calculated using the weighted average shares outstanding during
the year.
+ The total return would have been lower had certain expenses not
been reduced during the periods shown.
* Audited by prior auditors.
Managers Short and Intermediate Bond Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
For the
six months
ended
June 30, Year
1997 ended
Decembe
r 31,
(unaudited) 1996 1995 1994 1993 1992*
Net Asset Value, $19.45 $19.67 $18.06 $21.23 $20.89 $20.33
Beginning of
Period
Income from
Investment
Operations:
Net investment 0.54 1.03 1.28 1.45 1.38 1.69
income
Net realized and
unrealized gain
(loss)
on investments (0.08) (0.24) 1.45 (3.17) 0.34 0.57
Total from 0.46 0.79 2.73 (1.72) 1.72 2.26
investment
operations
Less
Distributions to
Shareholders:
From net (0.50) (1.01) (1.09) (1.37) (1.38) (1.70)
investment
income
In excess of net --- --- (0.03) (0.08) --- ---
investment
income
Total (0.50) (1.01) (1.12) (1.45) (1.38) (1.70)
distributions to
shareholders
Net Asset Value, $19.41 $19.45 $19.67 $18.06 $21.23 $20.89
End of Period
Total Return 2.35% (b 4.15% 15.57% (8.37)% 8.49% 11.55%
)
Ratio of net 1.45% (a 1.45% 1.50% 1.05% 0.94% 0.86%
expenses to )
average net
assets
Ratio of net
investment
income to
average
net assets 5.60% (a 5.43% 6.52% 7.11% 6.58% 8.33%
)
Portfolio 51% (b 96% 131% 57% 126% 117%
turnover )
Net assets at $16,540 $22,380 $25,241 $30,956 $112,228 $72,031
end of period
(000's omitted)
(a) Annualized.
(b) Not annualized.
* Audited by prior auditors.
Managers Intermediate Mortgage Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
For the
six months
ended
June Yea
30, r
1997 end
ed
Dec
emb
er
31,
(una 199 1995 1994 1993 199
udit 6 2*
ed)
Net Asset Value, $15. $15 $14.2 $20.65 $21.13 $21
Beginning of Period 17 .54 0 .77
Income from
Investment
Operations:
Net investment 0.44 0.8 0.93 1.52 1.94 2.5
income 7 8
Net realized and
unrealized gain
(loss)
on investments 0.02 (0. 1.45 (6.56) 0.44 (0.
38) 40)
Total from 0.46 0.4 2.38 (5.04) 2.38 2.1
investment 9 8
operations
Less Distributions
to Shareholders:
From net investment (0.4 (0. (1.03 (1.41) (2.28) (2.
income 2) 86) ) 40)
From net realized --- --- --- --- (0.51) (0.
gain on investments 42)
In excess of net --- --- --- --- (0.07) ---
investment income
In excess of net --- --- (0.01 --- --- ---
realized gain on )
investments
Total distributions (0.4 (0. (1.04 (1.41) (2.86) (2.
to shareholders 2) 86) ) 82)
Net Asset Value, End $15. $15 $15.5 $14.20 $20.65 $21
of Period 21 .17 4 .13
Total Return 3.09 (c 3.3 17.27 (25.00) + 11.45% + 10. +
% ) 3% % % 50%
Ratio of net 1.24 (b 1.1 1.17% 0.85% 0.75% 0.7
expenses to average % ) 9% 9%
net assets
Ratio of net
investment income to
average
net assets 5.76 (b 5.7 6.33% 8.37% 8.90% 11.
% ) 8% 30%
Portfolio turnover 223% (c 232 506% 240% 253% 278
) % %
Net assets at end of $22, $24 $40,0 $55,986 $271,86 $11
period (000's 097 ,84 22 1 5,8
omitted) 6 85
Expense Waiver (a)
Ratio of total N/A N/A N/A 0.92% 0.82% 0.8
expenses to average 4%
net assets
Ratio of net
investment income to
average
net assets N/A N/A N/A 8.30% 8.83% 11.
25%
(a) Ratio information assuming no waiver of investment advisory and
management fees and/or administrative fees in effect for the
year presented, if applicable. (See Note 2).
(b) Annualized.
(c) Not annualized.
+ The total return would have been lower had certain expenses not
been reduced during the year.
* Audited by prior auditors.
The Managers Funds
Notes to Financial Statements
June 30, 1997 (unaudited)
(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,
registered under the Investment Company Act of 1940, as amended.
Currently the Trust is comprised of 10 investment series. Included in
this report are Managers Short Government Fund ("Short Government"),
Managers Short and Intermediate Bond Fund ("Short and Intermediate")
and Managers Intermediate Mortgage Fund ("Intermediate Mortgage"),
collectively the "Funds."
The Funds' financial statements are prepared in accordance with
generally accepted accounting principles, which require the use of
management's estimates. The following is a summary of significant
accounting policies followed by the Funds:
(a) Valuation of Investments
Fixed income securities are valued based upon valuations furnished by
independent pricing services that utilize matrix systems which reflect
such factors as security prices, yields, maturities, and ratings, and
are supplemented by dealer and exchange quotations. Exchange-traded
equity securities are valued at the last quoted sales price, or in the
absence of any sales, on the basis of the last quoted bid price. Over-
the-counter securities for which market quotations are readily
available are valued at the last quoted bid price. Short-term
investments, having a remaining maturity of 60 days or less, are
valued at amortized cost which approximates market. Securities for
which market quotations are not readily available are valued at fair
value, as determined in good faith and pursuant to procedures
established by the Board of Trustees.
Investments in certain mortgage-backed, stripped mortgage-backed and
other debt securities, including derivative securities, not traded on
an organized market are valued on the basis of valuations provided by
dealers or by a pricing service which uses information with respect to
transactions in such securities, various relationships between
securities and yield to maturity in determining value.
(b) Security Transactions
Security transactions are accounted for as of trade date. Gains and
losses on securities sold are determined on the basis of identified
cost.
(c) Investment Income and Expenses
Interest income is determined on the basis of interest accrued.
Discounts and premiums are amortized using the effective interest
method when required for Federal income tax purposes. Dividend income
is recorded on the ex-dividend date. Other income and expenses are
recorded on an accrual basis. Expenses which cannot be directly
attributed to a particular fund are apportioned among the Funds in the
Trust based upon their average net assets.
(d) Dividends and Distributions
Dividends resulting from net investment income normally will be
declared daily for Short Government and monthly for Short and
Intermediate Bond and Intermediate Mortgage. These dividends normally
will be payable on the third to the last business day of the month.
Distributions of capital gains to shareholders will only be made to
the extent that net capital gains realized for tax purposes exceed the
Fund's capital loss carryovers.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for mortgage-backed securities, option
transactions, futures, market discount and losses deferred due to wash
sales. Permanent book and tax basis differences, if any, relating to
shareholder distributions will result in reclassifications to paid-in
capital.
(e) Repurchase Agreements
Each Fund may enter into repurchase agreements provided that the value
of the underlying collateral, including accrued interest, will be
equal to or exceed the value of the repurchase agreement during the
term of the agreement. The underlying collateral for all repurchase
agreements is held in safekeeping by the Fund's custodian or at the
Federal Reserve Bank.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings commence with respect to the seller of the
security, realization of the collateral by that Fund may be delayed or
limited.
(f) Federal Taxes
Each Fund intends to comply with the requirements under Subchapter M
of the Internal Revenue Code of 1986, as amended, and to distribute
substantially all of its taxable income and gains to its shareholders
and to meet certain diversification and income requirements with
respect to investment companies. Therefore, no provision for federal
income or excise tax is included in the accompanying financial
statements.
(g) Capital Loss Carryover
As of December 31, 1996, the Funds had accumulated net realized
capital loss carryovers from securities transactions for Federal
income tax purposes as shown in the following chart. These amounts may
be used to offset realized capital gains, if any, through December 31,
2004.
Capital Loss
FundAmountExpires
Short Government$1,580,1462001
11,764,8162002
48,4842004
Short and Intermediate
Bond1,241,4531997
2,885,4401998
2,344,8322002
7,662,2532003
64,3552004
Intermediate Mortgage59,251,2052002
20,796,3332003
224,0352004
(h) Capital Stock
The Trust's Declaration of Trust authorizes for each series the
issuance of an unlimited number of shares of beneficial interest,
without par value. Each Fund records sales and repurchases of its
capital stock on the trade date. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
(i) Delayed Delivery Transactions
The Funds may purchase or sell securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more
after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid
for are fixed at the time the transaction is negotiated.
The Funds may receive compensation for interest forgone on entering
into delayed delivery transactions. The Funds identify cash or
securities as segregated in its custodial records with a value at
least equal to the amount of the forward purchase commitment.
(j) Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. The
value of investments, assets and liabilities denominated in currencies
other than U.S. dollars are translated into U.S. dollars based upon
current foreign exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars
based on currency exchange rates prevailing on the respective dates of
such transactions. Net realized and unrealized gain (loss) on foreign
currency transactions will represent: (1) foreign exchange gains and
losses from the sale and holdings of foreign currencies; (2) gains and
losses between trade date and settlement date on investment securities
transactions and forward foreign currency exchange contracts; and (3)
gains and losses from the difference between amounts of interest and
dividends recorded and the amounts actually received.
In addition, the Funds do not isolate that portion of the results of
operations resulting from changes in exchange rates from the
fluctuations resulting from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
(2) Agreements and Transactions with Affiliates
The Managers Funds, L.P. (the "Investment Manager") provides or
oversees investment advisory and management services to the Funds
under Management Agreements with each Fund. The Investment Manager
selects portfolio managers for each Fund (subject to Trustee
approval), and monitors the portfolio manager's investment programs
and results. Each Fund's investment portfolio is managed by a
portfolio manager who serves pursuant to a Portfolio Management
Agreements with the Investment Manager and the Fund. Certain trustees
and officers of the Funds are officers of the Investment Manager.
Investment advisory and management fees are paid directly by each Fund
to The Managers Funds, L.P. based on each Fund's average daily net
assets. The annual investment advisory and management fee rates and
waivers as a percentage of average daily net assets for the six months
ended June 30, 1997, were as follows:
Investment Advisory and
Management Fees .
Actual
Maximum feefee after
Fundbefore waiverswaivers(a)
Short Government 0.45%0.20%
Short and Intermediate Bond0.50N/A
Intermediate Mortgage0.45N/A
(a) Reflects a voluntary fee waiver by the Investment Manager which
may be modified or terminated at any time at the sole discretion of
the Investment Manager.
The Trust has adopted an Administrative and Shareholder Servicing
Agreement. The Managers Funds, L.P. serves as each Fund's
administrator (the "Administrator") and is responsible for all aspects
of managing the Funds' operations, including administration and
shareholder services to each Fund, its shareholders, and certain
institutions, such as bank trust departments, broker-dealers and
registered investment advisers, that advise or act as an intermediary
with the Funds' shareholders.
For the six months ended June 30, 1997, Short and Intermediate Bond
and Intermediate Mortgage each paid a fee to the Administrator at the
rate of 0.25% per annum of each Fund's average daily net assets. For
this period, the Administrator was due a fee from Short Government of
0.20% per annum of the Fund's average daily net assets, all of which
was waived. This waiver may be modified or terminated at any time at
the sole discretion of the Administrator. The fees paid to the
Administrator are established by the Trustees and may not exceed the
annual rate of 0.25% of each Fund's average daily net assets.
An aggregate annual fee of $10,000 is paid to each outside Trustee for
serving as a Trustee of the Trust. In addition, these Trustees receive
meeting fees of $750 for each in-person meeting attended, and $200 for
participation in any telephonic meetings. The Trustee fee expense
shown in the financial statements represents each Fund's allocated
portion of the total fees.
(3) Purchases and Sales of Securities
Portfolio purchases, and sales or maturities, of long-term securities,
U.S. Government securities and futures contracts during the six months
ended June 30, 1997 were as follows:
Long-term U.S. Government
Securities Securities Only .
FundPurchasesSalesPurchasesSales
Short
Government $1,855,503$1,907,149$1,591,142$1,896,163
Short and
Intermediate
Bond $9,564,239$15,116,069$3,053,026$9,773,490
Intermediate
Mortgage $54,505,700$54,063,279$4,815,070$3,266,659
Long Futures Contracts Short Futures Contracts
OpenedClosedOpenedClosed
Short Government$1,236,234$1,238,625 - -
Intermediate Mortgage - - -$1,084,375
(4) Forward Commitments
Certain transactions, such as futures and forward transactions, dollar
roll agreements, or purchases of when-issued or delayed delivery
securities may have a similar effect on a Fund's net asset value as if
the Fund had created a degree of leverage in its portfolio. However,
if a Fund enters into such a transaction, the Fund will establish a
segregated account with its Custodian in which it will maintain cash,
U.S. government securities or other liquid securities equal in value
to its obligations in respect to such transaction. Securities and
other assets held in the segregated account may not be sold while the
transaction is outstanding, unless other suitable assets are
substituted.
(a) Forward Foreign Currency Contracts
During the six months ended June 30, 1997, Short and Intermediate Bond
invested in forward foreign currency exchange contracts. These
investments may involve greater market risk than the amounts disclosed
in the Fund's financial statements.
A forward foreign currency exchange contract is an agreement between a
Fund and another party to buy or sell a currency at a set price at a
future date. The market value of the contract will fluctuate with
changes in currency exchange rates. The contract is marked-to-market
daily, and the change in market value is recorded as an unrealized
gain or loss. Gain or loss on the purchase or sale of contracts having
the same settlement date, amount and counterparty is realized on the
date of offset, otherwise gain or loss is realized on settlement date.
The Funds may invest in non-U.S. dollar denominated instruments
subject to limitations, and enter into forward foreign currency
exchange contracts to facilitate transactions in foreign securities
and to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and such foreign
currency.
Risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
There were no open forward foreign currency exchange contracts at June
30, 1997.
(b) Futures Contracts
A futures contract is an agreement between two parties to buy and sell
a financial instrument at a set price on a future date. Upon entering
into such a contract the Fund is required to pledge to the broker an
amount of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded.
Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as "variation
margin" and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time
it was opened and the value of the contract at the time it was closed.
There are several risks in using futures contracts. Futures prices
may not correlate perfectly with the behavior of cash market prices of
the instrument being hedged so that even a correct forecast of general
price trends may not result in a successful transaction, or the Fund's
portfolio manager may be incorrect in its expectation of future
prices. There is also a risk that a secondary market in the
instruments that the Fund holds may not exist or may not be adequately
liquid to permit the Fund to close out positions when it desires to do
so.
A Fund may use futures contracts as a hedge to protect the value of
its portfolio against changes in prices of the financial instruments
in which it may invest. During the six months ended June 30, 1997,
Intermediate Mortgage and Short Government each entered into futures
contracts to manage the Fund's duration to that of its respective
benchmark index.
(c) Dollar Roll Agreements
Short Government and Intermediate Mortgage may enter into dollar roll
agreements whereby the Fund sells securities and agrees to repurchase
them or substantially similar securities, at a mutually agreed upon
date and price. Dollar roll agreements involve the risk that the
market value of the securities retained in lieu of sale by the Fund
may decline below the price of the securities the Fund has sold but is
obligated to repurchase.
In the event the buyer of the securities under a dollar roll agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities, and the
Fund's use of the proceeds of the dollar roll agreement may
effectively be restricted pending such decision.
(5) Risks Associated with Collateral Mortgage Obligations ("CMOs") and
Indexed Securities
The net asset values of the Funds may be sensitive to interest rate
fluctuations because the Funds may hold several instruments, including
CMOs, inverse floaters, super floaters and other derivatives, whose
values can be significantly impacted by interest rate movements. CMOs
are obligations collateralized by a portfolio of mortgages or mortgage-
related securities. Payments of principal and interest on the mortgage
are passed through to the holder of the CMOs on the same schedule as
they are received from mortgagees, although certain classes of CMOs
have priority over others with respect to the receipt of prepayments
on the mortgages. Therefore, the investment in CMOs may be subject to
a greater or lesser risk of prepayment than other types of mortgage-
related securities. In another version of mortgage-related securities,
all interest payments go to one class of holders-"Interest Only" or
"IO"-and all of the principal goes to a second class of holders-
"Principal Only" or "PO." The yield to maturity on an IO is extremely
sensitive to the rate of principal prepayments on the related
underlying mortgage assets and a rapid rate of principal prepayments
may have an adverse effect on yield to maturity. If greater than
anticipated prepayments of principal are experienced, the Fund may
fail to fully recoup its investment. Conversely, if less than
anticipated prepayments of principal occur, the yield on a PO class
could be materially affected.
CMOs may have a fixed or variable rate of interest, including inverse
floating rate securities on which the interest rates typically decline
as market rates increase and increase as market values decline.
Accordingly, such instruments can be expected to be more volatile than
fixed rate or other variable rate securities.
The Funds may also invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments.
Indexed securities may be more volatile than the reference instrument
itself, but any loss is limited to the amount of the original
investment.
(6) Contingencies
Two purported class action lawsuits have been filed in the federal
district courts of Connecticut and Minnesota against Managers
Intermediate Mortgage Fund and Managers Short Government Fund; the
Investment Manager; the former portfolio manager; and certain other
affiliates and affiliated individuals. The plaintiffs allege that,
from May 1, 1992 to June 13, 1994 and from May 10, 1993 to September
12, 1994, for the two Funds, respectively, defendants violated the
Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, and common law by, among other things,
failing to disclose adequately the Funds' investment strategies and
risks associated with an investment in the Funds. Plaintiffs allege
that they suffered unspecified damages based on losses incurred over
the course of the respective class periods.
The Managers Funds, its affiliates and affiliated individuals, as well
as certain of the other defendants, have filed motions to dismiss
these actions, on the basis that, among other grounds, the relevant
prospectus fully disclosed the Funds' respective investment strategies
and all material risks related to an investment in these Funds,
including, but not limited to, the risk of loss of principal. There
has been no decision yet from the court relating to Managers
Intermediate Mortgage Fund motion. 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 court has
preliminarily approved the parties' agreement to settle all claims by
the purported class. However, the settlement is subject to certain
conditions such as a percentage of class members participating in the
settlement and final court approval. 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.
Where Leading Money Managers Converge
Fund Distributor
The Managers Funds, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
Custodian
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Transfer Agent
Boston Financial Data Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800)252-0682
The Managers Funds
Equity Funds:
INCOME EQUITY FUND
Scudder, Stevens & Clark, Inc.
Spare, Kaplan, Bischel & Associates
CAPITAL APPRECIATION FUND
Essex Investment Management Company, 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.
Income Funds:
MONEY MARKET FUND
J.P. Morgan
SHORT GOVERNMENT FUND
Jennison Associates Capital Corp.
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE FUND
Jennison Associates Capital Corp.
BOND FUND.
Loomis, Sayles & Company, Inc.
GLOBAL BOND FUND
Rogge Global Partners
This report is prepared for the information of shareholders. It is
authorized for distribution to prospective investors only when
preceded by an effective prospectus.
