<PAGE>
MANAGERS SHORT GOVERNMENT FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
- ------------------------------------------
SEMI-ANNUAL REPORT
June 30, 1998
- ------------------------------------------
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
MANAGERS SHORT GOVERNMENT FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
SEMI-ANNUAL REPORT
JUNE 30, 1998
(unaudited)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
BEGIN
ON PAGE
-----
<S> <C>
President's Message.................................. 1
The Managers Funds Performance....................... 3
Complete performance table for all of
The Managers Funds as of June 30, 1998
Schedules of Portfolio Investments................... 4
Detailed portfolio listings by
security type and industry sector,
as valued at June 30, 1998
Statements of Assets and Liabilities................. 6
Fund balance sheets, Net Asset Value
(NAV) per share computation and
cumulative undistributed amounts
Statements of Operations............................. 7
Detail of sources of income, fund
expenses, and realized and unrealized
gains (losses) during the period
Statements of Changes in Net Assets.................. 8
Detail of changes in fund assets and
distributions to shareholders for
the past two periods
Financial Highlights................................. 9
Historical net asset values,
distributions, total returns, expense
ratios, turnover ratios and net assets
Notes to Financial Statements........................ 11
Accounting and distribution policies,
details of agreements and transactions
with fund management and description of
certain investment risks
</TABLE>
[FN]
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.
</FN>
<PAGE>
President's Message
- ----------------------------------------------------------
[PHOTO OF PRESIDENT]
Dear Fellow Shareholder:
The first half of 1998 was again a prosperous period for the U.S.
economy and most financial assets. Despite continuing economic and
financial upheaval in the Far East, the U.S. economy has continued to grow
and has even accelerated in 1998. Gross domestic product (GDP) grew at an
annual rate of 5.5% in the first quarter, having accelerated from a 3.7%
rate of growth during the fourth quarter of 1997. Statistics indicate that
second quarter growth may be stronger. Consumer spending, which makes up
approximately two thirds of the nation's economic activity and is thus an
important driver of GDP, grew at an annual rate of 6% during the first
quarter and continued increasing through May. Unemployment remains
extremely low at 4.3%, the annual rate of inflation is holding steady below
2% and personal income continues to rise. In his testimony to U.S.
Congress, Federal Reserve Chairman Alan Greenspan declared that the
current economic performance is as impressive as any I have witnessed in
my near half-century of daily observation of the American Economy. Thus,
it is not surprising that the Conference Board's Consumer Confidence Index
has risen to its highest level since 1969.
Because inflation has remained extremely moderate, and there is no
hard evidence to indicate any acceleration going forward, interest rates
have gradually fallen over the past six months. While short-term interest
rates have dropped slightly, long-term interest rates have fallen even more,
causing what financial practitioners refer to as a flattening of the yield
curve. What this means is that the difference (spread) in income yield
between long-term bonds, which generally pay a higher income yield than do
short-term securities, is much less than it has been in the recent past.
In fact, on June 30, 1998 the yield on 10-year Treasury bonds was only 0.08%
higher than the yield on one-year Treasury bills. For comparison, the
difference between 10-year and one-year Treasury yields in June 1997 was
0.84%, and in June 1994 the spread was 1.83%. The extremely flat yield
curve is the result of investors' expectations that the rate of inflation
will remain stable.
The historically low interest rates, the flat yield curve and
relatively tight yield spreads between investment grade bonds have made it
very challenging for portfolio managers to add measurable value above the
benchmark. The true value added dur-
1
<PAGE>
- -----------------------------------------------------------------------
ing these periods is in the positioning of the portfolios for the
inevitable changes in the environment going forward.
Neither of the Funds presented in this report outperformed its
benchmark or peers during the six months ended June 30, 1998. Although
this is unsatisfactory, it is not unexpected, and we do not believe that
it is a result of poor portfolio management. Rather, it is the result of
the decreasing size of both of the Funds and the commensurate increase in
the Funds' expense ratios. At The Managers Funds, we are making every
effort to reduce the expenses of each of our funds. In the case of the
Managers Short Government Fund, we have been and will continue to waive
all of our management and administrative fees. The Fund continues to pay
the sub-advisor management fees. In the case of the Managers Intermediate
Mortgage Fund, as of July 1, 1998 we are waiving The Managers Funds'
portion of the management fees.
For the six months ending June 30, 1998, Managers Short Government
Fund returned 2.4%, while the Merrill Lynch 1-2.99 year Treasury Index
returned 3.0%. The portfolio was structured very similarly with the
benchmark in composition and maturity throughout the period.
For the six months ending June 30, 1998, Managers Short Government
Fund returned 2.4%, while the Merrill Lynch 1-2.99 year Treasury Index
returned 3.0%. The portfolio was structured very similarly with the
benchmark in composition and maturity throughout the period.
For the six months ending June 30, 1998, Managers Intermediate
Mortgage Fund returned 2.8%, while the Salomon Brothers Mortgage Index
returned 3.4%. Due to a significant outflow of cash from the Fund on the
last day of the period, the schedule of investments as of June 30 appears
irregularly over-invested. This is not a tactical allocation or the use
of leverage, but rather a temporary aberration caused by the mid-month
settlement of certain mortgage securities.
As always, should you have any questions on this report, please feel
free to contact us at 1-800-835-3879.
We thank you for your continued investment in The Managers Funds.
Sincerely,
/S/ ROBERT P. WATSON
Robert P. Watson
President
2
<PAGE>
THE MANAGERS FUNS PERFORMANCE (unaudited)
All periods ending June 30, 1998
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
----------------------------
MORNING-
SIX 1 3 5 10 SINCE INCEPTION STAR
MONTHS YEAR YEARS YEARS YEARS INCEPTION DATE RATING
------ ----- ----- ----- ----- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Funds:
Income Equity Fund 10.99% 22.39% 24.03% 18.87% 15.20% 15.76% Oct. '84 ****
Capital
Appreciation Fund 33.40% 43.11% 24.19% 20.02% 16.85% 17.07% Jun. '84 ****
Special
Equity Fund 5.85% 19.85% 24.91% 18.90% 17.94% 16.86% Jun. '84 ****
International
Equity Fund 17.38% 15.33% 16.54% 16.18% 12.86% 14.87% Dec. '85 ****
Emerging Markets
Equity Fund -- -- -- -- -- (15.50%)Feb. '98 NA
Income Funds:
Short
Government Fund 2.40% 5.62% 5.16% 3.29% 5.15% 5.23% Oct. '87 **
Short & Intermediate
Bond Fund 2.49% 6.02% 6.23% 4.34% 6.97% 8.24% Jun. '84 ***
Intermediate
Mortgage Fund 2.81% 7.94% 6.55% 0.39% 6.60% 7.16% May '86 *
Bond Fund 4.83% 11.34% 9.82% 9.04% 10.18% 11.25% Jun. '84 ****
Global Bond Fund 2.68% 4.55% 2.90% -- -- 5.47% Mar. '94 *
Money Market Fund 2.60% 5.33% 5.31% 4.66% 5.31% 5.85% Jun. '84 NA
</TABLE>
- ----------------------------------------------------------------------------
[FN]
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS AND
SHARE PRICE WILL FLUCTUATE. THE REDEMPTION PRICE OF A MUTUAL FUND MAY BE
MORE OR LESS THAN THE PURCHASE PRICE. FOR ADDITIONAL OR MORE RECENT
INFORMATION ON ANY OF THE MANAGERS FUNDS, PLEASE CALL (800) 835-3879, OR
YOUR INVESTMENT ADVISOR. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST.
* Total returns equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. Returns
are net of fees and may reflect fee waivers or the reimbursement of
fund expenses as described in the prospectus. 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 6/30/98 and are subject to change every month. The ratings are
by asset class and are calculated rom 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 againt 2,564, 1,481 and 726 equity funds, the
International Equity Fund was rated against 788, 348 and 110
international equity funds, and each of the Income Funds was rated
against 1,478, 900 and 347 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.
</FN>
3
<PAGE>
- -------------------------------------------------------------------------
MANAGERS SHORT GOVERNMENT FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1998 (unaudited)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
U. S. TREASURY NOTES - 81.4%
0.000%*, 08/15/99 (cost $1,034,086) $1,100,000+ $1,034,957
----------
FEDERAL NATIONAL MORTGAGE
CORPORATION - 11.6%
Federal National Mortgage Corporation,
Series 93-32, Class PD, PAC-1,
5.000%, 11/25/19
(cost $147,054) 148,189 147,539
----------
ASSET-BACKED SECURITIES - 0.6%
Green Tree Home Improvement Loan
Trust, Series 96-F, Class HIA1,
6.100%, 11/15/27
(cost $8,130) 8,131 8,226
----------
<CAPTION>
- ---------------------------------------------------------------------------
SHARES
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 16.7%
JPM Prime Money Market Fund, 5.47%**
(cost $211,669) 211,669 211,669
----------
TOTAL INVESTMENTS - 110.4%
(cost $1,400,939) 1,402,391
OTHER ASSETS, LESS LIABILITIES - (10.4)% (131,654)
----------
NET ASSETS - 100.0% $1,270,737
==========
</TABLE>
[FN]
Note: Based on the cost of investments of $1,400,939 for federal income tax
purposes at June 30, 1998, the aggregate gross unrealized
appreciation was $1,492.
+ Certain principal amounts held are segregated as collateral against
open futures contracts.
* Zero coupon security.
** Yield shown for this investment company represents the June 30, 1998,
seven-day average yield, which refers to the sum of the previous
seven days' dividends paid, expressed as an annual percentage.
ABBREVIATIONS USED IN THIS REPORT:
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.
</FN>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
LONG FUTURES CONTRACTS OUTSTANDING AT JUNE 30, 1998:
- --------------------------------------------------------------------------
UNREALIZED
NUMBER OF FACE APPRECIATION
FUND CONTRACTS DESCRIPTION AMOUNT (DEPRECIATION)
- ---- --------- ----------- ------ --------------
<S> <C> <C> <C> <C>
Short 2 Two-Year U.S. $ 400,000 $500
Government Treasury Notes
Intermediate 25 Two-Year U.S. 2,500,000 (195)
Mortgage Treasury Notes
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
4
<PAGE>
- --------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Federal National Mortgage
Association (FNMA) - 207.6%
7.00%, TBA** $6,300,000 $6,384,656
6.50%, 09/01/10 3,482,899 3,516,614
6.50%, TBA** 10,000,000 10,051,170
6.50%, TBA** 6,000,000 6,037,500
-----------
TOTAL FNMAS
(cost $25,872,362) 25,989,940
-----------
U.S. GOVERNMENT AGENCY OBLIGATION - 35.9%
Federal Home Loan Mortgage Corporation,
9.00%, 06/01/10 329,346 341,324
Federal Home Loan Mortgage Corporation,
Series 1561, Class ZA, PAC-1,
6.000%, 01/15/05 4,161,195 4,153,372
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost $4,509,582) 4,494,696
-----------
U.S. TREASURY OBLIGATIONS - 33.1%
Note, 7.75%, 01/31/00 3,570,000+ 3,688,238
Note Principal Strip, 0.00%***,
11/15/01 545,000 452,977
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $4,146,956) 4,141,215
-----------
ASSET-BACKED SECURITIES - 0.3%
Green Tree Home Improvement Loan
Trust, Series 96-F, Class HIA1,
6.10%, 11/15/27
(cost $33,771) 33,776 34,169
-----------
<CAPTION>
- ---------------------------------------------------------------------------
SHARES VALUE
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 9.4%
OTHER INVESTMENT COMPANIES - 3.1%
JPM Prime Money Market Fund, 5.47%* 385,713 385,713
-----------
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- ---------------------------------------------------------------------------
COMMERCIAL PAPER - 6.3%
Clipper, 5.58%, 07/16/98 $800,000 798,140
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,023,493) 1,183,853
-----------
TOTAL INVESTMENTS - 286.4%
(cost $35,746,524) 35,843,873
OTHER ASSETS, LESS LIABILITIES - (186.4)% (23,328,045)
-----------
NET ASSETS - 100.0% $12,515,828
===========
</TABLE>
[FN]
Note: Based on the cost of investments of $35,746,524 for federal income
tax purposes at June 30, 1998, the aggregate gross unrealized
appreciation and depreciation was $117,977 and $20,628, respectively,
resulting in net unrealized appreciation of investments of $97,349.
* Yield shown for this investment company represents the June 30, 1998,
seven-day average yield, which refers to the sum of the previous
seven days' dividends paid, expressed as an annual percentage.
** 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, 1998, such securities amounted to $22,473,326, or
180% of net assets.
*** Zero coupon security.
+ Certain principal amounts held are segregated as collateral against
open futures contracts.
The accompanying notes are an integral part of these financial statements.
</FN>
5
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS MANAGERS
SHORT INTERMEDIATE
GOVERNMENT MORTGAGE
FUND FUND
---------- ------------
<S> <C> <C>
ASSETS:
Investments at value* $ 1,402,391 $ 35,843,873
Cash 85,305 --
Foreign currency -- --
Receivable for investments sold -- 6,404,519
Receivable for Fund shares sold -- 2,500
Interest receivable 1,155 239,822
Variation margin receivable 219 --
Prepaid expenses 5,407 8,483
---------- ------------
Total assets 1,494,477 42,499,197
---------- ------------
LIABILITIES:
Payable for Fund shares repurchased 111,153 1,007,948
Dividends payable to shareholders 820 --
Payable for investments purchased 94,046 28,932,842
Variation margin payable -- 3,516
Accrued expenses:
Investment advisory and management fees 713 6,297
Administrative fees -- 3,499
Other 17,008 29,267
---------- ------------
Total liabilities 223,740 29,983,369
---------- ------------
NET ASSETS $ 1,270,737 $ 12,515,828
========== ============
Shares outstanding 73,211 804,345
========== ============
Net asset value, offering and
redemption price per share $17.36 $15.56
===== =====
NET ASSETS REPRESENT:
Paid-in capital $ 14,715,791 $ 92,202,108
Undistributed net investment income 98 23,390
Accumulated net realized loss from
investments and futures contracts (13,447,104) (79,806,824)
Net unrealized appreciation of
investments and futures contracts 1,952 97,154
--------- ------------
NET ASSETS $ 1,270,737 $ 12,515,828
========== ============
* Investments at cost $ 1,400,939 $ 35,746,524
========== ============
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
6
- ---------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF OPERATIONS
For the six months ended June 30, 1998 (unaudited)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managers Managers
Short Intermediate
Government Mortgage
Fund Fund
---------- ------------
<S> <C> <C>
INTEREST INCOME: $ 151,554 $ 631,304
---------- ------------
EXPENSES:
Investment advisory and management fees 11,005 44,816
Administrative fees 4,891 24,898
Custodian fees 3,551 8,908
Audit fees 7,151 12,401
Transfer agent fees 9,570 17,174
Registration fees 5,232 8,612
Insurance 252 1,072
Legal fees 128 568
Trustee fees 53 285
Miscellaneous expenses 783 2,245
---------- ------------
Total expenses before reduction/waiver 42,616 120,979
Less: fee waiver (11,005) --
Expense reduction (2) (194)
---------- ------------
Net expenses 31,609 120,785
---------- ------------
Net investment income 119,945 510,519
---------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investment
transactions and futures contracts 9,694 333,179
Net unrealized depreciation of
investments and futures contracts (13,205) (275,975)
---------- ------------
Net realized and unrealized gain (loss) (3,511) 57,204
---------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 116,434 $ 567,723
========== ============
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
[FN]
7
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS SHORT MANAGERS INTERMEDIATE
GOVERNMENT FUND MORTGAGE FUND
----------------------- ---------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997 (unaudited) DECEMBER 31, 1997
----------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
FROM OPERATIONS:
Net investment
income $ 119,945 $ 291,209 $ 510,519 $ 1,297,173
Net realized gain
(loss) on investments
and futures contracts 9,694 (65,047) 333,179 108,768
Net unrealized
appreciation
(depreciation) of
investments and
futures contracts (13,205) 50,692 (275,975) 358,209
--------- ---------- ---------- -----------
Net increase in net
assets resulting
from operations 116,434 276,854 567,723 1,764,150
--------- ---------- ---------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (119,976) (293,161) (497,452) (1,260,846)
--------- ---------- ---------- -----------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from sale
of shares 681,225 2,165,355 1,254,987 4,166,005
Net asset value of
shares issued in
connection with
reinvestment of
dividends 112,709 271,442 388,873 941,342
Cost of shares
repurchased (4,593,610) (3,459,258) (10,798,632) (8,856,088)
--------- ---------- ---------- -----------
Net decrease from
capital share
transactions (3,799,676) (1,022,461) (9,154,772) (3,748,741)
---------- ---------- ---------- -----------
Total decrease in
net assets (3,803,218) (1,038,768) (9,084,501) (3,245,437)
NET ASSETS:
Beginning of
period 5,073,955 6,112,723 21,600,329 24,845,766
---------- ---------- ----------- -----------
End of period $ 1,270,737 $ 5,073,955 $ 12,515,828 $ 21,600,329
========== ========== =========== ===========
End of period
undistributed
net investment
income $ 98 $ 129 $ 23,390 $ 10,323
========== =========== =========== ==========
- ---------------------------------------------------------------------------
SHARE TRANSACTIONS:
Sale of shares 39,177 124,860 80,525 273,349
Shares issued in
connection with
reinvestment
of dividends 6,492 15,680 25,077 61,782
Shares repurchased (264,546) (199,713) (693,502) (581,240)
---------- ---------- ----------- ----------
Net decrease in
shares (218,877) (59,173) (587,900) (246,109)
========== ========== =========== ==========
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
8
<PAGE>
- ---------------------------------------------------------------------------
MANAGERS SHORT GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each period
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------
(UNAUDITED) 1997 1996 1995(B) 1994 1993
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.37 $17.40 $17.76 $16.96 $19.35 $19.86
------- ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.42 0.97 1.02 0.98 0.86 1.28
Net realized and
unrealized gain (loss)
on investments (0.01) (0.02) (0.37) 0.63 (2.01) (0.53)
------- ----- ----- ----- ----- -----
Total from investment
operations 0.41 0.95 0.65 1.61 (1.15) 0.75
------ ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
TO SHAREHOLDERS:
From net investment
income (0.42) (0.98) (1.01) (0.50) (1.17) (1.26)
In excess of net
investment income --- --- --- (0.31) (0.07) ---
------ ----- ----- ----- ----- -----
Total distributions
to shareholders (0.42) (0.98) (1.01) (0.81) (1.24) (1.26)
------ ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD $17.36 $17.37 $17.40 $17.76 $16.96 $19.35
====== ===== ===== ===== ===== =====
- ---------------------------------------------------------------------------
Total Return (c) 2.40%(e) 5.55% 3.89% 9.71% (6.18)% 3.81%
===========================================================================
Ratio of net expenses
to average net assets 1.29%(d) 1.15% 1.17% 1.25% 0.97% 0.87%
Ratio of net investment
income to average
net assets 4.90%(d) 5.51% 5.85% 5.62% 7.06% 8.71%
Portfolio turnover 173%(e) 191% 169% 238% 140% 189%
Net assets at end of
period (000's omitted) $1,271 $5,074 $6,113 $5,836 $10,263 $87,874
===========================================================================
Expense Waiver\Reduction (a)
Ratio of total expenses
to average net assets 1.74%(d) 1.60% 1.62% 1.65% 1.03% 0.96%
Ratio of net investment
income to average
net assets 4.45%(d) 5.06% 5.40% 5.22% 7.00% 8.62%
==========================================================================
</TABLE>
<FN
(a) Ratio information assuming no waiver of investment advisory and
management fees and/or administrative fees and no reduction of
custodian expenses in effect for the periods presented.
(See Note 2 of Notes to Financial Statements.)
(b) Calculated using the weighted average shares outstanding during the
year.
(c) The total return would have been lower had certain expenses not been
reduced during the periods shown.
(d) Annualized.
(e) Not annualized.
</FN>
9
- ---------------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each period
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ----------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $15.51 $15.17 $15.54 $14.20 $ 20.65 $ 21.13
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.41 0.87 0.87 0.93 1.52 1.94
Net realized and
unrealized gain (loss)
on investments 0.03 0.33 (0.38) 1.45 (6.56) 0.44
------ ------ ----- ------ ----- -----
Total from investment
operations 0.44 1.20 0.49 2.38 (5.04) 2.38
------ ------ ----- ------ ------ -----
LESS DISTRIBUTIONS
TO SHAREHOLDERS:
From net investment income (0.39) (0.86) (0.86) (1.03) (1.41) (2.28)
From net realized gain
on investments --- --- --- --- --- (0.51)
In excess of net
investment income --- --- --- (0.01) --- ---
In excess of net
realized gain on
investments --- --- --- --- --- (0.07)
------ ------ ----- ------ ----- -----
Total distributions
to shareholders (0.39) (0.86) (0.86) (1.04) (1.41) (2.86)
------ ------ ----- ------ ----- -----
NET ASSET VALUE,
END OF PERIOD $15.56 $15.51 $15.17 $15.54 $14.20 $20.65
====== ====== ===== ====== ===== =====
- ---------------------------------------------------------------------------
Total Return 2.81%(d) 8.23% 3.33% 17.27% (25.00)%(b) 11.45%(b)
===========================================================================
Ratio of net expenses
to average net assets 1.21%(c) 1.20% 1.19% 1.17% 0.85% 0.75%
Ratio of net investment
income to average
net assets 5.13%(c) 5.76% 5.78% 6.33% 8.37% 8.90%
Portfolio turnover 378%(d) 317% 232% 506% 240% 253%
Net assets at end of
period (000's omitted) $12,516 $21,600 $24,846 $40,022 $55,986 $271,861
===========================================================================
Expense Waiver\Reduction (a)
Ratio of total expenses to
average net assets 1.21% (c) N/A N/A N/A 0.92% 0.82%
Ratio of net investment
income to average
net assets 5.13% (c) N/A N/A N/A 8.30% 8.83%
===========================================================================
</TABLE>
[FN]
(a) Ratio information assuming no waiver of investment advisory and
management fees and/or administrative fees and no reduction of
custodian expenses in effect for the periods presented.
(See Note 2 of Notes to Financial Statements.)
(b) The total return would have been lower had certain expenses not been
reduced during the periods shown.
(c) Annualized.
(d) Not annualized.
</FN>
10
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (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 11 investment series. Included in this report are Managers
Short Government Fund ("Short Government") 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 management estimates
and assumptions that affect the reported amount of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during
the reporting periods. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by
the Funds in preparation of their financial statements:
(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 adopted 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.
11
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
(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. Non-cash dividends included in dividend income,
if any, are recorded at the fair market value of the securities received.
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.
Each of the Funds has a "balance credit" arrangement with the
custodian bank whereby each Fund is credited with an interest factor for
account balances left uninvested overnight. These credits serve to reduce
custody expenses that would otherwise be charged to the Funds. For the six
months ended June 30, 1998, the Short Government and Intermediate Mortgage
Funds' custody expenses were reduced by $2 and $194, respectively, under
these arrangements.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends resulting from net investment income normally will be
declared daily for Short Government and monthly for 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 that 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
12
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
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 June 30, 1998, 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, 2005.
<TABLE>
<CAPTION>
CAPITAL LOSS
FUND AMOUNT EXPIRES
- ---- ------------ -------
<S> <C> <C>
Short Government $ 1,580,146 2001
11,764,816 2002
48,483 2004
61,007 2005
Intermediate
Mortgage 59,119,637 2002
20,796,333 2003
224,035 2004
</TABLE>
(H) CAPITAL STOCK
The Trust's Declaration of Trust authorizes for each series the
issuance of an unlimited number of shares of beneficial interest, without
par value. Each Fund records sales and repurchases of its capital stock on
the trade date. Dividends and distributions to shareholders are recorded on
the ex-dividend date.
At June 30, 1998, certain unaffiliated shareholders, including
omnibus accounts, individually held greater than 10% of the outstanding
shares of each of the Funds: Short Government- one held 34%; and
Intermediate Mortgage- one held 16%.
(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.
(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.
13
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
Each Fund's investment portfolio is managed by portfolio managers who serve
pursuant to Portfolio Management Agreements with the Investment Manager and
the Fund. Certain trustees and officers of the Funds are officers of the
Investment Manager.
Investment advisory and management fees are paid directly by each
Fund to The Managers Funds, L.P. based on each Fund's average daily net
assets. The annual investment advisory and management fee rates for Short
Government and Intermediate Mortgage as a percentage of each Fund's average
daily net assets for the six months ended June 30, 1998, were 0.45% and
0.45%, respectively. With respect to Short Government, the Investment
Manager has elected to waive 0.25% of its advisory and management fee for
the six months ended June 30, 1998. This waiver may be modified or
terminated at any time at the sole discretion of the Investment Manager.
The Trust has adopted an Administration 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, 1998, Intermediate Mortgage paid a
fee to the Administrator at the rate of 0.25% per annum of the 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.
(Effective July 1, 1998, The Managers Funds, L.P. began waiving on
Intermediate Mortgage 0.25% of its advisory and management fee and its
entire 0.25% administration fee. These waivers may be modified or
terminated at any time at the sole discretion of The Managers Funds, L.P.)
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.
14
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
(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, 1998 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
LONG-TERM SECURITIES SECURITIES ONLY
----------------------- -----------------------
FUND PURCHASES SALES PURCHASES SALES
- ---- --------- ----- --------- -----
<S> <C> <C> <C> <C>
Short
Government $ 7,575,867 $ 10,587,235 $ 7,575,867 $ 9,474,577
Intermediate
Mortgage 112,982,429 98,378,757 12,618,340 12,186,227
</TABLE>
<TABLE>
<CAPTION>
LONG FUTURES SHORT FUTURES
CONTRACTS CONTRACTS
----------- -------------
OPENED CLOSED OPENED CLOSED
------ ------ ------ ------
<S> <C> <C> <C> <C>
Short
Government $2,500,781 $3,333,000 --- ---
Intermediate
Mortgage --- --- $2,741,992 ---
</TABLE>
(4) FORWARD COMMITMENTS
Certain transactions, such as futures and forward transactions,
dollar roll agreements, or purchases of when-issued or delayed delivery
securities may have a similar effect on a Fund's net asset value as if the
Fund had created a degree of leverage in its portfolio. However, if a Fund
enters into such a transaction, the Fund will establish a segregated
account with its Custodian in which it will maintain cash, U.S. government
securities or other liquid high-grade debt obligations equal in value to
its obligations in respect to such transaction. Securities and other
assets held in the segregated account may not be sold while the transaction
is outstanding, unless other suitable assets are substituted.
(A) 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
15
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
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 6June 30, 1998, Managers
Intermediate Mortgage Fund and Managers Short Government Fund each entered
into futures contracts to manage the Fund's duration to that of its
respective benchmark index.
(B) DOLLAR ROLL AGREEMENTS
Managers Short Government Fund and Managers Intermediate Mortgage
Fund may enter into dollar roll agreements whereby the Fund sells
securities and agrees to repurchase them or substantially similar
securities, at a mutually agreed upon date and price. Dollar roll
agreements involve the risk that the market value of the securities
retained in lieu of sale by the Fund may decline below the price of the
securities the Fund has sold but is obligated to repurchase.
In the event the buyer of the securities under a dollar roll
agreement files for bankruptcy or becomes insolvent, such buyer or its
trustee or receiver may receive an extension of time to determine whether
to enforce the Fund's obligation to repurchase the securities, and the
Fund's use of the proceeds of the dollar roll agreement may effectively be
restricted pending such decision.
(5) RISKS ASSOCIATED WITH COLLATERAL MORTGAGE OBLIGATIONS ("CMOS") AND
INDEXED SECURITIES
The net asset values of the Funds may be sensitive to interest rate
fluctuations because the Funds may hold several instruments, including CMOs,
inverse floaters, super floaters and other derivatives, whose values can be
significantly impacted by interest rate movements. CMOs are obligations
collateralized by a portfolio of mortgages or mortgage-related securities.
Payments of principal and interest on the mortgage are passed through to
the holder of the CMOs on the same schedule as they are received from
mortgagees, although certain classes of CMOs have priority over others with
respect to the receipt of prepay-
16
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------
ments 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.
17
<PAGE>
[LOGO]
WHERE LEADING MONEY MANAGERS CONVERGE
FUND DISTRIBUTOR
THE MANAGERS FUNDS, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203) 857-5321 or (800) 835-3879
CUSTODIAN
State Street Bank and Trust
Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Shereff, Friedman, Hoffman &
Goodman, LLP
919 Third Avenue
New York, New York 10022
TRANSFER AGENT
Boston Financial Data Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) 252-0682
This report is prepared for the information of shareholders. It is
authorized for distribution to prospective investors only when preceded by
an effective prospectus.
THE MANAGERS FUNDS
EQUITY FUNDS:
INCOME EQUITY FUND
Scudder, Kemper Investments, Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management
Company, LLC
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management, LLC
INTERNATIONAL EQUITY FUND
Scudder, Kemper Investments, Inc.
Lazard Asset Management Co.
EMERGING MARKETS EQUITY FUND
Montgomery Asset Management LLC
King Street Advisors, Limited
FIXED INCOME FUNDS:
MONEY MARKET FUND
J.P. Morgan
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
<PAGE>
