<PAGE>
The Managers Funds
BOND FUND
GLOBAL BOND FUND
- --------------------------------
ANNUAL REPORT
December 31, 1997
- --------------------------------
Where Leading Money Managers Converge
<PAGE>
MANAGERS BOND FUND
MANAGERS GLOBAL BOND FUND
Annual Report
December 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Begins
on Page
----------
<S> <C>
President's Message 1
The Managers Funds Performance 3
Complete performance table for all of The Managers Funds as
of December 31, 1997
Investment Manager's Comments 4
Discussion of Funds' investment results during the year and
cumulative total return graphs versus relevant index
Schedules of Portfolio Investments 10
Detailed portfolio listings by security type and industry
sector, as valued at December 31, 1997
Statements of Assets and Liabilities 17
Fund balance sheets, Net Asset Value (NAV) per share
computation and cumulative undistributed amounts
Statements of Operations 18
Detail of sources of income, fund expenses, and realized and
unrealized gains (losses) during the year
Statements of Changes in Net Assets 19
Detail of changes in fund assets and distributions to
shareholders for the past two years
Financial Highlights 20
Historical net asset values, distributions, total returns,
expense ratios, turnover ratios and net assets
Notes to Financial Statements 22
Accounting and distribution policies, details of agreements
and transactions with fund management and description of certain
investment risks
Report of Independent Accountants 29
</TABLE>
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.
<PAGE>
- ---------------------------------------------------------------------
PRESIDENT'S MESSAGE
- ---------------------------------------------------------------------
[Photo of President]
DEAR FELLOW SHAREHOLDER:
The past year was again a prosperous one for most financial assets,
particularly when compared to the rate of inflation. Despite economic
and financial upheaval in the Far East, the U.S. economy continued to
grow at a moderate pace throughout 1997. Corporate profits and personal
income rose while unemployment and the rate of inflation reached
historic lows.
Early in the year, both long and short-term interest rates rose as the
economy picked up speed and investors expressed concern about rising
inflation. In late March, the Federal Reserve Board raised the Fed Funds
rate by 0.25%. Inflation, however remained subdued. In fact, the
producer price index, which tracks wholesale price levels, fell for
seven consecutive months (ending July) for the first time ever. The
consumer price index, which tracks retail prices continued to rise,
although at an extremely low rate. Thus, interest rates moved lower
again and by early summer were nearing the levels at which they started
the year.
In July, news of the precarious economic situation in Southeast Asia
began to emanate, further diminishing inflationary fears and sending
interest rates lower. While the Malaysian, Indonesian and Thai
governments devalued their currencies in late August and early
September, investors fled to quality in the form of U.S. Treasury bonds.
Throughout the fourth quarter, the economic crisis intensified and
spread to other Far Eastern countries. Throughout the fourth quarter the
International Monetary Fund (IMF) arranged restructuring packages
accompanied by tough economic constraints with each of these countries
including Korea. Due to fiscal restraints, these Asian countries
cancelled infrastructure projects thus removing some of the demand for
industrial commodities. In addition, Asian commodities producers
increased exportation in order to raise cash while their own currencies
fell. As a result, commodities prices traded sharply lower, with metals
prices reaching four year lows.
Although the flight to U.S. Treasuries continued, the prospect of
deflation lured investors toward longer term securities, where they
could lock in current rates. Thus, while long-term interest rates
dropped sharply, short-term yields rose, leaving the yield curve
relatively flat. At year end, 30-year Treasury bonds provided a yield of
only 0.58% more than the yield on 3-month Treasury bills. At the end of
March 1997, when long-term rates peaked, the same yield spread was
1.79%. Due to the flattening yield curve, long-term bonds significantly
1
<PAGE>
- -------------------------------------------------------------------
outperformed shorter duration securities for the year. The trade-off
going forward is that long-term bonds offer little yield premium to less
volatile shorter duration securities, but they do offer a chance to lock
in a coupon in case yields fall even lower. The current shape of the
yield curve implies that investors believe that price deflation and
falling interest rates are genuine possibilities.
The yield premium for corporate bonds above similar duration Treasury
yields began the year very slim and continued to tighten throughout the
first nine months of the year in response to the healthy economy.
Spreads widened, however, in the fourth quarter as corporate bonds
responded less positively to deflationary fears than did Treasuries.
Mortgage securities performed well in the fourth quarter as investors
focused on their quality, however, prepayment rates are likely to rise
as long-term interest rates have fallen to historically low levels
inducing homeowners to refinance their mortgages.
Foreign bond markets performed similarly well as interest rates fell
across the globe. As in the U.S., government bond yield curves flattened
in most European countries and Japan. In Italy, government yields fell
across all maturities by almost two percentage points. Australian yields
also moved lower in parallel by more than one percentage point. The
yield curve for British Government bonds moved to a sharply inverted
position such that three-month securities yielded 0.9 percentage points
more than 30-year bonds at year-end.
These markets provided double digit returns for the year in local
currencies. However, the strength of the U.S. Dollar, which appreciated
significantly versus all foreign currencies during the year, reduced
foreign bond returns in U.S. Dollar terms. Far Eastern bonds other than
Japanese bonds suffered as credit quality in the region diminished and
currencies crashed.
Thus, while returns were diverse across countries, the Salomon Brothers
World Government Bond Index, which represents the average of the major
markets, returned a meager 0.2% in U.S. Dollar terms for the year.
In addition to discussions of each Fund's 1997 performance, this report
provides you with a listing of the investment portfolio, financial
statements, and the report of independent accountants. On the following
page you'll find a performance summary for all of The Managers Funds as
of December 31, 1997. Please contact us at 1-800-835-3879 if you'd like
to receive a prospectus and additional information on any of the other
funds in our family, or an information kit on our new no fee IRA and
Roth IRA accounts. As always, should you have any questions on this
report, please feel free to contact us.
We thank you for your continued investment in The Managers Funds.
Sincerely,
/s/Robert P. Watson
Robert P. Watson
President
2
<PAGE>
- ---------------------------------------------------------
THE MANAGERS FUNDS PERFORMANCE (unaudited)
All periods ending December 31, 1997
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Average Annualized Total Returns*
----------------------------------------------------
Since Inception Morningstar
1 Year 3 Years 5 Years 10 Years Inception Date Rating**
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Funds:
Income Equity Fund 27.19% 26.01% 17.83% 15.82% 15.49% Oct. '84 ****
Capital Appreciation Fund 12.74% 19.58% 14.46% 15.13% 15.27% Jun. '84 ***
Special Equity Fund 24.45% 27.64% 19.05% 19.27% 17.04% Jun. '84 ****
International Equity Fund 10.83% 13.26% 15.42% 11.05% 14.00% Dec. '85 ****
Income Funds:
Short Government Fund 5.55% 6.35% 3.23% 5.22% 5.24% Oct. '87 **
Short & Intermediate Bond
Fund 5.87% 8.43% 4.84% 7.18% 8.36% Jun. '84 ***
Intermediate Mortgage Fund 8.23% 9.46% 1.85% 6.86% 7.22% May '86 **
Bond Fund 10.42% 14.91% 9.44% 10.24% 11.30% Jun. '84 ****
Global Bond Fund 0.16% 7.58% -- -- 5.48% Mar. '94 *
Money Market Fund 5.36% 5.29% 4.38% 5.39% 5.87% 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 the Managers Income Funds, or for a prospectus
for the Equity Funds or the Money Market Fund, please call The Managers
Funds at (800) 835-3879, or your investment adviser. Read the
prospectus carefully before you invest.
* Total return 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 12/31/97 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 1,834, 1,076 and 585 equity funds, the
International Equity Fund was rated against 566, 240 and 72
international equity funds, and each of the Income Funds was rated
against 2,581, 1,435 and 651 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 BOND FUND
Investment Manager's Comments
- ------------------------------------------------------------------
MANAGERS BOND FUND seeks current income by investing in fixed income
securities. The Fund is currently managed by Daniel Fuss of Loomis,
Sayles & Company, who has been managing a portion of the fund since its
inception in 1984. Prior to April 1993, the Fund utilized a dual
investment manager structure.
THE PORTFOLIO MANAGER
Dan Fuss is a contrarian bond investor who focuses on individual
issues which will provide the highest return over long periods of time.
Dan and his team of credit analysts at Loomis Sayles research debt
offerings in the same way equity analysts research stocks, looking for
undervalued bonds where they see either a yield premium, the potential
for price appreciation, or both. They analyze the company's financial
condition in detail, as well as the terms of specific bond offerings.
Price appreciation can come from a variety of catalysts including
improving company fundamentals which would lead to credit upgrades,
changing market supply and demand forces, improving sector or economic
trends.
Given the typical shape of the yield curve, longer term bonds
generally yield more than shorter term bonds, and Dan is willing to take
the added interest rate risk in order to gain higher yields. In
addition, price improvements as a result of credit upgrades are more
meaningful for longer term bonds, thus Dan's portfolios tend to be
relatively long in duration*. In order to mitigate some of the interest
rate risk, Dan structures his portfolio with counter cyclical elements.
In doing so, Dan will utilize convertible bonds, municipal bonds,
preferred stocks and foreign corporate and government bonds, in addition
to the domestic corporate bonds which make up the majority of the
portfolio. In addition, Dan seeks bonds with call protection, either
through the terms of the bond structure or through deep price discounts
relative to the call price.
THE YEAR IN REVIEW
During the final six months of 1997, MANAGERS BOND FUND provided a
total return of +6.2%, which brought the return for the full year to
+10.4%. For the same periods, the Lehman Brothers Government/Corporate
Bond Index returned +6.8% and +9.8%, respectively.
Throughout 1997, the portfolio's duration was long, roughly twice
that of the index. Given this configuration, the Fund underperformed in
the first quarter, however, the incumbent advantage in yield from the
longer term bonds was a benefit. Likewise, the portfolio's positioning
in non-market related issues dampened the downside while interest rates
climbed. Throughout the rest of the year, duration was a benefit as
long-term interest rates steadily declined. The portfolio's best
performing position was a long-term U.S. Treasury strip with a zero
coupon which is doubly beneficial in a falling rate environment because
of its
4
<PAGE>
- ---------------------------------------------------------------
MANAGERS BOND FUND
Investment Manager's Comments (continued)
- ---------------------------------------------------------------
long duration and its lack of reinvestment risk. Similarly, a
pair of zero coupon Canadian Government bonds also performed very well
during the year. As long term interest rates reached historic lows
toward the end of the year, the portfolio's call protection became ever
more important.
Given the significant drop in yields, the portfolio's diversification
into investments with low correlation to domestic rates was an
impediment during the second half of the year. In particular, a position
in foreign corporate bonds, some of which have exposure to Southeast
Asia, performed poorly during the final six months. These bonds,
however, continue to offer attractive yields, good call protection,
sufficient credit quality and diversification. Thus, they remain an
important part of the portfolio.
Looking forward, Dan Fuss notes that yield spreads versus U.S.
Treasury securities remain very narrow, and, given the evolving
deflationary risks, he intends to maintain a long duration, call-
protected portfolio. As of year-end, the average maturity of the
portfolio is 19.1 years, and the duration is 11.1 years. For comparison,
the Lehman Brothers Government/ Corporate Bond Index has an average
maturity and duration of 10.1 years and 5.3 years, respectively. The
yield to maturity of the portfolio is 7.5%, while the yield to maturity
of the index is 6.0%. The Fund's 30-day SEC yield as of December 31,
1997 was 6.13%.
- ---------------------------------------------------------------------
* Duration is the weighted average time (typically quoted in years)
to the receipt of cash flows (principle + interest) for a bond or
portfolio. It is used to evaluate the interest rate sensitivity of a
bond or portfolio. The longer the duration, the more sensitive the price
of the bond is to movements in interest rates.
5
<PAGE>
- --------------------------------------------------------------------
MANAGERS BOND FUND
Cumulative Total Return Performance
- --------------------------------------------------------------------
The MANAGERS BOND FUND'S cumulative total return is based on the
monthly change in net asset value (NAV), and assumes that all
distributions were reinvested.
The Lehman Brothers Government/Corporate Bond Index is comprised of
5,620 government securities and investment grade corporate securities.
The Index assumes reinvestment of all income.
This chart compares a hypothetical $10,000 investment made in
Managers Bond Fund on December 31, 1987, to a $10,000 investment made in
the Lehman Brothers Government/Corporate Bond Index for the same time
period. Past performance is not indicative of future results.
<TABLE>
<CAPTION>
Measurement Period Managers Bond Lehman Brothers Govt/
(Fiscal Year Covered) Fund Corp Bond Index
<S> <C> <C>
1987 10000 10000
1988 10803 10759
1989 12219 12291
1990 13139 13310
1991 15648 15456
1992 16883 16627
1993 18837 18466
1994 17471 17818
1995 22871 21247
1996 24008 21864
1997 26510 23997
</TABLE>
This table shows the average annual total returns for Managers Bond
Fund for the one-year, five-year and ten-year periods through
December 31, 1997, and comparable returns for the Lehman Brothers
Government/Corporate Bond Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
Annualized
------------------------------
One Five Ten
Year Years Years
------ ------- -------
<S> <C> <C> <C>
Managers Bond Fund 10.4% 9.4% 10.2%
Lehman Brothers Government/
Corporate Bond Index 9.8 7.6 9.2
</TABLE>
6
<PAGE>
- --------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
Investment Manager's Comments
- --------------------------------------------------------------
MANAGERS GLOBAL BOND FUND seeks both income and capital appreciation
by investing in domestic and foreign fixed- income securities. The
Managers Funds has utilized a single independent sub-advisor, Olaf Rogge
of Rogge Global Partners, to manage the portfolio since the Fund's
inception in 1994.
THE PORTFOLIO MANAGER
Olaf's investment strategy begins with an assessment of each
country's economic outlook and currency strength. His investment
philosophy is that healthy countries with sound finances produce the
highest bond and currency returns. In analyzing the financial health of
a country, Olaf and the investment team at Rogge Global Partners
evaluate the fiscal policy, savings rates and money growth in each
country along with assessing the credibility of the monetary authorities
in each country. In addition to making country allocation decisions,
Rogge analyzes the yield curve and expected interest rate movements
within each economy to determine how to position the portfolio from a
duration* and maturity perspective. His portfolios consist primarily of
highly liquid government issues of developed market countries, with no
more than 10% in AAA rated corporate bonds.
THE YEAR IN REVIEW
During the final six months of 1997, Managers Global Bond Fund
provided a total return of 1.8%, which brought the return for the full
year to 0.2%. For the same periods, the Salomon Brothers World
Government Index returned 1.5% and 0.2%, respectively.
Throughout most of the year, the portfolio was invested with a
relatively heavy position in U.S. Treasury bonds, and with an average
duration longer than that of the index. Although the long duration was a
hindrance in the first quarter, it was a benefit throughout the
remainder of the year, as interest rates fell, and yield curves
flattened in most developed markets. The large and relatively long
position in U.S. Treasuries was also a benefit as a result of both the
bonds' and U.S. Dollar's strength throughout the year. Other significant
positions included an increasing position in British Treasury Bonds,
which also performed well along with the British Pound. A 9% position in
Italian bonds performed very well during the third and fourth quarters
after which it was sold, and a 3% position in Swedish bonds was
increased throughout the year, ending the year at 8% of the portfolio.
Other notable management decisions during the year included Rogge's
elimination of a 20% position in German bonds during the second quarter
in favor of U.S. Treasuries, and his complete avoidance of Japanese
bonds for the entire year.
Virtually all of the above mentioned bond positions and changes were
beneficial relative to the benchmark throughout the year, however,
7
<PAGE>
differences in fixed-income returns paled in comparison to the changes
in currency exchange rates. Despite the portfolio's overweighting in
U.S. Treasuries and avoidance of Japanese and German bonds throughout
the year, the Fund, through the use of forward foreign currency
contracts, had approximately 19% exposure to the Japanese Yen, which is
equal to the exposure in the benchmark, and was slightly underweight in
the U.S. Dollar relative to the benchmark. Thus, outperformance of the
bond positions was diminished by underperformance in the currency
positioning. After expenses, the Fund's performance was virtually
identical to that of the Salomon Brothers World Government Bond Index
for the year.
Late in the fourth quarter Rogge re-established a position in German
bonds, and at year end the Fund was concentrated in U.S., German and
U.K. bonds, with comparable currency exposures in those countries along
with a neutral position in Japanese Yen. The Fund's duration was 6.7
years, which was longer than the benchmark duration of 5.1 years. The
portfolio's average maturity was 11.4 years, its average yield to
maturity was 5.6%, and its 30-day SEC yield was 4.64%.
LOOKING FORWARD
Due to the extremely strong relative performance of the U.S. Dollar
along with U.S. bonds, Rogge is reducing the portfolio's position in
U.S. Treasuries in favor of European bonds with an emphasis on Germany.
Because of uncertainty about the success of the European Monetary Union,
bond and currency prices in the region have been pushed down. With
economic growth picking up, an improving trade surplus, controlled
inflation, and a positively sloped yield curve, German bonds offer good
value. Near term, Japanese bonds will continue to be avoided as the
economy remains unhealthy, especially in light of the Asian crisis.
Olaf continues to be encouraged that an extended period of continued
low inflation across world markets will allow the market to reduce the
inflation risk premium and reward bonds of healthy growing economies.
- --------------------------------------
* Duration is the weighted average time (typically quoted in years)
to the receipt of cash flows (principal + interest) for a bond or
portfolio. It is used to evaluate the interest rate sensitivity of a
bond or portfolio. The longer the duration, the more sensitive the price
of the bond is to movements in interest rates.
8
<PAGE>
- ---------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
Cumulative Total Return Performance
- ---------------------------------------------------------------------
The MANAGERS GLOBAL BOND FUND'S cumulative total return is based on
the monthly change in net asset value (NAV), and assumes that all
distributions were reinvested.
The Salomon Brothers World Government Bond Index is priced in U.S.
dollars, and includes 14 international government bond markets. The
index assumes reinvestment of all dividends.
This chart compares a hypothetical $10,000 investment made in
Managers Global Bond Fund at its inception on March 25, 1994, to a
$10,000 investment made in the Salomon Brothers World Government Bond
Index for the same time period. Past performance is not indicative of
future results.
<TABLE>
<CAPTION>
Measurement Period Managers Global Solomon Brothers World
(Fiscal Year Covered) Bond Fund Govt Bond Index
<S> <C> <C>
3/31/94 10000 10000
12/30/94 9809 10232
12/31/95 11681 12181
12/31/96 12194 12622
12/31/97 12214 12652
</TABLE>
This table shows the average annual total returns for Managers
Global Bond Fund for the one-year, three-year and since inception
periods through December 31, 1997, and comparable returns for the
Salomon Brothers World Government Bond Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
Annualized
----------------------------------
Since the
One Three Fund's Inception
Year Years March 25, 1994
---- ----- ----------------
<S> <C> <C> <C>
Managers Global Bond Fund 0.2% 7.6% 5.5%
Salomon Brothers World
Government Bond Index 0.2 7.3 6.5*
*Since March 31, 1994
</TABLE>
9
<PAGE>
- ------------------------------------------------------------------------
MANAGERS BOND FUND
Schedule of Portfolio Investments
December 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
CORPORATE DEBT SECURITIES -- 50.4%
BANKS AND FINANCE -- 4.6%
First Industrial L.P.,
Medium Term Notes,
7.500%, 12/01/17 $1,000,000 $1,011,600
Pan Pacific
Industries, Yankee,
Notes, 0.000%*,
04/28/07 2,000,000 598,300
U.S. West Capital
Funding, Inc.,
7.900%, 02/01/27 250,000 273,585
----------
TOTAL BANKS AND FINANCE 1,883,485
----------
CONVERTIBLE BONDS -- 14.4%
Banpu Public Company
Ltd., Euro-dollar,
Bonds, 2.750%, 04/10/03 250,000 160,000
Burns Philp & Co.,
Euro-dollar, Deb.,
5.500%, 04/30/04 1,100,000 668,525
Federal Realty
Investment Trust,
Euro-dollar, Sub.
Notes, 5.250%,
10/28/03 1,280,000 1,190,400
Loxley Public Co.,
Euro-dollar,
2.500%, 04/04/01 400,000 200,000
Meditrust, Deb.,
7.500%, 03/01/01 500,000 604,375
Ogden Corp.,
Euro-dollar, Sub.
Notes, 5.750%, 10/20/02 950,000 904,875
Ogden Corp., Euro-dollar,
Sub. Notes, 6.000%,
06/01/02 250,000 228,438
Samsung Corp.,
Euro-dollar,
Bonds, 0.250%,
06/26/06 250,000 200,000
<CAPTION>
- ----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------
Scholastic Corp.,
Sub. Notes, 5.000%,
08/15/05 $1,400,000 $1,226,750
Thermo Terratech Inc.,
Sub. Notes, 4.625%,
05/01/03 125,000 111,250
Total Access
Communications,
Registered Bonds,
2.000%, 05/31/06 250,000 107,500
Worldway Corp.,
Sub. Deb., 6.250%,
04/15/11 500,000 365,000
----------
TOTAL CONVERTIBLE BONDS 5,967,113
----------
INDUSTRIALS -- 26.5%
APL Ltd., Deb., 8.000%,
01/15/24 250,000 251,040
Burlington Industries,
Inc., Deb., 7.250%,
08/01/27 250,000 262,797
Georgia Pacific Corp.,
Deb., 7.375%,
12/01/25 700,000 713,209
Kellwood Co., Deb.,
7.625%, 10/15/17 250,000 256,393
Mead Corp. Deb.,
7.125%, 08/01/25 200,000 195,714
NGC Corp. Capital
Trust, Series B,
8.316%, 06/01/27 250,000 284,523
Philip Morris Cos.,
Inc., Deb., 7.750%,
01/15/27 500,000 539,970
Pioneer-Standard
Electronics, Inc.,
Senior Notes, 8.500%,
08/01/06 250,000 264,896
Pulte Corp., 7.625%,
10/15/17 500,000 515,400
RJR Nabisco, Inc.,
Notes, 7.625%, 09/15/03 950,000 971,014
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
------------------------------------------------------------------------
MANAGERS BOND FUND
Schedule of Portfolio Investments (continued)
December 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIALS (continued)
RJR Nabisco, Inc.,
Notes, 9.250%, 08/15/13 $ 700,000 $ 785,435
Samsung Electronics Ltd.,
Sinking Fund, Deb., 7.700%,
10/01/27 500,000 345,000
Seagate Technology, Inc.,
Deb., 7.875%, 03/01/17 250,000 260,030
TCI Communications, Inc.,
Deb., 7.875%, 02/15/26 1,600,000 1,732,112
TCI Communications, Inc.,
Deb., 7.875%, 08/01/13 125,000 134,446
Time Warner, Inc., Deb.,
7.570%, 02/01/24 1,235,000 1,291,995
Time Warner, Inc.,
Deb., 8.050%, 01/15/16 500,000 540,080
Trinet Corporate Realty
Trust, Inc., Senior Notes,
7.700%, 07/15/17 500,000 511,385
Westvaco Corp., Deb.,
7.000%, 08/15/23 250,000 249,205
Woolworth Corp., Deb.,
8.500%, 01/15/22 750,000 844,200
----------
TOTAL INDUSTRIALS 10,948,844
----------
REAL ESTATE -- 0.6%
Camden Property Trust,
Notes, 7.000%, 11/15/06 250,000 252,100
----------
<CAPTION>
- ----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------
UTILITIES -- 4.3%
Boston Edison Co.,
Deb., 7.800%, 03/15/23 $ 400,000 $ 419,831
GGIB Funding Corp.,
System Energy Resources,
7.430%, 01/15/11 1,348,078 1,358,836
----------
TOTAL UTILITIES 1,778,667
----------
TOTAL CORPORATE DEBT SECURITIES
(cost $20,980,207) 20,830,209
----------
FOREIGN CORPORATE OBLIGATIONS -- 5.5%
Bangkok Bank, Sub. Notes,
8.250%, 03/15/16 USD 500,000 384,715
Bangkok Bank, Sub. Notes,
8.375%, 01/15/27 USD 800,000 504,000
MacMillan Bloedel Ltd.,
Deb., 7.700%, 02/15/26 USD 1,350,000 1,401,381
----------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(cost $2,535,883) 2,290,096
----------
FOREIGN GOVERNMENT OBLIGATIONS -- 15.3%
British Columbia Province,
Generic Residual, Canada,
Deb., 0.000% *,08/23/2 CAD 15,000,000 2,002,729
Canadian Government,
Principal Strip,
Series JN21, 0.000%*,
06/01/21 CAD 1,500,000 259,893
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
- -------------------------------------------------------------------------
MANAGERS BOND FUND
Schedule of Portfolio Investments (continued)
December 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (continued)
Government of Poland,
Bearer Past Due Interest
Brady Bonds, Stepup,
4.000%, 10/27/14 USD 1,375,000 $1,187,725
Government of Poland,
Registered Past Due
Interest Brady Bonds,
Stepup, 4.000%, 10/27/14 USD 250,000 215,950
Manitoba Province,
Canada, Bonds, 7.750%,
12/22/25 CAD 350,000 296,608
Manitoba Province,
Canada, Medium Term
Notes, 6.500%, 09/22/17 CAD 1,800,000 1,318,274
Republic of South Africa,
Yankee, Notes, 8.500%,
06/23/17 USD 1,075,000 1,042,610
----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(cost $5,404,277) 6,323,789
----------
<CAPTION>
- ----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 22.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.0%
College & University Facilities
Loan Trust, Series 2,
Class D, 4.000%,
06/01/18 $1,000,000 $ 816,250
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) -- 5.0%
FNMA REMIC Series 93-212,
Class Z, 6.000%, 11/25/08 311,247 293,447
FNMA REMIC Series 94-30,
Class JA, 5.000%, 08/15/23 2,000,000 1,786,860
----------
TOTAL FNMA 2,080,307
----------
U.S. TREASURY BONDS -- 15.5%
0.000% *, 08/15/23 6,200,000 1,346,578
6.000% , 02/15/26 5,050,000 5,043,688
----------
TOTAL U.S. TREASURY BONDS 6,390,266
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $8,981,809) 9,286,823
----------
<CAPTION>
- ----------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------
PREFERRED STOCKS -- 2.4%
Aluminum Co. of
America, 3.750% 8,125 576,875
Connecticut Light &
Power Co., Series 47,
$2.00 6,655 170,118
Entergy Louisiana, Inc.,
4.440% 226 16,328
Entergy New Orleans,
Inc., 4.750% 482 36,030
Union Electric Co.,
3.500% 200 11,300
West Pennsylvania
Power Co., 4.500% 200 14,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- -------------------------------------------------------------------------
MANAGERS BOND FUND
Schedule of Portfolio Investments (concluded)
December 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
SHARES VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (continued)
Wisconsin Electric Power
Co., 3.600% 2,748 $ 144,270
----------
TOTAL PREFERRED STOCKS (cost $856,320) 968,921
----------
SHORT-TERM INVESTMENTS -- 2.5%
JPM Prime Money Market
Fund, 5.58%** (cost $1,016,868) 1,016,868 1,016,868
----------
TOTAL INVESTMENTS -- 98.6%
(cost $39,775,364) 40,716,706
OTHER ASSETS, LESS
LIABILITIES -- 1.4% 581,523
----------
NET ASSETS -- 100.0% $41,298,229
-----------
</TABLE>
- ----------------------------------------------------------------------
[FN]
Note: Based on the cost of investments of $39,775,364 for federal
income tax purposes at December 31, 1997, the aggregate gross
unrealized appreciation and depreciation of investments was
$2,663,186 and $1,721,844, respectively, resulting in net unrealized
appreciation of investments of $941,342.
* Zero coupon security.
** Yield shown for this Investment Company represents the December
31, 1997 seven-day average yield, which refers to the sum of the
previous seven days' dividends paid, expressed as an annual percentage.
Abbreviations have been used throughout this portfolio to indicate
amounts shown in currencies other than the U.S. Dollar (USD):
CAD: Canadian Dollar
OTHER INFORMATION (unaudited):
The composition of long-term debt holdings as a percentage of the total
value of investments in these securities is as follows:
S&P'S/MOODY'S RATINGS
Gov't/AAA 25%
AA 5
A 7
BBB 56
BB 3
Not Rated 4
100%
</FN>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
- -------------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
Schedule of Portfolio Investments
December 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT/AGENCY OBLIGATIONS -- 57.6%
CANADA -- 5.5%
Canadian Government,
8.000%, 06/01/27 CAD 580,000 $ 520,188
Canadian Government,
8.000%, 06/01/23 CAD 492,000 435,864
----------
TOTAL CANADA 956,052
----------
FINLAND -- 0.6%
Republic of Finland,
Yankee, Deb., 9.625%,
04/01/28 USD 100,000 105,068
----------
GERMANY -- 14.5%
Bundes, Series 97,
Bonds, 6.000%,
01/04/07 DEM 1,418,000 827,334
Bundes, Series 97,
Bonds, 6.000%,
07/04/07 DEM 2,919,000 1,704,393
----------
TOTAL GERMANY 2,531,727
----------
NORWAY -- 2.4%
Den Norske Stats
Oljeselskap, Yankee,
7.375%, 05/01/16(a) USD 60,000 63,730
Kingdom of Norway,
6.750%, 01/15/07 NOK 2,400,000 353,544
----------
TOTAL NORWAY 417,274
----------
<CAPTION>
- ----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------
SUPRA-NATIONAL -- 0.5%
African Development
Bank, Yankee,
Sub Notes, 6.875%,
10/15/15 USD 80,000 $ 83,124
----------
SWEDEN -- 7.9%
Kingdom of Sweden,
6.500%, 10/25/06 SEK 4,900,000 640,861
Kingdom of Sweden,
Series 1037, 8.000%,
08/15/07 SEK 5,200,000 749,150
----------
TOTAL SWEDEN 1,390,011
----------
UNITED KINGDOM -- 26.2%
United Kingdom Treasury,
7.250%, 12/07/07 GBP 951,025 1,672,867
United Kingdom Treasury,
8.000%, 06/07/21 GBP 590,000 1,176,517
United Kingdom Treasury,
8.000%, 09/27/13 GBP 291,331 556,568
United Kingdom Treasury,
8.000%, 12/07/05 GBP 600,000 1,166,277
----------
TOTAL UNITED KINGDOM 4,572,229
----------
TOTAL FOREIGN GOVERNMENT/AGENCY OBLIGATIONS
(cost $9,837,770) 10,055,485
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- -------------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
Schedule of Portfolio Investments (continued)
December 31, 1997
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 31.4%
U.S. TREASURY NOTES -- 25.0%
6.250%, 05/31/99 $ 600,000 $ 604,782
6.375%, 05/15/00 1,915,000 1,943,725
6.500%, 05/31/01 1,217,000 1,245,904
7.500%, 11/15/01 530,000 561,885
----------
TOTAL U.S. TREASURY NOTES 4,356,296
----------
U.S. TREASURY BONDS -- 6.4%
6.500% , 11/15/26 650,000 693,875
6.625% , 02/15/27 395,000 428,820
----------
TOTAL U.S. TREASURY BONDS 1,122,695
----------
TOTAL U.S. TREASURY OBLIGATIONS (cost $5,372,760) 5,478,991
----------
CORPORATE DEBT SECURITIES -- 3.8%
BANKS AND FINANCE -- 3.2%
American Re Corp.,
Series B, Senior Notes,
7.450%, 12/15/26 100,000 107,824
Bayerische Landesbank
New York, Deposit
Notes, 6.800%, 9/28/01 75,000 76,888
Bear Sterns Co., Senior
Notes, 6.500%, 07/05/0 100,000 100,935
National Westminster
Bank, 9.45%, 05/01/01 100,000 109,247
Railcar Leasing LLC,
Senior Notes, 7.125%,
01/15/13(a) 80,000 84,173
Toronto-Dominion Bank
New York, Sub. Notes,
Adjustable Rate 6.500%,
01/15/07 75,000 74,318
----------
TOTAL BANKS AND FINANCE 553,385
----------
<CAPTION>
- ----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------
UTILITY -- 0.6%
Cajun Electric Power,
U.S. Government Guarantee,
9.520%, 03/15/19 $ 100,000 $ 105,463
----------
TOTAL CORPORATE DEBT SECURITIES
(cost $643,436) 658,848
----------
<CAPTION>
- ----------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.5%
OTHER INVESTMENT COMPANIES -- 5.7%
Calvert Cash Reserves
Institutional Prime Fund,
5.90%* 118,920 118,920
JPM Prime Money Market
Fund, 5.58%* 882,400 882,400
----------
TOTAL OTHER INVESTMENT COMPANIES 1,001,320
----------
<CAPTION>
- ----------------------------------------------------------------------
PRINCIPAL
AMOUNT
- ----------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
State Street Bank & Trust
Co., dated 12/31/97,
due 01/02/98, 5.000%,
total to be received $145,040
(secured by $155,00 FNMA
7.000%, due 11/25/14, market
value $155,581), at cost $ 145,000 145,000
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,146,320) 1,146,320
----------
TOTAL INVESTMENTS -- 99.3%
(cost $17,000,286) 17,339,644
OTHER ASSETS, LESS
LIABILITIES -- 0.7% 125,844
----------
NET ASSETS -- 100.0% $17,465,488
-----------
</Table
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
- ---------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
Schedule of Portfolio Investments (concluded)
December 31, 1997
- -----------------------------------------------------------------
<FN>
Note: Based on the cost of investments of $17,000,351 for federal
income tax purposes at December 31, 1997, the aggregate gross
unrealized appreciation and depreciation of investments was $437,906
and $98,613, respectively, resulting in net unrealized
appreciation of investments of $339,293.
* Yield shown for each Investment Company represents the December
31, 1997 seven-day average yield, which refers to the sum of the
previous seven days' dividends paid, expressed as an annual
percentage.
(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 December 31, 1997, the value of these securities amounted to
$147,903, or 0.8% of net assets.
Abbreviations have been used throughout this portfolio to indicate
amounts shown in currencies other than the U.S. Dollar (USD):
CAD: Canadian Dollar
DEM: Deutsche Mark
GBP: British Pound
NOK: Norwegian Krone
SEK: Swedish Krona
Investment Abbreviations:
FNMA: Federal National Mortgage Association
</FN>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
- ----------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- ----------------------------------------------------------------------
MANAGERS MANAGERS
GLOBAL
BOND BOND
FUND FUND
-------- --------
<S> <C> <C>
ASSETS:
Investments at value* $40,716,706 $17,339,644
Cash -- 731
Receivable for Fund shares sold 74,067 8,757
Receivable for open forward
foreign currency contracts -- 7,031,975
Dividends, interest and other
receivables 701,345 258,599
Deferred organization expense -- 3,072
Prepaid expenses 16,620 12,050
----------- -----------
Total assets 41,508,738 24,654,828
----------- -----------
LIABILITIES:
Payable for Fund shares
repurchased 141,681 17,895
Payable for open forward
foreign currency contracts -- 7,111,312
Payable for closed forward
foreign currency contracts -- 8,652
Accrued expenses:
Investment advisory and
management fees 21,916 10,520
Administrative fees 8,766 3,006
Other 38,146 37,955
---------- -----------
Total liabilities 210,509 7,189,340
---------- -----------
NET ASSETS $41,298,229 $17,465,488
---------- -----------
Shares outstanding 1,740,917 834,446
---------- -----------
Net asset value, offering and
redemption price per share $23.72 $20.93
---------- -----------
NET ASSETS REPRESENT:
Paid-in capital $39,779,907 $17,403,878
Undistributed (overdistributed)
net investment income 11,832 (302,833)
Accumulated net realized gain
from investments and foreign
currency transactions 565,298 109,394
Net unrealized appreciation of
investments and foreign
currency contracts and
translations 941,192 255,049
---------- -----------
NET ASSETS $41,298,229 $17,465,488
---------- -----------
*Investments at cost $39,775,364 $17,000,286
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
- ----------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF OPERATIONS
December 31, 1997
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS MANAGERS
GLOBAL
BOND BOND
FUND FUND
-------- --------
<S> <C> <C>
INVESTMENT INCOME:
Interest income $2,505,009 $1,060,693
Dividend income 115,173 --
Foreign withholding tax -- (2,984)
Stock loan fees 915 --
---------- ----------
Total investment income 2,621,097 1,057,709
---------- ----------
EXPENSES:
Investment advisory and
management fees 221,232 115,996
Administrative fees 88,493 33,142
Custodian fees 33,235 34,594
Audit fees 23,315 29,498
Transfer agent fees 33,613 21,312
Registration fees 19,871 19,652
Legal fees 2,684 1,205
Trustee fees 1,490 661
Amortization of organization
expense -- 2,534
Miscellaneous expenses 24,083 12,301
---------- ----------
Total expenses 448,016 270,895
---------- ----------
Net investment income 2,173,081 786,814
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on
investment transactions 1,107,547 361,832
Net realized loss on foreign
currency contracts and
translations (46,880) (1,276,214)
Net realized loss on options -- (4,428)
Net unrealized appreciation
of investments 275,604 89,114
Net unrealized appreciation
(depreciation) from foreign
currency contracts and
translations 63 39,276
---------- ----------
Net realized and
unrealized gain (loss) 1,336,334 (790,420)
---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $3,509,415 $ (3,606)
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
- -----------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Managers Global
Managers Bond Fund Bond Fund
For the year ended For the year ended
December 31, December 31,
1997 1996 1997 1996
------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
From Operations:
Net investment income $ 2,173,081 $ 1,767,973 $ 786,814 $ 911,546
Net realized gain (loss) on
investments, options and
foreign currency transactions 1,060,667 486,867 (918,810) 652,952
Net unrealized appreciation
(depreciation) of
investments and foreign
currency translations 275,667 (732,438) 128,390 (820,553)
------------ ------------ ------------ -----------
Net increase (decrease) in net
assets resulting
from operations 3,509,415 1,522,402 (3,606) 743,945
------------ ------------- ------------ -----------
Distributions to Shareholders:
From net investment income (2,140,862) (1,776,139) (138,962) (678,250)
From net realized gain on investments -- -- (277,649) (308,091)
------------- -------------- ------------ ------------
Total distributions to shareholders (2,140,862) (1,776,139) (416,611) (986,341)
------------ -------------- ------------ ------------
From Capital Share Transactions:
Proceeds from sale of shares 19,635,395 17,350,976 8,504,428 9,371,671
Net asset value of shares issued
in connection with reinvestment
of dividends and distributions 1,907,220 1,450,259 410,786 938,767
Cost of shares repurchased (13,431,500) (13,105,056) (7,881,882) (12,038,199)
------------ ------------- ----------- -----------
Net increase (decrease) from
capital share transactions 8,111,115 5,696,179 1,033,332 (1,727,761)
------------ ------------- ----------- ------------
Total increase (decrease)
in net assets 9,479,668 5,442,442 613,115 (1,970,157)
------------- -------------- ----------- ------------
Net Assets:
Beginning of year 31,818,561 26,376,119 16,852,373 18,822,530
------------- --------------- ----------- -------------
End of year $41,298,229 $31,818,561 $17,465,488 $16,852,373
------------- --------------- ----------- -------------
End of year undistributed
(overdistributed) net
investment income $ 11,832 $ 26,493 $ (302,833) $ 148,615
------------ --------------- ------------ -------------
- ----------------------------------------------------------------------------------------------
Share Transactions:
Sale of shares 843,064 779,223 403,828 433,754
Shares issued in connection
with reinvestment
of dividends and distributions 82,422 65,848 19,423 43,898
Shares repurchased (578,194) (591,669) (376,301) (556,056)
------------- --------------- ----------- ------------
Net increase (decrease)
in shares 347,292 253,402 46,950 (78,404)
------------- ---------------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
- -------------------------------------------------------------------
MANAGERS BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each year
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $22.83 $23.13 $18.92 $22.18 $21.88
Income from Investment Operations:
Net investment income 1.39 1.35 1.44 1.59 1.49
Net realized and unrealized
gain (loss) on investments 0.90 (0.29) 4.23 (3.16) 0.98
Total from investment
operations 2.29 1.06 5.67 (1.57) 2.47
Less Distributions to Shareholders:
From net investment income (1.40) (1.36) (1.46) (1.55) (1.50)
From net realized gain on
investments -- -- -- (0.14) (0.67)
Total distributions to
shareholders (1.40) (1.36) (1.46) (1.69) (2.17)
Net Asset Value, End of Year $23.72 $22.83 $23.13 $18.92 $22.18
- ---------------------------------------------------------------------
Total Return 10.42% 4.97% 30.91% (7.25)% 11.56%
- ---------------------------------------------------------------------
Ratio of expenses to average net
assets 1.27% 1.36% 1.34% 1.20% 1.15%
Ratio of net investment income to average
net assets 6.14% 6.13% 6.84% 7.28% 6.65%
Portfolio turnover 35% 72% 46% 84% 373%
Net assets at end of year
(000's omitted) $41,298 $31,819 $26,376 $30,760 $44,038
</TABLE>
20
<PAGE>
- -------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each period
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
March 25, 1994
(commencement
Year ended December 31, of operations) to
-----------------------
1997(e) 1996 1995 December 31, 1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.40 $21.74 $19.10 $20.00
Income from Investment Operations:
Net investment income 0.97 1.21 0.95 0.48
Net realized and unrealized gain
(loss) on investments (0.93) (0.27) 2.66 (0.77)
Total from investment
operations 0.04 0.94 3.61 (0.29)
Less Distributions to Shareholders:
From net investment income (0.17) (0.87) (0.93) (0.50)
From net realized gain on investments(0.34) (0.41) -- --
In excess of net investment income -- -- (0.04) (0.11)
Total distributions to
shareholders (0.51) (1.28) (0.97) (0.61)
Net Asset Value, End of Period $20.93 $21.40 $21.74 $19.10
- -----------------------------------------------------------------------------
Total Return 0.16% 4.39%(d) 19.08%(d) (1.52)%(c)(d)
- ------------------------------------------------------------------------------------
Ratio of net expenses to average
net assets 1.63% 1.57% 1.55% 1.73%(b)
Ratio of net investment income
to average net assets 4.75% 4.98% 5.07% 4.19%(b)
Portfolio turnover 197% 202% 214% 266%(c)
Net assets at end of period
(000's omitted) $17,465 $16,852 $18,823 $9,520
- --------------------------------------------------------------------------------
Expense Waiver (a)
- -------------------
Ratio of total expenses to
average net assets N/A 1.60% 1.69% 2.03% (b)
Ratio of net investment income
to average net assets N/A 4.95% 4.93% 3.89% (b)
- ------------------------------------------------------------------------------------
</TABLE>
[FN]
(a)Ratio information assuming no waiver of investment advisory and
management fees and/or administrative fees in effect for the periods presented,
if applicable. (See Note 2).
(b) Annualized.
(c) Not annualized.
(d) The total return would have been lower had certain expenses not
been reduced during the periods.
(e) Calculated using the average shares outstanding during the year.
</FN>
21
- -------------------------------------------------------------------
MANAGERS BOND FUND AND MANAGERS GLOBAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- -------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Managers Funds (the "Trust") is a no-load, open-end, management
investment company, organized as a Massachusetts business trust, and
registered under the Investment Company Act of 1940 (the "1940 Act"), as
amended. Currently the Trust is comprised of 11 investment series.
Included in this report are Managers Bond Fund ("Bond") and Managers
Global Bond Fund ("Global Bond"), collectively the "Funds."
The Funds' financial statements are prepared in accordance with
generally accepted accounting principles, which require management to
make 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 the preparation of its
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. Equity securities
traded on a domestic or international securities exchange are valued at
the last quoted sales price, or, lacking any sales, on the basis of the
last quoted bid price. Over-the-counter securities for which market
quotations are readily available are valued at the last quoted bid
price. 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,
preferred stocks, convertible securities and other debt 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
22
<PAGE>
- ------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- ------------------------------------------------------------------
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 relative net assets.
(d) DIVIDENDS AND DISTRIBUTIONS
Dividends resulting from net investment income normally will be declared
monthly for Bond and quarterly for Global Bond. These dividends normally
will be payable on the third to the last business day of the month.
Distributions of capital gains, if any, will be made on an annual basis
and when required for federal excise tax purposes. Income and capital
gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments
for mortgage-backed securities, option transactions, market discount and
foreign currency transactions. Permanent book and tax basis differences,
if any, relating to shareholder distributions will result in
reclassifications to paid-in capital.
(e) ORGANIZATION COSTS (GLOBAL BOND ONLY)
Organization and registration related costs of $12,577 have been
deferred and are being amortized over a period of time not to exceed 60
months from the commencement of operations on March 25, 1994.
(f) REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements provided that the value
of the underlying collateral, including accrued interest, will be equal
to or exceed the value of the repurchase agreement during the term of
the agreement. The underlying collateral for all repurchase agreements
is held in safekeeping by the Fund's custodian or at the Federal Reserve
Bank.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings commence with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or
limited.
(g) 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 federal income or excise tax
provision is included in the accompanying financial statements.
23
<PAGE>
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------
(h) CAPITAL LOSS CARRYOVERS
There were no capital loss carryovers at December 31, 1997.
(i) CAPITAL STOCK
The Trust's Declaration of Trust authorizes each series of the Trust the
issuance of an unlimited number of shares of beneficial interest,
without par value. Each Fund records sales and repurchases of its
capital stock on the trade date. Dividends and distributions to
shareholders are recorded as of the ex-dividend date.
At December 31, 1997, one unaffiliated shareholder, which is an omnibus
account, individually held 14% of the outstanding shares of Bond.
(j) FOREIGN CURRENCY TRANSLATION
The books and records of each Fund are maintained in U.S. dollars. The
value of investments, assets and liabilities denominated in currencies
other than U.S. dollars are translated into U.S. dollars based upon
current foreign exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars
based on currency exchange rates prevailing on the respective dates of
such transactions. Net realized and unrealized gain (loss) on foreign
currency transactions represent: (1) foreign exchange gains and losses
from the sale and holdings of foreign currencies, (2) gains and losses
between trade date and settlement date on investment securities
transactions and forward foreign currency exchange contracts, and (3)
gains and losses from the difference between amounts of interest and
dividends recorded and the amounts actually received.
In addition, the Funds do not isolate that portion of the results of
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 a
portfolio manager(s) for each Fund (subject to Trustee approval),
allocates assets among portfolio managers, if applicable, and monitors
the portfolio managers' investment programs and results. Each Fund's
investment portfolio is currently managed by a single portfolio manager
who serves pursuant to a Portfolio Management Agreement 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 at the rates of 0.625% and 0.70% for Bond and Global Bond,
respectively.
24
<PAGE>
- ----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- ----------------------------------------------------------------
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 fiscal year ending December 31, 1997, the Administrator was paid
a fee based on each Fund's average daily net assets of 0.25% and 0.20%
for Bond and Global Bond, respectively.
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 of investments, excluding short-term
securities, and of U.S. government securities, for the fiscal year ended
December 31, 1997, were as follows:
<TABLE>
<CAPTION>
LONG-TERM U.S. GOVERNMENT
SECURITIES SECURITIES ONLY
------------------------- -----------------------
FUND PURCHASES SALES PURCHASES SALES
- --------- --------- ------ --------- ------
<S> <C> <C> <C> <C>
Bond $18,861,436 $11,836,230 $ 4,953,836 $ 231,594
Global Bond 31,929,507 29,049,209 10,232,313 8,852,267
</TABLE>
(4) PORTFOLIO SECURITIES LOANED
Each of the Funds may participate in a securities lending program
providing for the lending of corporate bonds, equity and government
securities to qualified brokers. Collateral on all securities loaned
except for government securities loaned is accepted only in cash.
Collateral on government securities loaned is in the form of other
similar securities. Collateral is maintained at a minimum level of 100%
of the market value, plus interest, if applicable, of investments on
loan. Collateral received in the form of cash is temporarily invested in
money market investments by the custodian. Earnings of such temporary
cash investments are divided between the custodian, as a fee for its
services under the program, and the Fund, according to agreed-upon
rates.
25
<PAGE>
- -------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------
(5) FORWARD FOREIGN CURRENCY CONTRACTS
During the fiscal year ended December 31, 1997, Global Bond invested in
forward foreign currency exchange contracts to manage currency exposure.
These investments may involve greater market risk than the amounts
disclosed in the Funds' 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.
Open forward foreign currency exchange contracts for Global Bond at
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
CONTRACT CURRENT UNREALIZED
AMOUNT (IN VALUE GAIN/LOSS
FOREIGN CURRENCY LOCAL CURRENCY) (IN U.S. DOLLARS) (IN U.S. DOLLARS)
----------------- ---------------- ----------------------
<S> <C> <C> <C>
All contracts expire February 19, 1998
BUY CONTRACTS
Canadian Dollar 1,215,303 $ 851,795 $ (5,259)
Deutsche Mark 1,511,281 842,490 (5,116)
Japanese Yen 433,711,168 3,345,508 (79,179)
---------- -----------
TOTAL BUY CONTRACTS
(Payable amount $5,129,347) $5,039,793 $ (89,554)
---------- ----------
SELL CONTRACTS
Deutsche Mark 1,569,206 $ 874,781 $ 9,279
Pound Sterling 675,684 1,107,184 938
---------- ----------
TOTAL SELL CONTRACTS
(Receivable amount $1,992,182) $1,981,965 $ 10,217
---------- ----------
26
<PAGE>
- --------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------
(6) RISKS ASSOCIATED WITH COLLATERAL MORTGAGE OBLIGATIONS ("CMOs")
The net asset value of Bond may be sensitive to interest rate
fluctuations because the Fund may hold several instruments, including
CMOs 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, 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. CMOs
may have a fixed or variable rate of interest.
(7) OPTIONS
The Funds may write covered put and covered call options for which
premiums are received and are recorded as liabilities, and are
subsequently adjusted to the current value of the options written.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are
exercised or closed are offset against the proceeds or amount paid on
the transaction to determine the realized gain or loss. If a put option
is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund, as a writer of an option, may have no
control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. During the year ended December 31, 1997, Global Bond entered
into the following options transactions as currency hedges:
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CONTRACTS PREMIUMS
--------- --------
<S> <C> <C>
Outstanding, beginning of year $ -- $ --
Options purchased 1,640,000 (5,822)
Options expired -- --
Options exercised (1,640,000) 5,822
Outstanding, end of year $ -- $ --
</TABLE>
27
<PAGE>
- -------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------
(8) CONTINGENCY
A lawsuit seeking class action status has been filed against Managers
Intermediate Mortgage Fund, the Manager and the Trust, among other
defendants in the United States District Court for the District of
Connecticut in September, 1994. The plaintiffs seek unspecified damages
based upon losses alleged in the fund named above. The parties have now
entered into an agreement to settle all claims by the purported class.
However, the settlement is subject to court approval and certain other
conditions, such as the minimum percentage of class members agreeing to
participate in the settlement. 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
lawsuit, as well as Managers Short Government Fund and Managers Short
and Intermediate Bond Fund. The parties have now entered into an
agreement to settle all claims by this customer and the settlement is
conditional on, among other things, the settlement of the class action
lawsuit. Certain other customers, who are potentially members of the
plaintiff class in the class action lawsuit referred to above, have
asserted that they may file similar lawsuits based on similar claims,
but have not yet done so. Management continues to believe that it has
meritorious defenses and, if the cases are not settled, the Management
intends to defend vigorously against these actions.
28
<PAGE>
- ---------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------------------------------------
To the Trustees of The Managers Funds and the Shareholders of Managers
Bond Fund and Managers Global Bond Fund:
We have audited the accompanying statements of assets and liabilities
of Managers Bond Fund and Managers Global Bond Fund, including the
schedules of portfolio investments, as of December 31, 1997 and the
related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then
ended, the financial highlights for each of the five years in the period
then ended for Managers Bond Fund, and each of the three years in the
period ended December 31, 1997 and the period March 25, 1994
(commencement of operations) to December 31, 1994 for Managers Global
Bond Fund. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of December 31, 1997, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Managers Bond Fund and Managers Global Bond Fund
as of December 31, 1997, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in
the period then ended, the financial highlights for each of the five
years in the period then ended for Managers Bond Fund and the financial
highlights for each of the three years in the period ended December 31,
1997 and the period March 25, 1994 (commencement of operations) to
December 31, 1994 for Managers Global Bond Fund, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 20, 1998
29
<PAGE>
- -----------------------------------------------------------------
[THE MANAGERS FUNDS LOGO]
Where Leading Money Managers Converge
FUND DISTRIBUTOR
THE MANAGERS FUNDS, L.P.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
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 Kemper Investments, Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management
Company, Inc.
Husic Capital Management
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates
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
State Street Global Advisors,
United Kingdom, Limited
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.
