<PAGE>
SHORT AND INTERMEDIATE BOND FUND
INTERMEDIATE MORTGAGE FUND
BOND FUND
GLOBAL BOND FUND
- ---------------------------------------
ANNUAL REPORT
DECEMBER 31, 1998
WHERE LEADING MONEY MANAGERS CONVERGE
<PAGE>
MANAGERS SHORT AND INTERMEDIATE BOND FUND
MANAGERS INTERMEDIATE MORTGAGE FUND
MANAGERS BOND FUND
MANAGERS GLOBAL BOND FUND
ANNUAL REPORT
DECEMBER 31, 1998
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, 1998
Investment Manager's Comments........................................ 4
Discussion of investment results during the period
and cumulative total return graphs versus relevant indices
Schedules of Portfolio Investments................................... 16
Detailed portfolio listings by security type and industry
sector, as valued at December 31, 1998
Statements of Assets and Liabilities................................. 28
Fund balance sheets, Net Asset Value (NAV) per share
computation and cumulative undistributed amounts
Statements of Operations............................................. 29
Details of sources of income, fund expenses, and realized and
unrealized gains (losses) during the period
Statements of Changes in Net Assets.................................. 30
Detail of changes in fund assets and distributions to
shareholders for the past two periods
Financial Highlights................................................. 32
Historical net asset values, distributions, total returns,
expense ratios, turnover ratios and net assets
Notes to Financial Statements........................................ 36
Accounting and distribution policies, details of agreements
and transactions with fund management and description of
certain investment risks
Report of Independent Accountants.................................... 45
</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 past year will be remembered as one of the most tumultuous years for
financial assets in recent history. While the U.S. economy grew steadily
throughout the year and inflation remained very moderate, several important
events sent financial markets throughout the world on a roller-coaster of
valuation.
Early in the year, despite continued uncertainty about the health of many
emerging economies, U.S. equity and fixed-income markets rose as continued
growth in gross domestic product (GDP) and the reality of low inflation
encouraged investors and consumers. Consumer spending continued to rise
along with personal income, while unemployment reached post-WWII lows. As
might be expected, consumer confidence estimates reached all-time highs.
During the summer, however, the continuing problems in foreign economies
threw a wrench into the works. A 7.7% drop in exports confirmed that the
economic crises in the Far East was having an impact on the U.S. economy,
and raised the possibility that the emerging markets could drag relatively
healthy developed markets, including the U.S., into recession. In mid-
August, Russia devalued its currency by one third and defaulted on much of
its debt to foreign creditors. Long Term Capital Management (LTCM), a hedge
fund consisting of some of the "smartest money" on Wall Street, had to be
bailed out by a consortium of large investment banking institutions after
LTCM's funds lost nearly 90 percent of their value. The Malaysian government
instituted capital controls over its currency, effectively eliminating
further foreign investment. These events set off a vicious cycle that led
to sharp declines of almost all of the world's financial markets. In
addition, U.S. manufacturing activity and construction spending leveled off
and U.S. job growth grew at a slower than expected pace in September. Again,
not surprisingly, consumer confidence fell for three straight months
into September. From their peak in mid-July most foreign and domestic stock
indices fell 20% or more by the end of August. Liquidity in the credit
markets dwindled as dealers and investors attempted to reduce their risk
exposure at all costs, sending corporate bond and all lower credit quality
debt prices lower. The beneficiaries were U.S. Treasury securities along
with a few other countries' government debt which rose dramatically in price
during the period.
In reaction to these events and the market weakness, the Federal Reserve
1
<PAGE>
- --------------------------------------------------------------------------
Board reduced the Federal Funds Rate by one quarter percentage point on
September 29th, and followed that with a surprise reduction in mid-October.
In explaining his decision, Fed Chairman Greenspan told the Senate Budget
Committee that "deteriorating foreign economies and their spillover to
domestic markets have increased the possibility that the slowdown in the
growth of the American economy will be more than sufficient to hold
inflation in check." Several foreign central banks augmented the Fed's move
by reducing their own rates.
The global equity markets celebrated the rate reductions along with some
encouraging corporate earnings news by surging to one of their best
quarterly performances ever. Before the end of the calendar year, the broad
large and medium capitalization indices were hitting all-time highs.
The increased volatility of the financial markets was clear evidence that
the success of the markets depends heavily on the continuation of a near
perfect environment; low inflation, high employment, an extended economic
expansion, strong corporate earnings driven by structural and technological
improvements, and low interest rates. Any threats to this environment will
likely trigger more volatility and dispersion of investment results. Now
more than ever, we believe that past performance is no guarantee of future
results, and that diversification is very important.
This past year was also a successful one for The Managers Funds. Most of
our funds performed within or exceeded our expectations during the year. In
February, we successfully launched a new fund, Managers Emerging Markets
Equity Fund. Although the emerging markets were not a particularly
profitable area of investment in 1998, we believe that there is excellent
opportunity going forward. We made one investment manager change during
the year in Managers Capital Appreciation Fund, which, incidentally, had a
very successful year. Please see page 3 for the performance results of all
of our funds.
I would like to take this opportunity to personally thank Bill Graulty, who
recently retired from the Funds' Board of Trustees, for his many years of
service to our shareholders. Bill has been a Trustee to the Funds since
their inception in 1984. Early in 1999 a proxy vote will be held to elect a
replacement for Bill Graulty. We wish him well in his future endeavors.
As always, should you have any questions about 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 FUNDS PERFORMANCE (unaudited)
All periods ending December 31, 1998
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL 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 11.77% 18.49% 17.68% 14.43% 15.22% Oct. '84 ***
Capital Appreciation
Fund 57.41% 26.34% 21.51% 18.36% 17.77% Jun. '84 ****
Special Equity Fund 0.20% 15.88% 15.35% 16.64% 15.80% Jun. '84 ***
International
Equity Fund 14.54% 12.70% 11.16% 11.62% 14.05% Dec. '85 ****
Emerging Markets
Equity Fund -- -- -- -- (22.60)% Feb. '98 NA
Income Funds:
Short & Intermediate
Bond Fund 5.36% 5.13% 4.23% 7.13% 8.15% Jun. '84 ***
Intermediate
Mortgage Fund 6.08% 5.84% 0.83% 6.72% 7.12% May '86 *
Bond Fund 3.34% 6.19% 7.77% 9.75% 10.73% Jun. '84 ***
Global Bond Fund 19.27% 7.64% -- -- 8.24% Mar. '94 **
Money Market Fund 5.25% 5.36% 4.94% 5.19% 5.83% 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 The Managers Funds at (800)835-3879,
or your investment adviser. Please 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
12/31/98 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
Treasury bill returns. For the three-, five- and ten-year periods,
respectively, each of the Equity Funds other than the International Equity Fund
was rated against 2,821, 1,721 and 751 equity funds, the International
Equity Fund was rated against 872, 417 and 124 international equity funds, and
each of the Income Funds was rated against 1,499, 998 and 378 taxable
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 & INTERMEDIATE BOND FUND
- -----------------------------------------------------------------
MANAGERS SHORT & INTERMEDIATE BOND FUND, managed by The Managers Funds,
L.P. since its inception in 1984, seeks high current income by investing
in fixed income securities while maintaining an average portfolio maturity
between one and five years. The Managers Funds currently utilizes a
single independent sub-advisor, Howard Rubin of Standish, Ayer & Wood, who
has managed a portion of the portfolio since August, 1991, and the entire
portfolio since December, 1995.
THE PORTFOLIO MANAGER
Howard Rubin's investment philosophy involves constructing a portfolio
using active sector positioning and credit analysis. Howard does not
attempt to forecast interest rates or make shifts in duration* in an
attempt to add value, rather, he manages the portfolio's duration to
within 85% and 115% of the Fund's benchmark, which is the Merrill Lynch 1-
5 Year Government/Corporate Index. Howard typically constructs a
diverse portfolio, using investment grade bonds including bonds from a
variety of corporate sectors, asset-backed securities, private and
government agency mortgage-backed securities, Treasury securities and a
small portion of foreign corporate and government bonds.
THE YEAR IN REVIEW
Managers Short and Intermediate Bond Fund provided a total return of
5.4% during 1998 while the Merrill Lynch 1 - 5 year Government/
Corporate Bond Index returned 7.7%.
After a quick rally during the first two weeks of the year, bonds remained
flat for the remainder of the first quarter. Mortgage securities
performed slightly better than government and corporate issues, and the
portfolio's relatively small allocation in mortgage related securities is
partially responsible for the Fund's underperformance. A 1.3% position in
a British corporate bonds was additive while the remainder of the foreign
bonds detracted from performance.
The Fund performed well, along with the index throughout most of the
second quarter. With only slight changes in interest rates for short- and
intermediate-term securities during the period, and reasonably steady
spreads between higher quality sectors, there was little room to add
value. Spreads did widen somewhat in the medium- and low-grade arena as
supply overwhelmed demand. Overall, bonds with built in yield premiums
performed better during the second quarter.
In the third quarter, although the portfolio performed well nominally due
to falling interest rates, it underperformed its benchmark index primarily
due to its diversification into corporate bonds. Virtually all sectors
underperformed treasuries as credit spreads widened dramatically during
the summer. Accompanying the widening yield spreads was a withdrawal of
liquidity similar to that which happened in the small capitalization
equity market. When attempting to purchase some undervalued corporate
bonds in August, the portfolio man-
4
<PAGE>
- -----------------------------------------------------------------
ager, had difficulty buying sizable positions. One explanation for this
is that corporate bonds, along with small capitalization stocks,
typically garner liquidity through the broker/dealer community, which,
because of significant trading losses, had become very risk averse. While
this is concerning, it also suggests that there is an opportunity to
capture incremental return.
During the fourth quarter, corporate spreads tightened somewhat, due
partly to rate cuts by the Fed and a "settling down" of international
capital markets. The Fund underperformed somewhat primarily as a result
of some individual positions. In particular, a position in Aames
Financial dropped substantially as its credit rating was lowered due to
the difficulty it had securing financing during the third quarter credit
squeeze. The position was eliminated. Holdings in Merrill Lynch, and
Crescent Real Estate, also fell in price during the fourth quarter.
Conversely, the Fund's performance was enhanced somewhat by its foreign
corporate exposure. A position in Wharf Capital International Ltd. rose
sharply as it bounced back from the depressed third quarter valuation.
Through all of this, the portfolio manager, Howard Rubin, has endeavored
to invest in securities with extremely sound fundamentals. Indeed,
despite the Fund's poor relative performance, Howard noted in mid-December
that "We have not seen as wide a portfolio yield advantage over the
indices since late 1995. In the past, such yield advantages have led to
excellent future returns."
At year-end, the Fund had 9% of its assets invested in U.S. Treasury
securities, 5% invested in mortgage securities, 4% in foreign corporate
securities and 81% in domestic corporate bonds, most of which were
financial institutions bonds and asset-backed securities. The Fund's
duration* at year-end was 2.3 years compared with the benchmark duration
of 2.2 years. The portfolio's average yield to maturity was 6.5% and its
30-day SEC yield was 5.3%.
[FN]
- -------------------------
* 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.
</FN>
5
<PAGE>
- -----------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
Cumulative Total Return Performance
- -----------------------------------------------------------------------
THE MANAGERS SHORT AND INTERMEDIATE BOND FUND'S cumulative total return
is based on the daily change in net asset value (NAV), and assumes that
all distributions were reinvested.
The Merril Lynch 1-5 Year Government/Corporate Index consists of over
2,200 government and investment grade corporate bonds with maturities
between one and five years. The index is heavily weighted in U.S.
Treasury issues, which make up over 75% of the index. The index assumes
reinvestment of dividends.
This chart compares a hypothetical $10,000 investment made in Managers
Short and Intermediate Bond Fund on December 31, 1988, to a $10,000
investment made in the Merrill Lynch 1-5 Year Government/Corporate
Index for the same time period. Past performance is not indicative of
future results.
[Line Graph comparing hypothetical $10,000 investment for the past ten years
between the Short and Intermediate Bond Fund and the Merrill Lynch 1-5 Yr.
Govt/Corp. Index]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----- ---- ----- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short and Intermediate
Bond Fund 10,000 11,061 11,860 13,376 14,921 16,182 14,826 17,134 17,855 18,893 19,906
Merrill Lynch 1-5 Yr
Govt/Corp Index 10,000 11,163 12,243 13,837 14,790 15,845 15,757 17,793 18,621 19,954 21,488
</TABLE>
This table shows the average annual total returns for Managers Short and
Intermediate Bond Fund for the one-year, five-year and ten-year periods
through December 31, 1998, and comparable returns for the Merrill Lynch
1-5 Year Government/Corporate Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
-------- ----------- ---------
<S> <C> <C> <C>
Managers Short and Intermediate
Bond Fund 5.4% 4.2% 7.1%
Merrill Lynch 1-5 Year
Government/Corporate Index 7.7% 6.3% 7.9%
</TABLE>
6
<PAGE>
- -------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
- -------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND, managed by The Managers Funds, L.P.
since its inception in 1987, seeks high current income by investing
primarily in mortgage-related securities. The Managers Funds currently
utilizes Jennison Associates Capital Corp., an independent outside sub-
adviser, to manage the portfolio. Jennison has managed the Fund since
October, 1994, with Thomas Doyle currently heading the team.
THE PORTFOLIO MANAGER
Tom Doyle utilizes an experienced fixed income team as well as a
proprietary analytical system to analyze and select undervalued securities
which will provide stable returns under a wide range of interest rate
scenarios. Tom makes no attempt to time the market or forecast interest
rates, rather, he maintains the portfolio duration close to that of the
Fund's benchmark, the Salomon Brothers Mortgage Pass-through Index. In
making purchase decisions, the team models potential returns for a given
security and compares them to the returns for similar duration Treasury
and mortgage securities. Tom also makes use of the collateralized
mortgage obligation(CMO) market, selecting individual securities and
combinations of securities which have better risk/return properties than
can be found in the generic mortgage market.
THE YEAR IN REVIEW
Managers Intermediate Mortgage Fund provided a total return of 6.1%
during 1998, while the Salomon Brothers Mortgage Index returned 7.0%.
Mortgage securities provided steady returns during the year and the Fund's
full year return was slightly better than its average yield to maturity at
the start of the year less annual Fund expenses. Mortgage and treasury
securities rallied during the summer as investors moved into high credit
quality securities. Mortgages then corrected somewhat in late September.
Throughout the year, the portfolio was invested primarily in fixed-rate
mortgage pools with coupons ranging from 6.5% to 8.0%. The remainder of
the portfolio was generally invested in U.S. Treasury securities. The
duration of the portfolio was also managed using U.S. Treasury futures
contracts. The portfolio's characteristics at the end of the year were
virtually the same as at the start of the year. The average life of the
portfolio was 5.1 years at year end, and the effective duration was 2.3
years. The portfolio's average yield to maturity was 6.7%. At December
31, 1998, the Fund's 30-Day SEC yield was 6.20%.
7
<PAGE>
- -------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE FUND
Cumulative Total Return Performance
- -----------------------------------------------------------------------
THE MANAGERS INTERMEDIATE MORTGAGE FUND's cumulative total return is based
on the daily change in net asset value (NAV), and assumes that all
distributions were reinvested.
The Salomon Brothers Mortgage Pass-through Index is designed to cover
The performance of the entire mortgage pass-through market, including
Single family pools of GNMA, FHLMC and FNMA mortgage securities.
This chart compares a hypothetical $10,000 invested in Managers
Intermediate Mortgage Fund on December 31, 1988, to a $10,000 investment
in the Salomon Brothers Mortgage Pass-Through Index for the same period.
Past performance is not indicative of future results.
[Line Graph comparing hypothetical $10,000 investment for the past ten years
between the Intermediate Mortgage Fund and the Salomon Brothers Mortgage
Index]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----- ---- ----- ---- ---- ---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managers Intermediate
Mortgage Fund 10,000 11,469 12,637 14,935 16,504 18,395 13,789 16,170 16,709 18,073 19,171
Salomon Brothers Mortgage
Pass-Through Index 10,000 11,516 12,770 14,768 15,857 16,973 16,731 19,536 20,585 22,493 24,067
</TABLE>
This table shows the average annual total returns for Managers Intermediate
Mortgage Fund for the one-year, five-year and ten-year periods
through December 31, 1998, and comparable returns for the Salomon Brothers
Mortgage Pass-Through Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
-------- ----------- ---------
<S> <C> <C> <C>
Managers Intermediate
Mortgage Bond Fund 6.1% 0.8% 6.7%
Salomon Brothers Mortgage
Pass-Through Index 7.0% 7.2% 9.2%
8
<PAGE>
- ------------------------------------------------------------------
MANAGERS BOND FUND
- ------------------------------------------------------------------
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, and 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
Managers Bond Fund provided a total return of 3.3% during 1998 while the
Lehman Brothers Government/Corporate Bond Index returned 9.5%.
Although the Fund's relatively long duration was beneficial during the
year, the portfolio's heavy allocation in foreign and BBB credit rated
bonds significantly hindered performance, particularly in the third
quarter.
During the first quarter of the year, the yield curve for domestic bonds
steepened slightly with long-term yields remaining stable and shorter
term rates falling. Thus, long-term bond prices and the Fund's corporate
and U.S. Treasury positions finished the first quarter mostly unchanged
in price. The primary driver of the Fund's outperformance in the first
quarter was significant appreciation of its foreign bond positions.
9
<PAGE>
- ------------------------------------------------------------------
Conversely, in the second quarter, while interest rates fell and the
yield curve flattened, foreign investors were buying U.S. Treasury
securities in a flight to quality. The portfolio's long duration was
very beneficial during the second quarter and the best performing
securities in the portfolio were the long U.S. Treasury strips. The bulk
of the portfolio, which was invested in domestic industrial corporate
bonds also performed well while the foreign positions detracted from
performance.
The flight to quality intensified in the third quarter to the extent that
liquidity in lower investment grade and foreign corporate bonds
evaporated. Although the Fund's long duration was again a positive
influence, the Fund underperformed dramatically due to its diversity.
There was great dispersion of bond returns during the period as the yield
spread between government/AAA bonds and medium to lower grade credits
widened dramatically. In addition, the prices of many foreign corporate
bonds fell as the marginal investor moved toward safety in the form of
U.S., German and British government bonds.
The portfolio's long U. S. Treasury position appreciated 9.8% during the
third quarter, and a moderate allocation in U.S. Government agency
mortgage-backed securities rose 6.2%. Over 40% of the portfolio,
however, was invested in domestic industrial fixed-rate bonds with an
average credit rating of BBB. Because of the maturity and call
protection built in to these bonds, they have and will continue to
provide a premium yield, however, their prices moved about 1% lower
during the third quarter. Foreign bonds fared worse as the demand for
them waned with investors seeking safety only in treasuries.
However, these bonds rebounded somewhat during the fourth quarter as a
perceived increase in overseas stability encouraged investors. For
instance, the portfolio's dollar-denominated Malaysian, South African and
Hong Kong bonds appreciated more than 30% during the fourth quarter. In
addition, a 3% position in Polish government bonds rose 9% in price, and
the Fund's long standing Canadian position appreciated 4% during the
quarter.
Despite three Federal Reserve Board interest rate cuts, U.S government
securities, particularly longer maturity bonds, declined during the
fourth quarter as more confident investors sought to take in more yield
or moved back into equities. Corporate bonds in general fell during the
quarter although spreads tightened somewhat.
The Fund continues to invest heavily in domestic corporate bonds
with an emphasis on long duration and call protection. In addition
the portfolio continues to have a significant investment in foreign
bonds. Most of the foreign bonds in the portfolio are
10
<PAGE>
- ------------------------------------------------------------------
"Yankee" bonds meaning that the issuers are foreign but that they are
priced in U.S. Dollars and traded in the U.S. These bonds are providing
extremely good yields compared to a flat treasury yield curve in the 5%
range, and offer some economic diversification. The primary risks to
these bonds are liquidity, which manifests itself in price volatility,
and credit, on which Dan Fuss and the analysts at Loomis Sayles
constantly focus. For several years, Dan has been asserting that
reinvestment risk is the greatest risk to a bond portfolio in this
environment. As rates have steadily fallen he has been correct all
along. Despite the volatile price performance, the portfolio is very
well positioned for the future with substantial yield premium and call
protection.
As of year end, the average maturity of the portfolio was 19.6 years, and
the duration* was 11.2 years. For comparison, the Lehman Brothers
Government/ Corporate Bond Index has an average maturity and duration of
10.3 years and 5.6 years, respectively. The yield to maturity of the
portfolio is 7.8%, while the yield to maturity of the index is 5.4%. As
of December 31, 1998, the annualized 30-day SEC yield on the Fund was
6.86%.
<FN>
- ---------------------------------------
* 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.
</FN>
11
<PAGE>
- -----------------------------------------------------------------------
MANAGERS BOND FUND
Cumulative Total Return Performance
- -----------------------------------------------------------------------
THE MANAGERS BOND FUND Fund's cumulative total return is based on the
daily 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 below compares a hypothetical $10,000 invested in Managers
Bond Fund on December 31, 1988, 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.
[Line Graph comparing hypothetical $10,000 investment for the past ten years
between the Bond Fund and the Lehman Brothers Government/Corporate Bond Index]
</TABLE>
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----- ---- ----- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managers Bond
Fund 10,000 11,310 12,162 14,485 15,628 17,437 16,172 21,171 22,224 24,529 25,348
Lehman Brothers Government/
Corporate Bond
Index 10,000 11,423 12,370 14,364 15,454 17,158 16,556 19,742 20,315 22,297 24,410
</TABLE>
<PAGE>
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, 1998,
and comparable returns for the Lehman Brothers Government/Corporate Bond
Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
ONE YEAR FIVE YEARS TEN YEARS
-------- ----------- ---------
<S> <C> <C> <C>
Managers Bond Fund 3.3% 7.8% 9.8%
Lehman Brothers Government/
Corporate Bond Index 9.5% 7.3% 9.3%
12
<PAGE>
- ---------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
- ---------------------------------------------------------------------
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. At the same time, Rogge recognizes that short-term
volatility in the currency market can significantly impact portfolio
performance. Thus, Rogge will sometimes hedge (usually toward an index-
like exposure) when he expects such short-term currency swings to go
against the expected trend for that country's bond market. 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
Managers Global Bond Fund provided a total return of 19.3% during 1998,
while the Salomon Brothers World Government Index returned 15.3%.
The Fund's excellent nominal performance for the year was the result of a
global flight to quality, particularly during the third quarter, which
drove the prices for high quality sovereign debt higher. The Fund's
excellent relative performance during the year was a result of the
portfolio manager's continued emphasis on high quality European bonds,
avoidance of Japanese Government Bonds and some timely currency
management. In addition, the portfolio's moderately longer than average
duration was beneficial in a year when interest rates fell across the
globe.
The first half of the year was uneventful from a performance perspective.
Yields fell in most of the major markets and the major currencies were
reasonably stable relative to the U.S. Dollar. Despite an inverted yield
curve, Rogge maintained a heavy allocation in U.K. bonds, citing the
government's balanced budget and its priority of keeping inflation in
check.
As equity markets tumbled in the third quarter, the Fund benefited from
the global flight to high quality sovereign debt. Interest rates in both
Europe and the U.S. continued to fall during the summer and European bonds
outper-
13
<PAGE>
- --------------------------------------------------------------------------
formed U. S. treasuries in the Fund only because of moderately rising
foreign currencies. The portfolio performed well due to Rogge's
overweight position in European bonds and avoidance of Japanese bonds.
Additionally, Rogge positioned the portfolio in longer duration bonds
which performed well in the falling interest rate environment. In both
French and Canadian bonds, Rogge moved far out on the yield curve with
average durations of 14.5 and 13.3 years, respectively, in each country.
The French bonds rose 11% during the third quarter while the Canadian
bonds rose 6%.
Throughout the turmoil, Rogge expanded the position in German and Canadian
bonds, and added new positions in Italian and French bonds which performed
extremely well. Despite this, the portfolio remained more that 60%
invested in Germany, United Kingdom, and the United States at the end of
the third quarter. Most importantly, the portfolio remained void of
Japanese Government Bonds, although it maintained a neutral (16%) exposure
to the Japanese Yen. This position was key to the Fund's performance in
the fourth quarter because Japanese bonds declined by 6% in the quarter
while the currency appreciated 21% versus the dollar.
Rogge was also successful in using the opposite structure in the UK bond
market. Here he took a large overweight position in British bonds, but
shorted the British Pound versus the U.S. Dollar. While the British bond
market returned 4.5% in the quarter, the Pound fell about 2% versus the
U.S. Dollar during the fourth quarter.
LOOKING AHEAD
It is important to note that the Fund's country and currency selection
processes are the most important in determining its performance. Once a
country is targeted, Rogge tends to buy only very liquid securities such
as government and supra-national agency issues. As such, security
selection will have little impact on the overall performance of the Fund.
However, with the introduction of the Euro, and the ensuing reduction of
individual countries' ability to manage their currency, it has become even
more important to correctly analyze each country's economic health.
At year-end, the Fund remained heavily overweighted in both German bonds
and D-Marks. In addition, the portfolio was heavily weighted in British
bonds, however, with most of the currency hedged. Rogge continues to
completely avoid Japanese bonds and underweight U.S. bonds although the
currency positions are near neutral in those countries.
<FN>
- ----------------------------
*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.
</FN>
14
<PAGE>
- -----------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
Cumulative Total Return Performance
- -----------------------------------------------------------------------
THE MANAGERS GLOBAL BOND FUND'S cumulative total return is based on the
daily 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 below compares a hypothetical $10,000 invested 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 period.
Past performance is not indicative of future results.
[Line Graph comparing hypothetical $10,000 investment since March, 31, 1994
between the Global Bond Fund and the Salomon Brothers World Government Bond
Index]
</TABLE>
<TABLE>
<CAPTION>
03/31/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Managers Global Bond
Fund 10,000 9,809 11,681 12,194 12,214 14,567
Salomon Brothers World
Government Bond 10,000 10,232 12,181 12,622 12,652 14,588
</TABLE>
This table shows the average annual total returns for Managers Global
Bond Fund for the one-year, five-year and since inception periods
through December 31, 1998, and comparable returns for the Salomon Brothers
World Government Bond Index
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
----------------------------------------
SINCE THE
FUND'S INCEPTION
ONE YEAR THREE YEARS MARCH 25, 1994
-------- ----------- ---------
<S> <C> <C> <C>
Managers Global
Bond Fund 19.3% 7.6% 8.2%
Salomon Brothers World
Government Bond Index 15.3% 6.2% 8.3%*
</TABLE>
[FN]
* Since March 31, 1994
</FN>
15
<PAGE>
- -----------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CORPORATE DEBT SECURITIES - 80.5%
ASSET-BACKED - 37.3%
Advanta Home Equity Loan Trust, Series 98-1,
Class A8, 6.240% , 02/25/13 $ 275,000 $ 276,210
Advanta Mortgage Loan Trust, Series 97-4,
Class A4, AMBAC insured,
6.660% , 03/25/22 125,000 125,513
AFC Home Equity Loan Trust, Series 93-1,
Class A, 5.900%, 05/20/08 51,880 51,507
Chemical Master Credit Card Trust 1,
Series 95-2, Class A, 6.230%, 06/15/03 350,000 355,460
Compass Auto Receivables Trust, Series 98-A,
Class A3, 5.990%, 05/15/04 300,000 301,320
Contimortgage Home Equity Loan Trust,
Series 94-4, Class A6, MBIA insured,
8.270%, 12/15/24 89,645 92,923
Delta Funding Home Equity Loan Trust,
Series 98-2, Class A3F, 6.240%,
05/15/25 500,000 500,650
EQCC Home Equity Loan Trust, Series 1997-1,
Class A7, FGIC insured, 7.120%,
05/15/28 337,000 346,741
EQCC Home Equity Loan Trust, Series 1998-1,
Class A3F, AMBAC insured, 6.2250%,
12/15/12 350,000 350,763
<CAPTION>
- -------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
ASSET-BACKED SECURITIES (continued)
EquiCredit Funding Trust, Series 96-A,
Class A3, FGIC insured, 7.350%,
11/15/19 $ 250,000 $ 256,650
EquiCredit Home Equity Loan Trust,
Series 93-4, Class A, FGIC insured,
5.725%, 12/15/08 43,190 43,174
Green Tree Financial Corp., Series 98-1,
Class A3, 5.950%, 04/01/13 300,000 301,311
Green Tree Financial Corp., Series 98-6,
Class A3, 5.930%, 04/01/09 200,000 200,686
IMC Home Equity Loan Trust, Series 97-3,
Class A4, 6.840%, 10/20/13 325,000 325,709
IMC Home Equity Loan Trust, Series 98-1,
Class A3, 6.410%, 04/20/18 400,000 399,872
Independent National Mortgage Corp.,
Series 96-A, Class A3, 6.960%,
09/25/26 296,720 298,109
Indymac Manufactured Housing Contract,
Series 98-2, Class A2, 6.170%, 12/25/11 350,000 350,455
J.C. Penney Master Credit Card Trust,
Series E, Class A, 5.500%, 06/15/07 250,000 250,000
MMCA Automobile Trust, Series 98-7,
Class A3, 5.860%, 08/16/04 350,000 352,405
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
16
<PAGE>
- -----------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES (continued)
Money Store Home Equity Loan Trust (The),
Series 95-C, Class A3, MBIA insured,
6.550%, 06/15/17 $ 475,000 $ 478,135
Money Store Home Equity Loan Trust (The),
Series 96-C, Class A3, 7.070%, 12/15/16 179,484 180,166
Oakwood Mortgage Investors Inc.,
Series 97-A, Class A3, 6.650%, 05/15/27 300,000 304,020
UCFC Home Equity Loan Trust,
Series 1994-D1, Class A4, MBIA insured,
8.775%, 02/10/16 218,777 223,509
UCFC Home Equity Loan Trust, Series 93-B1,
Class A1, FGIC insured, 6.075%, 07/25/14 131,273 132,033
Vendee Mortgage Trust, Series 1995-1C,
Class 3H, 8.000%, 11/15/03 350,000 362,467
--------
TOTAL ASSET BACKED SECURITIES 6,859,788
---------
BANKS AND FINANCE - 21.4%
American Health Properties, Inc.,
7.050%, 01/15/02 350,000 363,874
Avalon Bay Communities, Senior Notes,
6.500%, 07/15/03 300,000 296,157
CarrAmerica Realty Corporation, 6.625%,
10/01/00 175,000 174,564
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
BANKS AND FINANCE (continued)
Chelsea GCA Realty Partners, 7.750%,
01/26/01 $ 350,000 $ 347,504
Conseco Inc., 6.400%, 02/10/03 300,000 283,161
Crescent Real Estate Equities Co.,
6.625%, 09/15/02 (a) 375,000 353,565
First Interstate Bancorp., Sub. Notes,
9.900%, 11/15/01 225,000 251,735
Household Finance Corporation,
Medium-Term Notes, 6.125%, 07/15/02 325,000 324,064
Lehman Brothers Holdings Inc., 6.000%,
02/26/01 150,000 149,769
Merrill Lynch & Co., Inc. Medium-Term
Notes, Series B, Adjustable Rate, 7.260%
03/25/02 * 525,000 527,042
Norwest Financial, Inc., Senior Notes,
6.375%, 09/15/02 250,000 257,085
Reliance Group Holdings, Inc., Senior
Notes, 9.000%, 11/15/00 150,000 156,233
Salomon, Inc., 3-Year CMT, Adjustable
Rate, 4.45% , 04/05/99* 180,000 180,000
Wharf Capital International Ltd.,
8.875%, 11/01/04 300,000 ** 273,321
---------
TOTAL BANKS AND FINANCE 3,938,074
---------
INDUSTRIALS - 20.0%
Comdisco, Inc., 6.130%, 0/01/01 350,000 347,312
Cox Communications Inc., 6.150%, 08/01/03 350,000 356,478
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
17
<PAGE>
- -----------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIALS (continued)
IMC Global, 7.400%, 11/01/02 $ 350,000 $ 355,506
Kaufman & Broad Home Corp., Senior
Notes, 7.750%, 10/15/04 150,000 ** 150,000
Kern River Funding Corp., Series B,
Senior Notes, 6.720%, 09/30/01 (a) 200,000 206,828
Quest Communications International,
Inc., Senior Discount Notes, 8.290%,
02/01/08 225,000 168,750
Royal Caribbean Cruises Ltd., Senior
Notes, 8.125%, 07/28/04 325,000 344,243
TCI Communications, Inc., Senior Notes,
8.650%, 09/15/04 300,000 343,800
Tenet Healthcare Corporation, Senior
Notes, 8.625%, 12/01/03 175,000 183,313
Tyco International Group SA, Yankee,
6.125%, 06/15/01 300,000 302,889
USA Waste Services, Inc., 6.500%,
12/15/02 175,000 177,819
Walt Disney Company, 5.125%, 12/15/03 400,000 ** 395,960
WorldCom, Inc., Senior Notes, 6.125%,
08/15/01 350,000 355,593
--------
TOTAL INDUSTRIALS 3,688,491
---------
TRANSPORTATION - 1.0%
CSX Corporation, 5.850%, 12/01/03 175,000 ** 174,524
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
UTILITIES - 0.8%
Niagara Mohawk Power Corp., Series E,
7.375%, 07/01/03 $ 150,000 $ 153,964
----------
TOTAL CORPORATE DEBT SECURITIES
(cost $14,855,806) 14,814,841
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 13.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) - 0.2%
8.750%, 04/01/01 13,464 14,234
8.750%, 09/01/01 14,222 14,679
8.750%, 10/01/01 8,620 9,113
-------
TOTAL FHLMC 38,026
-------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) - 3.1%
8.000%, 12/01/12 185,492 190,997
8.500%, 10/01/26 356,635 373,468
--------
TOTAL FNMA 564,465
--------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.5%
8.000%, 11/15/17 268,330 281,495
-------
U. S. TREASURY NOTES - 8.6%
5.500%, 03/31/03 1,050,000 1,081,826
6.250%, 04/30/01 100,000 103,516
6.625%, 04/30/02 375,000 396,855
----------
TOTAL U. S. TREASURY NOTES 1,582,197
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $2,467,860) 2,466,183
---------
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
18
<PAGE>
- -----------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (concluded)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS - 4.4%
Banco Latinomericano S.A., 6.500%,
04/02/01 (a) $ 250,000 $ 254,687
Brascan Ltd., 7.375%, 10/01/02 225,000 233,699
Groupe Videotron Limited, Senior Notes,
10.625%, 02/15/05 300,000 324,828
---------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(cost $808,862) 813,214
---------
<CAPTION>
- -----------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.8%****
JPM Prime Money Market Fund, 4.92% 103,678 103,678
Navigator Security Lending Prime
Portfolio, 5.24% *** 790,050 790,050
--------
TOTAL SHORT-TERM INVESTMENTS
(cost $893,728) 893,728
--------
TOTAL INVESTMENTS - 103.1%
(cost $19,026,256) 18,987,966
OTHER ASSETS, LESS LIABILITIES - (3.1)% (579,613)
----------
NET ASSETS - 100.0% $ 18,408,353
----------
----------
</TABLE>
[FN]
Note: Based on the cost of investments of $19,026,256 for federal income
tax purposes at December 31, 1998, the aggregate gross unrealized
appreciation and depreciation was $98,675 and $136,965, respectively,
resulting in net unrealized depreciation of investments of $38,290.
* Variable rate security. Coupon or dividend rate disclosed is that in
effect at December 31, 1998.
** All or a portion of each of these securities, amounting to $770,808, or
4.2 % of net assets, were out on loan to various brokers as of
December 31, 1998.
*** Collateral received from brokers for securities lending was invested in
this short-term investment.
**** Yield shown for each investment company represents the December 31, 1998
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
registration, normally to qualified buyers. At December 31, 1998, the
value of these securities amounted to $815,080, or 4.4% of net assets.
ABBREVIATIONS:
AMBAC: Ambac Assurance Corp.
CMT: Constant Maturity Treasury Index
FGIC: Financial Guaranty Insurance Co.
MBIA: Municipal Bond Investors Assurance Corp.
OTHER INFORMATION (UNAUDITED):
The composition of long-term debt holdings as a percentage of the total value
of investments in securities was as follows:
<TABLE>
<CAPTION>
S&P's/MOODY'S RATINGS
<S> <C>
Gov't/AAA 49%
AA 5
A 11
BBB 28
BB 3
Not Rated 4
----
100%
----
----
</TABLE>
The accompanying notes are an integral part of these financial statements.
</FN>
19
<PAGE>
- -----------------------------------------------------------------------
MANAGERS INTERMEDIATE MORTGAGE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) - 130.3%
FNMA, 6.500%, 09/01/10 $ 2,913,765 + $ 2,956,539
FNMA, 7.000%, 10/01/12 923,069 942,685
FNMA REMIC Series 92-19, Class PD,
PAC-11, 6.500%, 04/25/16 2,820,947 + 2,822,442
FNMA TBA 6.000%** 1,900,000 1,914,250
FNMA TBA 7.000%** 6,300,000 6,418,125
----------
TOTAL FNMAs
(cost $14,933,248) 15,054,041
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 22.0%
Federal Home Loan Mortgage Corp., Series 1561,
Class ZA PAC, 6.000%, 01/15/05 2,543,714 + 2,538,932
(cost $2,543,931)
<CAPTION>
- -----------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 19.6%
OTHER INVESTMENT COMPANIES - 16.1%
JPM Prime Money Market Fund, 4.92%* 959,744 959,744
Calvert Cash Reserves Institutional Prime
Fund, 5.26% * 902,143 902,143
--------
TOTAL OTHER INVESTMENT COMPANIES 1,861,887
---------
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
REPURCHASE AGREEMENT - 3.5%
State Street Bank dated
12/31/98, due 01/04/99, 4.45%, total to
be received $ 400,198 (secured by
$405,000 Federal Home Loan Banks 5.03%,
due 10/29/99, market value $408,427),
at cost $ 400,000 $ 400,000
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,261,887) 2,261,887
---------
TOTAL INVESTMENTS - 171.9%
(cost $19,739,066) 19,854,860
OTHER ASSETS, LESS LIABILITIES - (71.9)% (8,305,397)
-----------
NET ASSETS - 100.0% $ 11,549,463
-----------
-----------
</TABLE>
[FN]
Note: Based on the cost of investments of $19,739,066 for federal income
tax purposes at December 31, 1998, the aggregate gross unrealized
appreciation and depreciation was $124,731 and $8,937, respectively,
resulting in net unrealized appreciation of investments of $115,794.
* Yield shown for each investment company represents the December 31,
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 December 31, 1998, such securities amounted to $8,332,375, or
72.1% of net assets.
+ Certain principal amounts held are segregated as collateral for TBA
securities.
The accompanying notes are an integral part of these financial statements.
</FN>
20
<PAGE>
- -----------------------------------------------------------------------
MANAGERS BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
CORPORATE DEBT SECURITIES - 62.6%
BANKS AND FINANCE - 16.6%
Bangkok Bank, Sub. Notes, 8.250%,
03/15/16 (a) $ 500,000 $ 277,625
Bangkok Bank, Sub. Notes, 8.375%,
01/15/27 (a) 800,000 463,000
First Industrial L.P., Medium Term Notes,
7.500%, 12/01/17 645,000 588,027
First Industrial L.P., 7.600%, 12/01/17 1,750,000 1,547,892
Highwoods/Forsyth L.P., Senior Notes,
7.500%, 04/15/18 2,250,000 1,981,867
KN Capital Trust III, 7.630%, 04/15/98 500,000 469,503
Meditrust, 7.000%, 08/15/07 500,000 422,165
Pan Pacific Industries, Yankee Notes,
0.000%*, 04/28/07 (a) 2,000,000 695,580
Security Capital Group, 7.700%, 06/15/28 750,000 664,178
---------
TOTAL BANKS AND FINANCE 7,109,837
---------
CONVERTIBLE BONDS - 17.0%
Banpu Public Company Ltd., Euro-dollar,
Bonds, 2.750%, 04/10/03 250,000 181,250
Baker Hughes Inc., 0.000% *, 05/05/08 250,000 162,500
Bell Atlantic Financial, Euro-dollar,
Bonds, 4.250%, 09/15/05 800,000 831,000
Burns Philp & Co., Euro-dollar, 5.500%,
04/30/04 1,100,000 523,875
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
CONVERTIBLE BONDS (continued)
Federal Realty Investment Trust, Euro-dollar,
Sub. Notes, 5.250%, 10/28/03 $ 1,280,000 $ 1,193,600
Loxley Public Co., Euro-dollar, 2.500%,
04/04/01 400,000 72,000
Noram Energy, Sub., 6.000%, 03/15/12 475,000 456,000
Ogden Corp., Euro-dollar, Sub. Notes, 5.750%,
10/20/02 950,000 929,840
Samsung Corp., Euro-dollar, Bonds, 0.250%,
06/26/06 250,000 230,625
Scholastic Corp., Sub. Notes, 5.000%,
08/15/05 (a) 1,400,000 1,342,250
Thermo Terratech, Inc., Euro-dollar, Sub.
Notes, 4.625%, 05/01/03 450,000 387,000
Thermo Terratech, Inc., Sub. Notes, 4.625%,
05/01/03 (a) 456,000 385,890
Total Access Communications, Registered
Bonds, 2.000%, 05/31/06 250,000 187,500
Worldway Corp., Sub. Deb., 6.250%, 04/15/11 500,000 400,000
---------
TOTAL CONVERTIBLE BONDS 7,283,330
---------
INDUSTRIALS - 27.4%
APL Ltd., 8.000%, 01/15/24 250,000 137,500
Atlas Air, Inc., Series B, 7.680%,
01/02/14 1,000,000 1,019,510
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
21
<PAGE>
- -----------------------------------------------------------------------
MANAGERS BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
INDUSTRIALS (continued)
Bausch & Lomb, Inc., 7.125%, 08/01/28 $ 500,000 $ 467,055
Burlington Industries, Inc., 7.250%,
08/01/27 250,000 ** 235,677
Compania De Transporte Energia, Senior
Notes, 9.250%, 04/01/08 (a) 700,000 602,000
Kellwood Co., 7.625%, 10/15/17 250,000 236,480
Loews Corporation, Sub-Notes, 3.125%,
09/15/07 410,000 325,950
Philip Morris Cos., Inc., 7.750%,
01/15/27 500,000 567,725
Pioneer Natural Resource Company, 7.200%,
01/15/28 250,000 182,460
Pioneer-Standard Electronics, Inc., Senior
Notes, 8.500%, 08/01/06 250,000 244,644
Pulte Corp., 7.625%, 10/15/17 500,000 484,575
RJR Nabisco, Inc., 7.625%, 09/15/03 650,000 ** 633,412
RJR Nabisco, Inc., 9.250%, 08/15/13 700,000 ** 719,712
R&B Falcon Corp., Senior Notes, Series B,
7.375%, 04/15/18 900,000 767,673
Samsung Electronics Ltd., Sinking Fund,
7.700%, 10/01/27 (a) 500,000 337,500
Seagate Technology, Inc., 7.875%,
03/01/17 250,000 236,907
Tata Electric Co., 8.500%, 08/19/17 (a) 400,000 303,000
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
INDUSTRIALS (continued)
TCI Communications, Inc., 7.125%, 02/15/28 $ 325,000 ** $ 354,447
Thermo Electron Corporation, 4.250%,
01/01/03 (a) 500,000 445,000
Thermo Instrument System, 4.500%, 10/15/03 (a) 250,000 222,812
Time Warner, Inc., 6.625%, 05/15/29 550,000 559,028
Time Warner, Inc., 6.875%, 06/15/18 360,000 377,122
Time Warner, Inc., 6.950%, 01/15/28 300,000 ** 317,802
Time Warner, Inc., 7.570%, 02/01/24 635,000 718,725
Trinet Corporate Realty Trust, Inc.,
Senior Notes, 7.700%, 07/15/17 500,000 450,490
Westvaco Corp., 7.000%, 08/15/23 250,000 236,240
Woolworth Corp., 8.500%, 01/15/22 570,000 507,796
--------
TOTAL INDUSTRIALS 11,691,242
REAL ESTATE - 0.6%
Camden Property Trust, 7.000%, 11/15/06 250,000 238,803
----------
UTILITIES - 1.0%
Boston Edison Co., 7.800%, 03/15/23 400,000 425,619
---------
TOTAL CORPORATE DEBT SECURITES
(cost $29,542,592) 26,748,831
-----------
FOREIGN CORPORATE OBLIGATIONS - 7.5%
MacMillan Bloedel Ltd., 7.700%,
02/15/26 USD 1,350,000 1,292,031
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
22
<PAGE>
- -----------------------------------------------------------------------
MANAGERS BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (continued)
PDVSA Finance Ltd, Series 98-1, 7.500%,
11/15/28 (a) USD $ 1,000,000 $ 848,090
Telekom Malaysia Berhad, 7.875%,
08/01/25 (a) USD 500,000 323,825
Telekom Malaysia Berhad, Convertible,
4.000%, 10/03/04 USD 300,000 222,000
Tenaga Nasional Berhad, 7.500%,
11/01/25 (a) USD 1,000,000 528,540
---------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(cost $3,705,830) 3,214,486
---------
FOREIGN GOVERNMENT OBLIGATIONS - 15.9%
British Columbia Province, Generic
Residual, 0.000% *,
08/23/24 CAD 15,000,000 2,287,242
Government of Poland, Bearer Past Due
Interest Brady Bonds, Stepup, 5.000%,
10/27/14 USD 1,375,000 1,280,538
Government of Poland, Registered Past
Due Interest Brady Bonds, Stepup, 5.000%,
10/27/14 USD 250,000 232,825
Manitoba Province, Medium Term Notes, 6.500%,
09/22/17 CAD 1,800,000 1,313,052
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS (continued)
Ontario Hydro, Debentures, 0.000%*,
10/15/21 CAD 1,700,000 308,636
Province of Alberta, Series CS,
Sinking Fund, 5.930%,
09/16/16 CAD 267,680 186,071
Republic of South Africa, Yankee, 8.500%,
06/23/17 USD 1,075,000 817,000
South Australia Government Finance
Authority, 0.000%*,
12/21/15 AUD 1,600,000 355,414
---------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(cost $5,913,455) 6,780,778
---------
U.S GOVERNMENT AND AGENCY OBLIGATIONS- 9.2%
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.1%
College & University Facilities Loan
Trust, Series 2, Class D, 4.000%,
06/01/18 $ 1,000,000 890,210
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATON (FNMA) - 3.3%
FNMA REMIC Series 94-30, Class JA,
5.000%, 08/15/23 1,500,000 1,411,395
---------
U.S. TREASURY BONDS- 3.8%
0.000% *, 08/15/23 6,200,000 1,638,598
---------
TOTAL U.S GOVERNMENT AND AGENCY OBLIGATIONS
(cost $3,427,677) 3,940,203
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
23
<PAGE>
- -----------------------------------------------------------------------
MANAGERS BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (concluded)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
SHARES VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS - 3.1%
Aluminum Co. of America, 3.750% 8,125 $ 589,063
Connecticut Light & Power Co.,
Series 47, 2.00% 6,655 197,986
Entergy Louisiana, Inc., 4.440% 226 18,207
Entergy New Orleans, Inc., 4.750% 482 40,398
EVI Inc., 5.000% 7,500 ** 231,562
Union Electric Co., 3.500% 350 21,175
West Pennsylvania Power Co., 4.500% 200 15,450
Wisconsin Electric Power Co., 3.600% 3,298 201,178
--------
TOTAL PREFERRED STOCKS
(cost $1,156,068) 1,315,019
----------
SHORT-TERM INVESTMENTS - 4.1%****
JPM Prime Money Market Fund, 4.92% 48,294 48,294
Navigator Security Lending Prime
Portfolio, 5.24%*** 1,687,420 1,687,420
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,735,714) 1,735,714
----------
TOTAL INVESTMENTS- 102.4%
(cost $45,481,336) 43,735,031
OTHER ASSETS, LESS LIABILITIES - (2.4)% (1,005,680)
-----------
NET ASSETS - 100.0% $ 42,729,351
-------------
-------------
</TABLE>
[FN]
Note: Based on the cost of investments of $45,481,336 for federal income
tax purposes at December 31, 1998, the aggregate gross unrealized
appreciation and depreciation of investments was $2,407,697 and
$4,154,002, respectively, resulting in net unrealized depreciation
of investments of $1,746,305.
- --------------------------------------------------------------------------
* Zero coupon security.
** All or a portion of each of these securities, amounting to $1,681,303, or
3.9 % of net assets, were out on loan to various brokers as of
December 31, 1998.
*** Collateral received from brokers for securities lending was invested in
this short-term investment.
**** Yield shown for each investment company represents the December 31, 1998,
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, 1998, the
value of these securities amounted to $6,775,112, or 15.9% 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
AUD: Australian Dollar
OTHER INFORMATION (UNAUDITED):
The composition of long-term debt holdings as a percentage of the total value of
investments in these securities was as follows:
<TABLE>
<CAPTION>
S&P's/MOODY'S RATINGS
<S> <C>
Gov't/AAA 9%
AA 5
A 15
BBB 51
BB 7
B 3
Not Rated 10
-----
100%
-----
-----
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
24
<PAGE>
- -----------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT/AGENCY OBLIGATIONS - 70.1%
CANADA - 3.8%
Canadian Government, 5.625%,
02/19/03 USD 200,000 $ 202,253
Canadian Government, 8.000%,
06/01/27 CAD 688,000 632,424
---------
TOTAL CANADA 834,677
---------
DENMARK - 3.6%
Kingdom of Denmark, 6.000%,
11/15/09 DKK 4,477,000 803,698
---------
FRANCE - 5.5%
Government of France, 5.500%,
04/25/29 FRF 6,084,000 1,218,432
---------
GERMANY - 18.5%
Bundes, Series 93, 6.500%,
07/15/03 DEM 1,063,000 718,829
Bundes, Series 97, 4.250%,
12/17/99 DEM 870,000 527,349
Bundes, Series 97, 6.000%,
07/04/07 DEM 2,740,000 1,890,018
Bundes, Series 116, 5.750%,
08/22/00 DEM 1,503,000 938,361
---------
TOTAL GERMANY 4,074,557
---------
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
ITALY - 5.6%
Republic of Italy, 7.000%,
09/18/01 USD 300,000 $ 312,750
Republic of Italy, Bonds, 6.500%,
11/01/27 ITL 1,215,000,000 918,167
---------
TOTAL ITALY 1,230,917
---------
NETHERLANDS - 4.0%
Dutch Government, 5.250%,
07/15/08 NLG 1,486,000 870,861
--------
SPAIN - 3.9%
Kingdom of Spain, 6.000%,
01/31/29 ESP 105,000,000 868,991
--------
SWEDEN - 2.9%
Kingdom of Sweden, Series 1038, 6.500%,
10/25/06 SEK 4,500,000 641,458
--------
UNITED KINGDOM - 22.3%
United Kingdom Treasury Bonds, 5.750%,
09/12/07 GBP 1,020,000 1,916,631
United Kingdom Treasury Bonds, 6.000%,
08/10/99 GBP 522,000 870,463
United Kingdom Treasury Bonds, 6.500%,
12/07/03 GBP 1,175,000 2,141,510
---------
TOTAL UNITED KINGDOM 4,928,604
---------
TOTAL FOREIGN GOVERNMENT/AGENCY OBLIGATIONS
(cost $14,652,553) 15,472,195
----------
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
25
<PAGE>
- -----------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (continued)
December 31, 1998
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY NOTES - 7.5%
4.750%, 11/15/08 $ 704,000 $ 709,498
5.375%, 06/30/03 340,000 349,880
6.500%, 05/31/01 557,000 580,238
7.500%, 11/15/01 9,000 9,678
--------
TOTAL U.S. TREASURY NOTES
(cost $1,638,383) 1,649,294
----------
U.S. GOVERNMENT OBLIGATIONS - 2.3%
Federal Home Loan Bank, 5.625%, 06/10/03
(cost $498,863) GBP 300,000 508,596
---------
FOREIGN CORPORATE OBLIGATIONS - 1.7%
GERMANY - 0.3%
Deutsche Ausgleichsbank, 5.875%,
05/20/03 DEM 75,000 76,875
--------
SUPRA-NATIONAL - 1.4%
InterAmerican Development Bank, 5.375%,
11/18/08 $ 300,000 302,319
--------
TOTAL FOREIGN CORPORATE OBLIGATIONS
(cost $375,585) 379,194
--------
CORPORATE DEBT SECURITIES - 1.6%
ASSET-BACKED SECURITIES - 0.7%
CitiBank Credit Card Master Trust I,
Series 98-9, Class A, 5.300%, 01/09/06 158,000 156,531
--------
<CAPTION>
- -----------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
BANKS AND FINANCE - 0.9%
National Westminster Bank, 9.45%, 05/01/01 $ 100,000 $ 108,865
Railcar Leasing LLC, 7.125%, 01/15/13 (a) 80,000 85,260
---------
TOTAL BANKS AND FINANCE 194,125
---------
TOTAL CORPORATE DEBT SECURITIES
(cost $346,254) 350,656
---------
SHORT-TERM INVESTMENTS - 13.5%
DISCOUNT NOTES - 9.1%
Clipper, 5.540%, 01/05/99 1,000,000 999,385
FNMA Notes, 5.450, 01/20/99 1,000,000 997,345
---------
TOTAL DISCOUNT NOTES 1,996,730
---------
<CAPTION>
- --------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------
OTHER INVESTMENT COMPANIES - 4.4%
JPM Prime Money Market Fund, 4.92%*** 164,911 164,911
Calvert Cash Reserves Institutional
Prime Fund, 5.26%*** 805,806 805,806
---------
TOTAL OTHER INVESTMENT COMPANIES 970,717
----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,967,447) 2,967,447
----------
TOTAL INVESTMENTS - 96.7%
(cost $20,479,085) 21,327,382
OTHER ASSETS, LESS LIABILITIES - 3.3% 739,178
----------
NET ASSETS - 100.0% $ 22,066,560
------------
------------
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
26
<PAGE>
- -----------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS (concluded)
December 31, 1998
- -----------------------------------------------------------------------
Note: Based on the cost of investments of $20,483,079 for federal income tax
purposes at December 31, 1998, the aggregate gross unrealized
appreciation and depreciation of investments was $885,841 and $41,538,
respectively, resulting in net unrealized appreciation of investments
of $844,303.
*** Yield shown for each investment company represents the December 31, 1998
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, 1998, the
value of these securities amounted to $85,260, or 0.4% of net assets.
Abbreviations have been used throughout this portfolio to indicate amounts shown
in currencies other than the U.S. Dollar (USD):
DEM: Deutsche Mark
DKK: Danish Krone
CAD: Canadian Dollar
ESP: Spanish Peseta
FRF: French Franc
GBP: British Pound
ITL: Italian Lira
NLG: Netherland Guilder
SEK: Swedish Krona
</FN>
27
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGERS MANAGERS MANAGERS
SHORT AND INTERMEDIATE MANAGERS GLOBAL
INTERMEDIATE MORTGAGE BOND BOND
BOND FUND FUND FUND FUND
------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments at value* $ 18,987,966 $ 19,854,860 $ 43,735,031 $ 21,327,382
Cash 82 -- -- 200
Foreign currency
(cost $4,935) -- -- -- 4,957
Receivable for
investments sold -- -- 209,786 --
Receivable for Fund
shares sold 40,126 8,371 120,709 293,825
Receivable for open
forward foreign
currency contracts -- -- -- 11,042,373
Receivable for closed
forward foreign currency
contracts, net -- -- -- 4,558
Dividends, interest and
other receivables 232,660 71,411 737,474 251,071
Deferred organization
expense -- -- -- 571
Prepaid expenses 6,986 7,140 10,833 7,725
-------- ------- -------- ----------
Total assets 19,267,820 19,941,782 44,813,833 32,932,662
---------- ---------- ---------- ----------
LIABILITIES:
Payable to Custodian -- -- 170,843 --
Payable upon return of
securities loaned 790,050 -- 1,687,420 --
Payable for investments
purchased, delayed
delivery -- 8,342,223 -- --
Payable for Fund shares
repurchased 30,092 28,870 163,527 188
Payable for open forward
foreign currency contracts -- -- -- 10,812,423
Payable for closed forward
foreign currency
contracts, net -- -- -- 6,818
Accrued expenses:
Investment advisory and
management fees 7,872 1,989 23,159 13,195
Administrative fees 3,936 -- 9,264 3,770
Other 27,517 19,237 30,269 29,708
--------- -------- -------- ---------
Total liabilities 859,467 8,392,319 2,084,482 10,866,102
--------- --------- --------- ----------
NET ASSETS $ 18,408,353 $ 11,549,463 $ 42,729,351 $ 22,066,560
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares outstanding 944,420 739,750 1,925,478 986,103
------- ------- --------- -------
-------- ------ --------- -------
Net asset value, offering
and redemption price
per share $19.49 $15.61 $22.19 $22.38
------ ------ ------ ------
NET ASSETS REPRESENT:
Paid-in capital $ 28,734,518 $ 91,186,691 $ 44,328,733 $ 20,766,007
Undistributed net
investment income 2,185 -- 23,147 17,058
Accumulated net realized
gain (loss) from investments
and foreign currency
transactions (10,290,060) (79,753,022) 123,590 205,903
Net unrealized appreciation
(depreciation) of investments
and foreign currency
translations (38,290) 115,794 (1,746,119) 1,077,592
------------- ---------- ----------- ----------
NET ASSETS $ 18,408,353 $ 11,549,463 $ 42,729,351 $ 22,066,560
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
* Investments at cost $ 19,026,256 $ 19,739,066 $ 45,481,336 $ 20,479,085
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
28
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF OPERATIONS
For the year ended December 31, 1998
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MANAGERS MANAGERS MANAGERS
SHORT AND INTERMEDIATE MANAGERS GLOBAL
INTERMEDIATE MORTGAGE BOND BOND
BOND FUND FUND FUND FUND
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,104,347 $ 976,753 $ 3,263,683 $ 1,073,961
Dividend income -- -- 64,868 --
Foreign withholding tax (2,975) -- -- --
Securities lending income 707 -- 1,024 --
----------- --------- ----------- -----------
Total investment income 1,102,079 976,753 3,329,575 1,073,961
----------- --------- ----------- -----------
EXPENSES:
Investment advisory and
management fees 84,177 72,020 281,699 132,588
Administrative fees 42,089 40,011 112,679 37,882
Custodian fees 20,181 15,306 32,863 29,098
Audit fees 31,457 21,084 23,560 29,737
Transfer agent fees 29,010 25,793 67,205 46,255
Registration fees 11,639 15,688 17,739 12,587
Insurance 1,694 2,112 3,330 1,565
Legal fees 590 645 1,677 696
Trustee fees 463 407 1,277 531
Amortization of organization
expense -- -- -- 2,501
Miscellaneous expenses 2,270 5,116 5,215 2,215
----------- --------- ----------- -----------
Total expenses before
waivers and reduction 223,570 198,182 547,244 295,655
Less: Fee waivers -- (30,226) -- --
Expense reduction (560) (278) (1,478) (6,526)
----------- --------- ----------- ------------
Net expenses 223,010 167,678 545,766 289,129
----------- --------- ----------- ------------
Net investment income 879,069 809,075 2,783,809 784,832
----------- --------- ----------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain on
investment transactions 107,997 386,983 1,170,950 1,488,694
Net realized gain (loss)
on foreign currency contracts
and transactions 10 -- (31,637) 384,702
Net unrealized appreciation
(deprecation) of investments (96,923) (257,335) (2,687,647) 508,961
Net unrealized appreciation of
foreign currency contracts
and translations -- -- 336 313,582
----------- --------- ----------- -----------
Net realized and
unrealized gain (loss) 11,084 129,648 (1,547,998) 2,695,939
----------- --------- ------------ -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 890,153 $ 938,723 $ 1,235,811 $ 3,480,771
----------- --------- ----------- -----------
----------- --------- ----------- -----------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
29
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MANAGERS SHORT AND INTERMEDIATE
BOND FUND
-------------------------------
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1998 1997
------------ ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS FROM OPERATIONS:
Net investment income $ 879,069 $ 984,163
Net realized gain (loss) on investments
and foreign currency transactions 108,007 (177,477)
Net unrealized appreciation (depreciation)
of investments and foreign currency
translations (96,923) 156,158
---------- ----------
Net increase (decrease) in net
assets resulting from operations 890,153 962,844
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (890,799) (954,428)
From net realized gain on investments -- --
---------- ----------
Total distributions to shareholders (890,799) (954,428)
---------- ---------
FROM CAPITAL SHARE TRANSACIONS:
Proceeds from sale of shares 8,396,707 6,970,193
Net asset value of shares issued
in connection with reinvestment
of dividends and distributions 746,084 770,320
Cost of shares repurchased (5,815,760) (15,046,564)
----------- ------------
Net increase (decrease) from capital
share transactions 3,327,031 (7,306,051)
----------- ------------
Total increase (decrease)
in net assets 3,326,385 (7,297,635)
NET ASSETS:
Beginning of year 15,081,968 22,379,603
----------- ------------
End of year $ 18,408,353 $ 15,081,968
----------- ------------
----------- ------------
End of year undistributed
(overdistributed) net investment
income $ 2,185 $ 13,915
----------- ------------
----------- ------------
- ----------------------------------------------------------------------------
SHARE TRANSACTIONS
Sale of shares 430,449 357,625
Shares issued in connection with
reinvestment of dividends and
distributions 38,268 39,627
Shares repurchased (297,144) (774,840)
---------- -----------
Net increase (decrease) in shares 171,573 (377,588)
---------- -----------
---------- -----------
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
30
<PAGE>
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
MANAGERS INTERMEDIATE
MORTGAGE FUND MANAGERS BOND FUND MANAGERS GLOBAL BOND FUND
- ----------------------------------------------------------------------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
- ------------------------- ---------------- -----------------------
1998 1997 1998 1997 1998 1997
---- ---- ----- ----- ----- ------
<C> <C> <C> <C> <C> <C>
$ 809,075 $ 1,297,173 $ 2,783,809 $ 2,173,081 $ 784,832 $ 786,814
386,983 108,768 1,139,313 1,060,667 1,873,396 (918,810)
(257,335) 358,209 (2,687,311) 275,667 822,543 128,390
---------- ----------- ----------- ----------- ---------- ----------
938,723 1,764,150 1,235,811 3,509,415 3,480,771 (3,606)
---------- ----------- ----------- ----------- ---------- ----------
(824,004) (1,260,846) (2,769,414) (2,140,862) (1,019,814) (138,962)
-- -- (1,584,234) -- (1,222,014) (277,649)
---------- ----------- ------------ ------------ ------------ ---------
(824,004) (1,260,846) (4,353,648) (2,140,862) (2,241,828) (416,611)
---------- ----------- ------------ ------------- ----------- ----------
1,407,921 4,166,005 23,693,347 19,635,395 18,174,768 8,504,428
616,249 941,342 4,017,252 1,907,220 2,220,753 410,786
(12,189,755) (8,856,088) (23,161,640) (13,431,500) (17,033,392) (7,881,882)
----------- ----------- ------------ ------------- ------------ ----------
(10,165,585) (3,748,741) 4,548,959 8,111,115 3,362,129 1,033,332
----------- ------------ ---------- ------------- ------------ ---------
(10,050,866) (3,245,437) 1,431,122 9,479,668 4,601,072 613,115
21,600,329 24,845,766 41,298,229 31,818,561 17,465,488 16,852,373
------------ ---------- ------------ ----------- ---------- ----------
$ 11,549,463 $ 21,600,329 $ 42,729,351 $ 41,298,229 $ 22,066,560 $ 17,465,488
---------- ----------- ------------ ----------- ------------ ------------
---------- ----------- ------------ ----------- ------------ ------------
-- $ 10,323 $ 23,147 $ 11,832 $ 17,058 $ (302,833)
---------- ----------- ------------ ----------- ----------- ------------
---------- ----------- ------------ ----------- ----------- ------------
- -----------------------------------------------------------------------------
90,308 273,349 994,509 843,064 790,567 403,828
39,630 61,782 175,879 82,422 100,486 19,423
(782,433) (581,240) (985,827) (578,194) (739,396) (376,301)
----------- ------------ ------------ ----------- ----------- -----------
(652,495) (246,109) 184,561 347,292 151,657 46,950
----------- ------------ ------------ ----------- ----------- -----------
----------- ------------ ------------ ----------- ----------- -----------
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements.
</FN>
31
<PAGE>
- --------------------------------------------------------------------------
MANAGERS SHORT AND INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each year
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996 1995 1994
---- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $19.51 $19.45 $19.67 $18.06 $21.23
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 1.02 1.08 1.03 1.28 1.45
Net realized and
unrealized gain (loss)
on investments 0.00 0.03 (0.24) 1.45 (3.17)
------ ------- ------- ------- -------
Total from investment
operations 1.02 1.11 0.79 2.73 (1.72)
------ ------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.04) (1.05) (1.01) (1.09) (1.37)
In excess of net
investment income --- --- --- (0.03) (0.08)
------ ------ ------ ------ ------
Total distributions to
shareholders (1.04) (1.05) (1.01) (1.12) (1.45)
------- ------ ------- ------- ------
NET ASSET VALUE,
END OF YEAR $19.49 $19.51 $19.45 $19.67 $18.06
------ ------ ------ ------ ------
------ ------ ------ ------ ------
- --------------------------------------------------------------------------
Total Return 5.36% 5.87% 4.15% 15.57% (8.37)%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Ratio of net expenses to
average net assets 1.32% (a) 1.40% 1.45% 1.50% 1.05%
Ratio of net investment
income to average
net assets 5.22% 5.54% 5.43% 6.52% 7.11%
Portfolio turnover 115% 91% 96% 131% 57%
Net assets at end of
year (000's omitted) $18,408 $15,082 $22,380 $25,241 $30,956
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
[FN]
(a) The Fund has received credits against its custodian expense for
uninvested overnight cash balances. Absent this expense reduction, the
ratio of expenses to average net assets for the year ended
December 31, 1998, would have been 1.33%. (See Note 1c of Notes to
Financial Statements.)
</FN>
32
<PAGE>
- --------------------------------------------------------------------------
MANAGERS INTERMEDIATE NORTGAGE FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each year
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $15.51 $15.17 $15.54 $14.20 $20.65
------ ------- ------- ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.81 0.87 0.87 0.93 1.52
Net realized and unrealized
gain (loss) on investments 0.11 0.33 (0.38) 1.45 (6.56)
------ -------- -------- ------ -------
Total from investment
operations 0.92 1.20 0.49 2.38 (5.04)
------ ----- ------ ------- ------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (0.82) (0.86) (0.86) (1.03) (1.41)
In excess of net
investment income --- --- --- (0.01) ---
------- ------ ------- ------ ------
Total distributions
to shareholders (0.82) (0.86) (0.86) (1.04) (1.41)
------- -------- ------- ------ -------
NET ASSET VALUE,
END OF YEAR $15.61 $15.51 $15.17 $15.54 $14.20
------ ------ ------ ------ ------
------ ------ ------ ------ ------
- -----------------------------------------------------------------------------
Total Return 6.08% (b) 8.23% 3.33% 17.27% (25.00)% (b)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Ratio of net expenses to
average net assets 1.05% 1.20% 1.19% 1.17% 0.85%
Ratio of net investment
income to average
net assets 5.06% 5.76% 5.78% 6.33% 8.37%
Portfolio turnover 652% 317% 232% 506% 240%
Net assets at end of
year (000's omitted) $11,549 $21,600 $24,846 $40,022 $55,986
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Expense Waiver\Reduction (a)
- ---------------------------
Ratio of total expenses
to average net assets 1.24% N/A N/A N/A 0.92%
Ratio of net investment
income to average
net assets 4.86% N/A N/A N/A 8.30%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</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 years presented. (See Notes 1c and 2 of Notes to Financial
Statements.)
(b) The total return would have been lower had certain expenses not been
reduced during the years shown.
</FN>
33
<PAGE>
- --------------------------------------------------------------------------
MANAGERS BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each year
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR $23.72 $22.83 $23.13 $18.92 $22.18
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 1.46 1.39 1.35 1.44 1.59
Net realized and unrealized
gain (loss)
on investments (0.69) 0.90 (0.29) 4.23 (3.16)
------ ------- ------ ------ -------
Total from investment
operations 0.77 2.29 1.06 5.67 (1.57)
------ ------ ------ ------ -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1.45) (1.40) (1.36) (1.46) (1.55)
From net realized gain
on investments (0.85) --- --- --- (0.14)
------ ------ ------ ------- -------
Total distributions to
shareholders (2.30) (1.40) (1.36) (1.46) (1.69)
------ ------ ------ ------ ------
NET ASSET VALUE,
END OF YEAR $22.19 $23.72 $22.83 $23.13 $18.92
------ ------ ------ -------- -------
------ ------ ------- -------- -------
- --------------------------------------------------------------------------
Total Return 3.34% 10.42% 4.97% 30.91% (7.25)%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Ratio of net expenses to
average net assets 1.21% (a) 1.27% 1.36% 1.34% 1.20%
Ratio of net investment
income to average
net assets 6.18% 6.14% 6.13% 6.84% 7.28%
Portfolio turnover 55% 35% 72% 46% 84%
Net assets at end of
year (000's omitted) $42,730 $41,298 $31,819 $26,376 $30,760
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
[FN]
(a) The Fund has received credits against its custodian expense for
uninvested overnight cash balances. Absent this expense reduction, the
ratio of expenses to average net assets for the year ended
December 31, 1998, would have been 1.21%. (See Note 1c of Notes to
Financial Statements.)
</FN>
34
<PAGE>
- --------------------------------------------------------------------------
MANAGERS GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each period
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 25, 1994
(COMMENCEMENT
YEAR ENDED DECEMBER 31, OF OPERATIONS) TO
----------------------------------
1998 1997 1996 1995 DECEMBER 31, 1994
---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $20.93 $21.40 $21.74 $19.10 $20.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.92(e) 0.97(e) 1.21 0.95 0.48
Net realized and
unrealized gain (loss)
on investments 3.08 (0.93) (0.27) 2.66 (0.77)
------ ------- ------ ------- -------
Total from investment
operations 4.00 0.04 0.94 3.61 (0.29)
------ -------- ------ ------- -------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (1.16) (0.17) (0.87) (0.93) (0.50)
From net realized gain
on investments (1.39) (0.34) (0.41) --- ---
In excess of net
investment income --- --- --- (0.04) (0.11)
------- ------- ------ ------- ---------
Total distributions
to shareholders (2.55) (0.51) (1.28) (0.97) (0.61)
------- ------- ------- -------- --------
NET ASSET VALUE,
END OF PERIOD $22.38 $20.93 $21.40 $21.74 $19.10
------ ------ ------ ------ -------
------ ------ ------ ------- -------
- --------------------------------------------------------------------------
Total Return 19.27%(d) 0.16% 4.39%(d) 19.08%(d) (1.52)%(c)(d)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Ratio of net expenses to
average net assets 1.53% 1.63% 1.57% 1.55% 1.73% (b)
Ratio of net investment
income to average
net assets 4.14% 4.75% 4.98% 5.07% 4.19% (b)
Portfolio turnover 232% 197% 202% 214% 266% (c)
Net assets at end of
period (000's omitted) $22,067 $17,465 $16,852 $18,823 $9,520
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Expense Waiver/Reduction (a)
- --------------------------
Ratio of total expenses to
average net assets 1.56% N/A 1.60% 1.69% 2.03% (b)
Ratio of net investment
income to average
net assets 4.11% 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 and no reduction of custodian
expenses in effect for the periods presented, if applicable.
(See Note 1c of Notes to Financial Statements.)
(b) Annualized.
(c) Not annualized.
(d) The total return would have been lower had certain expenses not been
reduced during the period.
(e) Calculated using the average shares outstanding during the year.
</FN>
35
<PAGE>
- --------------------------------------------------------------------------
THE MANAGERS FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFACANT 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 10 investment series.
Included in this report are Managers Short and Intermediate Bond Fund
("Short and Intermediate Bond"), Managers Intermediate Mortgage Fund
("Intermediate Mortgage"), 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 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. 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.
36
<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 relative net assets.
Each of the Funds has a "balance credit" arrangement with the custodian
bank whereby each Fund is credited with an interest factor equal to 0.75%
of the nightly Fed Funds rate for account balances left uninvested
overnight. These credits serve to reduce custody expenses that would
otherwise be charged to the Funds. For the year ended December 31, 1998,
the Short and Intermediate Bond, Intermediate Mortgage, Bond and Global Bond
Funds' custody expenses were reduced by $560, $278, $1,478 and $6,526,
respectively, under these arrangements.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends resulting from net investment income normally will be declared
monthly for Short and Intermediate Bond, Intermediate Mortgage and Bond
and annually 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.
37
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
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.
(H) CAPITAL LOSS CARRYOVERS
As of December 31, 1998, Short and Intermediate Bond and Intermediate
Mortgage 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 and Intermediate $ 2,344,832 2002
7,662,253 2003
70,508 2004
179,401 2005
Intermediate Mortgage $ 58,714,139 2002
20,796,333 2003
224,035 2004
</TABLE>
(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, 1998, certain omnibus accounts held greater than 10% of
the outstanding shares of the following Funds: Intermediate Mortgage - two
own a total of 38%, Bond - two own a total of 42%; and Global Bond - one
owns 30%.
(J) 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.
(K) FOREIGN CURRENCY TRANSLATION
The books and records of each Fund are maintained in U.S. dollars. The
value of investments, assets and li-
38
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
abilities 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 accrued daily and paid monthly
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, as a percentage of average daily net assets for the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
FUND AND MANAGEMENT FEE
---- -------------------
<S> <C>
Short and Intermediate Bond 0.50%
Intermediate Mortgage 0.45%*
Bond 0.625%
Global Bond 0.70%
</TABLE>
[FN]
- ---------------------------------------------------------------------
* For the period July 1, 1998 to December 31, 1998, the Investment Manager
voluntarily waived a portion of its investment advisory and management
fee, amounting to $15,113. This waiver may be terminated at any time at
the sole discretion of the Investment Manager.
</FN>
39
<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 year ended December 31, 1998, the Administrator was paid a fee
based on each Fund's average daily net assets of 0.25% for Short and
Intermediate Bond, and Bond, and 0.20% for Global Bond.
With respect to Intermediate Mortgage, for the period ended June 30, 1998,
the Administrator was paid a fee based on the Fund's average daily net
assets of 0.25%. The Administrator waived its entire fee for the period
July 1, 1998 to December 31, 1998, amounting to $15,113. This waiver may
be terminated at any time at the sole discretion of the Investment
Manager.
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
With respect to Intermediate Mortgage, for the year ended December 31, 1998,
the market value of futures contracts opened and closed amounted to $ 7,122,734
and 7,184,797, respectively.
Portfolio purchases and sales of investments, excluding short-term
securities, and of U.S. government securities, for the year ended December
31, 1998, were as follows:
<TABLE>
<CAPTION>
LONG-TERM SECURITIES U.S. GOVERNMENT SECURITES ONLY
------------------- ------------------------------
FUND PURCHASES SALES PURCHASES SALES
- ---- --------- ----- --------- ------
<S> <C> <C> <C> <C>
Short and Intermediate
Bond $ 22,778,806 $ 17,899,745 $ 7,425,222 $ 1,503,209
Intermediate
Mortgage 151,329,882 148,733,438 7,998,245 11,008,258
Bond 27,465,776 24,177,924 3,558,086 10,025,859
Global Bond 38,754,722 38,666,954 7,409,029 12,595,494
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------
(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. During the year
ended December 31, 1998, Intermediate Mortgage and Global Bond did not
participate in any security lending program.
(5) FORWARD COMMITMENTS
Certain transactions, such as futures and forward transactions, dollar
roll agreements, or purchases of when-issued or delayed delivery
securities may have a similar effect on a Fund's net asset value as if the
Fund had created a degree of leverage in its portfolio. However, if a
Fund enters into such a transaction, the Fund will establish a segregated
account with its Custodian in which it will maintain cash, U.S. government
securities or other liquid securities equal in value to its obligations in
respect to such transaction. Securities and other assets held in the
segregated account may not be sold while the transaction is outstanding,
unless other suitable assets are substituted.
(A) FORWARD FOREIGN CURRENCY CONTRACTS
During the year ended December 31, 1998, only 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
41
<PAGE>
- ------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- ------------------------------------------------------------------------
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, 1998 were as follows:
<TABLE>
<CAPTION>
CURRENT UNREALIZED
SETTLEMENT VALUE (IN GAIN/LOSS (IN
FOREIGN CURRENCY DATE U.S. DOLLARS) U.S. DOLLARS)
- ---------------- --------- ------------ ----------------
<S> <C> <C> <C>
BUY CONTRACTS
Deutsche Mark 01/04/99 $ 500 $ 2
Deutsche Mark 02/19/99 537,562 (5,113)
British Pound 02/19/99 324,853 1,719
Japanese Yen 02/19/99 5,159,091 238,545
---------- ---------
TOTAL BUY CONTRACTS
(Payable Amount $5,786,853) $ 6,022,006 $ 235,153
------------ ----------
------------ ----------
SELL CONTRACTS
Deutsche Mark 02/19/99 $ 667,885 $ 641
Danish Krone 02/19/99 864,362 2,177
British Pound 02/19/99 2,633,523 (7,145)
Netherland Guilder 02/19/99 859,800 (876)
---------- -----------
TOTAL SELL CONTRACTS
(Receivable Amount $5,020,367) $ 5,025,570 $ (5,203)
------------ -----------
------------ -----------
</TABLE>
(b) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into
such a contract the Fund is required to pledge to the broker an amount of
cash or securities equal to the minimum "initial margin" requirements of
the exchange on which the contract is traded. Pursuant to the contract,
the Fund agrees to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as "variation margin" and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records
a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value of the contract at the
time it was closed.
There are several risks in using futures contracts. Futures prices may
not correlate perfectly with the behavior of cash market prices of the
instrument
42
<PAGE>
- --------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------
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 year ended December 31, 1998, Intermediate
Mortgage entered into futures contracts to manage the Fund's duration to
that of its respective benchmark index.
(C) DOLLAR ROLL AGREEMENTS
Intermediate Mortgage may enter into dollar roll agreements whereby the
Fund sells securities and agrees to repurchase them or substantially
similar securities, at a mutually agreed upon date and price. Dollar roll
agreements involve the risk that the market value of the securities
retained in lieu of sale by the Fund may decline below the price of the
securities the Fund has sold but is obligated to repurchase.
In the event the buyer of the securities under a dollar roll agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce
the Fund's obligation to repurchase the securities, and the Fund's use of
the proceeds of the dollar roll agreement may effectively be restricted
pending such decision.
(6) RISKS ASSOCITATED WITH COLLATERAL MORTGAGE OBLIGATIONS ("CMOs")
The net asset value of Funds may be sensitive to interest rate
fluctuations because the Funds 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.
43
<PAGE>
- --------------------------------------------------------------------------
SUBSEQUENT EVENTS (unaudited)
- --------------------------------------------------------------------------
On January 29, 1999, The Managers Funds, L.P. (the "Manager") and its
partners entered into an agreement (the "Purchase Agreement") with
Affiliated Managers Group, Inc. ("AMG"). Under the Purchase Agreement, at
the closing, The Managers Funds, L.P. will convert into a Delaware limited
liability company ("LLC") and AMG will acquire a 95% interest in its
profits and a 100% interest in the capital of the Manager with the
remaining 5% interest in the profits to be retained by certain key
employees of the Manager (the "Transaction"). AMG will become the
managing member of the LLC. AMG is a publicly-traded Delaware corporation
that acquires and holds interests in investment management firms. The
Transaction is expected to close on or about April 2, 1999, subject to
various conditions.
At an in-person meeting held on January 13, 1999, the Board of Trustees of
The Managers Funds considered the proposed Transaction and approved a new
advisory agreement between each Fund (other than Managers Money Market
Fund) and the LLC, new sub-advisory agreements and other contracts with
the LLC on the same terms as the existing contracts, and to take effect
upon effective date of the Transaction. The approval of the advisory
agreements with the LLC and of the Sub-Advisory Agreement on behalf of
Managers Capital Appreciation Fund and Essex Investment Management
Company, LLC (an affiliate of AMG) are subject to the approval by the
shareholders of the applicable Funds. A special meeting of shareholders
will be held to consider these matters before the proposed Transaction is
consummated. A proxy statement describing the matters to be considered
will be mailed to each shareholder in advance of the meeting.
44
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REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Trustees of The Managers Funds and the Shareholders of Managers
Short and Intermediate Bond Fund, Managers Intermediate Mortgage Fund, Managers
Bond Fund, and Managers Global Bond Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of portfolio investments, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material aspects, the financial position of
Managers Short and Intermediate Bond Fund, Managers Intermediate Mortgage Fund,
Managers Bond Fund, and Managers Global Bond Fund (four of the series
constituting The Managers Funds, hereafter referred to as the
Funds) at December 31, 1998, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financials statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
45
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[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
Swidler Berlin Shereff Friedman, 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 Co., Inc.
Roxbury Capital Management, LLC
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Lazard Asset Management
INTERNATIONAL EQUITY FUND
Scudder, Kemper Investments, Inc.
Lazard Assed Management
EMERGING MARKETS EQUITY FUND
King Street Advisors, Limited
INCOME FUNDS:
- ------------
MONEY MARKET FUND
J.P. Morgan
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc.
INTERMEDIATE MORTGAGE FUND
Jennison Associates Capital Corp.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
