INCOME EQUITY FUND
CAPITAL APPRECIATION FUND
SPECIAL EQUITY FUND
Annual Report
December 31, 1999
We pick the talent. You reap the results
MANAGERS INCOME EQUITY FUND
MANAGERS CAPITAL APPRECIATION FUND
MANAGERS SPECIAL EQUITY FUND
Annual Report
December 31, 1999
TABLE OF CONTENTS
Begins
on Page
Letter to Shareholders............. 1
The Managers Funds Performance..3
...
Complete performance table for all of The Managers Funds
As of December 31, 1999
Investment Manager's Comments..........4
Discussion of investment results during the year and
cumulative total return graphs versus relevant indices
Summary of Industry Weightings and Top Ten Holdings..21
Side by side comparison of the Funds' sector breakdown
and top ten holdings
Schedules of Portfolio Investments..22
Detailed portfolio listings by security trpe and
industry sector, as valued at December 31, 1999
Financial Statements
Statements of Assets and Liabilities..36
Fund balance sheets, Net Asset Value (NAV) per share
computation and Cumulative undistributed amounts
Statements of Operations..37
Detail of sources of income, fund expenses, and realized
and unrealized gains (losses) during the year
Statements of Changes in Net Assets..38
Detail of changes in funds assets and distributions to
shareholders for the past two years
Financial Highlights..40
Historical net assets values, distributions, total
returns, expense ratios, turnover ratios and net assets
Notes to Financial Statements..43
Accounting and distribution policies, details of
agreements and transactions with fund management and
description of certain investment risks
Report of Independent Accountants..47
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.
Dear Fellow Shareholder:
From an investment standpoint, 1999 was
among the most diverse years of the century.
While the NASDAQ Composite Index returned more
than 86% for the year, the largest ever
calendar year return for any broad U.S. stock
index, there were significant portions of the
financial markets that actually diminished in
value during the year. For example, the S&P
500 and the Russell 2000 indices soared to
record highs despite the fact that roughly half
of the stocks in those indices lost value
during the year. Medium and long-term domestic
and international developed markets bonds also
went down in price in 1999 due to a steady rise
in interest rates. Meanwhile, emerging markets
stocks and bonds soared as investors'
confidence in the recovery of these markets
improved.
The performance of the various funds
within The Managers Funds family reflects the
wide divergence of opportunities during 1999
and affirmed that we are indeed providing a
diversified offering of investments. I am
pleased to report that the vast majority of our
Funds met or exceeded our expectations of real
returns and performance relative to our
competitors. In addition, our Funds, when
viewed as a balanced portfolio, provided
exceptional returns this past year; in fact
better than any year in our fifteen-year
history.
We are living in a truly extraordinary
period of economic prosperity. The U.S.
economy continued to grow in 1999, on its way
to becoming the longest and strongest economic
expansion in United States history. This
expansion, like many in the past, is a result
of a virtuous cycle of inter-related factors
such as improvements in productivity, a high
employment rate, low interest rates, a low rate
of inflation, high consumer confidence, a high
rate of consumer spending, a high rate of
business investment and, importantly, a
relatively peaceful planet. What set this
expansion apart are technological and capital
market advances that have enabled businesses to
improve their decision-making and reduce their
risk. Improvements in all aspects of
production have enabled businesses to shorten
the time it takes to bring new ideas to market
and reduce inventories to a fraction of what
was previously necessary. Many businesses have
been able to implement just-in-time inventory
management practices that virtually eliminate
inventory. The obvious advantage to this is
the cost savings, but the more profound effect
on the economy is the reduction of risk.
Business managers do not need to predict the
demand for their products as far into the
future as before. They do not have to purchase
raw materials and begin production schedules
months in advance of expected demand. Thus,
they are much less apt to over-produce or
under-produce, which has typically been a
significant factor in causing boom and bust
economic cycles.
In cases where technology alone cannot
reduce risk, the development of the capital
markets has enabled business managers to
diversify and hedge some of the risks inherent
in their businesses. Global and international
businesses can hedge against the possibility of
currency movements wiping out profits. Farmers
can insure themselves against adverse price
changes in their crops or even adverse weather
conditions. With futures contracts and other
financial instruments, transportation companies
can create for themselves more stable energy
prices. The development of mortgage and asset-
backed securities has enabled financial
institutions to offer more loans without having
to take on more risk. All these developments
have effectively lowered the cost of doing
business, enabled businesses to expand further
and faster than ever before and increased the
available supply of goods and services. Thus,
despite growing demand, prices have remained
somewhat stable and our standard of living has
improved.
Because the virtuous cycle currently
remains in place, most indicators point to
continued prosperity for the U.S. economy.
While the aforementioned developments have
smoothed the business cycle and enabled
businesses to diversify risk, they have also
enabled some participants to take on more risk.
In addition, most of these factors have been
instrumental in increasing competition. While
increased competition is generally good for
consumers and the economy as a whole, it is an
added challenge for business leaders and
investors. It increases the cost of bad
decisions and inefficient operations. As
businesses have become more competitive and
information has become more available,
intelligence and sound judgement has become
more important.
Business leaders and investors are forced
to make quicker, more complex decisions every
day. Investment results in 1999 proved that
despite a broadly healthy economy there can be
a wide disparity between the top tier and the
also-rans. For these reasons, we at The
Managers Funds continue to believe that the
best investment strategy is to identify and
hire experienced investment managers who focus
their energy and demonstrate intelligence,
sound judgment and discipline. Although we
cannot expect to match the exceptional returns
we achieved in 1999 every year, we will always
seek to capitalize on opportunities as they arise.
The following report contains discussions
of each Fund's 1999 performance along with a
listing of the investment portfolios, financial
statements, and the report of independent
accountants. On the following page you'll find
a performance summary for all of The Managers
Funds as of December 31, 1999.
Should you have any questions about this
report, or if you'd like to receive a
Prospectus and additional information,
including fees and expenses, for any of the
other Funds in our family, please feel free to
contact us at 1-800-835-3879, or visit our
website at www.managersfunds.com. As always,
please read the Prospectus carefully before you
invest or send money. The Managers Funds are
distributed by The Managers Funds LLC.
We thank you for your continued
investment in The Managers Funds.
Sincerely,
Peter M. Lebovitz
President
The Managers Funds Performance (unaudited)
All periods ending December 31, 1999
Average Annual Total Returns*
Since Inception
Morningstar
Equity Funds: 1 Year
3 Years 5 Years 10
Years Inception Date
Rating**
Income Equity 4.15% 0.00%
13.96% 0.00% 18.41% 0.00%
12.61% 0.00% 14.45% Oct.
'84 PPP
Capital Appreciation 103.02%
0.00% 53.28% 0.00% 40.43% 0.00%
24.65% 0.00% 21.98% Jun.
'84 PPPPP
Special Equity 54.11% 0.00%
24.33% 0.00% 26.28% 0.00%
18.39% 0.00% 18.02% Jun.
'84 PPPP
International Equity 25.28% 0.00% 16.72% 0.00% 15.83% 0.00%
12.57% 0.00% 14.81% Dec. '85 PPPP
Emerging Markets
Equity 90.06% __
__ __ 22.60%
Feb. '98 N/A
Income Funds:
Short & Intermediate
Bond 2.21% 0.00% 4.45% 0.00% 6.53%
0.00% 6.28% 0.00% 7.79% Jun. '84
PPPP
Bond 3.66% 0.00% 5.74% 0.00%
10.19% 0.00% 8.79% 0.00% 10.28%
Jun. '84 PPPP
Global Bond (9.97)% 2.46%
0.00% 5.97% __ 4.89%
Mar. '94 P
Money Market 4.89% 0.00% 5.16%
0.00% 5.28% 0.00% 4.81% 0.00% 5.82%
Jun. '84 N/A
Past performance is not a guarantee of future
results. Investment returns and principal
value of mutual fund shares will fluctuate so
that the redemption price may be more or less
than the original purchase price. For a
prospectus including fees and expenses, please
visit our website at www.managersfunds.com, or
call The Managers Funds at (800) 835-3879 or
your investment adviser. Read the prospectus
carefully before you invest.
* Total return equals income yield plus
share price change and assumes reinvestment of
all dividends and capital gain distributions.
Returns are net of fees and may reflect fee
waivers or the reimbursement of fund expenses
as described in the prospectus. No adjustment
has been made for taxes payable by shareholders
on their reinvested dividends and capital gain
distributions. Returns for periods greater than one year are annualized.
** Morningstar proprietary ratings reflect
risk-adjusted performance through 12/31/99 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
rated, other than the International Equity
Fund, was rated against 3,487, 2,198 and 788
equity funds, the International Equity Fund was
rated against 1,114, 648 and 133 international
equity funds, and each of the Income Funds was
rated against 1,628, 1,232 and 397 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.
Managers Income Equity Fund ("Fund") is an
income-oriented stock fund managed by The
Managers Funds LLC since its inception in 1984.
The Managers Funds currently utilizes two
independent sub-advisors who each manage
approximately half of the total portfolio:
Harold Ofstie of Chartwell Investment Partners
("Chartwell"), hired in September 1997, and
Lori Ensinger, who recently replaced Robert
Hoffman as head of the Growth & Income
investment team at Scudder Kemper Investments,
Inc. ("Scudder"), hired in August 1991.
The Portfolio Managers
Harold Ofstie and the investment management
team at Chartwell are value-oriented investors
who use relative dividend yields,
price/earnings ratios and price/cash flow
ratios of stocks to help identify issues that
are undervalued by the market. They seek to
obtain excess returns from the dividend income
stream of the portfolio, the appreciation of
stocks from depressed levels and appreciation
of stocks due to growth in earnings. Because
the income stream provides a positive return,
and the level of the dividend provides somewhat
of a floor for the price of each stock, the
returns from this type of strategy are intended
to be less volatile than the market in general.
Harold's process is such that he only considers
stocks that are yielding more than the average
dividend yield of the S&P 500. In the case of
stocks in the technology industry which tend
not to pay meaningful dividends, he will
consider stocks without a yield if they appear
undervalued based on other criteria such as
price/earnings and price/cash flow ratios. He
and a team of analysts and portfolio managers
at Chartwell then analyze the list of potential
holdings in search of strong balance sheets,
ample cash flows and valuation characteristics
which are customized for each industry group,
in order to find the most statistically
attractive securities. Fundamental
investigation of the candidates seeks to
confirm the statistical findings and uncover
catalysts within each company or the
environment that could potentially improve the
earnings and/or stock valuation in the near
future. Catalysts can be in the form of a new
product or technology, an acquisition,
divestiture or restructuring, significant
management changes, or outside forces such as
industry events, regulatory revisions or
changes in demand. Harold is not a pure
contrarian manager likely to initiate a
position just because it is cheap. Instead he
will utilize relative strength and earnings
revision models to confirm the efficacy of the
catalysts and help optimize the timing of
purchases. Harold's portfolios consist of 40
to 50 securities with the restriction that no
sector will have a weighting of more than two
and a half times the weighting of the S&P 500.
Each position has a pre-determined 12-month
price target. Stocks are sold when the price
targets are met, if fundamentals deteriorate,
or if the prices rise to a level at which the
dividend yield is below that of the S&P 500.
Additionally, stocks may be sold simply to make
room for new purchases with better potential.
Lori Ensinger of Scudder believes, that stock
portfolios with high relative dividend yields
provide above average returns with below
average volatility in the long run. Although
the portfolio maintains a premium yield (versus
the S&P 500 Index and a value-oriented
benchmark like the Russell 1000 Value Index)
not every stock in the portfolio will have a
premium yield. Ensinger employs a three-factor
screen combining relative dividend yield,
price/earnings and price/cash flow ratios to
identify attractive investment ideas among the
largest 1000 U.S. companies and 100 ADRs that
constitute the investible universe.
The stock selection process combines the
benefits of the valuation screens and
fundamental research. The valuation screen
ranks the universe into quintiles with the
least expensive 40% of the stocks in the
universe falling into the buy zone, and most
expensive 20% falling into the sell zone.
Ensinger believes that a valuation screen alone
can not distinguish "value traps" (cheap stocks
that just get cheaper) from value
opportunities, and therefore relies heavily on
fundamental input from the research analysts.
Lori and a team of Scudder analysts analyze
potential holdings in search of strong and
improving fundamentals, earnings and dividend
growth and strong management. A stock is most
likely to be purchased if its valuation is
compelling, and, one of three general
fundamental scenarios is identified: the
company's true earnings power is greater than
consensus expectations; the company operates in
a cyclical industry and the stock is already
discounting a cyclical trough; management
articulates and executes a clear strategy for
shareholder value creation.
Scudder manages risk at several levels. By its
nature, a high relative yield, low
price/earnings, low price/cash flow strategy
results in a portfolio of stocks which have a
below average risk profile (as measured by
downside risk and standard deviation of
returns). The next layer of risk management is
in the form of diversification. Scudder will
not allocate more than 5% of its portfolio to
one stock or 30% to one sector. Typically, the
Scudder portfolio will be fully invested at all
times (i.e. 3% or less cash) to minimize market
timing risk.
The Year in Review
During 1999, the Fund provided a total return
of 4.2% compared with a full-year return of
21.0% for the S&P 500.
Similar to the previous year, 1999 was an
extremely frustrating year for investment
managers who use strict valuation disciplines.
The market rewarded stocks of companies that
have huge future potential even if they didn't
have current or historical earnings from which
to base a valuation. Meanwhile the market
essentially ignored companies with moderate
earnings growth even if they produced results
better than expectations. Those companies that
produced results below expectations were
severely penalized. Thus, despite a broadly
growing economy and healthy corporate earnings
across most sectors, stocks in the high
technology industries along with internet-
related consumer goods businesses and wireless
communications companies appreciated
dramatically while most other sectors showed
mixed performance. A few sectors, such as
utilities, transportations, health care and
consumer staples, posted negative returns for
the year. Both managers search for stocks that
are undervalued relative to current or future
earnings led them away from the high flying
technology, consumer services and wireless
communications companies. Instead, the
portfolio was heavily invested in financials,
traditional communications companies, energy
and basic materials producers.
During the first quarter, both the lack of
technology and the poor performance of the few
technology companies in the portfolio impeded
the Fund's performance. Xerox was the
portfolio's largest position at the start of
the year, and due to problems in transitioning
its sales force, along with some other
fundamental problems, the stock detracted from
the Fund's performance all year. The position
was liquidated in the fourth quarter.
During the early part of the second quarter,
value stocks made a comeback as investors
rotated out of the high flying tech sector and
into the less flashy, but considerably more
favorably priced, basic material and energy
sectors. These commodity-sensitive sectors
benefited further as signs of a resurgence in
certain Asian emerging nations provided more
optimism about global economic demand. During
the second quarter, the Fund's holdings in the
basic materials sector returned 23% and its
energy holdings returned 15%.
The strength was short lived, however, and the
market traded lower during the third quarter as
fears of higher interest rates were confirmed
by the Federal Reserve's tightening bias.
While technology stocks moved higher, virtually
all other sectors lost ground. Financial
stocks were particularly hard hit, and the
Fund's holdings fell approximately 15% during
the period. Health care companies also
depreciated, however, the portfolio managers
had significantly reduced their positions
during the first half of the year so that the
damage was limited.
During the fourth quarter, the high tech
industries exploded higher with the technology
sector of the S&P 500 rising 36%. Tech stocks
in the smaller capitalization indices jumped
even higher. Although the Fund appreciated
5.9% during the quarter, its lack of technology
left it far behind the benchmark return of
14.9%.
Despite the lackluster year, there were a few
very successful positions for the Fund during
the year. Corning, the leading maker of fiber
optic equipment, appreciated 189% during the
year becoming one of the Fund's largest
holdings. Also, a top ten position at the
beginning of the year, Frontier Corp. grew 121%
as it was acquired by Global Crossing.
Looking Forward
The Fund remains heavily invested in financial
companies, which, the managers believe, can
thrive even in rising interest rate
environments, despite the short-term negative
reaction that the market perceives. In
addition, the portfolio is currently positioned
with emphasis on communications and energy
positions. While the weighting in technology
is currently well below average, both managers
recently modified screening processes will
likely identify more technology companies in
the future. That said, the extremely high
valuations that many technology stocks are
currently exhibiting are far from inviting to
value managers.
We asked both managers to review the thesis
behind one of their largest holdings going into
the new year. With respect to her position in
Corning, Lori Ensinger of Scudder notes:
The investment thesis for Corning centers on
the company's leading global position in the
manufacture of optical fiber and optical
electronic products for fiber networks.
Corning is a direct beneficiary of the
explosive demand for bandwidth intensive
applications such as data and video, which are
critically dependent on high capacity fiber
networks. Earnings growth of 20-25% is being
driven by 30% revenue growth in fiber, and a
doubling in optical electronic revenues. New
products in optical switching and amplifiers as
well as the burgeoning flat panel display
business contribute to our confidence for
accelerating growth this year.
We initially purchased the stock two years ago
when it was selling at only 16 times earnings,
and investors were concerned (incorrectly) with
a slowing in Corning's core fiber business.
Because the stock currently sports a valuation
which places it close to the sell zone
according to our investment discipline, and we
have been recently trimming the position.
With respect to his position in Federal
National Mortgage Association ("FNMA"), Hal
Ofstie offered the following comments:
FNMA is a government sponsored company involved
in the purchase of mortgage obligations from
U.S. lending institutions with the purpose of
providing liquidity to those generators of home
mortgages and other financial transactions. It
is a company with a very stable long term
growth rate of 15% which should continue to
generate similar rates of above average
earnings and dividend growth in the future.
Notwithstanding this extraordinary financial
record and unassailable competitive position,
the stock has been weak over the last year,
declining 15%, largely in reaction to rising
interest rates. It now trades at an extremely
attractive price, close to an all time low
relative PE ratio and relative dividend yield
versus the broad market. While investors have
been very concerned about rising interest
rates, we believe the increase is close to
over, and would expect FNMA to be one of the
prime beneficiaries of that reversal.
Applying a traditional PE relative to year 2001
earnings estimates would result in appreciation
to the $90 level over the next 12 months, a
gain of 50%. Downside risk from today's prices
would seem to be very limited.
The tables on page 21 display a full breakdown
of the sector allocation of the Fund as well as
the top ten positions as of December 31, 1999.
The Managers Income Equity Fund's cumulative
total return is based on the
daily change in net asset value (NAV), and
assumes that all distributions
were reinvested.
The S&P 500 Index is an unmanaged
capitalization weighted indes of 500 commonly
traded stocks designed to measure performance
of the broad domestic economy
through changes in the aggregate market value
of those stocks. The Index
assumes reinvestment of dividends.
This chart compares a hypothetical $10,000
investment made in Managers Income
Equity Fund on December 31, 1989, to a $10,000
investment made in the S&P 500
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 Income Equity Fund and the S&P500
Index]
This table shows the average annual total
returns for Managers Income Equity
Fund and the S&P 500 Index for the one-year,
five-year and ten-year
periods through December 31, 1999.
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
--------------------
ONE YEAR FIVE YEARS TEN YEARS
- ---- ----------- ---------
Managers Income Equity Fund 4.15% 18.41% 12.61%
S&P 500 Index 21.04% 28.56% 18.21%
Managers Capital Appreciation Fund ("Fund") is
a growth-oriented stock fund managed by The
Managers Funds LLC since its inception in 1984.
The Managers Funds currently utilizes two
independent sub-advisors who each manage
approximately half of the total portfolio.
Kevin Riley of Roxbury Capital Management LLC
("Roxbury"), was hired in October 1998, and
Joseph McNay of Essex Investment Management
Company, LLC ("Essex"), has served as sub-
advisor since March 1997.
The Portfolio Managers
Roxbury's investment philosophy leads it to
focus on companies with strong competitive
positions, which are leaders in their
respective industries and are oriented toward
maximizing shareholder value. The key
ingredient for inclusion in the portfolio is
sustainable growth in earnings and cash flow.
Thus, the portfolio will tend to be heavily
weighted in companies which have not only
demonstrated earnings and cash flow growth in
the recent past, but which can be expected to
maintain or increase their growth rate into the
foreseeable future. While valuation is, in the
final analysis, important, however, growth and
quality parameters must first be recognized.
Roxbury uses quantitative screens to identify
companies with strong earnings growth, high returns on
invested capital, healthy balance
sheets and positive cash flow. The team of
analysts and portfolio managers at Roxbury
perform fundamental analysis on companies which
appear attractive based on the screens. This
entails visiting with companies' managements,
speaking with competitors and clients of the
companies, analyzing the current and future
market trends where they relate to the
businesses and doing an in-depth analysis of
the companies' financial statements. The goal
of the fundamental analysis is to determine
whether or not each company's earnings and cash
flow growth is sustainable into the future.
Will the market support the company's growth?
Does the company have the appropriate physical
and financial resources? Does the management
have a viable business plan and the ability to
execute it? What are the competitors doing?
Particular attention is paid toward businesses
with high returns on capital because these
businesses tend to generate significant free
cash flow and offer a high likelihood of
sustainability. Analysis of these issues
enables the investment team at Roxbury to
estimate the earnings and cash flow potential
of each company.
With these estimates, portfolio manager Kevin
Riley, constructs a portfolio of between 35 and
40 stocks which have the most potential
relative to their valuation. While sector and
industry concentration are mostly a result of
the individual stocks selected, Kevin manages
the risk of the portfolio by diversifying
across industries and investing in companies
which are in different phases of their business
cycle.
Typically, most of Roxbury's portfolio will be
invested in large capitalization "blue chip"
companies with predictable businesses and
sustainable earnings and cash flow growth. An
additional positive characteristic of these
companies is that they are typically the most
liquid of stocks. Up to 20% of the portfolio
may be invested in medium capitalization
companies that have a strong niche or franchise
and offer superior long-term growth potential.
In addition, another portion of the portfolio
may be invested in companies that have an
unusually strong reward/risk relationship due
to some special circumstances such as corporate
restructuring. Roxbury expects to earn most of
its investment return through the capital
appreciation of its holdings as a result of
growth in company earnings.
Kevin generally will sell a position if and
when the price exceeds his expectations given
his estimate of the company's sustainable
earnings growth rate. He may also sell stocks
in order to invest in other companies with
superior potential. Most importantly, Kevin
will sell a stock if Roxbury's ongoing
fundamental analysis determines that the
quality or outlook of the company is
deteriorating in any way.
At Essex, Joe McNay's investment philosophy is
similar to Roxbury's in that he focuses on the
principle that a company's earnings growth and
profitability will drive its future price
performance. He is thus determined to identify
companies which have accelerating, sustainable
earnings growth and the potential for superior
revenue growth and margin expansion. Ideally,
Joe searches for companies which have a
dominant product or service and a strong
management team. Although he is not a "value"
manager, Joe is value conscious, and seeks
investments that he considers to be under-owned
or attractively priced relative to his growth
projections. Companies that meet all these
criteria are defined as "franchise
opportunities."
The research and portfolio management team at
Essex generates ideas by visiting companies,
attending conferences and trade shows, as well
as through database screening. Then they
develop earnings models and projections,
evaluate balance sheet strengths and
weaknesses, and speak with company managements.
Upon initiating a position, Essex applies risk
controls to limit negative effects. These
consist of price targets, individual position
limits of 5% of the portfolio, and a maximum
industry exposure limit of 20% of the
portfolio. Companies are sold when Essex
perceives a loss of proprietary or dominant
position, an earnings disappointment, excess
value versus forecasted growth, or if there is
a better opportunity elsewhere.
The result is that Essex's portfolio is
comprised of a blend of large multinationals
with dynamic medium to large industry leaders.
The portfolio's market cap ranges from $1
billion to $100 billion with 50 to 60 companies
that display sustainable, high quality earnings
growth at reasonable valuations.
The Year in Review
The Fund provided a total return of 103.0%
during 1999 while the Standard & Poor's 500
Stock Index (S&P 500) returned 21.0%.
The Fund's exceptional performance during 1999
is mostly a result of both investment managers'
focus on the fastest growing segments of the
economy along with their avoidance of slower
growth and cyclical segments. As has been well
documented in the financial press, domestic
stocks provided widely divergent returns during
the year. Despite a broadly growing economy
and healthy corporate earnings across most
sectors, stocks in the high technology
industries, internet related consumer goods
businesses and wireless communications
companies appreciated dramatically while most
other sectors showed mixed performance. A few
sectors, such as utilities, transportation,
health care and consumer staples, posted
negative returns for the year. Although both
managers select stocks on an individual basis,
their search for explosive and/or sustainable
growth led them to invest much of the portfolio
in high technology, consumer services and
wireless communications companies. Meanwhile,
the portfolio remained completely void of
utilities, transportation companies and basic
materials firms throughout most of the year.
In addition, the Fund had modest exposure in
sectors such as health care, financials and
capital goods.
Throughout all sectors both managers
demonstrated adept security selection during
the year. While the Fund's exposure to
technology grew because of appreciation, the
managers steadily took profits, eliminated
over-priced positions, and recycled assets into
new ideas. For example, America Online ("AOL")
began the year as the Fund's largest holding.
During the first quarter, as AOL was
appreciating by 90%, the Fund's position was
reduced in order to reduce portfolio
concentration. Of the top ten positions at the
start of the year, only seven remained in the
portfolio at year-end, and none remained in the
top ten, despite the fact that they produced an
average return of 130% for the year. The
largest single contributor to the Fund's
performance during the year was CMGI, an
internet content holding company which began
the year as the Fund's fifth largest holding
and appreciated 940%.
During the first quarter, the managers added
Sun Microsystems, and AT&T Liberty Media Group,
which have grown to become top five holdings
while appreciating 262% and 147%, respectively,
during the year. The managers added Nokia
during the second quarter and built the
position as the stock struggled in the third
quarter. We were rewarded in the fourth
quarter as the price appreciated 112%. Yahoo!
was trimmed during the first quarter but
purchased again in the second quarter and
appreciated 141% in the final quarter. Another
testament to the managers' fine stock selection
during the year is the fact that portfolio
holdings that appreciated more than 100%
significantly outnumbered those that went down
by even a small amount.
The ever present risk to many of these
securities is that they are very highly valued
relative to their current or historical
earnings. Our portfolio managers are
anticipating significant growth in revenue,
earnings and/or cash flow over the next several
years. If the company managements can
successfully execute their business strategies,
these holdings should justify the current
valuations and continue to appreciate. If the
companies fall short of these expectations the
stock prices will fall dramatically. As we
proceed and expectations change, these stocks'
prices will be very volatile. In order to
diversify some of this risk, the managers have
also invested in companies which have already
demonstrated strong sustainable earnings growth
and whose valuations are justifiable to current
and historical financial success.
There were a few notable actions in sectors
other than in the high technology arena. In
late March, one of the managers added a
significant position in energy and energy
service companies just in time for a run up in
oil prices and subsequent appreciation of the
energy sector. These positions were eliminated
during the fourth quarter. Beginning in late
1998 and continuing in 1999, the managers
reduced the portfolio's exposure in health care
stocks, which proved to be prescient as these
stocks underperformed throughout the year.
Biotechnology companies, however, bucked this
trend, and the Fund took advantage with
holdings of Amgen and Biogen. Biogen was
eliminated in the fourth quarter. During the
third quarter, the managers slashed their
positions in financial stocks. While Morgan
Stanley Dean Witter, a top ten holding at the
beginning of the year, remains in the portfolio
after rising more than 100% during the year,
Citigroup, another top ten holding from the
start of 1999 was eliminated in the fourth
quarter.
Looking Forward
The Fund remains heavily invested in technology
companies going into the year 2000 and both
managers are optimistic about the future
prospects for these stocks. We asked each
manager to review the thesis behind one of his
largest holdings going into the new year.
With respect to his position in Yahoo!
("YHOO"), Joe McNay of Essex notes:
Our investment thesis for Yahoo! is based on
several years of following the company combined
with an awareness of the enormous fundamental
growth the company is poised to benefit from as
consumers shift to online shopping, creating an
estimated $124 billion in Internet based
shopping revenues by the year 2003. It is our
opinion that YHOO, with its worldwide reach and
the targetability of its services, has
positioned itself as the web-based marketing
venue of choice for advertisers, sponsors and
retailers on a global basis. Given YHOO's
operating model as a media, commerce and
communication platform, our projections for the
company are targeted to 38% to 40% operating
margin. To illustrate the company's size and
scale its services were utilized by 65% of the
entire U.S. web audience during the month of
December according to Media Matrix with a
global audience of 120 million unique users in
December alone.
The management team at YHOO is second to none
as it has exceeded every metric which we (and
the street) have set as benchmarks. We believe
revenues have and will continue to grow at
better than 100% into the future as the company
is positioned to capture a changing demographic
phenomenon.
With respect to his position in AT&T Liberty
Media, Kevin Riley, of Roxbury, comments:
Roxbury believes the convergence of
telecommunications, technology and media &
entertainment will be one of the most exciting
areas of growth this decade, and no company is
better positioned to benefit from this trend
than Liberty Media. We believe Liberty
represents an exciting aggregation of diverse
entertainment and media properties managed by
the best management team in the industry.
Through a strategy of tax efficient
acquisitions and asset swaps, Liberty has
compiled media assets ranging from major stakes
in publicly traded companies like News Corp,
USA Network and Time Warner, to full or partial
ownership of a wide range of private assets
such as Discovery Communications, Encore Media,
QVC and E! Entertainment. In total, Liberty
owns interests in more than 100 sources of
media content. The Company is also the
majority owner of Liberty Digital, a recent
spin-off of an exciting array of internet
properties, and the platform by which Liberty
will capitalize on the impending "digital
revolution."
As regional Bell operating companies, long
distance telecom carriers, cable and satellite
companies all battle to provide high speed
digital services to customers, we believe the
demand for quality content will expand
exponentially. Liberty is adept at maximizing
the cash flows generated from their assets and
is now in a position to provide superior media
content for a variety of traditional
distribution outlets and even internet portal
companies. We believe Liberty can grow cash
flows in excess of 25% per year for many years
and management is committed to increasing
shareholder value over time. In our opinion,
the synergies among Liberty's various assets
are under appreciated, and the stock is very
reasonably valued at current levels.
Significant upside in the stock could come from
future acquisitions or major strategic
initiatives at Liberty Digital.
The tables on page 21 display a full breakdown
of the sector allocation of the Fund as well as
the top ten positions as of December 31, 1999.
The Managers Captial Appreciation Fund's
cumulative total return is based on
the daily change in net asset value (NAV), and
assumes that all distributions
were reinvested.
The S&P 500 Index is an unmanaged
capitalization weighted index of 500
commonly traded stocks designed to measure
performance of the broad domesic
economy through changes in the aggregate market
value of those stocks. The Index
assumes reinvestment of all dividends.
This chart compares a hypothetical $10,000
investment made in Managers
Capital Appreciation Fund on December 31, 1989,
to a $10,000 investment made in
the S&P 500 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 Capital Appreciation Fund and the
S&P 500 Index]
This table shows the average annual total
returns for Managers Captial
Appreciation Fund and the S&P 500 Index for the
one-year, five-year
and ten-year periods through
December 31, 1999.
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
- -----
ONE YEAR FIVE YEARS TEN YEARS
-------- --------- --------
Managers Capital Appreciation Fund 103.02%
40.43% 24.65%
S&P 500 Index 21.04% 28.56% 18.21%
Managers Special Equity Fund ("Fund"), managed
by The Managers Funds LLC since its inception
in 1984, is a growth-oriented equity fund which
primarily invests in the stocks of small
capitalization companies. The Managers Funds
currently utilizes four independent sub-
advisors who each manage separate portions of
the portfolio: Andrew Knuth of Westport Asset
Management ("Westport"), who has been managing
a portion of the Fund since December 1985,
manages approximately one third of the total
portfolio. Gary Pilgrim of Pilgrim Baxter &
Associates ("Pilgrim Baxter"), who has been
managing a portion of the Fund since October
1994, manages approximately one third of the
portfolio. Timothy Ebright of Goldman Sachs
Asset Management ("Goldman") (formerly named
Liberty Investment Management), has been
managing a portion of the Fund since December
1985 and manages approximately one sixth of the
portfolio. Bob Kern, of Kern Capital
Management ("Kern Capital"), was added as a
sub-advisor in September 1997 and manages the
remaining one sixth of the Fund.
The Portfolio Managers
Andy Knuth's investment philosophy entails
investing in small capitalization companies
which he perceives as having significant upside
potential in earnings and return on equity over
the next twelve to eighteen months. Although
he is investing for growth, Andy will purchase
stocks only if they are selling at or below the
market's price/earnings multiple, or below
valuations of other companies in the same
industry. Thus, he must discover and invest in
companies very early in their growth cycle.
Implicit in the strategy is that Andy and his
investment team focus on a small number of
issues, and tend to hold them for a long time.
The concentration and low turnover enable Andy
to heavily research and monitor each position.
He is focused on future profits only, and, in
fact, prefers to find businesses which are
inherently good but which have gone through a
troubling period. Factors that may improve
earnings and investor perceptions include
acquisitions or divestitures, management shake-
ups, changes in the business cycle, or the
development of a proprietary product in a
strong industry. He searches, in particular,
for companies with good managers who are
finding ways to substantially improve the
company.
The result is that Andy will typically have a
concentrated portfolio, and any significant
industry concentrations are merely an outcome
of bottom up stock selection. Because some of
the companies in which he invests may not yet
have earnings, the price to trailing earnings
ratio may be high, although the price to
forward earnings will be well below average.
Andy is a patient investor, usually turning
over less than 20% of his portfolio per year.
Gary Pilgrim, of Pilgrim Baxter focuses only on
companies with high and accelerating earnings
growth. First, he screens for stocks which
are exhibiting at least 20% or greater earnings
growth. He then ranks these stocks using a
proprietary quantitative ranking system (QRS)
which focuses on recent earnings growth,
earnings acceleration, prospective earnings
growth and potential for earnings surprise. A
team of analysts at Pilgrim speak with
managements and analyze the businesses to
confirm and refine earnings expectations, and
stocks are purchased and sold based on their
relative rankings.
Typically the portfolio will have an average
historical and expected earnings growth rate of
near 50%. Because such a high priority is
placed on high growth, the companies in the
portfolio tend to be very visible, and possess
very high price to earnings multiples. While
successful growers move up in price quickly,
companies posting disappointing earnings move
down dramatically as well. High multiples also
make the prices very sensitive to industry and
economic news and events. The result is a
portfolio which exhibits a high level of price
volatility.
In addition, the QRS's focus on short-term
periods results in a high amount of portfolio
turnover. This is a necessary circumstance
since companies with high price multiples whose
growth is slowing need to be identified and
replaced immediately. Gary typically holds
around 80 positions and has an annual turnover
ratio in excess of 200%. His portfolios are
also typically heavily weighted in a few
business sectors.
While similar in some respects to Andy Knuth,
Tim Ebright, of Goldman, searches for a
different kind of value and growth. Tim
searches for companies which have very
predictable earnings, positive operational cash
flow and a defensible market position, which
are selling for less than the intrinsic value
of the business. In addition, Tim prefers
companies in which the managers own a
substantial portion of the stock.
Typically, this combination can only be found
in companies that have not been "discovered" by
institutional investors, or have been
"orphaned" since their initial public
offerings. Companies such as this tend to be
very small, thus Tim is what many consider a
micro-cap manager. That is, he typically
invests only in companies with market
capitalizations under $300 million, sometimes
far smaller. If his analysis is correct, the
portfolio makes money in one of three ways:
First, the company may continue to churn out
steady earnings growth for an indefinite
period. Second, the stock may be discovered by
institutional investors and enjoy an expansion
of its valuation. Third, the company may be
acquired at or above its intrinsic value.
Because of the size of the companies, Tim must
build a portfolio of close to 100 positions.
These stocks tend to be less susceptible to
market swings, and exhibit less price
volatility merely because they trade much less
than larger companies. Their added risk is in
their lower liquidity.
Bob Kern is one of the pioneers of micro-cap
investing, and while similar to Tim Ebright in
his focus on very small companies, Bob directs
his efforts toward finding companies which are
succeeding through innovation of new products
or services. Thus, Bob's portfolio tends to be
concentrated in technology, healthcare,
consumer goods and service sectors. Bob seeks
to earn returns from the appreciation of stocks
as the companies' products develop and
penetrate new markets.
In most cases, the analysis of the product and
judgements as to its potential are the most
important aspects of the decision to own stock.
In all cases, however, the operational and
financial health of the company must be
verified. Bob likes to find companies in which
margins will increase with revenue growth, and
which can finance much of their growth from
operating cash flow.
Although valuation is clearly important, Bob is
often willing to pay relatively high multiples
where he sees enough growth potential. Bob
will typically hold a portfolio of 60 to 70
stocks with a median market capitalization of
under $500 million.
Risk is a necessary part of investing, and is
particularly inherent in investing in small
capitalization companies. In this Fund we have
combined four managers who each specialize in a
different types of risk. Andy Knuth takes on
extra specific (or company) risk by
concentrating his portfolio in a small number
of stocks. Meanwhile he is trying to decrease
price risk by purchasing undervalued companies.
Tim Ebright is taking on added liquidity risk
while decreasing specific and price risks. Gary
Pilgrim is taking on added price risk while
lowering specific risk. Bob Kern diversifies
specific risk while taking on price risk and
liquidity risk.
The Year in Review
The Fund returned 54.1% during 1999, compared
with a return of 21.3% for the Russell 2000
Index of small-capitalization stocks.
The year did not start well for the Fund as
small company stocks moved lower during the
first quarter and the few stocks that performed
well were internet companies with negative
earnings. While the Fund did have significant
exposure to various internet related
businesses, it was (and is) underexposed to
those without some prospect of positive
earnings in the near future. This reversed
during the second quarter, and not only did
small capitalization stocks recover, but the
market began to reward companies with, what we
would consider, higher quality earnings growth.
As the year proceeded, the market became
focused on technology companies. While the
market traded lower through the summer, the
Fund gained ground as a result of strong
performance from technology holdings such as
Puma Technology, Emulex and Netopia.
Additionally, the Fund's largest holding, Emmis
Broadcasting, began a strong second half run
due to strong revenue gains which were at least
partly due to increased radio advertising on
the part of internet companies.
During the fourth quarter, technology stocks
dominated even more. The Fund's technology
holdings were responsible for three fourths of
the 36% return during the quarter. These were
again led by Puma, which rose 750%, and many
other internet related holdings.
The ever present risk to many of these
securities is that they are very highly valued
relative to their current or historical
earnings. The portfolio managers who own them
are anticipating significant growth in revenue,
earnings and/or cash flow over the next several
years. If the company managements can
successfully execute their business strategies,
these holdings should justify the current
valuations and continue to appreciate. If the
companies fall short of these expectations the
stock prices will fall dramatically. As we
proceed and expectations change, these stocks'
prices will be very volatile. This is why we
believe so strongly that it is important to
diversify this risk by owning some stocks which
are currently demonstrating strong earnings and
steady earnings growth, as well as owning
stocks which are selling at a discount to their
current earnings even if their expected growth
rates are moderate.
Looking Forward
The Fund is currently 40% invested in
technology companies, which is much higher than
is typical, and is partly a result of the
extremely high relative performance of these
stocks. The managers have been diligent in
rebalancing, and given the new tax year they
will be more willing to realize profits as we
go forward. For the same reasons, the average
market capitalization of the portfolio has
increased. While we do not encourage portfolio
managers to sell securities purely on the basis
of capitalization, we can expect that they will
continue to recycle any realized gains into
small capitalization companies.
We asked each manager to review the thesis
behind one of his largest holdings going into
the new year.
With respect to his position in Emmis
Broadcasting, Andy Knuth of Westport notes:
Emmis was originally purchased for the Fund in
September, 1997. At that time, the shares were
selling at a significant discount to the
valuation accorded other radio broadcasting
companies. In our view, the focus of many of
the company's stations in the key New York,
Chicago, and Los Angeles markets, indicated
that a premium valuation, not a discount, was
warranted.
We also viewed the radio industry as a likely
vehicle for e-commerce companies to use in
their effort to build business and customer
awareness. This, in fact, has happened,
resulting in a surge of advertising revenues
and a firming in over-all rates.
With respect to his position in Applied Micro
Circuits, Gary Pilgrim, of Pilgrim Baxter,
comments as follows:
Applied Micro Circuits (AMCC) manufactures and
sells high performance, high bandwidth
semiconductors for the telecommunications and
data communications markets. The company is
especially strong in the market for leading
edge, broadband telecommunications data
transport. Both the overall market for their
type of products and AMCC's market share are
growing rapidly. The company has consistently
exceeded the consensus Wall Street revenue and
earnings estimates and guidance for these
estimates has gone up nearly every quarter. We
think very highly of Dave Rickey, AMCC's CEO,
who has a background working at Nortel, who is
also their largest customer. The business is
extremely profitable and there are high
barriers to entry including intellectual
expertise and long design cycles.
With respect to his position in Rural Cellular
Corp., Tim Ebright, of Goldman, writes:
Located in out-of-the-way Alexandria,
Minnesota, Rural Cellular Corp. long evaded the
interest of the institutional investment
community. But as one of the few remaining pure
opportunities in the provision of cellular
telephone services in rural markets, the
company's rapid growth is beginning to attract
quite a following.
The attraction of Rural Cellular Corp. is
threefold. Rapid customer penetration gains
within the company's Upper Midwest and New
England service areas are yielding 40% + gains
in cash flow, concurrent with dramatic
reductions in capital spending. The resultant
free cash flow is being used to expand the
company's geographic footprint via acquisition.
Secondly, rural operators are not experiencing
the level of competition from other wireless
providers as their peers in urban markets.
Thus, gains in profitability accrue primarily
to shareholders. And thirdly, Rural Cellular
Corp benefits from the proliferation of so-
called "bucket plans" offered by national
vendors such as Nextel, Sprint and AT &T.
Providing national coverage at essentially
local rates, these plans depend upon companies
such as Rural Cellular Corp. to fill geographic
coverage gaps that enable seamless national
coverage. Roaming revenues are a highly
profitable source of growth to Rural Cellular
Corp.
With respect to his position in Verisign, Bob
Kern, of Kern Capital, makes the following
comments:
Kern Capital approach to investing in the
internet revolution has been to identify key
technology that everyone needs. The key is not
to try and figure out which dot-com company
will be able to succeed in a very competitive
environment but rather which elements every
internet commerce platform needs in order to
succeed. Then choose the companies with the
highest barriers to entry and strongest
competitive position to invest in.
VeriSign's ("VRSN") security and authentication
technology is a critical element for e-
Commerce. The management had incredible
foresight many years ago to give their
technology away for free to Netscape and
Microsoft in order to be embedded in their
browsers. This means that just about every
browser that has been sold or downloaded since
the internet revolution began contains VRSN's
technology.
The market opportunity is huge and their
business model, in which VRSN services are
renewed every year, provides excellent
visibility and is one of the best I have seen.
Additionally, there is little competition (only
a hundred or so people in the world are experts
on PKI technology, the underlying technology on
which VRSN's technology is based). VRSN's
market position is dominant and, in my opinion,
growing stronger relative to their primary
competitor Entrust. Other competitors which
include GTE, IBM, and Baltimore Technologies,
do not seem to be posing any significant
threats at this time.
The tables on page 21 display a full breakdown
of the sector allocation of the Fund as well as
the top ten positions as of December 31, 1999.
The Managers Special Equity Fund's cumulative
total return is based on the
daily change in net asset value (NAV), and
assumes that all distributions
were reinvested.
The Russell 2000 Index is comprised of the
smallest 2000 companies in the
Russell 3000 Index, representing approximately
8% of the Russell 3000 total
market capitalization.
The Russell 3000 Index is composed of 3000
large U.S. companies, as determined
by market capitalization. This portfolio of
securities represents approximately
98% of the investable U.S. equity market.
This chart compares a hypothetical $10,000
investment made in Managers
Special Equity Fund on December 31, 1989, to a
$10,000 investment made in the
Russell 2000 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 Managers Special Equity Fund and the
Russell 2000 Index]
This table shows the average annual total
returns for Managers Special Equity
Fund and the Russell 2000 Index for one-year,
five-year and ten-year
periods through December 31, 1999.
AVERAGE ANNUAL TOTAL RETURNS
ANNUALIZED
- -------------
ONE YEAR FIVE YEARS TEN YEARS
- ---- ---------- --------
Managers Special Equity Fund 54.11% 26.28% 18.39%
Russell 2000 Index 21.26% 16.69% 13.40%
The Managers Funds
Summary of Industry Weightings as of December
31, 1999
Managers Managers Managers
Income Capital Special
Major Sectors Equity Fund Appreciation Fund
Equity Fund
Basic Materials 9.1 %- %
1.0 %
Capital Goods 7.9
2.9 8.1
Communication Services 17.5
11.6 1.6
Consumer Cyclicals 8.4
9.9 13.7
Consumer Staples 1.8
9.5 8.8
Energy 11.4
- 1.0
Financials 22.7
2.7 5.6
Health Care 4.9
4.4 6.0
Technology 3.4
55.7 40.5
Transportation 2.2
- 3.2
Utilities 7.1
- 1.4
Other 3.6 3.3
9.1
Managers Income Equity Fund
Managers Capital Appreciation Fund
Managers Special Equity Fund
% Fund % Fund
% Fund
GTE Corp. 4.2 Yahoo!, Inc. 5.4
Emmis Broadcasting
Federal National Nokia Corp.,
Corp., Class A* 2.6
Mortgage Association* 3.5 Sponsored
ADR 4.2 TeleTech Holdings, Inc. 2.1
Exxon Mobil Corp. 3.3 AT&T Corp.,
Liberty Conexant Systems, Inc.
1.9
Total Fina SA, Media Group
3.2 Puma Technology, Inc. 1.4
Sponsored ADR 3.2 Sun Microsystems,
Inc. 2.9 ANADIGICS, Inc. 1.3
Corning, Inc. 3.1 Cisco Systems,
Inc. 2.9 VeriSign, Inc. 1.2
Chase Manhattan Corp. 2.8 CBS Corp.
2.9 Alpha Industries, Inc. 1.2
Bell Atlantic Corp. 2.7 Nortel
Networks Corp. 2.5 Applied Micro
Morgan Stanley Home Depot, Inc.
2.4 Circuits Corp. 1.2
Dean Witter & Co. 2.5 Texas
Instruments, Inc. 2.3 Cytyc Corp. 1.1
McGraw-Hill Cos.* 2.3 VoiceStream
InfoSpace.com, Inc. 1.1
American Home Wireless Corp.
2.3
Products Corp.* 2.3
*Top Ten Holding at December 31, 1998
Managers Income Equity Fund
Schedule of Portfolio Investments
December 31, 1999
Common Stocks - 96.4%
Basic Materials - 9.1%
Abitibi-Consolidated, Inc. 35,260 418,713
AK Steel Holding Corp. 14,160 267,270
Dow Chemical Co. 4,315 576,592
Georgia Pacific Corp. 3,200 ** 162,400
Lyondell Petrochemical Co. 29,100 371,025
Rohm and Haas Co. 18,455 750,888
Temple-Inland, Inc. 6,610 435,847
Weyerhaeuser Co. 12,325 ** 885,088
Total Basic Materials 3,867,823
Capital Goods - 7.9%
Corning, Inc. 10,300 ** 1,328,056
PACCAR, Inc. 5,800 256,650
Parker-Hannifin Corp. 12,800 656,800
Pitney Bowes, Inc. 18,311 884,650
Rockwell International Corp. 5,200 248,950
Total Capital Goods 3,375,106
Communication Services - 17.5%
ALLTEL Corp. 5,400 446,513
AT&T Corp. 8,175 414,881
BCE, Inc. 8,623 777,687
Bell Atlantic Corp. 18,784 ** 1,156,390
BellSouth Corp. 18,000 842,625
Cable & Wireless PLC, Sponsored ADR 12,895 ** 682,629
Global Crossing, Ltd.* 7,045 ** 351,810
GTE Corp. 25,005 1,764,415
SBC Communications, Inc. 8,041 391,999
Sprint Corp. 9,200 619,274
Total Communication Services 7,448,223
Consumer Cyclicals - 8.4%
Dayton Hudson Corp. 5,900 433,281
Ford Motor Co. 4,700 251,156
Limited, Inc., The 13,503 584,849
Masco Corp. 14,140 358,803
Maytag Corp. 13,975 670,800
McGraw-Hill Cos. 15,885 978,913
Meritor Automotive, Inc. 14,700 284,812
Total Consumer Cyclicals 3,562,614
Consumer Staples - 1.8%
Heinz (H.J.) Co. 5,400 214,988
Kimberly-Clark Corp. 8,260 538,965
Total Consumer Staples 753,953
Energy - 11.4%
Conoco, Inc., Class B 25,100 624,363
Exxon Mobil Corp. 17,284 1,392,442
Halliburton Co. 13,930 560,683
Kerr Mcgee Corp. 5,965 369,830
Texaco, Inc. 9,800 532,263
Total Fina SA, Sponsored ADR 19,583 1,356,122
Total Energy 4,835,703
Financials - 22.7%
Allstate Corp., The 20,000 480,000
Bank of America Corp. 7,800 391,463
Chase Manhattan Corp. 15,405 1,196,776
Citigroup, Inc. 11,600 644,525
Federal National Mortgage Association 23,807 1,486,450
FleetBoston Financial Corp. 17,599 612,665
Hartford Financial Services Group, Inc. 12,825 607,584
Household International, Inc. 8,975 334,319
Lincoln National Corp. 13,300 532,000
Merrill Lynch & Co., Inc. 4,495 375,333
Morgan Stanley Dean Witter & Co. 7,300 1,042,075
PNC Bank Corp. 8,700 387,150
St. Paul Cos., Inc., The 7,100 239,181
Starwood Hotels & Resorts Worldwide, Inc. (REIT) 26,720 627,920
U.S. Bancorp 13,535 322,302
XL Capital Ltd., Class A 7,300 378,687
Total Financials 9,658,430
Health Care - 4.9%
American Home Products Corp. 24,325 959,317
Baxter International, Inc. 11,695 734,592
Bristol-Myers Squibb Co. 3,500 224,656
Pharmacia & Upjohn, Inc. 3,735 168,075
Total Health Care 2,086,640
Technology - 3.4%
Cadence Design Systems, Inc.* 5,700 136,800
Computer Associates International, Inc. 11,600 811,275
National Semiconductor Corp.* 11,975 512,680
Total Technology 1,460,755
Transportation - 2.2%
Canadian National Railway Co. 13,800 363,113
CSX Corp. 17,400 545,925
Total Transportation 909,038
Utilities - 7.1%
El Paso Energy Corp. 9,010 ** 349,701
Illinova Corp. 23,095 802,551
Montana Power Co., The 20,195 ** 728,282
ScottishPower PLC, Sponsored ADR 13,398 375,144
Williams Cos., Inc., The 24,210 739,918
Total Utilities 2,995,596
Total Common Stocks
(cost $34,762,575) 40,953,881
Other Investment Companies - 4.7%****
JPM Prime Money Market Fund, 5.50% 49,394 49,394
Navigator Securities Lending
Prime Portfolio, 5.83%*** 1,934,899 1,934,899
Total Other Investment Companies
(cost $1,984,293) 1,984,293
Total Investments - 101.1%
(cost $36,746,868) 42,938,174
Other Assets, less Liabilities - (1.1)% (466,739)
Net Assets - 100.0% 42,471,435
Note: Based on the cost of investments of $36,864,627 for
federal income tax purposes at December 31, 1999, the
aggregate gross unrealized appreciation and depreciation was
$8,196,539 and $2,122,992, respectively, resulting in net
unrealized appreciation of investments of $6,073,547.
* Non-income-producing securities.
** Some or all of these shares, amounting to $1,933,112,
or 4.6% of net assets, were out on loan to various brokers as
of December 31, 1999.
*** Collateral received from brokers for securities lending
were invested in this short-term investment.
**** Yields shown for each investment company represents
the December 31, 1999, seven-day average yield, which refers
to the sum of the previous seven days' dividends paid,
expressed as an annual percentage.
Investments Abbreviations:
ADR: Securities whose value is determined or significantly
influenced by trading on exchanges not located in the
United States or Canada. ADR after the name of a holding
stands for American Depositary Receipt, representing
ownership of foreign securities on deposit with a domestic
custodian bank. Sponsored ADRs are initiated by the
underlying foreign company.
Managers Capital Appreciation Fund
Schedule of Portfolio Investments
December 31,1999
Common Stocks - 96.7%
Capital Goods - 2.9%
Brocade Communications Systems, Inc.* 16,800 2,952,600
General Electric Co. 27,400 4,240,150
Total Capital Goods 7,192,750
Communication Services - 11.6%
Covad Communications Group, Inc.* 35,300 1,963,563
Global TeleSystems Group, Inc.* 64,800 2,243,700
ITXC Corp.* 17,900 595,175
Jazztel PLC, Sponsored ADR 35,000 ** 2,288,125
MCI WorldCom, Inc.* 87,300 4,626,900
Net2Phone, Inc.* 42,300 ** 1,937,869
Nextel Communications, Inc., Class A* 15,700 ** 1,618,081
Qwest Communications International, Inc.* 126,600 ** 5,435,888
Sprint Corp., PCS Group* 12,200 1,250,500
Vodafone AirTouch PLC, Sponsored ADR 21,450 ** 1,061,775
VoiceStream Wireless Corp.* 40,450 ** 5,738,843
Total Communication Services 28,760,419
Consumer Cyclicals - 9.9%
CMGI, Inc.* 12,600 3,487,838
Costco Wholesale Corp.* 62,700 5,717,456
DoubleClick, Inc.* 14,300 3,618,794
Gap, Inc., The 73,500 3,381,000
Home Depot, Inc. 87,750 6,016,359
Internet Capital Group, Inc.* 13,300 2,255,181
Total Consumer Cyclicals 24,476,628
Consumer Staples - 9.5%
AT&T Corp., Liberty Media Group* 140,500 ** 7,973,375
CBS Corp.* 112,900 7,218,544
CVS Corp. 30,100 1,202,119
EchoStar Communications Corp., Class A* 39,000 3,792,750
Infinity Broadcasting Corp., Class A* 96,900 3,506,568
Total Consumer Staples 23,693,356
Financials - 2.7%
American Express Co. 11,250 1,870,313
eSPEED, Inc., Class A 37,900 1,354,925
Morgan Stanley Dean Witter & Co. 23,800 3,397,450
Total Financials 6,622,688
Health Care - 4.4%
Amgen, Inc.* 58,800 ** 3,528,000
MedImmune, Inc.* 9,000 1,491,750
QLT PhotoTherapeutics, Inc.* 46,400 2,714,400
Sepracor, Inc.* 12,900 ** 1,279,519
Tularik, Inc. 60,200 ** 1,948,974
Total Health Care 10,962,643
Technology - 55.7%
Aether Systems, Inc. 30,900 2,213,213
Agile Software Corp.* 5,600 1,216,250
Akamai Technologies, Inc.* 11,600 ** 3,800,450
Allaire Corp.* 9,800 1,433,863
America Online, Inc.* 55,600 ** 4,194,325
Ariba, Inc.* 13,800 2,442,600
Broadcom Corp., Class A* 9,600 2,614,200
Cisco Systems, Inc.* 67,500 7,226,719
Cobalt Networks, Inc.* 13,800 1,476,600
Dell Computer Corp.* 56,300 2,867,781
Digex, Inc.* 27,100 1,842,800
EMC Corp.* 18,900 2,064,825
E-Tek Dynamics, Inc.* 17,700 2,376,225
Exodus Communications, Inc.* 28,800 2,557,800
Finisar Corp. 16,500 1,470,563
i2 Technologies, Inc.* 10,800 2,101,950
Infonet Services Corp., Class B 79,200 ** 2,079,000
Inktomi Corp.* 25,000 2,215,625
Juniper Networks, Inc.* 6,100 2,069,425
Kana Communications, Inc.* 11,100 ** 2,267,869
Lam Research Corp.* 24,400 2,722,125
Liberate Technologies, Inc.* 4,800 1,230,000
Metasolv Software, Inc. 28,400 2,335,900
Micromuse, Inc.* 16,000 2,720,000
Netopia, Inc.* 25,100 1,363,244
Network Appliance, Inc.* 28,200 2,340,600
Nokia Corp., Sponsored ADR 55,000 10,450,000
Nortel Networks Corp. 62,300 ** 6,292,300
Oracle Corp.* 48,350 5,415,200
PE Corp., PE Biosystems Group 20,600 2,478,438
Phone.com, Inc.* 18,800 2,179,625
PMC Sierra, Inc.* 11,400 1,826,850
QLogic Corp.* 12,200 1,950,475
Redback Networks, Inc.* 21,000 ** 3,710,438
S1 Corp.* 23,000 1,791,125
Siebel Systems, Inc.* 18,400 1,550,200
Sun Microsystems, Inc.* 94,400 7,304,200
Terra Networks, SA, Sponsored ADR 44,900 2,424,600
Texas Instruments, Inc. 59,500 5,764,063
VeriSign, Inc.* 17,400 3,325,574
VERITAS Software Corp.* 18,747 2,681,992
Vignette Corp.* 15,400 2,509,237
Yahoo!, Inc.* 31,164 13,484,272
Total Technology 138,382,541
Total Common Stocks
(cost $153,568,853) 240,091,025
Short-Term Investments - 12.5%
Other Investment Companies - 10.1%****
AIM Liquid Asset Portfolio, 5.42%*** 2,242,387 2,242,387
AIM Prime Portfolio, 5.24%*** 927,981 927,981
AIM Treasury Portfolio, 5.19%*** 984,130 984,130
Alliance Institutional Reserves
Prime Portfolio, 5.83%*** 3,979,959 3,979,959
Calvert Cash Reserves Institutional
Prime Fund, 6.06% 2,130,958 2,130,958
JPM Prime Money Market Fund, 5.50% 508,889 508,889
Navigator Securities Lending
Prime Portfolio, 5.83%*** 11,216,379 11,216,379
Provident Institutional TempFund, 5.48%*** 1,109,087 1,109,087
Scudder Institutional Money
Market Fund, 5.87%*** 2,000,001 2,000,001
Total Other Investment Companies 25,099,771
Repurchase Agreement - 2.4%
State Street Bank & Trust Co., dated 12/31/99,
due 01/03/00, 2.50%, total to be received
$6,038,258 (secured by $6,200,000 FNMAs
0.00%, due 02/10/00, market value $6,161,250),
at cost 6,037,000 6,037,000
Total Short-Term Investments
(cost $31,136,771) 31,136,771
Total Investments - 109.2%
(cost $184,705,624) 271,227,796
Other Assets, less Liabilities - (9.2)% (22,740,456)
Net Assets - 100.0% 248,487,340
Note: Based on the cost of investments of $185,356,270 for federal income
tax purposes at December 31, 1999, the aggregate gross unrealized
appreciation and depreciation was $88,331,206 and $2,459,680, respectively,
resulting in net unrealized appreciation of investments of $85,871,526.
* Non-income-producing securities.
** Some or all of these shares, amounting to $22,577,485, or 9.1% of
net assets, were out on loan to various brokers as of December 31, 1999.
*** Collateral received from brokers for securities lending was invested
in these short-term investments.
**** Yields shown for each investment company represents the
December 31, 1999, seven-day average yield, which refers to the sum of the
previous seven days' dividends paid, expressed as an annual percentage.
Investments Abbreviations:
ADR: Securities whose value is determined or significantly influenced by
trading on exchanges not located in the United States or Canada. ADR after
the name of a holding stands for American Depositary Receipt, representing
ownership of foreign securities on deposit with a domestic custodian bank.
Sponsored ADRs are initiated by the underlying foreign company.
FNMA: Federal National Mortgage Association
Managers Special Equity Fund
Schedule of Portfolio Investments
December 31, 1999
Common Stocks - 90.9%
Basic Materials - 1.0%
Allegheny Technologies, Inc. 35,769 802,567
ATMI, Inc.* 218,400 7,193,550
Mail-Well, Inc.* 195,400 2,637,900
NuCo2, Inc.* 90,100 1,317,712
Sylvan, Inc.* 110,400 883,200
U.S. Aggregates, Inc. 155,700 1,868,400
Total Basic Materials 14,703,329
Capital Goods - 8.1%
AAR Corp. 259,200 4,649,400
Advanced Energy Industries, Inc.* 65,300 3,211,944
Allied Waste Industries, Inc.* 232,425 2,048,245
Anaren Microwave, Inc.* 182,100 9,696,825
Arguss Holdings, Inc.* 143,700 1,859,119
C&D Technologies, Inc. 217,600 9,248,000
Capital Environmental Resource, Inc.* 202,500 1,177,031
Casella Waste Systems Inc., Class A* 123,600 2,325,225
C-Cor.net Corp.* 39,300 3,006,450
Checkpoint Systems, Inc.* 309,900 3,157,106
Cognex Corp.* 79,000 3,076,063
DuPont Photomasks, Inc.* 159,000 7,651,875
Dycom Industries, Inc.* 60,200 2,652,563
Electro Scientific Ind., Inc.* 45,500 3,310,125
Flextronics International* 103,200 ** 4,747,200
Group Maintenance America Corp.* 221,700 2,369,419
JLG Industries, Inc. 388,600 ** 6,193,313
KEMET Corp.* 96,300 4,339,519
Lydall, Inc.* 100,000 662,500
Met-Pro Corp. 92,300 923,000
Mettler-Toledo International, Inc.* 331,600 12,662,975
Miller Industries, Inc.* 331,800 953,925
Motorcar Parts & Accesories, Inc. 131,800 131,800
Reynolds & Reynolds Co., Class A, The 150,000 ** 3,375,000
Rogers Corp.* 76,700 2,933,775
Sensormatic Electronics Corp.* 247,300 ** 4,312,294
Sequa Corp., Class A* 99,600 5,372,175
Spectra-Physics Lasers, Inc.* 112,400 3,147,200
Teledyne Technologies, Inc.* 10,219 96,442
Thomas & Betts Corp. 75,000 2,390,625
URS Corp.* 94,900 2,058,144
Waste Connections, Inc.* 169,900 2,421,075
Waste Industries, Inc.* 172,700 1,932,081
Watsco, Inc. 159,100 ** 1,839,593
Wolverine Tube, Inc.* 48,100 679,412
Zomax Optical Media, Inc.* 105,500 4,767,280
Total Capital Goods 125,378,718
Communication Services - 1.6%
Boston Communications Group, Inc.* 377,200 1,968,513
CFW Communications Co. 75,900 2,599,575
Focal Communications Corp.* 102,000 2,460,750
General Communication, Inc., Class A* 400,000 1,725,000
Metrocall, Inc.* 153,180 248,918
Powerwave Technologies, Inc.* 89,700 5,230,631
Price Communications Corp.* 130,840 3,638,987
Rural Cellular Corp., Class A* 75,800 6,859,900
Total Communication Services 24,732,274
Consumer Cyclicals - 13.7%
Aaron Rents, Inc., Class B 126,400 2,243,600
American Eagle Outfitters, Inc.* 20,000 ** 900,000
American Retirement Corp.* 157,200 ** 1,247,775
Andover.Net, Inc.* 52,700 1,870,850
AnnTaylor Stores Corp.* 128,300 ** 4,418,331
Avis Rent A Car, Inc.* 111,000 2,837,438
Baker, Michael Corp.* 223,000 1,477,375
Brookdale Living Communities, Inc.* 142,800 1,677,900
Burns International Services Corp.* 109,700 1,186,131
Carriage Services, Inc., Class A* 271,100 1,609,656
Central Parking Corp. 82,400 ** 1,575,900
Chemed Corp. 65,900 ** 1,886,388
Children's Comprehensive Services, Inc.* 160,700 924,025
Coinmach Laundry Corp.* 187,400 1,967,700
Consolidated Stores Corp.* 165,252 ** 2,685,345
Cost Plus, Inc.* 177,300 6,294,150
David's Bridal, Inc.* 183,300 ** 2,016,300
Diamond Technology Partner, Inc.* 104,100 8,965,613
Duckwall-ALCO Stores, Inc.* 154,900 1,181,113
Elcor Corp. 153,600 4,627,200
Electro Rent Corp.* 140,700 1,618,050
F.Y.I., Inc.* 100,600 3,420,400
Freds, Inc., Class A 151,650 2,407,444
Genesco, Inc.* 306,600 ** 3,985,800
Getty Images, Inc.* 174,200 8,524,913
Glacier Water Services, Inc.* 66,700 1,079,706
Hanover Direct, Inc.* 2,021,200 7,326,850
Helen of Troy, Ltd.* 199,300 1,444,925
Horizon Health Corp.* 143,400 1,021,725
Houghton Mifflin Co. 86,400 3,645,000
Hughes Supply, Inc. 104,650 2,256,516
IMPCO Technologies, Inc.* 256,500 ** 3,558,938
Insight Enterprises, Inc.* 158,500 6,399,438
Isle Capri Casinos, Inc.* 70,300 927,081
ITT Educational Services, Inc.* 746,800 11,528,725
Keystone Automotive Industries, Inc.* 90,100 526,522
Lamar Advertising Co., Class A* 178,500 10,776,938
Mac-Gray Corp.* 166,400 634,400
Michael Anthony Jewelers, Inc.* 82,400 242,050
MIPS Technologies, Inc.* 57,600 2,995,200
OrthAlliance, Inc., Class A* 220,800 1,380,000
Pameco Corp.* 59,200 240,500
Pittston Brink's Group 400,200 8,804,400
Premier Parks, Inc.* 227,000 6,554,625
Protection One, Inc.* 307,300 595,394
Rent-Way, Inc.* 281,100 ** 5,253,056
Rock of Ages Corp., Class A* 123,400 563,013
RoweCom, Inc.* 69,500 3,153,562
ShopNow.com, Inc.* 139,600 2,634,950
Speedway Motorsports, Inc.* 73,600 2,047,000
Steven Madden, Ltd.* 147,850 2,772,187
TeleTech Holdings, Inc.* 981,400 33,060,912
TJX Cos., Inc. 80,000 ** 1,635,000
Tower Automotive, Inc.* 173,300 ** 2,675,318
U.S. Vision, Inc.* 256,300 656,768
United Rentals, Inc.* 120,100 2,056,712
Water Pik Technologies, Inc.* 3,576 34,195
Xtra Corp.* 274,400 11,696,300
Total Consumer Cyclicals 211,727,303
Consumer Staples - 8.8%
ABM Industries, Inc. 130,700 2,663,013
Adelphia Communications Corp., Class A* 54,600 ** 3,579,713
Allscripts, Inc.* 194,400 8,407,800
Applebee's International, Inc. 115,000 3,385,313
Benihana, Inc., Class A* 153,300 2,107,875
Bindley Western Industries, Inc. 257,066 3,872,057
Cinar Films, Inc., Class B* 281,200 6,959,700
Citadel Communications Corp.* 121,200 7,847,700
Cox Radio, Inc., Class A* 106,200 10,593,450
Duane Reade, Inc.* 289,200 ** 7,971,075
Emmis Broadcasting Corp., Class A* 327,100 ** 40,764,838
Gaylord Entertainment Co., Class A 131,400 3,933,788
Granite Broadcasting Corp.* 190,700 1,918,919
Gray Communications Systems, Inc. 62,700 1,109,006
Gray Communications Systems, Inc., Class B 11,200 ** 151,200
Insight Communications Co., Inc., Class A* 76,600 2,269,275
Manpower, Inc. 46,500 ** 1,749,563
Marketing Specialists Corp. * 168,500 610,813
MPW Industrial Services Group, Inc.* 107,300 824,869
NBTY, Inc.* 271,800 2,989,800
Owens & Minor, Inc. Holding Co. 213,300 ** 1,906,369
Priority Healthcare Corp., Class B* 114,561 3,315,109
RCM Technologies, Inc.* 30,300 511,313
Ruby Tuesday, Inc. 222,000 4,037,624
Saga Communications, Inc., Class A* 157,625 3,191,905
Salem Communications Corp., Class A* 130,200 3,002,737
Topps Co., Inc., The* 157,900 1,628,343
Volt Information Sciences, Inc.* 69,350 1,655,730
Whole Foods Market, Inc.* 61,200 2,822,850
Total Consumer Staples 135,781,747
Energy - 1.0%
Atwood Oceanics, Inc.* 137,400 5,307,075
Berry Petroleum Co., Class A 181,500 2,745,188
Hanover Compressor Co.* 52,700 1,989,425
Tosco Corp. 75,000 2,039,063
Varco International, Inc.* 377,300 3,843,743
Total Energy 15,924,494
Financials - 5.6%
Alabama National BanCorp. 64,400 1,199,450
Alexandria Real Estate Equities, Inc. 1,000 31,813
Allied Capital Corp. 325,265 5,936,086
Andover Bancorp, Inc. 98,500 2,714,906
Cash America International, Inc. 486,100 4,739,475
Charter One Financial, Inc. 196,910 3,765,904
Chateau Communities, Inc. (REIT) 89,329 2,316,971
Chittenden Corp. 214,000 6,339,750
Downey Financial Corp. 278,580 5,623,834
Equity Inns, Inc. (REIT) 199,600 1,347,300
First Washington Bancorp, Inc. 180,400 2,660,900
Firstar Corp. 129,719 2,740,314
Golden State Bancorp, Inc.* 26,400 ** 455,400
Harbor Florida Bancshares, Inc. 224,900 2,895,588
Health Care Property Investors, Inc. (REIT) 57,400 1,370,425
Hilb, Rogal & Hamilton Co. 128,000 3,616,000
Metris Cos., Inc. 79,586 ** 2,840,225
National Health Investors, Inc. (REIT) 51,400 764,575
National Western Life Insurance Co., Class A* 12,000 823,500
Pacific Gulf Properties, Inc. (REIT) 105,900 2,144,475
Penn Treaty American Corp.* 118,500 1,866,375
Penn-America Group, Inc. 158,350 1,227,213
People's Bank 48,200 1,015,213
Quotesmith.com, Inc.* 61,100 687,375
Riverview Bancorp, Inc. 100,000 1,000,000
Seacoast Financial Services Corp. 227,500 2,289,219
Sovran Self Storage, Inc. (REIT) 75,100 1,422,205
Sterling Financial Corp.* 178,200 2,004,750
Summit Bancorp 71,332 2,184,542
Sun Communities, Inc. 20,000 643,750
Timberland Bancorp, Inc. 175,000 1,968,750
UST Corp. 320,000 10,140,000
Washington Mutual, Inc. 33,750 877,500
Webster Financial Corp. 179,800 ** 4,236,537
Total Financials 85,890,320
Health Care - 6.0%
Advance Paradiam, Inc.* 170,400 3,663,600
Arthrocare Corp.* 157,100 ** 9,583,100
Celgene Corp.* 214,000 14,980,000
Centennial HealthCare Corp.* 223,200 641,700
Datascope Corp.* 3,200 125,600
Genelabs Technologies, Inc.* 322,400 1,692,600
Gilead Sciences, Inc.* 6,600 ** 356,400
Jones Pharma, Inc. 136,050 5,901,169
King Pharmaceuticals, Inc.* 172,900 ** 9,671,594
Medicis Pharmaceutical Corp.* 223,400 9,508,463
National Dentex Corp.* 85,200 1,427,100
Orthodontic Centers of America, Inc.* 226,100 ** 2,699,069
Oxford Health Plans, Inc.* 78,700 998,506
Prime Medical Services, Inc.* 217,200 1,954,800
Protocol Systems, Inc.* 155,400 1,388,888
Province Healthcare Co.* 82,200 1,561,800
Quorum Health Group, Inc.* 407,950 3,799,034
Res-Care, Inc.* 279,900 ** 3,551,231
ResMed, Inc.* 110,300 4,605,025
Rural/Metro Corp.* 121,800 521,456
Summit Technology, Inc.* 104,200 1,198,300
Techne Corp.* 57,700 3,173,500
Universal Health Services, Inc., Class B* 108,400 3,902,400
Wesley Jessen VisionCare, Inc.* 163,400 6,147,924
Total Health Care 93,053,259
Technology - 40.5%
24 / 7 Media, Inc.* 78,600 ** 4,401,600
Actuate Software Corp.* 73,000 ** 3,125,313
ACTV, Inc.* 226,600 10,253,650
Advanced Digital Information, Corp.* 81,300 3,953,213
Affiliated Computer Services, Inc., Class A* 78,500 3,611,000
Allaire Corp.* 45,400 6,642,588
Alpha Industries, Inc.* 316,050 17,935,838
American Tower Corp., Class A* 217,500 ** 6,647,344
Amplicon, Inc. 72,100 784,088
ANADIGICS, Inc.* 435,900 20,569,031
Ancor Communications, Inc.* 108,500 7,364,438
Apex, Inc.* 74,000 2,386,500
Applied Micro Circuits Corp.* 141,000 ** 17,907,000
Aspect Development, Inc.* 47,400 3,246,900
Atmel Corp.* 210,600 6,225,863
AudioCodes, Ltd.* 40,900 3,727,013
BroadVision, Inc.* 68,400 11,632,275
Cabletron Systems, Inc.* 464,300 12,071,800
CACI International, Inc., Class A* 72,100 1,631,263
California Amplifier, Inc.* 146,900 3,856,125
Caredata Com, Inc.* 209,900 1,390,588
CBT Group PLC, Sponsored ADR* 265,100 8,781,438
Comdial Corp.* 194,600 1,933,838
CommScope, Inc.* 91,400 3,684,563
Computer Outsourcing Services, Inc.* 114,500 2,769,469
Concord EFS, Inc.* 74,668 1,918,034
Conexant Systems, Inc.* 436,000 ** 28,803,250
Credence Systems Corp.* 80,100 6,908,625
Cytyc Corp.* 273,400 ** 16,711,575
Davel Communications, Inc.* 234,765 1,085,788
Dendrite International, Inc.* 108,900 ** 3,661,763
Ditech Communications Corp.* 28,700 2,676,275
DSP Group, Inc.* 106,000 9,844,750
Emulex Corp.* 138,800 15,675,725
Etec Systems, Inc.* 23,700 1,063,538
F5 Networks, Inc.* 16,800 1,920,450
Fairchild Semiconductor International Corp., Class A* 176,300 5,244,925
Finisar Corp. 12,100 1,078,413
Harmonic Lightwaves, Inc.* 39,800 3,771,050
Homeseekers.com* 270,700 3,552,938
Informatica Corp.* 69,300 7,276,500
Information Resources Engineering, Inc.* 203,400 4,093,425
InfoSpace.com, Inc.* 77,500 16,580,156
Internet.com LLC* 59,600 3,114,100
Inter-Tel, Inc. 118,800 2,962,575
Intraware, Inc.* 117,000 9,323,438
Kent Electronics Corp.* 356,000 8,099,000
K-Tron International, Inc.* 103,800 1,388,325
L-3 Communications Holdings, Inc.* 120,700 5,024,138
Lifeline Systems, Inc.* 74,700 1,106,494
MCK Communications, Inc. 123,700 2,721,400
MDSI Mobile Solutions, Inc.* 174,700 4,498,525
Mediconsult.com, Inc.* 230,950 1,429,003
MedQuist, Inc.* 32,100 822,563
Mercury Interactive Corp.* 70,900 7,652,769
Micrel, Inc.* 52,600 2,994,913
Microchip Technology, Inc.* 120,500 8,261,781
Micromuse, Inc.* 37,900 6,443,000
Mpath Interactive, Inc.* 64,100 1,706,663
MRV Communications, Inc.* 148,600 ** 9,324,650
MTI Technology Corp.* 171,300 ** 6,316,688
National Data Corp. 137,200 ** 4,656,225
Natural MicroSystems Corp.* 114,800 5,374,075
NetCreations, Inc. 57,000 2,426,063
Netopia, Inc.* 257,600 13,990,900
New Era of Networks, Inc.* 198,200 ** 9,439,275
NOVA Corp.* 178,579 5,636,400
Pharmacopeia, Inc.* 404,900 9,135,556
Photon Dynamics, Inc.* 190,100 ** 7,318,850
Policy Management Systems Corp.* 457,900 11,705,069
Polycom, Inc.* 136,200 8,674,238
Pomeroy Computer Resources, Inc.* 5,900 76,700
PSInet, Inc.* 39,300 2,426,774
Puma Technology, Inc.* 163,300 21,320,855
QLogic Corp.* 37,600 6,011,300
QRS Corp.* 76,000 7,980,000
Quest Software, Inc.* 16,800 ** 1,673,700
Rare Medium Group, Inc.* 247,200 ** 8,343,000
Rational Software Corp.* 56,500 2,775,562
RF Micro Devices, Inc.* 54,700 3,733,274
Sanchez Computer Associates, Inc.* 49,700 ** 2,050,124
Sawtek, Inc.* 92,200 6,137,062
SDL, Inc.* 45,800 9,984,400
Shared Medical Systems Corp. 310,100 15,795,718
Sykes Enterprises, Inc.* 81,200 3,557,574
TranSwitch Corp.* 116,700 8,460,750
TriQuint Semiconductor, Inc.* 120,900 13,427,455
TSI International Software, Ltd.* 76,200 4,305,300
Tut Systems, Inc. * 26,600 1,426,424
Usinternetworking, Inc.* 94,500 ** 6,591,374
USWeb Corp.* 116,600 5,181,412
Verio, Inc.* 106,000 4,895,874
VeriSign, Inc.* 96,800 ** 18,500,900
Visual Networks, Inc.* 48,500 ** 3,831,500
Whittman-Hart, Inc.* 71,900 ** 3,855,637
Ziplink, Inc.* 163,700 1,964,400
Total Technology 624,253,663
Transportation - 3.2%
AHL Services, Inc.* 202,500 ** 4,227,188
Air Express International Corp. 245,450 7,931,103
Airborne Freight Corp. 418,200 9,200,400
American Classic Voyages Co.* 156,200 5,427,950
Circle International Group, Inc. 246,100 5,383,438
CNF Transportation, Inc. 68,100 2,349,450
Fritz Cos., Inc.* 293,600 3,082,800
Iron Mountain, Inc.* 89,250 ** 3,508,641
Pierce Leahy Corp.* 65,100 ** 2,815,575
Pittston Burlington Corp. 197,900 2,102,688
Sea Containers, Ltd., Class A 107,000 2,848,874
Sea Containers, Ltd., Class B 13,890 367,216
Total Transportation 49,245,323
Utilities - 1.4%
Calpine Corp.* 223,400 ** 14,297,600
El Paso Electric Co.* 808,900 7,937,331
Total Utilities 22,234,931
Total Common Stocks
(cost $870,132,290) 1,402,925,361
Short-Term Investments - 13.3%
Other Investment Companies - 9.6%****
AIM Liquid Asset Portfolio, 5.42% 38,414,397 38,414,397
Calvert Cash Reserves Institutional
Prime Fund, 6.06% 19,098,607 19,098,607
Harris Insight Money Market Fund, 5.87% 19,073,102 19,073,102
JPM Prime Money Market Fund, 5.50% 2,623,836 2,623,836
Navigator Securities Lending
Prime Portfolio, 5.83%*** 68,390,749 68,390,749
Total Other Investment Companies 147,600,691
Commerical Paper - 1.9%
Clipper Receivables Corp., 6.28%, 01/13/00 30,000,000 29,937,200
Repurchase Agreement - 1.8%
State Street Bank & Trust Co., dated 12/31/99,
due 01/03/00, 2.500%, total to be received
$28,218,878 (secured by $29,415,000 FNMAs
0.000% - 5.875%, due 02/10/00 - 04/23/04,
market value $28,783,469), at cost 28,213,000 28,213,000
Total Short-Term Investments
(cost $205,750,891) 205,750,891
Total Investments - 104.2%
(cost $1,075,883,181) 1,608,676,252
Other Assets, less Liabilities - (4.2)% (65,526,446)
Net Assets - 100.0% 1,543,149,806
Note: Based on the cost of investments of $1,079,530,827 for
federal income tax purposes at December 31, 1999, the aggregate
gross unrealized appreciation and depreciation was $598,186,566 and
$69,041,141, respectively, resulting in net unrealized appreciation of
investments of $529,145,425.
* Non-income-producing securities.
** Some or all of these shares, amounting to
$67,322,321, or 4.4% of net assets, were out on loan to various
brokers as of December 31, 1999.
*** Collateral received from brokers for securities
lending were invested in this short-term investment.
**** Yields shown for each investment company
represents the December 31, 1999, seven-day average yield, which
refers to the sum of the previous seven days' dividends paid,
expressed as an annual percentage.
Investments Abbreviations:
FNMA: Federal National Mortgage Association
The Managers Funds
Statements of Assets and Liabilities
December 31, 1999
Managers Managers Managers
Income Capital Special
Equity Appreciation Equity
Fund Fund Fund
Assets:
Investments at value* 42,938,174
271,227,796
1,608,676,252
Cash 1,446,110
3,011 2,120
Receivable for investments sold
1,418,458 9,433,926
Receivable for Fund shares sold
72,351 2,374,087 4,848,350
Dividends, interest and other receivables
68,287 13,950 435,040
Prepaid expenses 9,426
14,381 71,250
Total assets 44,534,348
275,051,683 1,623,466,938
Liabilities:
Payable for Fund shares repurchased
34,287 302,984 4,571,193
Payable upon return of securities loaned
1,934,899 22,459,924
68,390,749
Payable for investments purchased
3,522,745 5,647,093
Accrued expenses:
Investment advisory and
management fees 28,613 145,343
1,077,455
Administrative fees 9,538
45,420 299,293
Other 55,576 87,927
331,349
Total liabilities 2,062,913
26,564,343 80,317,132
Net Assets 42,471,435
248,487,340 1,543,149,806
Shares outstanding 1,544,431
4,065,790 16,879,768
Net asset value, offering and redemption
price per share 27.50
61.12 91.42
Net Assets Represent:
Paid-in capital 35,758,819
152,412,513 947,603,219
Undistributed net investment income
8,793 295,064
Accumulated net realized gain
from investments 512,517
9,552,655 62,458,452
Net unrealized appreciation of investments
6,191,306 86,522,172
532,793,071
Net Assets 42,471,435
248,487,340 1,543,149,806
*Investments at cost 36,746,868
184,705,624 1,075,883,181
The Managers Funds
Statements of Operations
For the year ended December 31, 1999
Managers Managers Managers
Income Capital Special
Equity Appreciation Equity
Fund Fund Fund
Investment Income:
Dividend income 1,276,978
236,710 4,823,577
Interest income 29,449
252,032 3,832,843
Foreign withholding tax (12,229)
(1,262)
Stock loan fees 2,246
29,327 141,013
Total investment income 1,296,444
516,807 8,797,433
Expenses:
Investment advisory and management fees
428,149 1,025,351
9,364,371
Administrative fees 142,716
320,422 2,601,214
Transfer agent 76,501
127,095 814,694
Custodian 63,430
85,305 453,537
Professional fees 30,503
40,730 94,464
Registration 13,977
29,462 84,412
Insurance 7,125
11,951 70,214
Trustees 3,830
8,623 71,115
Miscellaneous 5,351
15,485 122,441
Total expenses before reductions
771,582 1,664,424
13,676,462
Expense reductions (2,475)
(47,745) (37,299)
Net expenses 769,107
1,616,679 13,639,163
Net investment income (loss) 527,337
(1,099,872) (4,841,730)
Net Realized and Unrealized Gain (Loss):
Net realized gain on investment transactions
8,248,709 42,947,204
174,421,927
Net unrealized appreciation (depreciation)
of investments (6,175,222)
65,219,481 356,613,714
Net realized and unrealized gain
2,073,487 108,166,685
531,035,641
Net Increase in Net Assets
Resulting from Operations 2,600,824
107,066,813 526,193,911
The Managers Funds
Statements of Changes in Net Assets
Managers Income Equity Fund
For the For the
year ended year ended
December 31, 1999 December 31, 1998
Increase (Decrease) in Net Assets
From Operations:
Net investment income (loss)
527,337 866,023
Net realized gain (loss) on investments
8,248,709 4,967,355
Net unrealized appreciation (depreciation)
of investments (6,175,222)
1,379,664
Net increase in net assets
resulting from operations 2,600,824
7,213,042
Distributions to Shareholders:
From net investment income (524,821)
(865,105)
From net realized gain on investments
(5,593,496) (7,385,826)
Total distributions to shareholders
(6,118,317) (8,250,931)
From Capital Share Transactions:
Proceeds from sale of shares 14,667,822
23,758,769
Net asset value of shares issued in connection
with reinvestment of dividends and
distributions 5,824,403
7,479,697
Cost of shares repurchased
(43,894,423) (25,755,736)
Net increase (decrease) from
capital share transactions (23,402,198)
5,482,730
Total increase (decrease) in net assets
(26,919,691) 4,444,841
Net Assets:
Beginning of year 69,391,126
64,946,285
End of year 42,471,435 69,391,126
End of year undistributed
net investment income 8,793 21,353
Share Transactions:
Sale of shares 465,736 729,152
Shares issued in connection with reinvestment
of dividends and distributions 212,243
244,946
Shares repurchased (1,396,000)
(802,321)
Net increase (decrease) in shares (718,021)
171,777
Managers Capital Appreciation Fund
Managers Special Equity Fund
For the For the For the For the
year ended year ended
year ended year ended
December 31, 1999 December 31, 1998
December 31, 1999 December 31, 1998
(1,099,872) (590,885)
(4,841,730) (2,155,039)
42,947,204 19,561,648
174,421,927 (23,605,905)
65,219,481 11,585,959
356,613,714 31,926,270
107,066,813 30,556,722
526,193,911 6,165,326
(25,681,317) (10,197,107)
(46,045,625) (1,103,588)
(25,681,317) (10,197,107)
(46,045,625) (1,103,588)
141,945,105 110,123,436
1,339,252,873 962,148,890
24,514,976 9,382,893
40,517,245 933,968
(87,549,367) (125,534,506)
(1,276,707,583)
(727,912,988)
78,910,714 (6,028,177)
103,062,535 235,169,870
160,296,210 14,331,438
583,210,821 240,231,608
88,191,130 73,859,692
959,938,985 719,707,377
248,487,340 88,191,130
1,543,149,806 959,938,985
295,064 143,444
3,061,447 3,635,252
20,425,960 16,300,224
416,143 275,562
459,901 15,795
(2,022,232) (4,347,025)
(19,682,513) (12,403,122)
1,455,358 (436,211)
1,203,348 3,912,897
Managers Income Equity Fund
Financial Highlights
For a shar of capital stock outstanding
throughout each year
Year ended December 31,
1999 1998 1997 1996
1995
Net Asset Value,
Beginning of Year $30.67
$31.06 $30.49 $28.43
$24.90
Income from
Investment Operations:
Net investment income 0.30
0.41 0.67 0.76 0.87
Net realized and unrealized
gain on investments 0.91
3.10 7.27 3.97 7.47
Total from investment
operations 1.21 3.51 7.94
4.73 8.34
Less Distributions to
Shareholders from:
Net investment income (0.29)
(0.41) (0.69) (0.76)
(0.86)
Net realized gain on
investments (4.09) (3.49)
(6.68) (1.91) (3.95)
Total distributions to
shareholders (4.38)
(3.90) (7.37) (2.67)
(4.81)
Net Asset Value,
End of Year $27.50
$30.67 $31.06 $30.49
$28.43
Total Return 4.15%
11.77% 27.19% 17.08%
34.36%
Ratio of net expenses
to average net assets 1.35%
(a) 1.28% (a) 1.32% (a) 1.44% (a) 1.45%
Ratio of net investment income
to average net assets 0.92%
1.26% 1.97% 2.63% 2.85%
Portfolio turnover 94% 84%
96% 33% 36%
Net assets at end of year
(000's omitted) $42,471
$69,391 $64,946 $53,063
$37,807
(a) The Fund has entered into
arrangements with unaffiliated broker-
dealers who have paid a portion of the
Fund's expenses. In addition, the Fund has
received credits against its custodian
expense for uninvested overnight cash
balances. Absent these expense reductions,
the annualized ratio of expenses to average
net assets for the years ended December 31,
1999, 1998, 1997 and 1996 would have been
1.35%, 1.32%, 1.35% and 1.44%, respectively.
(See Note 1c of Notes to Financial
Statements).
Managers Capital Appreciation Fund
Financial Highlights
For a share of capital stock outstanding
throughout each year
Year ended December 31,
1999 1998 1997
1996 1995
Net Asset Value,
Beginning of Year $33.78
$24.24 $26.34
$27.14 $23.25
Income from
Investment Operations:
Net investment income (loss)
(0.27) (0.23)
(0.13) (a) 0.09 0.09
Net realized and unrealized
gain on investments 34.81
14.18 3.15 3.66
7.62
Total from investment
operations 34.54 13.95
3.02 3.75 7.71
Less Distributions to
Shareholders from:
Net investment income ---
--- ---
(0.10) (0.08)
Net realized gain on
investments (7.20)
(4.41) (5.12)
(4.45) (3.74)
Total distributions to
shareholders (7.20)
(4.41) (5.12)
(4.55) (3.82)
Net Asset Value,
End of Year $61.12
$33.78 $24.24
$26.34 $27.14
Total Return 103.02%
57.41% 12.74%
13.73% 33.39%
Ratio of net expenses
to average net assets 1.26%
(b) 1.29% (b) 1.26% (b)
1.33% (b) 1.36%
Ratio of net investment income
(loss) to average net assets
(0.86)% (0.80)%
(0.45)% 0.34% 0.31%
Portfolio turnover 200% 252%
235% 172% 134%
Net assets at end of year
(000's omitted) $248,487
$88,191 $73,860
$101,282 $83,353
(a) Calculated using the average shares
outstanding during the year.
(b) The Fund has entered into
arrangements with unaffiliated broker-dealers
who have paid a portion of the Fund's expenses.
In addition, the Fund has received credits
against its custodian expense for uninvested
overnight cash balances. Absent these expense
reductions, the annualized ratio of expenses to
average net assets for the years ended December
31, 1999, 1998, 1997 and 1996 would have been
1.30%, 1.36%, 1.32% and 1.38%, respectively.
(See Note 1c of Notes to Financial Statements).
Managers Special Equity Fund
Financial Highlights
For a share of capital stock outstanding
throughout each year
Year ended December 31,
1999 1998 1997
1996 1995
Net Asset Value,
Beginning of Year $61.23
$61.18 $50.95
$43.34 $36.79
Income from
Investment Operations:
Net investment income (loss)
(0.29) (0.14)
0.08 (0.00) (0.07)
(a)
Net realized and unrealized
gain on investments 33.30
0.26 12.29 10.68
12.28
Total from investment
operations 33.01 0.12
12.37 10.68 12.21
Less Distributions to
Shareholders from:
Net investment income -
- -- --- (0.07)
--- ---
Net realized gain on
investments (2.82)
(0.07) (2.07)
(3.07) (5.66)
Total distributions to
shareholders (2.82)
(0.07) (2.14)
(3.07) (5.66)
Net Asset Value,
End of Year $91.42
$61.23 $61.18
$50.95 $43.34
Total Return 54.11% 0.20%
24.45% 24.75% 33.94%
Ratio of net expenses
to average net assets 1.31% (b)
1.34% (b) 1.35% (b) 1.43%
1.44%
Ratio of net investment income
(loss) to average net assets (0.47)%
(0.26)% 0.17% (0.10)%
(0.16)%
Portfolio turnover 89% 64%
49% 56% 65%
Net assets at end of year
(000's omitted) $1,543,150
$959,939 $719,707
$271,433 $118,362
(a) Calculated using the average shares
outstanding during the year.
(b) The Fund has entered into
arrangements with unaffiliated broker-dealers who
have paid a portion of the Fund's expenses. In
addition, the Fund has received credits against
its custodian expense for uninvested overnight
cash balances. Absent these expense reductions,
the annualized ratio of expenses to average net
assets for the years ended December 31, 1999,
1998 and 1997 would have been 1.31%, 1.34% and
1.36%, respectively. (See Note 1c of Notes to
Financial Statements).
(1) Summary of Significant
Accounting Policies
The Managers Funds (the "Trust") is a no-load,
open-end, management investment company, organized
as a Massachusetts business trust, and registered
under the Investment Company Act of 1940, as
amended (the "1940 Act"). Currently the Trust is
comprised of 9 investment series. Included in
this report are Managers Income Equity Fund
("Income Equity"), Managers Capital Appreciation
Fund ("Capital Appreciation") and Managers Special
Equity Fund ("Special Equity"), collectively the
"Funds."
The Funds' financial statements are prepared in
accordance with accounting principles generally
accepted in the United States 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
Equity securities traded on a domestic or
international securities exchange are valued at
the last quoted sales price, or, lacking any
sales, at last quoted bid price. Over-the-counter
securities for which market quotations are readily available are valued at the
last quoted sales
price, or, lacking any sales, at the last quoted
bid price. Fixed-income securities are valued
based on valuations furnished by independent
pricing services that utilize matrix systems which
reflect such factors as security prices, yields,
maturities, and ratings, and are supplemented by
dealer and exchange quotations. Short-term
investments, having a remaining maturity of 60
days or less, are valued at amortized cost which
approximates market. Investments in other
regulated investment companies are valued at their
end of day net asset value per share. 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.
(b) Security Transactions
Security transactions are accounted for as of
trade date. Realized gains and losses on
securities sold are determined on the basis of
identified cost.
(c) Investment Income
and Expenses
Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign
securities where the ex-dividend date may have
passed are recorded as soon as the Trust is
informed of the ex-dividend date. Dividend income
on foreign securities is recorded net of
withholding tax. Interest income is recorded on
the accrual basis and includes amortization of
discounts and premiums when required for federal
income tax purposes. Non-cash dividends included
in dividend income, if any, are reported at the
fair market value of the securities received.
Other income and expenses are recorded on an
accrual basis. Expenses which cannot be directly
attributed to a particular fund are apportioned
among the funds in the Trust based upon their
average net assets.
The Funds each had certain portfolio trades
directed to various brokers who paid a portion of
such Fund's expenses. For the year ended December
31, 1999, the custody expenses for Capital
Appreciation and Special Equity were reduced by
$41,508 and $17,705, respectively, under these
arrangements.
In addition, 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, 1999, the
custody expenses for Income Equity, Capital
Appreciation and Special Equity were reduced by
$2,475, $6,237 and $19,594, respectively, under these arrangements.
(d) Dividends and Distributions
Dividends resulting from net investment income, if
any, normally will be declared and paid annually
for Capital Appreciation and Special Equity. In
1999, dividends resulting from net investment
income were declared and paid monthly for Income
Equity and effective January 1, 2000, such
dividends, if any, will be declared and paid
quarterly. Distributions of capital gains, if
any, will be made on an annual basis and when
required for federal excise tax purposes. Income
and capital gain distributions are determined in
accordance with Federal income tax regulations
which may differ from generally accepted
accounting principles. These differences are
primarily due to differing treatments for losses
deferred due to wash sales and equalization
accounting for tax purposes. Permanent book and
tax basis differences, if any, relating to
shareholder distributions will result in
reclassifications to paid-in capital.
(e) Federal Taxes
Each Fund intends to comply with the requirements
under Subchapter M of the Internal Revenue Code of
1986, as amended, and to distribute substantially
all of its taxable income and gains to its
shareholders and to meet certain diversification
and income requirements with respect to investment
companies. Therefore, no provision for federal
income or excise tax is included in the
accompanying financial statements.
(f) Capital Stock
The Trust's Declaration of Trust authorizes for
each series the issuance of an unlimited number of
shares of beneficial interest, without par value.
Each Fund records sales and repurchases of its
capital stock on the trade date. Dividends and
distributions to shareholders are recorded on the
ex-dividend date.
At December 31, 1999, certain unaffiliated
shareholders, specifically omnibus accounts,
individually held greater than 10% of the
outstanding shares of the following Funds: Income
Equity- 1 owns 24%; Capital Appreciation- 1 owns
27%; and Special Equity- 1 owns 39%.
(g) Repurchase Agreements
Each Fund may enter into repurchase agreements
provided that the value of the underlying
collateral, including accrued interest, will be
equal to or exceed the value of the repurchase
agreement during the term of the agreement. The
underlying collateral for all repurchase
agreements is held in safekeeping by the Fund's
custodian or at the Federal Reserve Bank.
If the seller defaults and the value of the
collateral declines, or if bankruptcy proceedings
commence with respect to the seller of the
security, realization of the collateral by the
Fund may be delayed or limited.
(h) Foreign Currency
Translation
The books and records of the Funds are maintained
in U.S. dollars. The value of investments, assets
and liabilities denominated in currencies other
than U.S. dollars are translated into U.S. dollars
based upon current foreign exchange rates.
Purchases and sales of foreign investments and
income and expenses are converted into U.S.
dollars based on currency exchange rates
prevailing on the respective dates of such
transactions. Net realized and unrealized gain
(loss) on foreign currency transactions represent:
(1) foreign exchange gains and losses from the
sale and holdings of foreign currencies; (2) gains
and losses between trade date and settlement date
on investment securities transactions and forward
foreign currency exchange contracts; and (3) gains
and losses from the difference between amounts of
interest and dividends recorded and the amounts
actually received.
In addition, the Funds do not isolate that portion
of the results of operation resulting from changes
in exchange rates from the fluctuations resulting
from changes in market prices of securities held.
Such fluctuations are included with the net
realized and unrealized gain or loss on
investments.
(2) Agreements and Trans-
actions with Affiliates
Effective April 1, 1999, the Trust entered into a
Fund Management Agreement under which The Managers
Funds LLC (the "Investment Manager"), formerly The
Managers Funds, L.P. and now a subsidiary of
Affiliated Managers Group, Inc. ("AMG"), provides
or oversees investment advisory and management
services to the Funds. The Investment Manager
selects portfolio managers for each Fund (subject
to Trustee approval), allocates assets among
portfolio managers and monitors the portfolio
managers' investment programs and results. Each
Fund's investment portfolio is managed by
portfolio managers who serve pursuant to Portfolio
Management Agreements with the Investment Manager
and the Fund. Certain Trustees and Officers of the
Funds are Officers of the Investment Manager and
of AMG.
Investment advisory and management fees are paid
directly by each Fund to The Managers Funds LLC
based on 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, 1999, were as follows:
Investment Advisory
Fund and Management Fee
Income Equity 0.75%
Capital Appreciation 0.80%
Special Equity 0.90%
Effective April 1, 1999, the Trust entered into a
Administration and Shareholder Servicing Agreement
under which The Managers Funds LLC 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.
During the year ended December 31, 1999, each of
the Funds paid a fee to the Administrator at the
rate of 0.25% per annum of the Fund's average
daily net assets.
Effective April 1, 1999, the aggregate annual fee
paid to each outside Trustee for serving as a
Trustee of the Trust is $16,000. In addition, the
in-person and telephonic meeting fees the Trustees
receive are $1,000 and $500 per meeting,
respectively. The Trustee fee expense shown in the
financial statements represents each Fund's
allocated portion of the total fees and expenses
paid by the Trust.
(3) Purchases and Sales
of Securities
Purchases and sales of securities, excluding
short-term securities, for the year ended December
31, 1999, were as follows:
Fund Purchases Sales
Income Equity $ 52,236,260 $ 82,408,504
Capital Appreciation 298,519,748 252,331,934
Special Equity 869,472,910 892,594,597
There were no purchases or sales of U.S.
Government securities.
(4) Portfolio Securities Loaned
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 are accepted in cash and/or government
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 invested
temporarily in money market funds by the
custodian. Earnings of such temporary cash
investments are divided between the custodian, as
a fee for its services under the program, and the
Fund loaning the security, according to agreed-
upon rates.
(5) Tax Information
Pursuant to Section 852 of the Internal Revenue
Code, Income Equity, Capital Appreciation and
Special Equity designated $5,144,212, $7,671,479
and $30,541,678, respectively, as 20% capital gain
distributions for the year ended December 31,
1999.
To the Trustees of The Managers Funds and the Shareholders of
Managers Income Equity Fund,
Managers Capital Appreciation Fund
and Managers Special Equity 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 respects, the financial
position of Managers Income Equity Fund, Managers
Capital Appreciation Fund and Managers Special
Equity Fund (three of the series constituting The
Managers Funds, hereafter referred to as the
"Funds"), at December 31, 1999, and the results
of their operations, the changes in their net
assets and the financial highlights for the
periods indicated, in conformity with accounting
principles generally accepted in the United
States. These financial 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 auditing
standards generally accepted in the United
States, 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, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2000
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., LLC
Roxbury Capital Management, LLC
SPECIAL EQUITY FUND
Liberty Investment Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management, LLC
INTERNATIONAL EQUITY
FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management Co.
EMERGING MARKETS
EQUITY FUND
Rexiter Capital Management Limited
INCOME FUNDS:
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MONEY MARKET FUND
J.P. Morgan Investment Management Inc.
SHORT AND INTERMEDIATE
BOND FUND
Standish, Ayer & Wood, Inc.
BOND FUND
Loomis, Sayles & Company, L.P.
GLOBAL BOND FUND
Rogge Global Partners
www.managersfunds.com
