The Managers Funds
Semi-Annual Report
September 30, 2000
U.S. Stock Market Plus Fund
Short Duration Government Fund
Intermediate Duration Government Fund
We pick the talent.
You reap the results.
Letter to Shareholders 1
The Managers Funds Performance 2
Complete performance table for all of
The Managers Funds as of September 30, 2000
Schedules of Portfolio Investments 3
Detailed portfolio listings by security
type, as valued at September 30, 2000
Financial Statements
Statements of Assets & Liabilities 8
Fund balance sheets, Net Asset Value (NAV)
per share computation and cumulative undistributed amounts
Statements of Operations 9
Detail of sources of income,
fund expenses, and realized and unrealized
gains (losses) during the period
Statements of Changes in Net Assets 10
Detail of changes in fund assets and distributions
to shareholders for the past two periods
Financial Highlights 12
Historical net asset values,
distributions, total returns, expense ratios,
turnover ratios and total net assets for each fund
Notes to Financial Statements 15
Accounting and distribution policies,
details of agreements and transactions with
fund management and description of certain investment risks
Supplemental Data ..................................23
Results from the Special Meeting of Shareholders held on
July 21, 2000
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.
Founded in 1983, The Managers Funds offers
individual and institutional investors the experience
and discipline of some of the world's most highly
regarded investment professionals.
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,
As always, should you have any questions on this Semi-Annual
Report, please feel free to contact us at 1-800-835-3879. We
thank you for your continued investment in The
Managers Funds.
Sincerely,
Peter M. Lebovitz
President
The Managers Funds
Thomas G. Hoffman, CFA
Director of Research
The Managers Funds LLC
1
The Managers Funds Performance (unaudited)
All periods ended September 30, 2000
Average Annual Total Returns (a)
Equity Funds: Year to Date 1 Year 3 Years
5 Years 10 Years Since Inception
Inception Date Morningstar Rating (b)
Income Equity 4.13% 0.00% 10.26% 0.00%
7.12% 0.00% 14.10% 0.00% 15.38% 0.00% 14.02%
Oct. '84 PPP
Capital Appreciation 2.44% 0.00% 62.28% 0.00% 46.63%
0.00% 33.91% 0.00% 26.18% 0.00% 21.05% Jun. '84
PPPPP
Small Company (c) 1.10% - -
- - 0 1.10% Jun. '00 N/A
Special Equity 10.32% 0.00% 49.93%
0.00% 19.00% 0.00% 22.68% 0.00% 22.93% 0.00%
17.84% Jun. '84 PPPP
International Equity (9.40)% 0.00% 2.69%
0.00% 7.24% 0.00% 10.61% 0.00% 12.95% 0.00%
13.25% Dec. '85 PPPP
Emerging Markets Equity (19.35)%
15.87% - - - 6.69%
Feb. '98 N/A
U.S. Stock Market Plus (3.17)% 0.00%
11.38% 0.00% 14.77% 0.00% 20.61% 0.00% -
0.00% 19.14% Jun. '92 PPPP
Income Funds:
Bond 7.53% 0.00% 7.25% 0.00% 5.16% 0.00% 7.11% 0.00% 9.28% 0.00%
10.27% Jun. '84 PPPP
Global Bond (6.48)% 0.00% (8.57)% 0.00% 0.11% 0.00% 1.81%
0.00% - 0.00% 3.25% Mar. '94 P
Intermediate Duration
Government 5.68% 0.00% 6.15% 0.00% 5.24% 0.00% 6.08% 0.00%
- 0.00% 7.38% Mar. '92 PPPP
Short & Intermediate Bond 4.40% 0.00% 4.90%
0.00% 4.43% 0.00% 5.06% 0.00% 6.32% 0.00% 7.70% Jun. '84 PPPP
Short Duration Government 3.33% 0.00% 4.92% 0.00% 4.53% 0.00%
5.19% 0.00% - 0.00% 5.22% Mar. '92 PPPPP
Money Market 4.48% 0.00% 5.85% 0.00% 5.33%
0.00% 5.35% 0.00% 4.68% 0.00% 5.83% Jun. '84 N/A
Past performance is not a guarantee of future results. The
investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be
more or less than the original cost. An investment in the Money
Market Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although
the Money Market Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by
investing in the Fund. Additional risks are associated with
investing in international and emerging markets, and such
securities may be considered speculative. There are also risks
associated with investing in small-cap companies, such as
increased volatility. For a Prospectus including fees and
expenses, please visit our website at www.managersfunds.com, or
call The Managers Funds LLC at (800) 835-3879 or your investment
adviser. Read the prospectus carefully before you invest. The
Managers Funds are distributed by The Managers Funds LLC, a NASD
member.
(a) 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 offsets 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. Year to date total returns
are based on calendar year.
(b) Morningstar proprietary ratings reflect historical risk-
adjusted performance as of 09/30/00 and are subject to change
every month. The ratings are calculated from the Funds' three-,
five- and ten-year average annual returns (if applicable) in
excess of 90-day Treasury bill returns with appropriate fee
adjustments, 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, were rated against
3,876, 2,419 and 796 equity funds, the International Equity Fund
was rated against 1,175, 730 and 146 international equity funds,
and each of the Income Funds were rated against 1,741, 1,300 and
386 taxable fixed-income funds. The top ten percent of the funds
in an investment class receive five stars, the next 22.5% receive
4 stars, the next 35% receive 3 stars, the next 22.5% receive 2
stars and the bottom 10% receive 1 star.
(c) Small Company's returns are since inception (June 19,
2000).
U.S. Government and Agency Obligations - 117.9%1
Federal Home Loan Mortgage Corporation - 27.2%
FHLMC Gold, 6.000%, 01/01/29 17,800,560 16,683,397
FHLMC Gold 30 Year, 7.500%, TBA 28,300,000 28,246,938
FHLMC, 9.500%, 07/01/02 12,516 12,603
Total Federal Home Loan Mortgage Corporation 44,942,938
Federal National Mortgage Association - 45.8%
FNMA, 6.000%, 06/01/14 through 11/01/14 11,427,545
11,001,869
FNMA, 6.500%, 03/01/29 3,461,395 3,325,812
FNMA, 7.000%, 02/01/29 through 11/01/28 5,869,861
5,764,672
FNMA, 7.250%, 01/15/10 7,100,000 7,321,783
FNMA, 7.500%, 03/01/30 through 09/01/30 22,624,618
22,589,149
FNMA 30 Year, 7.500%, TBA 5,100,000 5,085,659
FNMA, 7.580%, 03/01/30 232,303 238,030
FNMA 30 Year, 8.000%, TBA 20,000,000 20,262,500
FNMA, 12.500%, 09/01/12 44,831 50,052
Total Federal National Mortgage Association 75,639,526
Government National Mortgage Association - 44.9%
GNMA, 5.000%, 01/20/30 997,273 975,144
GNMA, 6.000%, 04/20/29 through 06/20/29 15,601,347
15,371,937
GNMA, 6.375%, 05/20/16 through 06/20/21 2,306,804 2,322,988
GNMA, 6.500%, 01/15/29 through 11/15/28 16,904,341 16,294,866
GNMA, 6.750%, 09/20/21 52,769 53,279
GNMA, 7.000%, 03/15/28 4,148,897 4,090,107
GNMA, 7.125%, 12/20/17 1,787,179 1,805,891
GNMA, 7.375%, 01/20/18 through 03/20/28 3,774,494 3,801,690
GNMA 30 Year, 7.500%, TBA 20,500,000 20,557,646
GNMA 30 Year, 8.000%, TBA 8,800,000 8,956,746
Total Government National Mortgage Association 74,230,294
Total U.S. Government and Agency Obligations
(cost $195,737,508) 194,812,758
Corporate Bonds-Asset Backed - 13.6%
First Union-Lehman Brothers-Bank of America Commercial
Mortgage Trust, 6.560%, 11/18/08 5,000,000 4,860,196
GMAC Commercial Mortgage Securities, 6.420%, 08/15/08 5,500,000
5,232,920
Nomura Asset Securities Corp., Series 1998-D6, Class A1B,
6.590%, 03/17/28 4,000,000 3,882,672
Spinnaker IA A2, 7.630%, 05/01/01 8,500,000 8,478,750
Total Corporate Bonds (cost $23,175,466) 22,454,538
Option Contracts on Three-Month LIBOR
Interest Rate Swap Agreements - 0.7%
Option to enter into a pay-fixed 6.500% interest rate Swap with
Deutsche Bank AG beginning 09/29/03 and expiring 09/29/08
30,000,000 969,815
The accompanying notes are an integral part of these financial
statements.
3
Option to enter into a receive-fixed 5.250% interest rate Swap
With Deutsche Bank AG beginning 09/29/03 and expiring 09/29/08
30,000,000 132,709
Total Interest Rate Swap Agreements (cost $870,000) 1,102,524
S&P 500 Swaps - (0.1)%
Morgan Guaranty Trust Co. Swap, receive S&P 500 Index,
pay 3-Month LIBOR-14 basis points, expires 03/16/01 45,903,356
(247,958)
Preferred Stock - 5.3%
Home Ownership Funding Corporation2 (cost $9,515,385) 11,700
8,822,519
Short-Term Investments - 13.0%
Other Investment Companies - 8.0%3
AIM Liquid Assets Portfolio, 6.590% 1,016,063 1,016,063
Calvert Cash Reserves Institutional Prime Fund, 6.530%
5,080,421 5,080,421
JPM Prime Money Market Fund, 6.500% 7,135,266 7,135,266
Total Other Investment Companies 13,231,750
Federal National Mortgage Association
Discount Notes - 5.0%
0.000%, 04/23/01 through 07/16/014,5 8,640,000 8,288,568
Total Short-Term Investments (cost $21,520,318) 21,520,318
Total Investments - 150.4% (cost $250,818,677) 248,464,699
Other Assets, less Liabilities - (50.4)% (83,293,285)
Net Assets - 100.0% 165,171,414
U.S. Government and Agency Obligations - 148.3%1
Federal Home Loan Mortgage Corporation - 49.2%
FHLMC Gold, 6.500%, 07/01/29 927,908 892,341
FHLMC Gold, 7.000%, 06/01/30 1,191,574 1,168,660
FHLMC Gold 30 Year, 7.000%, TBA 7,100,000 6,955,785
FHLMC Gold 30 Year, 7.500%, TBA 4,000,000 3,992,500
FHLMC Gold, 8.500%, 05/01/25 through 12/01/25 1,720,282
1,770,293
Total Federal Home Loan Mortgage Corporation 14,779,579
Federal National Mortgage Association - 34.1%
FNMA, 6.010%, 12/01/08 4,789,100 4,544,589
FNMA, 6.040%, 10/01/08 1,330,068 1,268,316
FNMA 30 Year, 6.500%, TBA 1,000,000 960,000
FNMA, 7.250%, 01/15/10 2,700,000 2,784,340
FNMA 30 Year, 7.500%, TBA 500,000 498,594
FNMA IO Strip, 9.000%, 12/15/16 626,076 182,616
Total Federal National Mortgage Association 10,238,455
Government National Mortgage Association - 65.0%
GNMA, 6.375%, 04/20/24 through 06/20/22 685,628 690,588
GNMA, 6.750%, 07/20/17 through 07/20/18 3,139,414 3,167,885
GNMA, 7.000%, 01/15/28 through 10/15/28 11,485,961 11,323,660
GNMA, 7.375%, 03/20/21 594,269 598,756
GNMA, 7.500%, 09/20/22 457,288 461,767
GNMA 30 Year, 8.000%, TBA 2,900,000 2,951,655
GNMA, 9.500%, 07/15/09 through 12/15/17 293,108 308,718
Total Government National Mortgage Association 19,503,029
Total U.S. Government and Agency Obligations
(cost $44,878,194) 44,521,063
Corporate Bonds-Asset Backed - 9.5%
GMAC Commercial Mortgage Securities, 6.420%, 08/15/08
(cost $2,856,920) 3,000,000 2,854,320
Interest Rate Cap Contracts - 0.4%
Salomon Swapco, Expires 04/23/03, Strike Rate 7.500%
(cost $2,245,445) 50,000,000 112,500
Preferred Stock - 8.3%
Home Ownership Funding Corporation2 (cost $2,691,383) 3,300
2,488,403
Short-Term Investments - 0.9%4,5
FNMA Discount Notes, 0.000%, 07/16/01 through 08/23/01 225,000
212,980
FHLMC Discount Notes, 0.000%, 09/13/01 50,000 47,045
Total Short-Term Investments (cost $259,247) 260,025
Total Investments - 167.4% (cost $52,931,189) 50,236,311
Other Assets, less Liabilities - (67.4)% (20,221,122)
Net Assets - 100.0% 30,015,189
U.S. Government and Agency Obligations - 119.2%1
Federal Home Loan Mortgage Corporation - 39.3%
FHLMC Gold, 6.000%, 01/01/29 4,580,853 4,293,359
FHLMC 30 Year, 6.500%, TBA 2,000,000 1,921,876
FHLMC 15 Year, 7.000%, TBA 2,000,000 1,990,000
FHLMC Gold, 7.000%, 07/01/30 1,397,815 1,370,935
FHLMC Gold 30 Year, 7.500%, TBA 1,200,000 1,197,750
Total Federal Home Loan Mortgage Corporation 10,773,920
Federal National Mortgage Association - 41.3%
FNMA, 6.000%, 01/01/14 1,638,386 1,577,913
FNMA, 6.500%, 11/01/28 2,429,707 2,334,778
FNMA IO Strip, 6.500%, 04/01/29 316,696 97,700
FNMA 30 Year, 6.500%, TBA 500,000 480,000
FNMA, 7.250%, 01/15/10 1,000,000 1,031,237
FNMA 30 Year, 7.500%, TBA 5,800,000 5,787,310
Total Federal National Mortgage Association 11,308,938
Government National Mortgage Association - 38.6%
GNMA, 6.375%, 05/20/21 through 06/20/16 575,381 579,350
GNMA, 6.750%, 08/20/17 through 08/20/18 756,973 763,835
GNMA, 7.000%, 01/15/28 through 11/15/28 5,161,547 5,088,407
GNMA, 7.125%, 11/20/17 through 12/20/17 312,095 314,178
GNMA, 7.375%, 03/20/16 246,530 248,243
GNMA, 7.500%, 09/15/28 3,565,538 3,579,871
Total Government National Mortgage Association 10,573,884
Total U.S. Government and Agency Obligations
(cost $33,079,650) 32,656,742
Corporate Bonds-Asset Backed - 14.1%
GMAC Commercial Mortgage Securities, 6.420%, 08/15/08 2,000,000
1,902,880
Nomura Asset Securities Corp., Series 1998-D6,
Class A1B, 6.590%, 03/17/28 2,000,000 1,941,336
Total Corporate Bonds (cost $4,043,414) 3,844,216
Short-Term Investments - 3.6%
Other Investment Companies - 3.1%
JPM Prime Money Market Fund, 6.500%3 856,899 856,899
Federal National Mortgage Association
Discount Notes - 0.5%
0.000%, 07/16/014,5 140,000 132,877
Total Short-Term Investments (cost $989,776) 989,776
Total Investments - 136.9% (cost $38,112,840) 37,490,734
Other Assets, less Liabilities - (36.9)% (10,095,872)
Net Assets - 100.0% 27,394,862
The following footnotes and abbreviations are to be read in
conjunction with the Statements of Portfolio Investments on pages
3 through 6:
At September 30, 2000, the cost of securities for Federal income
tax purposes and the gross aggregate unrealized appreciation
and/or depreciation based on tax cost were approximately as
follows:
Fund Cost Appreciation Depreciation Net
U.S. Stock Market Plus $250,818,677 $1,734,202 $(4,088,180)
$(2,353,978)
Short Duration Government 52,931,189 341,212 (3,036,090)
(2,694,878)
Intermediate Duration Government 38,112,840 111,110 (733,216)
(622,106)
1 Mortgage-backed obligations are subject to principal
paydowns as a result of prepayments or refinancings of the
underlying mortgage instruments. As a result, the average life
may be substantially less than the original maturity.
Adjustable-rate mortgages have coupon rates that adjust
periodically. The interest rate shown is the rate in effect at
September 30, 2000. The adjusted rate is determined by adding a
spread to a specified index.
2 Security is exempt from registration under Rule 144A of the
Securities Act of 1933, as amended. These securities may be
resold in transactions exempt from registration, normally to
qualified buyers. Such securities represented 5.3% of net assets
for the U.S. Stock Market Plus Fund and 8.3% of net assets for
the Short Duration Government Fund.
3 Yields shown for each investment company represents the
September 30, 2000, seven-day average yield, which refers to the
sum of the previous seven days' dividends paid, expressed as an
annual percentage.
4 Security is held as collateral for futures transactions by
J.P. Morgan Investment Management Inc.
5 Zero-coupon security.
Investments Abbreviations:
FHLMC: Federal Home Loan Mortgage Corporation
FNMA: Federal National Mortgage Association
GMAC: General Motors Acceptance Corporation
GNMA: Government National Mortgage Association
Managers Managers Managers
U.S. Stock Short Duration Intermediate Duration
Market Plus Government Government
Fund Fund Fund
Assets:
Investments at value* $248,464,699
$50,236,311 $37,490,734
Cash 400,279 858,616 21,804
Receivable for investments sold 81,422,625 25,266,845
10,199,348
Receivable for Fund shares sold 115,435 15,701
193,041
Dividends, interest and other receivables 1,558,260
369,037 185,684
Prepaid expenses 6,912 2,780
-
Total assets 331,968,210 76,749,290
48,090,611
Liabilities:
Payable for Fund shares repurchased 249,043 170 33,393
Payable for investments purchased 144,755,696
30,822,447 15,695,686
Variation margin on futures contracts 1,758,094
23,229 4,375
Payable for securities sold short 19,836,727 9,850,000
4,925,000
Interest payable-swap positions 56,604 - -
Dividends payable to shareholders - -
9,684
Reverse repurchase agreement
(proceeds $6,012,000) - 6,013,117 -
Accrued expenses:
Investment advisory and management fee 98,921 17,464
15,549
Other 41,711 7,674 12,062
Total liabilities 166,796,796 46,734,101 20,695,749
Net Assets $165,171,414 $30,015,189 $27,394,862
Shares outstanding 11,712,399 3,108,960 2,852,606
Net asset value, offering and redemption
price per share $14.10 $9.65 $9.60
Net Assets Represent:
Paid-in capital $180,941,836 $36,920,283 $30,002,015
Undistributed (overdistributed)
net investment income 1,632,335 19,030 (130,789)
Accumulated net realized loss from
investments, futures and option contracts (10,364,593)
(3,967,532) (1,800,979)
Net unrealized depreciation of investments,
futures and option contracts (7,038,164) (2,956,592) (675,385)
Net Assets $165,171,414 $30,015,189 $27,394,862
*Investments at cost $250,818,677 $52,931,189
$38,112,840
Managers Managers Managers
U.S. Stock Short Duration Intermediate Duration
Market Plus Government Government
Fund Fund Fund
Investment Income:
Interest income $4,534,863 $1,377,119 $956,013
Dividend income 506,912 92,678 -
Securities lending fees 928,454 10,097 5,278
Total investment income 5,970,229 1,479,894 961,291
Expenses:
Investment advisory and management fees 634,934 115,766
98,860
Transfer agent 121,645 11,082 11,083
Custodian 43,268 20,987 18,582
Trustees 41,041 28,557 18,805
Professional fees 29,654 8,228 8,732
Registration 4,280 1,694 1,428
Insurance 6,692 4,531 2,355
Miscellaneous 16,987 4,334 2,620
Total expenses before reimbursements 898,501 195,179 162,465
Expense reimbursement (100,298) (66,182) (38,183)
Net expenses 798,203 128,997 124,282
Net investment income 5,172,026 1,350,897 837,009
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investments
and option contracts 669,309 (57,058) 67,047
Net realized gain (loss) on futures contracts 1,258,981
(714,683) (503,745)
Net unrealized appreciation (depreciation)
of investments and option contracts 2,849,106
(713,672) 846,203
Net unrealized appreciation (depreciation)
of futures contracts (16,494,532) 110,960 266,787
Net realized and unrealized gain (loss)
on investments (11,717,136) (1,374,453) 676,292
Net Increase (Decrease) in Net Assets
Resulting from Operations $(6,545,110) $(23,556)
$1,513,301
Managers
U.S. Stock Market Plus Fund
September 30 March 31
Increase (Decrease) in Net Assets
From Operations:
Net investment income $5,172,026 $11,417,703
Net realized gain (loss) on investments 1,928,290 9,813,534
Net unrealized appreciation (depreciation)
of investments (13,645,426) 5,540,085
Net increase (decrease) in net assets
resulting from operations (6,545,110) 26,771,322
Distributions to Shareholders:
From net investment income (3,552,090) (12,518,994)
In excess of net investment income - -
From net realized gain on investments (12,657,330) (24,674,903)
Total distributions to shareholders (16,209,420) (37,193,897)
From Capital Share Transactions:
Proceeds from sale of shares 22,847,928 96,921,050
Net asset value of shares issued in connection
with reinvestment of dividends and distributions 15,609,309
36,203,243
Cost of shares repurchased (41,906,457) (116,910,676)
Net increase (decrease) from
capital share transactions (3,449,219) 16,213,617
Total increase (decrease) in net assets (26,203,749) 5,791,042
Net Assets:
Beginning of period 191,375,163 185,584,121
End of period $165,171,414 $191,375,163
End of period undistributed
(overdistributed) net investment income $1,632,335 $12,399
Share Transactions:
Sale of shares 1,516,908 5,994,091
Shares issued in connection with reinvestment
of dividends and distributions 1,075,363 2,304,861
Shares repurchased (2,823,875) (7,413,923)
Net increase (decrease) in shares (231,604) 885,029
Managers Managers
Short Duration Government Fund
Intermediate Duration Government Fund
September 30 March 31 September 30 March 31
$1,350,897 $3,196,619 $837,009 $2,764,180
(771,741) (1,567,240) (436,698) (1,052,626)
(602,712) 77,849 1,112,990 (1,641,380)
(23,556) 1,707,228 1,513,301 70,174
(947,433) (3,117,768) (828,177) (2,764,180)
- - - (5,173)
- - - (105,706)
(947,433) (3,117,768) (828,177) (2,875,059)
5,089,009 45,705,401 3,988,608 12,864,608
831,809 2,856,393 641,035 2,713,480
(10,474,857) (72,418,486) (9,058,508) (36,760,396)
(4,554,039) (23,856,692) (4,428,866) (21,182,308)
(5,525,028) (25,267,232) (3,743,742) (23,987,193)
35,540,217 60,807,449 31,138,604 55,125,797
$30,015,189 $35,540,217 $27,394,862 $31,138,604
$19,030 $(384,434) $(130,789) $(139,621)
529,735 4,672,634 422,036 1,338,329
86,785 292,708 67,925 283,573
(1,195,577) (7,397,351) (961,114 (3,858,008)
(579,057) (2,432,009) (471,153) (2,236,106)
Managers U.S. Stock Market Plus Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
Sept. 30, Fiscal Year Ended March 31,
2000 (a) 2000 1999 1998 1997 1996
Net Asset Value,
Beginning of Period $16.02 $16.78 $16.86 $12.56 $12.27 $10.84
Income from
Investment Operations:
Net investment income 0.91 0.88 0.69 0.59 0.59 0.61
Net realized and unrealized
gain (loss) on investments (1.48) 1.38 1.76 4.94 1.82 2.77
Total from investment
operations (0.57) 2.26 2.45 5.53 2.41 3.38
Less Distributions to
Shareholders from:
Net investment income (0.77) (0.98) (0.62) (0.59) (0.59) (0.58)
Net realized gain on
investments (0.58) (2.04) (1.91) (0.64) (1.53) (1.37)
Total distributions to
Shareholders (1.35) (3.02) (2.53) (1.23) (2.12) (1.95)
Net Asset Value,
End of Period $14.10 $16.02 $16.78 $16.86 $12.56 $12.27
Total Return (3.62)%(b) 14.91% 17.17% 45.71%
21.41% 32.30%
Ratio of net expenses
to average net assets (c) 0.88%(d) 0.88% 0.88% 0.88% 0.88% 0.90%
Ratio of net investment income
to average net assets 5.70%(d) 5.47% 4.62% 4.79% 5.30% 5.53%
Portfolio turnover 250%(b) 442% 527% 424% 182% 107%
Net assets at end of period
(000's omitted) $165,171 $185,584 $136,667 $13,507 $4,767
(a) For the six months ended September 30, 2000 (unaudited).
(b) Not annualized.
(c) Absent the expense reimbursements, the annualized
ratio of expenses to average net assets for the six months ended
September 30, 2000, and the fiscal years ended March 31, 2000,
1999, 1998, 1997 and 1996 would have been 0.99%, 1.01%, 1.04%,
1.23%, 2.60% and 4.58%, respectively. (See Note 1c of Notes to
Financial Statements.)
(d) Annualized.
Managers Short Duration Government Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
Sept. 30, Fiscal Year Ended March 31,
2000 (a)2000 1999 1998 1997 1996
Net Asset Value,
Beginning of Period $9.64 $9.94 $9.92 $9.83 $9.74 $9.90
Income from
Investment Operations:
Net investment income 0.39 0.54 0.45 0.48 0.48 0.62
Net realized and unrealized
gain (loss) on investments (0.10) (0.27) 0.02 0.12 0.14 (0.15)
Total from investment
operations 0.29 0.27 0.47 0.60 0.62 0.47
Less Distributions to Shareholders from:
Net investment income (0.28) (0.57) (0.45) (0.51) (0.48) (0.62)
In excess of net investment
income - - - - (0.05) (0.01)
Total distributions to
Shareholders (0.28) (0.57) (0.45) (0.51) (0.53) (0.63)
Net Asset Value,
End of Period $9.65 $9.64 $9.94 $9.92 $9.83 $9.74
Total Return 3.12%(b) 2.75% 4.83% 6.24% 6.57% 4.95%
Ratio of net expenses
to average net assets (c)0.78%(d) 0.78% 0.78% 0.78% 0.78% 0.78%
Ratio of net investment income
to average net assets 8.17%(d) 6.01% 4.78% 5.28% 5.04% 6.29%
Portfolio turnover 416%(b) 268% 298% 626% 556% 225%
Net assets at end of period
(000's omitted) $30,015 $35,540 $60,807 $78,428 $118,989 $221,825
(a)For the six months ended September 30, 2000 (unaudited).
(b) Not annualized.
(c) Absent the expense reimbursements, the annualized ratio of
expenses to average net assets for the six months ended September
30, 2000, and the fiscal years ended March 31, 2000, 1999, 1998,
1997 and 1996 would have been 1.18%, 1.07%, 1.00%, 1.00%, 0.93%
and 0.93%, respectively. (See Note 1c of Notes to Financial
Statements.)
(d) Annualized.
Managers Intermediate Duration Government Fund
Financial Highlights
For a share of capital stock outstanding throughout each period
Sept. 30, Fiscal Year Ended March 31,
2000 (a) 2000 1999 1998 1997 1996
Net Asset Value,
Beginning of Period $9.37 $9.91 $10.00 $9.73 $10.01 $9.83
Income from
Investment Operations:
Net investment income 0.28 0.53 0.53 0.59 0.60 0.66
Net realized and unrealized
gain (loss) on investments 0.23 (0.50) 0.03 0.42 (0.02)0.28
Total from investment
Operations 0.51 0.03 0.56 1.01 0.58 0.94
Less Distributions to
Shareholders from:
Net investment income (0.28) (0.53) (0.52) (0.56) (0.61) (0.66)
In excess of net investment
income - (0.02) - - - -
Net realized gain
on investments - (0.02) (0.13) (0.18) (0.25) (0.10)
Total distributions to
Shareholders (0.28) (0.57) (0.65) (0.74) (0.86) (0.76)
Net Asset Value,
End of Period $9.60 $9.37 $9.91 $10.00 $9.73 $10.01
Total Return 0.51%(b) 0.40% 5.73% 10.65%
5.92% 9.69%
Ratio of net expenses
to average net assets (c)0.88%(d)0.88% 0.88% 0.88% 0.88%0.90%
Ratio of net investment income
to average net assets 5.93%(d) 5.72% 5.25% 5.61% 6.19% 6.49%
Portfolio turnover 276%(b) 455% 423% 583% 409% 193%
Net assets at end of period
(000's omitted) $27,395 $31,139 $55,126 $38,642 $37,736 $36,447
(a) For the six months ended September 30, 2000 (unaudited).
(b) Not annualized.
(c) Absent the expense reimbursements, the annualized ratio of
expenses to average net assets for the six months ended September
30, 2000, and the fiscal years ended March 31, 2000, 1999, 1998,
1997 and 1996 would have been 1.15%, 1.06%, 1.06%, 1.13%, 1.16%
and 1.14%, respectively. (See Note 1c of Notes to Financial
Statements.)
(d) Annualized.
(1) Summary of Significant Accounting Policies
Managers Trust I ("Trust I"), formerly Smith Breeden Trust, and
Managers Trust II ("Trust II"), formerly Smith Breeden Series
Fund, (collectively, the "Trusts") are no-load, open-end,
investment companies each organized as a Massachusetts business
trust and registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). Currently Trust I is comprised of
Managers U.S. Stock Market Plus Fund ("Stock Market Plus"),
formerly Smith Breeden U.S. Equity Market Plus(r) Fund. Trust II
currently offers shares in two series: Managers Short Duration
Government Fund ("Short Duration"), formerly Smith Breeden Short
Duration U.S. Government Fund, and Managers Intermediate Duration
Government Fund ("Intermediate Duration"), formerly Smith Breeden
Intermediate Duration U.S. Government Fund.
The financial statements of Stock Market Plus, Short Duration and
Intermediate Duration (collectively, the "Funds") 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 (including
derivatives) 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 of
the Trusts.
Investments in certain mortgage-backed, stripped mortgage-backed,
preferred stocks, convertible securities, derivatives and other
debt securities not traded on an organized securities market, are
valued on the basis of valuations provided by dealers or by a
pricing service which uses information with respect to
transactions in such securities, various relationships between
securities and yield to maturity in determining value.
(b) Security Transactions
Security transactions are accounted for as of trade date.
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. Interest
income is determined on the basis of interest accrued. Discounts
and premiums are amortized using the effective interest method
when required for Federal income tax purposes. 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 that
cannot be directly attributed to a particular Fund are
apportioned among the Funds, and in some cases other Funds in the
family, based upon their relative net assets or number of
shareholders.
The Managers Funds LLC (the "Investment Manager"), a subsidiary
of Affiliated Managers Group, Inc. ("AMG"), has contractually
agreed, through at least July 31, 2002, to waive its fees and/or
bear expenses of each Fund to cause total expenses to not exceed
the annual rates of 0.88% for Stock Market Plus and Intermediate
Duration and 0.78% for Short Duration (the "Expense Agreements").
The Expense Agreements would not apply during any period that the
total net assets of a Fund are below $50 million or if the
shareholders of that Fund approve a fund management agreement or
a merger of that Fund into another mutual fund. The Investment
Manager has also made a voluntary undertaking to limit the
expenses to 0.88% for Stock Market Plus and Intermediate Duration
and 0.78% for Short Duration for the year ending March 31, 2001.
(d) Dividends and Distributions
Dividends resulting from net investment income were declared and
paid daily for Intermediate Duration. Effective October 1, 2000,
dividends resulting from net investment income, if any, normally
will be declared and paid monthly for Short Duration and
Intermediate Duration. Dividends resulting from net investment
income, if any, normally will be declared and paid quarterly for
Stock Market Plus. Distributions of capital gains, if any, will
be made on an annual basis in December 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,
equalization accounting for tax purposes, foreign currency and
market discount transactions. 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.
(f) Capital Loss Carryovers
As of September 30, 2000, Short Duration had accumulated net
realized capital loss carryovers from securities transactions for
Federal income tax purposes as shown in the following chart.
These amounts may be used to offset realized capital gains, if
any, through March 31, 2008.
Capital Loss
Fund Carryover Amount Expires Mar. 31,
Short Duration $658,505 2004
829,556 2005
760,963 2008
(g) Capital Stock
Each 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 September 30, 2000, certain unaffiliated shareholders,
specifically omnibus accounts, individually held greater than 10%
of the outstanding shares of the following Funds: Stock Market
Plus - 1 owns 39%; Short Duration - 4 own 70%; Intermediate
Duration - 2 own 78%.
(h) 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.
(i) Reverse Repurchase Agreements
A reverse repurchase agreement involves the sale of portfolio
assets together with an agreement to repurchase the same assets
later at a fixed price. Additional assets are maintained in a
segregated account with the custodian, and are marked to market
daily. The segregated assets may consist of cash, U.S. Government
securities, or other liquid securities at least equal in value to
the obligations under the reverse repurchase agreements. In the
event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, a Fund's use
of the proceeds under the agreement may be restricted pending a
determination by the other party, or its trustee or receiver,
whether to enforce the obligation to repurchase the securities.
(j) Dollar Roll and Reverse Dollar Roll Agreements
A dollar roll is an agreement to sell securities for delivery in
the current month and to repurchase substantially similar
securities on a specified future date. During the roll period,
principal and interest paid on these securities are not received.
When a Fund invests in a dollar roll, it is compensated by the
difference between the current sales price and the forward price
for the future purchase as well as by earnings on the cash
proceeds of the initial sale. A reverse dollar roll is agreement
to buy securities for delivery in the current month and to sell
substantially similar securities on a specified future date,
typically at a lower price. During the roll period, the Fund
receives the principal and interest on the securities purchased
in compensation for the cash invested in the transaction.
(k) Short Sales
A short sale is a transaction in which a fund sells a security it
does not own in anticipation that the market price of that
security will decline. All of the Funds expect to engage in
short sales as a form of hedging in order to shorten the overall
duration of the portfolio and maintain portfolio flexibility.
While a short sale may act as an effective hedge to reduce the
market or interest rate risk of a portfolio, it may also result
in losses which can reduce the portfolio's total return.
As of September 30, 2000, the following Funds held short sales.
Fund Principal Security Proceeds Market Value
Stock Market Plus $16,500,000 GNMA 30 Year 6.500% $15,832,266
$(15,896,727)
4,000,000 GNMA 30 Year 7.000% 3,922,500 (3,940,000)
Short Duration 10,000,000 GNMA 30 Year 7.000% 9,781,250
(9,850,000)
Intermediate Duration 5,000,000 GNMA 30 Year 7.000% 4,890,625
(4,925,000)
(l) Futures Contracts Held or Issued for Purposes other than
Trading
Each of the Funds use interest-rate futures contracts for risk
management purposes in order to reduce fluctuations in each
Funds' net asset values relative to each Funds targeted option-
adjusted duration. On entering into a futures contract, either
cash or securities in an amount equal to a certain percentage of
the contract value (initial margin) must be deposited with the
futures broker. Subsequent payments (variation margin) are made
or received each day. The variation margin payments equal the
daily changes in the contract value and are recorded as
unrealized gains or losses. The Funds recognize a realized gain
or loss when the contract is closed or expires equal to the
difference between the value of the contract at the time it was
opened and the value at the time it was closed.
Stock Market Plus had the following open futures contracts as of
September 30, 2000:
Number of Expiration Unrealized
Type Contracts Position Month
Gain/(Loss)
5 Year U.S. Treasury 74 Long December 2000 3,136
10 Year U.S. Treasury 90 Long December 2000 62,595
5 Year U.S. Treasury 646 Short December 2000 (500,058)
10 Year U.S. Treasury 588 Short December 2000 (238,230)
U.S. Treasury Bond 24 Short December 2000 (13,608)
3 Month Eurodollar 27 Short December 2000 891
3 Month Eurodollar 19 Long December 2001 46,115
3 Month Eurodollar 10 Short March 2001 (1,420)
3 Month Eurodollar 63 Short June 2001 (16,821)
3 Month Eurodollar 150 Short September 2001 4,463
3 Month Eurodollar 39 Long December 2002 55,337
3 Month Eurodollar 19 Long June 2002 44,689
3 Month Eurodollar 11 Short March 2002 (16,837)
3 Month Eurodollar 60 Short September 2002 20,718
3 Month Eurodollar 20 Long December 2003 39,097
3 Month Eurodollar 35 Long June 2003 43,855
3 Month Eurodollar 67 Short March 2003 (108,814)
3 Month Eurodollar 65 Short September 2003 (30,305)
3 Month Eurodollar 26 Long December 2004 45,383
3 Month Eurodollar 29 Long June 2004 55,157
3 Month Eurodollar 54 Long September 2004 81,444
3 Month Eurodollar 29 Short March 2004 (36,143)
3 Month Eurodollar 9 Long December 2005 7,384
3 Month Eurodollar 122 Short March 2005 156,139
3 Month Eurodollar 3 Short June 2005 (3,364)
3 Month Eurodollar 16 Long December 2006 13,928
3 Month Eurodollar 8 Long June 2006 6,864
3 Month Eurodollar 21 Long September 2006 18,018
3 Month Eurodollar 65 Short March 2006 64,108
3 Month Eurodollar 24 Short March 2007 39,192
Total (157,087)
Short Duration had the following open futures contracts as of
September 30, 2000:
Number of Expiration Unrealized
Type Contracts Position Month
Gain/(Loss)
10 Year U.S. Agency 15 Long December 2000 8,370
5 Year U.S. Treasury 103 Short December 2000 (67,916)
10 Year U.S. Treasury 103 Short December 2000 (35,526)
U.S. Treasury Bond 9 Short December 2000 834
3 Month Eurodollar 6 Short December 2000 (6,477)
3 Month Eurodollar 1 Long December 2001 833
3 Month Eurodollar 2 Long June 2001 1,466
3 Month Eurodollar 51 Long September 2001 (52,530)
3 Month Eurodollar 35 Short March 2001 (53,570)
3 Month Eurodollar 1 Long December 2002 596
3 Month Eurodollar 1 Long March 2002 833
3 Month Eurodollar 1 Long September 2002 670
3 Month Eurodollar 19 Short June 2002 6,052
3 Month Eurodollar 1 Long September 2003 445
3 Month Eurodollar 1 Long December 2003 395
3 Month Eurodollar 16 Short March 2003 (23,197)
3 Month Eurodollar 19 Short June 2003 5,127
3 Month Eurodollar 2 Long December 2004 591
3 Month Eurodollar 1 Long March 2004 383
3 Month Eurodollar 19 Short June 2004 3,677
3 Month Eurodollar 4 Short September 2004 (1,018)
3 Month Eurodollar 2 Long March 2005 541
3 Month Eurodollar 10 Short December 2005 2,343
3 Month Eurodollar 7 Short June 2005 (394)
3 Month Eurodollar 2 Short September 2005 (9)
3 Month Eurodollar 4 Long December 2006 2,307
3 Month Eurodollar 3 Long June 2006 474
3 Month Eurodollar 6 Long September 2006 6,386
3 Month Eurodollar 12 Short March 2006 5,196
3 Month Eurodollar 1 Long March 2007 83
3 Month Eurodollar 1 Long June 2007 71
Total (192,964)
Intermediate Duration had the following open interest-rate
futures contracts as of September 30, 2000:
Number of Expiration Unrealized
Type Contracts Position Month
Gain/(Loss)
5 Year U.S. Treasury 11 Short December 2000 (5,761)
10 Year U.S. Treasury 103 Short December 2000 (13,144)
Total (18,905)
Futures transactions involve additional costs and may result in
losses. The effective use of futures depends on the Funds'
ability to close futures positions at times when the Funds'
portfolio managers deem it desirable to do so. The use of futures
also involves the risk of imperfect correlation among movements
in the values of the securities underlying the futures purchased
and sold by the Funds, of the futures contracts themselves, and
of the securities that are the subject of a hedge.
(m) Derivative Financial Instruments Held or Issued for Trading
Purposes
Stock Market Plus invests in futures contracts on the S&P 500
Index whose returns are expected to track movements in the S&P
500 Index.
Stock Market Plus had the following open futures contracts on the
S&P 500 Index as of September 30, 2000:
Number of Expiration Unrealized
Contracts Position Month Gain/(Loss)
292 Long December 2000 (4,502,819)
10 Long March 2000 (92,675)
27 Long June 2001 (82,719)
Total (4,678,213)
(n) Assets Pledged to Cover Margin Requirements for Open
Futures Positions
The aggregate market value of assets pledged to cover margin
requirements for the open futures positions at September 30, 2000
was:
Fund Assets Pledged
Stock Market Plus $8,288,568
Short Duration 260,025
Intermediate Duration 132,877
(o) Interest Rate Caps and Swap Contracts and Options
The Funds may enter into over-the-counter transactions involving
interest rate caps, swapping interest rates, or purchase options
to enter into such contracts, in order to manage interest rate
risk. In an interest rate cap agreement, one party agrees to
make payments only under specified circumstances, usually in
return for payment of a fee by the other party. An interest rate
cap entitles the purchaser, to the extent that a specified index
exceeds a predetermine interest rate, to receive payments of
interest on a notional principal amount from the party selling
such interest rate cap. Interest rate swaps represent an
agreement between counterparties to exchange cash flows based on
the difference between two interest rates applied to a notional
principal amount for a specified period. The most common type of
interest rate swap involves the exchange of fixed-rate cash flows
for variable-rate cash flows. Interest rate swaps do not involve
the exchange of principal between the parties. Purchased options
on interest rate swap contracts ("swaptions") give the holder the
right, but not the obligation, to enter into a swap contract with
the counterparty which has written the option on a date, at an
interest rate, and with a notional amount as specified in the
swaption agreement. If the counterparty to the swap transaction
defaults, the Funds will be limited to contractual remedies
pursuant to the agreements governing the transaction. There is no
assurance that interest rate swap or swaption contract
counterparties will be able to meet their obligations under the
contracts or that, in the event of default, the Funds will
succeed in pursuing contractual remedies. The Funds may thus
assume the risk that payments owed the Funds under a swap or
swaption contract will be delayed, or not received at all.
During the term of the interest rate swap agreement or swaption,
unrealized gains or losses are recorded as a result of "marking
to market". When the interst rate swap agreement or swaption is
terminated, the Funds will record a realized gain or loss equal
to the difference between the proceeds from (or cost of) the
closing transaction and the Funds' basis in the contract, if any.
As of September 30, 2000, the Stock Market Plus Fund held
two open swaptions. In each of the contracts, the Fund paid a
premium, to the counterparty, in return for the swaptions. These
swaptions may be exercised by entering into a swap contract with
the counterparty only on the date specified in each contract.
(2) Agreements and Transactions with Affiliates
The Trusts have entered into Fund Management Agreements with the
Investment Manager dated August 1, 2000. Under this agreement,
the Investment Manager provides or oversees investment advisory
and management services to the Funds. [(Prior to August 1, 2000,
the investment manager of each of the Funds was Smith Breeden
Associates, Inc. ("Smith Breeden")]. The Investment Manager
selects sub-advisors for each Fund (subject to Trustee approval),
and monitors the portfolio managers' investment programs and
results. Each Fund's investment portfolio is currently managed
by Smith Breeden, pursuant to Sub-Advisory Agreements by and
between the Investment Manager on behalf of each fund and the
sub-advisor. Certain Trustees and Officers of the Funds are
Officers of the Investment Manager or of AMG.
Investment advisory and management fees of 0.70% per annum are
paid directly by each Fund to the Investment Manager based on
average daily net assets. (Prior to August 1, 2000, the Funds
paid an identical fee to Smith Breeden for these services.)
Effective August 1, 2000, the aggregate annual fee paid to each
independent Trustee for serving as a Trustee of the Trusts is
$4,000. (Prior to August 1, 2000, each independent Trustee was
paid a combined fee of $75,000 for serving as a Trustee to the
predecessor Trusts.) The Trustee fee expense shown in the
financial statements represents each Fund's allocated portion of
the total fees and expenses paid by the Trusts during the six
months ended September 30, 2000.
(3) Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term and U.S.
Government securities, for the six months ended September 30,
2000, were as follows.
Long-Term Securities
Fund Purchases Sales
Stock Market Plus $570,784,417 $627,033,741
Short Duration 173,014,269 178,993,352
Intermediate Duration 113,418,554 137,226,968
(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. The custodian invests collateral received in the form
of cash temporarily in money market funds. Earnings of such
temporary cash investments or a fee paid is 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) Risks Associated with Collateral Mortgage Obligations
("CMOs")
The net asset value of Funds may be sensitive to interest rate
fluctuations because the Funds may hold several instruments,
including CMOs and other derivatives, whose values can be
significantly impacted by interest rate movements. CMOs are
obligations collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest
on the mortgages are passed through to the holder of the CMOs on
the same schedule as they are received, although certain classes
of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, the investment in CMOs
may be subject to a greater or lesser risk of prepayment than
other types of mortgage-related securities. CMOs may have a
fixed or variable rate of interest.
At the Special Meeting of Shareholders of the Smith Breeden Trust
("Trust I")and Smith Breeden Series Fund ("Trust II"), held on
July 21, 2000, the following votes were recorded for Smith
Breeden U.S. Equity Market Plus Fund ("Equity Fund"), Smith
Breeden Short Duration U.S. Government Fund ("Short Fund") and
Smith Breeden Intermediate Duration U.S. Government Fund
("Intermediate Fund,"and collectively the "Funds"). The
proposals, which shareholders were asked to vote on, are
explained in further detail in the proxy statement dated June 9,
2000.
Proposal 1 - Election of Nominees as Trustees of the Trusts
Trust I
Trustee Votes For Withheld
Madeline H. McWhinney 6,801,210 719,781
Steven J. Paggioli 6,823,519 697,472
Thomas R. Schneeweis 6,818,624 702,367
Sean M. Healey 6,824,720 696,271
Jack W. Aber 6,824,290 696,701
William E. Chapman, II 6,821,859 699,132
Edward J. Kaier 6,824,546 696,445
Eric Rakowski 6,822,659 698,332
Trust II
Trustee Votes For Withheld
Madeline H. McWhinney 3,880,748 580,452
Steven J. Paggioli 3,884,995 576,922
Thomas R. Schneeweis 3,883,334 578,583
Sean M. Healey 3,879,553 582,364
Jack W. Aber 3,881,561 580,356
William E. Chapman, II 3,881,855 580,062
Edward J. Kaier 3,881,855 580,779
Eric Rakowski 3,881,855 580,062
Proposal 2 - Approval or Disapproval of the Proposed
Management Agreements
Fund Shares For Shares Against Shares Abstained
Equity Fund 6,615,105 214,954 690,932
Short Fund 2,098,527 379,415 202,669
Intermediate Fund 1,688,559 30,828 61,920
Proposal 3 - Approval or Disapproval of Sub-advisory
Agreements
Fund Shares For Shares Against Shares Abstained
Equity Fund 6,594,594 224,149 702,248
Short Fund 2,099,158 379,048 202,405
Intermediate Fund 1,674,311 31,148 75,848
Proposal 4 - Approval or Disapproval of an Amendment to the
Trusts' Declarations of Trust to permit the future merger of the
Funds into The Managers Funds complex without additional
shareholder approval
Trust I
Fund Shares For Shares Against Shares Abstained
Equity Fund 6,060,477 773,601 686,913
Trust II
Fund Shares For Shares Against Shares Abstained
Short & Intermediate Funds 3,510,255 674,958 276,705
Proposal 5 - Approval or Disapproval of a Proposal allowing the
Advisor to change the Sub-advisor of the Funds without
Shareholder Approval
Fund Shares For Shares Against Shares Abstained
Equity Fund 5,743,910 1,112,235 664,846
Short Fund 1,871,711 596,230 212,670
Intermediate Fund 1,402,716 288,587 90,004
Pursuant to Article III, Section 1 of the By-Laws of the Trusts and the
1940 Act, such total votes on each proposal represents a quorum of the
outstanding shares of each Fund.
We pick the talent. You reap the results.
www.managersfunds.com
Investment Manager,
Administrator and Distributor
The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203) 857-5321 or (800) 835-3879
Custodian
State Street Bank & Trust, Co.
1776 Heritage Drive
North Quincy, Massachusetts 02171
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Transfer Agent
Boston Financial Data Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) 252-0682
Trustees
Jack W. Aber
William E. Chapman, II
Sean M. Healey*
Edward J. Kaier
Madeline H. McWhinney
Steven J. Paggioli
Eric Rakowski
Thomas R. Schneeweis
*Interested Person
This report is prepared for the information of shareholders. It
is authorized for distribution to prospective investors only when
preceded or accompanied by an effective prospectus.
The Managers Funds
Equity Funds:
INCOME EQUITY FUND
Armstrong Shaw Associates Inc.
Chartwell Investment Partners, L.P.
CAPITAL APPRECIATION FUND
Essex Investment Management Co., LLC
Roxbury Capital Management, LLC
SMALL COMPANY FUND
Kalmar Investment Advisers, Inc.
HLM Management Co., Inc.
SPECIAL EQUITY FUND
Goldman Sachs Asset Management
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
INTERNATIONAL EQUITY FUND
Scudder Kemper Investments, Inc.
Lazard Asset Management
Mastholm Asset Management, L.L.C.
EMERGING MARKETS EQUITY FUND
Rexiter Capital Management Limited
U.S. STOCK MARKET PLUS FUND
Smith Breeden Associates, Inc.
Income Funds:
BOND FUND
Loomis, Sayles & Co. L.P.
GLOBAL BOND FUND
Rogge Global Partners plc.
INTERMEDIATE DURATION
GOVERNMENT FUND
Smith Breeden Associates, Inc.
SHORT AND INTERMEDIATE BOND FUND
Standish, Ayer & Wood, Inc.
SHORT DURATION
GOVERNMENT FUND
Smith Breeden Associates, Inc.
MONEY MARKET FUND
J.P. Morgan Investment Management Inc.
