N-CSRS 1 d403909dncsrs.htm THE MANAGERS FUNDS The Managers Funds
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-03752

 

THE MANAGERS FUNDS

(Exact name of registrant as specified in charter)

 

800 Connecticut Avenue, Norwalk, Connecticut 06854

(Address of principal executive offices) (Zip code)

 

Managers Investment Group LLC

800 Connecticut Avenue, Norwalk, Connecticut 06854

(Name and address of agent for service)

Registrant’s telephone number, including area code: (203) 299-3500

 

Date of fiscal year end: DECEMBER 31
Date of reporting period: JANUARY 1, 2012 – JUNE 30, 2012

            (Semi-Annual Shareholder Report)

 

 

 

Table of Contents
Item 1. Reports to Shareholders

Table of Contents

SEMI-ANNUAL REPORT

Managers Funds

June 30, 2012

Managers Special Equity Fund

 

LOGO

Table of Contents

Table of Contents

Managers Special Equity Fund

 

Semi-Annual Report — June 30, 2012 (unaudited)

TABLE OF CONTENTS

 

      Page  

ABOUT YOUR FUND’S EXPENSES

      4   

FUND PERFORMANCE

      5   

FUND SNAPSHOTS AND SCHEDULE OF PORTFOLIO INVESTMENTS

      6   

NOTES TO SCHEDULE OF PORTFOLIO INVESTMENTS

      11   

FINANCIAL STATEMENTS

   

Statement of Assets and Liabilities

     12   

Balance sheet, net asset value (NAV) per share computation and cumulative undistributed amounts

   

Statement of Operations

     13   

Detail of sources of income, expenses, and realized and unrealized gains (losses) during the period

   

Statements of Changes in Net Assets

     14   

Detail of changes in assets for the past two periods

   

FINANCIAL HIGHLIGHTS

     15   

Historical net asset values per share, distributions, total returns, income and expense ratios, turnover ratios and net assets

   

NOTES TO FINANCIAL HIGHLIGHTS

      16   

NOTES TO FINANCIAL STATEMENTS

      17   

Accounting and distribution policies, details of agreements and transactions with Fund management and affiliates, and descriptions of certain investment risks

   

ANNUAL RENEWAL OF INVESTMENT ADVISORY AGREEMENT

     22   

Nothing contained herein is to be considered an offer, sale or solicitation of an offer to buy shares of any series of the Managers Family of Funds. Such offering is made only by Prospectus, which includes details as to offering price and other material information.

 

Table of Contents

 

About Your Fund’s Expenses (unaudited)

 

 

As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

Six Months Ended
June 30, 2012

    Expense
Ratio
for the
Period		     Beginning
Account
Value
01/01/12		      Ending
Account
Value
06/30/2012		      Expenses
Paid
During
the
Period*		  

Managers Special Equity Fund

           

Managers Class

           

Based on Actual Fund Return

      1.35 %    $ 1,000       $ 1,080       $ 6.98   

Hypothetical (5% return before expenses)

      1.35 %    $ 1,000       $ 1,018       $ 6.77   

Institutional Class

           

Based on Actual Fund Return

      1.10 %    $ 1,000       $ 1,081       $ 5.69   

Hypothetical (5% return before expenses)

      1.10 %    $ 1,000       $ 1,019       $ 5.52   

 

* Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the period (182), then divided by 366.
 

 

 

 

4

Table of Contents

 

Fund Performance

Periods ended June 30, 2012 (unaudited)

 

The table below shows the average annual total returns for the periods indicated for the Fund, as well as the Fund’s relative index for the same time periods.

 

Average Annual Total Returns1

    Six
Months*		     One
Year		     Five
Years		     Ten
Years		     Since
Inception		     Inception
Date		  

Managers Special Equity Fund2,3

             

Managers Class

      8.02 %      (2.27 )%      (0.11 )%      5.97 %      11.04 %      06/01/84   

Institutional Class

      8.13 %      (1.93 )%      0.13 %      —          4.89 %      05/03/04   

Russell 2000® Growth Index4

      8.81 %      (2.71 )%      1.99 %      7.39 %      7.44 %      06/01/84 † 

 

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. For performance information through the most recent month end, please call (800) 835-3879 or visit our Web site at www.managersinvest.com.

Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. For this and other information, please call (800) 835-3879 or visit our Web site at www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Funds are distributed by Managers Distributors, Inc., member FINRA.

 

* Not annualized.
† 

The date reflects the inception date of the Fund, not the index.

1 

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. The listed returns on the Fund are net of expenses and based on the published NAV as of June 30, 2012. All returns are in U.S. dollars($).
2 

From time to time, the Fund’s advisor has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

3 

The Fund is subject to risks associated with investments in small capitalization companies, such as erratic earnings patterns, competitive conditions, limited earnings history, and a reliance on one or a limited number of products.

4 

The Russell 2000® Growth Index measures the performance of the Russell 2000® Index companies with higher price-to-book ratios and higher forecasted growth values. Unlike the fund, the index is unmanaged, is not available for investment and does not incur expenses. The Russell 2000® Growth Index and the Russell 2000® Index are registered trademarks of Russell Investments. Russell® is a registered trademark of Russell Investments.

Not FDIC Insured, nor bank guaranteed. May lose value.

 

 

 

 

5

Table of Contents

 

Managers Special Equity Fund

Fund Snapshots

June 30, 2012

 

Portfolio Breakdown (unaudited)

 

Industry

    Managers
Special Equity Fund**		     Russell
2000®
Growth Index		  

Health Care

      20.6 %      22.1 % 

Consumer Discretionary

      20.1 %      16.2 % 

Information Technology

      19.5 %      22.1 % 

Industrials

      15.2 %      16.9 % 

Financial

      8.4 %      6.8 % 

Consumer Staples

      5.1 %      4.8 % 

Energy

      4.8 %      5.5 % 

Materials

      2.4 %      4.2 % 

Telecommunication Services

      0.0 %      1.1 % 

Utilities

      0.0 %      0.3 % 

Other Assets and Liabilities

      3.9 %      0.0 % 

 

** As a percentage of net assets
 

 

Top Ten Holdings (unaudited)

 

Security Name

    % of
Net Assets		  

Tangoe, Inc.

      1.7 % 

Pier 1 Imports, Inc.*

      1.4   

Air Methods Corp.

      1.3   

Texas Capital Bancshares, Inc.

      1.3   

Treehouse Foods, Inc.

      1.3   

Wabtec Corp.

      1.2   

MAXIMUS, Inc.

      1.2   

athenahealth, Inc.

      1.1   

SVB Financial Group

      1.1   

Acacia Research Corp.*

      1.1   

Top Ten as a Group

      12.7 % 
  

 

 

  

 

* Top Ten Holding at December 31, 2011

 

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

 

 

6

Table of Contents

 

Managers Special Equity Fund

Schedule of Portfolio Investments

June 30, 2012 (unaudited)

 

 

    Shares     Value  

Common Stocks - 96.1%

    

Consumer Discretionary - 20.1%

    

Aeropostale, Inc.*

     31,127      $ 554,994   

America’s Car-Mart, Inc.*

     25,717        999,105   

ANN, INC.*

     34,418        877,315   

Ascena Retail Group, Inc.*

     76,549        1,425,342   

Biglari Holdings, Inc.*

     1,252        483,760   

BJ’s Restaurants, Inc.*

     22,520        855,760   

Bridgepoint Education, Inc.*

     18,943        412,957   

Brunswick Corp.

     26,743        594,229   

Buckle, Inc., The1

     10,990        434,874   

Buffalo Wild Wings, Inc.*

     24,123        2,090,017   

Capella Education Co.*

     10,855        377,320   

Carter’s, Inc.*

     27,747        1,459,492   

Cato Corp., The, Class A

     14,520        442,279   

Cheesecake Factory, Inc., The*

     12,055        385,278   

Children’s Place Retail Stores, Inc., The*

     3,263        162,595   

Coinstar, Inc.*,1

     36,025        2,473,477   

Columbia Sportswear Co.

     11,574        620,598   

Cracker Barrel Old Country Store, Inc.

     17,234        1,082,295   

Crocs, Inc.*

     31,402        507,142   

Dana Holding Corp.

     64,642        828,064   

Dick’s Sporting Goods, Inc.

     8,799        422,352   

DineEquity, Inc.*

     11,195        499,745   

Express, Inc.*

     66,558        1,209,359   

Finish Line, Inc., The, Class A

     45,290        947,014   

Francesca’s Holdings Corp.*

     31,340        846,493   

Genesco, Inc.*

     18,580        1,117,587   

GNC Holdings, Inc., Class A

     14,481        567,655   

Group 1 Automotive, Inc.

     32,470        1,480,957   

Hibbett Sports, Inc.*

     27,135        1,565,961   

HSN, Inc.

     20,608        831,533   

Interval Leisure Group, Inc.

     27,000        513,270   

Jos A Bank Clothiers, Inc.*

     19,477        826,993   

New York & Co, Inc.*

     50,900        177,132   

Overstock.com, Inc.*,1

     28,770        198,801   

PetMed Express, Inc.

     40,820        496,371   

Pier 1 Imports, Inc.*

     191,645        3,148,727   

Pool Corp.

     21,541        871,549   

Red Robin Gourmet Burgers, Inc.*

     26,680        814,007   

Saks, Inc.*,1

     24,869        264,855   

Sally Beauty Holdings, Inc.*

     52,449        1,350,037   

Select Comfort Corp.*

     19,310        403,965   

Sotheby’s1

     5,660        188,818   
    Shares     Value  

Steven Madden, Ltd.*

     58,862      $ 1,868,869   

Sturm Ruger & Co., Inc.

     6,460        259,369   

Teavana Holdings, Inc.*

     10,627        143,783   

Tenneco, Inc.*

     38,428        1,030,639   

Tesla Motors, Inc.*,1

     24,407        763,695   

Tumi Holdings, Inc.*,1

     23,920        418,600   

Tupperware Brands Corp.

     16,830        921,611   

Ulta Salon Cosmetics & Fragrance, Inc.

     5,470        510,789   

Under Armour, Inc., Class A*,1

     5,131        484,777   

Valassis Communications, Inc.*

     28,480        619,440   

Vitamin Shoppe, Inc.*

     11,170        613,568   

Warnaco Group, Inc., The*

     27,441        1,168,438   

Wolverine World Wide, Inc.

     29,480        1,143,234   

Total Consumer Discretionary

       45,756,886   

Consumer Staples - 5.1%

    

Annie’s, Inc.*

     6,031        252,458   

Cal-Maine Foods, Inc.1

     11,055        432,251   

Casey’s General Stores, Inc.

     13,725        809,638   

Coca-Cola Bottling Co. Consolidated

     2,395        153,951   

Fresh Market, Inc., The*,1

     14,171        759,991   

Hain Celestial Group, Inc., The*

     13,387        736,820   

Harris Teeter Supermarkets, Inc.

     19,646        805,290   

Nu Skin Enterprises, Inc., Class A

     23,228        1,089,393   

Pricesmart, Inc.*

     9,219        622,375   

Revlon, Inc., Class A*

     18,915        269,160   

Rite Aid Corp.*

     230,215        322,301   

Spectrum Brands Holdings, Inc.*

     5,260        171,318   

Treehouse Foods, Inc.*

     46,837        2,917,477   

United Natural Foods, Inc.*

     37,498        2,057,140   

USANA Health Sciences, Inc.*

     5,395        221,842   

Total Consumer Staples

       11,621,405   

Energy - 4.8%

    

Approach Resources, Inc.*

     62,070        1,585,268   

Cheniere Energy, Inc.*

     23,172        341,555   

Clean Energy Fuels Corp.*

     26,970        418,035   

Dril-Quip, Inc.*

     4,519        296,401   

Energy XXI Bermuda, Ltd.

     43,095        1,348,443   

GasLog, Ltd.*,1

     27,818        282,353   

Lufkin Industries, Inc.

     23,383        1,270,164   

McMoRan Exploration Co.*,1

     33,963        430,311   

Pacific Drilling SA*,1

     86,020        732,030   

Rosetta Resources, Inc.*

     24,830        909,771   

Stone Energy Corp.*

     43,076        1,091,546   

Vaalco Energy, Inc.*

     57,340        494,844   
 

 

 

The accompanying notes are an integral part of these financial statements.

7

Table of Contents

 

Managers Special Equity Fund

Schedule of Portfolio Investments (continued)

 

 

    Shares     Value  

Energy - 4.8% (continued)

    

W&T Offshore, Inc.

     34,121      $ 522,052   

Western Refining, Inc.

     56,111        1,249,592   

Total Energy

       10,972,365   

Financials - 8.4%

    

Bank of the Ozarks, Inc.

     23,479        706,248   

Cohen & Steers, Inc.1

     12,320        425,163   

Ezcorp, Inc., Class A*

     25,328        594,195   

Financial Engines, Inc.*

     12,397        265,916   

HFF, Inc., Class A*

     25,175        350,940   

Home Bancshares, Inc.

     65,450        2,001,461   

MarketAxess Holdings, Inc.

     62,356        1,661,163   

Nationstar Mortgage Holdings, Inc.*,1

     14,569        313,525   

Ocwen Financial Corp.*

     51,607        969,179   

Omega Healthcare Investors, Inc.

     4,660        104,850   

PrivateBancorp, Inc.

     76,710        1,132,240   

Prosperity Bancshares, Inc.

     39,880        1,676,156   

Signature Bank*

     29,300        1,786,421   

Strategic Hotels & Resorts, Inc.*

     26,305        169,930   

SVB Financial Group*

     43,474        2,552,793   

Texas Capital Bancshares, Inc.*

     72,359        2,922,580   

Western Alliance Bancorp*

     33,770        316,087   

WisdomTree Investments, Inc.*

     54,131        355,641   

World Acceptance Corp.*

     7,660        504,028   

Zillow, Inc., Class A*

     7,993        308,770   

Total Financials

       19,117,286   

Health Care - 20.6%

    

Air Methods Corp.*

     29,765        2,924,412   

Akorn, Inc.*

     81,750        1,289,197   

Align Technology, Inc.*

     39,514        1,322,138   

Alnylam Pharmaceuticals, Inc.*

     11,655        136,014   

AMAG Pharmaceuticals, Inc.*

     10,100        155,540   

Amarin Corp. PLC, ADR*

     53,577        774,723   

Amedisys, Inc.*

     629        7,831   

Amicus Therapeutics, Inc.*

     19,710        108,405   

AMN Healthcare Services, Inc.*

     12,900        76,497   

Analogic Corp.

     6,325        392,150   

Arena Pharmaceuticals, Inc.*

     25,141        250,907   

Ariad Pharmaceuticals, Inc.*

     32,463        558,688   

Arqule, Inc.*

     32,300        191,539   

Array Biopharma, Inc.*

     71,125        246,804   

ArthroCare Corp.*

     9,725        284,748   

athenahealth, Inc.*,1

     32,957        2,609,206   

Auxilium Pharmaceuticals, Inc.*

     15,253        410,153   

BioCryst Pharmaceuticals, Inc.*

     42,420        168,832   
    Shares     Value  

BioMarin Pharmaceutical, Inc.*

     18,629      $ 737,336   

Catalyst Health Solutions, Inc.*

     25,910        2,421,030   

Celldex Therapeutics, Inc.*

     60,865        315,889   

Centene Corp.*

     67,669        2,040,896   

Cepheid, Inc.*

     20,816        931,516   

Chemed Corp.

     18,754        1,133,492   

Computer Programs & Systems, Inc.

     29,680        1,698,289   

Cryolife, Inc.*

     18,915        98,925   

Cubist Pharmaceuticals, Inc.*

     17,865        677,262   

DexCom, Inc.*

     45,046        583,796   

Endologix, Inc.*

     41,493        640,652   

Genomic Health, Inc.*

     19,478        650,565   

HealthStream, Inc.*

     18,860        490,360   

HeartWare International, Inc.*,1

     7,174        637,051   

HMS Holdings Corp.*

     65,880        2,194,463   

Impax Laboratories, Inc.*

     109,420        2,217,943   

Incyte Corp, Ltd.*,1

     41,062        932,108   

Infinity Pharmaceuticals, Inc.*

     13,250        179,670   

Insulet Corp.*

     21,869        467,341   

Integra LifeSciences Holdings Corp.*

     12,002        446,234   

Invacare Corp.

     4,665        71,981   

IPC The Hospitalist Co., Inc.*

     45,370        2,056,168   

Jazz Pharmaceuticals PLC*

     10,590        476,656   

MAKO Surgical Corp.*,1

     11,351        290,699   

Medicis Pharmaceutical Corp., Class A

     46,708        1,595,078   

Medivation, Inc.*

     6,371        582,309   

Molina Healthcare, Inc.*

     60,835        1,427,189   

MWI Veterinary Supply, Inc.*

     2,986        306,871   

National Research Corp.

     3,930        205,736   

NuVasive, Inc.*

     12,666        321,210   

Onyx Pharmaceuticals, Inc.*

     13,997        930,101   

Owens & Minor, Inc.

     35,032        1,073,030   

Pharmacyclics, Inc.*,1

     8,343        455,611   

Pozen, Inc.*

     41,096        256,439   

Providence Service Corp., The*

     14,385        197,218   

PSS World Medical, Inc.*

     29,748        624,411   

Questcor Pharmaceuticals, Inc.*,1

     19,692        1,048,402   

RTI Biologics, Inc.*

     77,385        290,968   

Spectrum Pharmaceuticals, Inc.*

     9,055        140,896   

STERIS Corp.

     29,388        921,902   

Team Health Holdings, Inc.*

     12,397        298,644   

Theravance, Inc.*

     7,725        171,650   

Trius Therapeutics, Inc.*

     34,365        197,942   

Vanda Pharmaceuticals, Inc.*

     23,310        102,564   

Vical, Inc.*

     31,830        114,588   
 

 

 

The accompanying notes are an integral part of these financial statements.

8

Table of Contents

 

Managers Special Equity Fund

Schedule of Portfolio Investments (continued)

 

 

    Shares     Value  

Health Care - 20.6% (continued)

    

Vivus, Inc.*

     4,943      $ 141,073   

Vocera Communications, Inc.*

     28,161        754,433   

WellCare Health Plans, Inc.*

     6,736        357,008   

Total Health Care

       46,813,379   

Industrials - 15.2%

    

Acacia Research Corp.*

     67,048        2,496,868   

Acuity Brands, Inc.

     33,772        1,719,332   

Advisory Board Co., The*

     31,622        1,568,135   

Allegiant Travel Co.*

     13,290        926,047   

American Science & Engineering, Inc.

     7,125        402,206   

Applied Industrial Technologies, Inc.

     21,925        807,936   

AZZ, Inc.

     8,700        532,962   

Barnes Group, Inc.

     14,303        347,420   

BE Aerospace, Inc.*

     36,314        1,585,469   

Belden, Inc.

     21,931        731,399   

Brink’s Co., The

     29,357        680,495   

Chart Industries, Inc.*

     30,665        2,108,525   

Consolidated Graphics, Inc.*

     2,930        85,117   

Deluxe Corp.

     34,489        860,156   

Dollar Thrifty Automotive Group, Inc.*

     15,120        1,224,115   

EMCOR Group, Inc.

     5,995        166,781   

Exponent, Inc.*

     10,655        562,904   

Generac Holdings, Inc.

     11,455        275,607   

Hexcel Corp.*

     28,426        733,107   

HNI Corp.

     14,910        383,933   

HUB Group, Inc., Class A*

     68,460        2,478,252   

Insperity, Inc.

     13,720        371,126   

Interface, Inc., Class A

     25,241        344,035   

Knoll, Inc.

     31,836        427,239   

Meritor, Inc.*

     31,300        163,386   

Middleby Corp.*

     7,183        715,499   

Mine Safety Appliances Co.

     9,700        390,328   

Mueller Industries, Inc.

     1,865        79,430   

NACCO Industries, Inc., Class A

     6,186        719,123   

Park-Ohio Holdings Corp.*

     9,325        177,455   

Portfolio Recovery Associates, Inc.*

     4,800        438,048   

Proto Labs, Inc.*

     8,096        232,841   

RBC Bearings, Inc.*

     12,186        576,398   

Robbins & Myers, Inc.

     9,455        395,408   

Spirit Airlines, Inc.*

     28,727        559,027   

Standex International Corp.

     2,665        113,449   

Titan Machinery, Inc.*

     14,152        429,796   

Triumph Group, Inc.

     34,310        1,930,624   

United Stationers, Inc.

     12,071        325,313   
    Shares     Value  

Wabtec Corp.

     35,295      $ 2,753,363   

Watsco, Inc.

     15,279        1,127,590   

Wesco Aircraft Holdings, Inc.*,1

     61,230        779,458   

Westport Innovations, Inc.*

     19,568        719,124   

Total Industrials

       34,444,826   

Information Technology - 19.5%

    

3D Systems Corp.*,1

     19,215        656,000   

Allot Communications, Ltd.*

     54,740        1,525,056   

Amkor Technology, Inc.*

     8,354        40,768   

Ancestry.com, Inc.*

     6,795        187,066   

Angie’s List, Inc.*

     48,303        765,120   

Anixter International, Inc.

     23,282        1,235,110   

Applied Micro Circuits Corp.*

     10,005        57,229   

Arris Group, Inc.*

     16,300        226,733   

Aspen Technology, Inc.*

     27,698        641,209   

Bankrate, Inc.*,1

     28,490        523,931   

Bazaarvoice, Inc.*

     5,273        95,969   

CACI International, Inc., Class A*

     17,294        951,516   

Callidus Software, Inc.*

     147,382        733,962   

Cirrus Logic, Inc.*

     21,205        633,605   

CommVault Systems, Inc.*

     10,325        511,810   

Concur Technologies, Inc.*

     19,778        1,346,882   

Constant Contact, Inc.*

     9,658        172,685   

Cornerstone OnDemand, Inc.*

     35,450        844,065   

CoStar Group, Inc.*

     13,386        1,086,943   

DealerTrack Holdings, Inc.*

     22,061        664,257   

Demand Media, Inc.*

     15,100        169,120   

Echelon Corp.*

     28,771        100,123   

Electronics for Imaging, Inc.*

     18,180        295,425   

Fair Isaac Corp.

     31,047        1,312,667   

FARO Technologies, Inc.*

     9,041        380,445   

Fusion-io, Inc.*,1

     20,395        426,052   

Heartland Payment Systems, Inc.

     16,850        506,848   

Imperva, Inc.*

     12,849        370,308   

Infoblox, Inc.*

     16,692        382,748   

Inphi Corp.*

     158,580        1,503,338   

InvenSense, Inc.*

     49,991        564,898   

IPG Photonics Corp.*

     10,570        460,746   

Jive Software, Inc.*,1

     28,005        587,825   

LivePerson, Inc.*

     111,077        2,117,128   

Manhattan Associates, Inc.*

     11,585        529,550   

MAXIMUS, Inc.

     51,430        2,661,502   

Mellanox Technologies, Ltd.*

     11,302        800,634   

MercadoLibre, Inc.

     7,337        556,145   

MicroStrategy, Inc., Class A*

     1,992        258,681   
 

 

 

The accompanying notes are an integral part of these financial statements.

9

Table of Contents

 

Managers Special Equity Fund

Schedule of Portfolio Investments (continued)

 

 

    Shares     Value  

Information Technology - 19.5% (continued)

    

Monotype Imaging Holdings, Inc.*

     8,325      $ 139,610   

MTS Systems Corp.

     10,190        392,825   

Netscout Systems, Inc.*

     15,850        342,202   

NetSuite, Inc.*

     15,804        865,585   

Parametric Technology Corp.*

     25,369        531,734   

Plantronics, Inc.

     11,720        391,448   

Plexus Corp.*

     14,185        400,017   

Progress Software Corp.*

     29,339        612,305   

ServiceNow, Inc.*

     6,500        159,900   

ServiceSource International, Inc.*

     105,650        1,463,253   

SolarWinds, Inc.*

     12,838        559,223   

Sourcefire, Inc.*

     24,658        1,267,421   

Splunk, Inc.*,1

     11,105        312,051   

Stratasys, Inc.*

     14,643        725,561   

Synchronoss Technologies, Inc.*

     94,470        1,744,861   

Syntel, Inc.

     5,460        331,422   

Tangoe, Inc.*

     179,944        3,834,606   

TeleNav, Inc.*

     22,375        137,159   

TiVo, Inc.*

     30,300        250,581   

TNS, Inc.*

     15,585        279,595   

Ultimate Software Group, Inc.*

     6,484        577,854   

Unisys Corp.*

     33,106        647,222   

Velti PLC*,1

     59,763        388,460   

Websense, Inc.*

     23,801        445,793   

Yelp, Inc.*,1

     19,341        439,621   
    Shares     Value  

Youku, Inc., ADR*,1

     11,184      $ 242,469   

Total Information Technology

       44,366,877   

Materials - 2.4%

    

Chemtura Corp.*

     11,655        168,998   

Coeur d’Alene Mines Corp.*

     6,990        122,744   

Koppers Holdings, Inc.

     2,395        81,430   

Kraton Performance Polymers, Inc.*

     54,450        1,193,000   

Minerals Technologies, Inc.

     6,795        433,385   

Rockwood Holdings, Inc.

     35,967        1,595,137   

TPC Group, Inc.*

     25,140        928,923   

Worthington Industries, Inc.

     47,082        963,769   

Total Materials

       5,487,386   

Telecommunication Services - 0.0%#

    

Premiere Global Services, Inc.*

     9,100        76,349   

Total Common Stocks
(cost $193,629,157)

       218,656,759   

Other Investment Companies - 7.6%2

    

BNY Mellon Overnight Government Fund, 0.18%3

     11,084,567        11,084,567   

Dreyfus Cash Management Fund, Institutional Class Shares, 0.08%

     6,253,891        6,253,891   

Total Other Investment Companies
(cost $17,338,458)

       17,338,458   

Total Investments - 103.7%
(cost $210,967,615)

       235,995,217   

Other Assets, less Liabilities - (3.7)%

       (8,419,727 ) 

Net Assets - 100.0%

     $ 227,575,490   
 

 

 

The accompanying notes are an integral part of these financial statements.

10

Table of Contents

 

Notes to Schedule of Portfolio Investments (unaudited)

 

The following footnotes and abbreviations should be read in conjunction with the Schedule of Portfolio Investments previously presented in this report.

Based on the approximate cost of investments of $215,577,782 for Federal income tax purposes at June 30, 2012, the aggregate gross unrealized appreciation and depreciation were $29,697,940 and $9,280,505, respectively, resulting in net unrealized appreciation of investments of $20,417,535.

 

* Non-income-producing security.
# 

Rounds to less than 0.1%.

1 

Some or all of these shares were out on loan to various brokers as of June 30, 2012, amounting to a market value of $10,209,032, or approximately 4.5% of net assets.

2 

Yield shown for an investment company represents the June 30, 2012, seven-day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage.

3 

Collateral received from brokers for securities lending was invested in this short-term investment.

As of June 30, 2012, all investments in the Fund were all valued using Level 1 inputs. For a detailed break-out of the common stocks by major industry classification, please refer to the Schedule of Portfolio Investments previously presented in this report. (See Note 1(a) in the Notes to Financial Statements.)

For the six months ended June 30, 2012, the Fund had no transfers between Level 1 and Level 2 from the beginning of the reporting period.

Investment Abbreviations and Definitions:

ADR: ADR after the name of a holding stands for American Depositary Receipt, representing ownership of foreign securities on deposit with a domestic custodian bank. The value of the ADR security is determined or significantly influenced by trading on exchanges not located in the United States or Canada. Sponsored ADRs are initiated by the underlying foreign company.

 

 

The accompanying notes are an integral part of these financial statements.

11

Table of Contents

 

Statement of Assets and Liabilities

June 30, 2012 (unaudited)

 

 

Assets:

   

Investments at value* (including securities on loan valued at $10,209,032)

    $ 235,995,217   

Receivable for investments sold

      8,790,518   

Dividends, interest and other receivables

      8,897   

Receivable for Fund shares sold

      73,821   

Receivable from affiliate

      36,310   

Prepaid expenses

      38,599   

Total assets

      244,943,362   

Liabilities:

   

Payable upon return of securities loaned

      11,084,567   

Payable for investments purchased

      5,581,932   

Payable for fund shares repurchased

      317,812   

Accrued expenses:

   

Investment advisory and management fees

      164,290   

Administrative fees

      45,636   

Trustee fees

      1,179   

Other

      172,456   

Total liabilities

      17,367,872   

Net Assets

    $ 227,575,490   

Net Assets Represent:

   

Paid-in capital

    $ 423,999,036   

Undistributed net investment loss

      (942,906 ) 

Accumulated net realized loss from investments

      (220,508,242 ) 

Net unrealized appreciation of investments

      25,027,602   

Net Assets

    $ 227,575,490   

Managers Shares:

   

Net Assets

    $ 210,579,453   

Shares outstanding

      3,577,122   

Net asset value, offering and redemption price per share

    $ 58.87   

Institutional Class:

   

Net Assets

    $ 16,996,037   

Shares outstanding

      283,442   

Net asset value, offering and redemption price per share

    $ 59.96   

*  Investments at cost

    $ 210,967,615   

 

 

The accompanying notes are an integral part of these financial statements.

12

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Statement of Operations

For the six months ended June 30, 2012 (unaudited)

 

 

Investment Income:

   

Dividend income

    $ 640,201   

Securities lending income

      169,882   

Interest income

      690   

Total investment income

      810,773   

Expenses:

   

Investment advisory and management fees

      1,146,685   

Administrative fees

      318,526   

Transfer agent

      335,996   

Custodian

      59,553   

Registration fees

      32,476   

Professional fees

      30,823   

Reports to shareholders

      23,309   

Trustees fees and expenses

      11,519   

Miscellaneous

      5,673   

Total expenses before offsets

      1,964,560   

Expense reimbursements

      (251,139 ) 

Expense reductions

      (13,617 ) 

Net expenses

      1,699,804   

Net investment loss

      (889,031 ) 

Net Realized and Unrealized Gain (Loss):

   

Net realized gain on investments

      20,230,363   

Net change in unrealized appreciation (depreciation) of investments

      1,247,697   

Net realized and unrealized gain

      21,478,060   

Net increase in net assets resulting from operations

    $ 20,589,029   

 

 

The accompanying notes are an integral part of these financial statements.

13

Table of Contents

 

Statements of Changes in Net Assets

For the six months ended June 30, 2012 (unaudited) and the year ended December 31, 2011

 

 

     2012     2011  

Increase (Decrease) in Net Assets From Operations:

     

Net investment loss

    $ (889,031 )    $ (2,850,490 ) 

Net realized gain on investments

      20,230,363        42,550,826   

Net change in unrealized appreciation (depreciation) of investments

      1,247,697        (37,008,078 ) 

Net increase in net assets resulting from operations

      20,589,029        2,692,258   

From Capital Share Transactions:

     

Managers Class:

     

Proceeds from sale of shares

      10,732,065        152,829,719   

Cost of shares repurchased

      (63,401,143 )      (189,754,386 ) 

Net decrease from Managers Class share transactions

      (52,669,078 )      (36,924,667 ) 

Institutional Class:

     

Proceeds from sale of shares

      3,256,140        11,950,135   

Cost of shares repurchased

      (1,420,009 )      (3,388,450 ) 

Net increase from Institutional Class share transactions

      1,836,131        8,561,685   

Net decrease from capital share transactions

      (50,832,947 )      (28,362,982 ) 

Total decrease in net assets

      (30,243,918 )      (25,670,724 ) 

Net Assets:

     

Beginning of period

      257,819,408        283,490,132   

End of period

    $ 227,575,490      $ 257,819,408   

End of period undistributed net investment loss

    $ (942,906 )    $ (53,875 ) 
  

 

 

    

 

 

  

Share Transactions:

     

Managers Class:

     

Sale of shares

      180,041        2,679,236   

Shares repurchased

      (1,076,841 )      (3,492,876 ) 

Net decrease in shares

      (896,800 )      (813,640 ) 

Institutional Class:

     

Sale of shares

      55,020        224,397   

Shares repurchased

      (23,350 )      (62,207 ) 

Net increase in shares

      31,670        162,190   

 

 

The accompanying notes are an integral part of these financial statements.

14

Table of Contents

 

Managers Special Equity Fund

Financial Highlights

For a share outstanding throughout each period

 

 

Managers Class

    For the six
months ended
June 30, 2012
(unaudited)		    

 

For the year ended December 31,

  
     2011     2010     2009     2008     2007  

Net Asset Value, Beginning of Period

    $ 54.51      $ 52.71      $ 39.60      $ 30.28      $ 64.27      $ 82.96   

Income from Investment Operations:

             

Net investment loss1

      (0.21 )      (0.50 )      (0.41 )      (0.34 )      (0.28 )      (0.51 ) 

Net realized and unrealized gain (loss) on investments1

      4.57        2.30        13.52        9.66        (27.93 )      0.55   

Total from investment operations

      4.36        1.80        13.11        9.32        (28.21 )      0.04   

Less Distribution to Shareholder from:

             

Net realized gain from investments

      —          —          —          —          (5.78 )      (18.73 ) 

Net Asset Value, End of Period

    $ 58.87      $ 54.51      $ 52.71      $ 39.60      $ 30.28      $ 64.27   

Total Return2

      8.00 %4,6      3.41 %4      33.11 %      30.78 %      (43.49 )%      (0.60 )% 

Ratio of net expenses to average net assets

      1.35 %7      1.37 %5      1.48 %      1.58 %      1.48 %      1.43 % 

Ratio of net investment loss to average net assets2

      (0.70 )%7      (0.89 )%      (0.95 )%      (1.08 )%      (0.52 )%      (0.59 )% 

Portfolio turnover

      56 %6      126 %      138 %      186 %      138 %      67 % 

Net assets at end of period (000’s omitted)

    $ 210,579      $ 243,858      $ 278,701      $ 221,159      $ 352,106      $ 1,668,031   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ratios absent expense offsets:3

             

Ratio of total expenses to average net assets

      1.56 %7      1.54 %      1.55 %      1.61 %      1.51 %      1.46 % 

Ratio of net investment loss to average net assets

      (0.91 )%7      (1.06 )%      (1.02 )%      (1.11 )%      (0.55 )%      (0.62 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Institutional Class

    For the six
months ended
June 30, 2012
(unaudited)		    

 

For the year ended December 31,

  
     2011     2010     2009     2008     2007  

Net Asset Value, Beginning of Period

    $ 55.45      $ 53.43      $ 40.04      $ 30.56      $ 64.71      $ 83.56   

Income from Investment Operations:

             

Net investment loss1

      (0.14 )      (0.29 )      (0.30 )      (0.26 )      (0.15 )      (0.32 ) 

Net realized and unrealized gain (loss) on investments1

      4.65        2.31        13.69        9.74        (28.16 )      0.52   

Total from investment operations

      4.51        2.02        13.39        9.48        (28.31 )      0.20   

Less Distributions to Shareholders from:

             

Net realized and unrealized loss on investments

      —          —          —          —          (5.84 )      (19.05 ) 

Net Asset Value, End of Period

    $ 59.96      $ 55.45      $ 53.43      $ 40.04      $ 30.56      $ 64.71   

Total Return2

      8.13 %6      3.78 %4      33.44 %4      31.02 %4      (43.35 )%      (0.39 )% 

Ratio of net expenses to average net assets

      1.10 %7      1.12 %5      1.23 %      1.33 %      1.23 %      1.20 % 

Ratio of net investment loss to average net assets2

      (0.45 )%7      (0.53 )%      (0.70 )%      (0.83 )%      (0.29 )%      (0.36 )% 

Portfolio turnover

      56 %6      126 %      138 %      186 %      138 %      67 % 

Net assets at end of period (000’s omitted)

    $   16,996      $   13,961      $     4,786      $     8,028      $   92,439      $    247,396   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ratios absent expense offsets:3

             

Ratio of total expenses to average net assets

      1.31 %7      1.29 %      1.30 %      1.36 %      1.26 %      1.23 % 

Ratio of net investment loss to average net assets

      (0.66 )%7      (0.70 )%      (0.77 )%      (0.86 )%      (0.32 )%      (0.39 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

 

 

15

Table of Contents

 

Notes to Financial Highlights (unaudited)

 

The following footnotes should be read in conjunction with the Financial Highlights of the Fund previously presented in this report.

 

1

Per share numbers have been calculated using average shares.

2 

Total returns and net investment income would have been lower had certain expenses not been reduced. (See Note 1(c) of Notes to Financial Statements.)

3 

Excludes the impact of expense reimbursements or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest and taxes. (See Note 1(c) of Notes to Financial Statements.)

4 

The Total Return is based on the Financial Statement Net Asset Values as shown above.

5 

Effective July 1, 2011, as described in the current prospectus, the Fund’s expense cap was reduced to 1.11% from 1.14%. For the period April 1, 2011 through June 30, 2011, the Fund’s expense cap was 1.14%. From January 1, 2011 through March 31, 2011, the Fund’s expense cap was 1.19%. The expense ratio shown reflects the weighted average expense ratio for the full year ended December 31, 2011.

6

Not annualized.

7 

Annualized.

 

 

 

16

Table of Contents

 

Notes to Financial Statements

June 30, 2012 (unaudited)

 

 

1. Summary of Significant Accounting Policies

The Managers Funds (the “Trust”) is an 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 consists of a number of different funds, each having distinct investment management objectives, strategies, risks and policies. Included in this report is the Managers Special Equity Fund (“Special Equity” or the “Fund”).

The Fund offers both Managers Class shares and Institutional Class shares. The Institutional Class shares, which are designed primarily for institutional investors that meet certain administrative and servicing criteria, have a minimum investment of $2,500,000. Managers Class shares are offered to all other investors. Each class represents an interest in the same assets of the Fund and the classes are identical except for class specific expenses related to shareholder activity. Each class has equal voting privileges except that each class has exclusive voting rights with respect to its services and/or distribution plan. Please refer to a current prospectus for additional information on each share class.

The Fund’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require management to make estimates and assumptions that affect the reported amounts 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 period. Actual results could differ from those estimates and such differences could be material. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:

 

a. Valuation of Investments

Equity securities traded on a domestic or international securities exchange are valued at the last quoted sale price, or, lacking any sales, at the last quoted bid price. Over-the-counter securities are valued at the Nasdaq Official Closing Price, if one is available. Lacking any sales, over-the-counter securities are valued at the last quoted bid price. The Fund’s investments are generally valued based on market quotations provided by third-party pricing services approved by the Board of Trustees of the Fund (the “Board”).

Short-term investments having a remaining maturity of 60 days or less are generally valued at amortized cost, which approximates market value. Investments in other open-end regulated investment companies are valued at their end of day net asset value per share.

Under certain circumstances, the value of certain Fund investments (including derivatives) may be based on an evaluation of fair value, pursuant to procedures established by and under the general supervision of the Board. The Pricing Committee is the committee formed by the Board to make fair value determinations for such investments. When determining the fair value of an investment, the Pricing Committee seeks to determine the price that the Fund might reasonably expect to receive from a current sale of that investment in an arm’s-length transaction. Fair value determinations shall be based upon consideration of all available facts and information, including, but not limited to (i) attributes specific to the investment;

(ii) fundamental analytical data and press releases relating to the investment and its issuer; (iii) the value of comparable securities or relevant financial instruments, including derivative securities, traded on other markets or among dealers; and (iv) other factors, such as future cash flows, interest rates, yield curves, volatilities, credit risks and/or default rates. The Board will be presented with a quarterly report comparing fair values determined by the Pricing Committee against subsequent market valuations for those securities. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. The Fund may use the fair value of a portfolio investment to calculate its net asset value (“NAV”) when, for example, (1) market quotations are not readily available because a portfolio investment is not traded in a public market or the principal market in which the investment trades is closed, (2) trading in a portfolio investment is suspended and has not resumed before the Fund calculates its NAV, (3) a significant event affecting the value of a portfolio investment is determined to have occurred between the time of the market quotation provided for a portfolio investment and the time as of which the Fund calculates its NAV, (4) an investment’s price has remained unchanged over a period of time (often referred to as a “stale price”), or (5) Managers Investment Group LLC (the “Investment Manager”) determines that a market quotation is inaccurate. Portfolio investments that trade primarily on foreign markets are priced based upon the market quotation of such securities as of the close of their respective principal markets, as adjusted to reflect the Investment Manager’s determination of the impact of events occurring subsequent to the close of such markets but prior to the time as of which the Fund calculates its NAV. Under certain circumstances, the Investment Manager may adjust such prices based on its determination of the impact of events occurring subsequent to the close of such markets but prior to the time as of which the Fund calculates its NAV. The Fund may invest in securities that may be thinly traded. The Board has adopted procedures to adjust prices of thinly traded securities that are judged to be stale so that they reflect fair value. An investment valued on the basis of its fair value may be valued at a price higher or lower than available market quotations. An investment’s valuation may differ depending on the method used and the factors considered in determining value according to the Fund’s fair value procedures.

U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a framework for measuring fair value, and a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the

 

 

 

 

17

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Notes to Financial Statements (continued)

 

 

assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized below:

Level 1 – inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies)

Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs) (e.g., debt securities, government securities, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities with observable inputs)

Level 3 – inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., fair valued securities with unobservable inputs)

Changes in inputs or methodologies used for valuing investments may result in a transfer in or out of levels within the fair value hierarchy. Transfers between different levels in the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.

 

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. Dividend income on foreign securities is recorded net of any withholding tax. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. 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 fund are apportioned among the Funds in the Trust and in some cases other affiliated funds based upon their relative average net assets or number of shareholders. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund and certain Fund level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund.

The Fund had certain portfolio trades directed to various brokers, under a brokerage recapture program, which paid a portion of the Fund’s expenses. For the six months ended June 30, 2012, the amount by which the Fund’s expenses were reduced and the impact on the expense ratio if any, were as follows: $13,583 or 0.01%.

The Fund has a “balance credit” agreement with The Bank of New York Mellon (“BNYM”), the Fund’s custodian, whereby the Fund is credited with an interest factor equal to 0.75% below the effective 90-day T-Bill rate for account balances left uninvested overnight. If the T-Bill rate falls below 0.75%, no credits will be earned. These credits serve to reduce custody expenses that otherwise would be charged to the Fund. For the six months ended June 30, 2012, the custodian expense was not reduced.

Overdrafts will cause a reduction of any earnings credits, computed at 2% above the Federal funds rate on the day of the overdraft. For the six months ended June 30, 2012, overdraft fees equaled $1.

The Trust also has a balance credit arrangement with its Transfer Agent, BNY Mellon Investment Servicing (US) Inc., whereby earnings credits are used to offset banking charges and other out-of-pocket expenses. For the six months ended June 30, 2012, the transfer agent expense was reduced by $34.

Total returns and net investment income for the Fund would have been lower had certain expenses not been offset. Total expenses before offsets exclude the impact of expense reimbursements or fee waivers and expense reductions such as brokerage recapture credits, but include non-reimbursable expenses, if any, such as interest and taxes.

 

d. Dividends and Distributions

Dividends resulting from net investment income and distributions of capital gains, if any, normally will be declared and paid annually 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 U.S. GAAP. These differences are primarily due to differing treatments for losses deferred due to wash sales, equalization accounting for tax purposes 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

The Fund intends to comply with the requirements under

Subchapter M of the Internal Revenue Code of 1986, as amended, 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.

Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for the foreign jurisdictions in which it invests, the Fund will provide for foreign taxes, and where appropriate, deferred foreign taxes.

Management has analyzed the Funds’ tax positions taken on federal income tax returns for all open tax years (tax years ended December 31, 2008-2011), and has concluded that no provision for federal income tax is required in the Funds’ financial statements. Additionally, the Fund is not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

 

 

 

 

18

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Notes to Financial Statements (continued)

 

 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), post-enactment capital losses may be carried forward for an unlimited time period. However, any new losses incurred will be required to be utilized prior to any loss carryovers incurred in pre-enactment taxable years, which generally expire eight years following the close of the taxable year in which they were incurred. As a result of this ordering rule, pre-enactment capital loss carryovers may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward retain their tax character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

 

f. Capital Loss Carryover and Deferrals

As of June 30, 2012, the Fund had accumulated net realized capital loss carryovers from security 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 the expiration date listed or in the case of post-enactment losses, for an unlimited time period.

 

    Capital Loss Carryover Amounts     Expires  
    Short-Term     Long-Term     December 31,  

(Pre-Enactment)

   $ 51,507,571        —          2016   

(Pre-Enactment)

     183,621,777        —          2017   
 

 

 

    

 

 

    

Totals

   $ 235,129,348        —       
 

 

 

    

 

 

    

 

g. 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. The Fund records sales and repurchases of its capital stock on the trade date. The cost of securities contributed to the Fund in connection with the issuance of shares is based on the valuation of those securities in accordance with the Fund’s policy on investment valuation. Dividends and distributions to shareholders are recorded on the ex-dividend date.

At June 30, 2012, certain unaffiliated shareholders of record, specifically omnibus accounts, individually or collectively held greater than 10% of the outstanding shares of the Fund as follows: two collectively own 53%. Transactions by these shareholders may have a material impact on the Fund.

 

2. Agreements and Transactions with Affiliates

The Trust has entered into an Investment Management Agreement under which the Investment Manager, a subsidiary of Affiliated Managers Group, Inc. (“AMG”), serves as investment manager to the Fund and is responsible for the Fund’s overall administration and operations. The Investment Manager selects subadvisors for the Fund (subject to Board approval) and monitors the subadvisor’s investment performance, security holdings and investment strategies. The Fund’s investment portfolio is managed by one or more portfolio managers who serves pursuant to a subadvisory agreement with the Investment Manager.

Investment management fees are paid directly by the Fund to the Investment Manager based on average daily net assets. For the six months ended June 30, 2012 the investment management fee rate, as a percentage of average daily net assets, was 0.90%.

 

At a meeting held on June 9-10, 2011, the Board approved a new contractual expense limitation with respect to the Fund. Effective July 1, 2011, the Investment Manager has contractually agreed, until at least May 1, 2013, to waive management fees and/or reimburse Fund expenses, in order to limit total annual Fund operating expenses after fee waiver and expense reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts), shareholder servicing fees, brokerage commissions and other transaction costs, acquired fund fees and expenses, and extraordinary expenses) to 1.11% of the Fund’s average daily net assets. For the period April 1, 2011 to June 30, 2011, the Fund had a contractual expense limitation of 1.14%. From January 1, 2011 to April 1, 2011, the Fund’s contractual expense limitation was 1.19%.

The Fund is obligated to repay the Investment Manager such amounts waived, paid or reimbursed in future years provided that the repayment occurs within thirty-six (36) months after the waiver or reimbursement and that such repayment would not cause the Fund’s total operating expenses in any such future year to exceed the Fund’s expense cap. For the six months ended June 30, 2012, the Fund made no such repayments to the Investment Manager. For the six months ended June 30, 2012, the Fund’s components of reimbursement are detailed in the following chart:

 

Reimbursement Available - 12/31/11

    $ 550,121   

Additional Reimbursements

      251,139   

Repayments

      —     

Expired Reimbursements

      —     
  

 

 

  

Reimbursement Available - 06/30/12

    $ 801,260   
  

 

 

  

The Fund has entered into an Administration and Shareholder Servicing Agreement under which the Investment Manager serves as the Fund’s administrator (the “Administrator”) and is responsible for all aspects of managing the Fund’s operations, including administration and shareholder services to the 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 Fund’s shareholders. The Fund pays a fee to the Administrator at the rate of 0.25% per annum of the Fund’s average daily net assets for this service.

The aggregate annual retainer paid to each Independent Trustee of the Board is $80,000, plus $5,000 or $2,500 for each regular or special meeting attended, respectively. The Independent Chairman of the Trusts receives an additional payment of $20,000 per year. The Chairman of the Audit Committee receives an additional payment of $8,000 per year. The Trustees’ fees and expenses are allocated among all of the funds for which the Investment Manager serves as the advisor (the “Managers Funds”) based on the relative net assets of such funds. The “Trustees fees and expenses” shown in the financial statements represents the Fund’s allocated portion of the total fees and expenses paid by the Managers Funds.

The Fund is distributed by Managers Distributors, Inc. (the “Distributor” or “MDI”), a wholly-owned subsidiary of the Investment Manager. MDI serves as the distributor and underwriter

 

 

 

 

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Notes to Financial Statements (continued)

 

 

for the Fund and is a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Shares of the Fund will be continuously offered and will be sold directly to prospective purchasers through brokers, dealers or other financial intermediaries who have executed selling agreements with MDI. Subject to the compensation arrangement discussed below, generally MDI bears all or a portion of the expenses of providing services pursuant to the distribution agreement, including the payment of the expenses relating to the distribution of prospectuses for sales purposes and any advertising or sales literature. Certain Trustees and Officers of the Fund are Officers and/or Directors of the Investment Manager, AMG and/or the Distributor.

The Securities and Exchange Commission granted an exemptive order that permits the Fund to lend and borrow money for certain temporary purposes directly to and from other eligible Managers Funds. Participation in this interfund lending program is voluntary for both borrowing and lending Funds, and an interfund loan is only made if it benefits each participating fund. The Investment Manager administers the program according to procedures approved by the Board, and the Board monitors the operation of the program. An interfund loan must comply with certain conditions set out in the exemptive order, which are designed to assure fairness and protect all participating Funds. For the six months ended June 30, 2012, the Fund lent to other Managers Funds varying amounts up to $2,271,746 for 5 days earning interest of $282. The interest earned is included in the Statement of Operations as interest income. For the same period, the Fund did not borrow from any other Managers Funds.

During the six months ended June 30, 2012, the Fund executed the following transactions at the closing price of the security and with no commissions under Rule 17a-7 procedures approved by the Board of Trustees:

June 7, 2012 – sold 1,455 shares of Titan Machinery, Inc. at $27.97 to Lord Abbett Small Cap Fund.

June 26, 2012 – bought 2,554 shares of Portfolio Recovery Assoc. at $85.28 from Lord Abbett Small Cap Blend Fund.

 

3. Purchases and Sales of Securities

Purchases and sales of securities (excluding short-term securities and U.S. Government obligations) for the six months ended June 30, 2012, were $138,430,651 and $191,831,862, respectively. There were no purchases or sales of U.S. Government Obligations for the Fund.

 

4. Portfolio Securities Loaned

The Fund participates in a securities lending program offered by BNYM (the “Program”), providing for the lending of securities to qualified brokers. Securities lending income include earnings of such temporary cash investments, plus or minus any rebate to a borrower. These earnings (after any rebate) are then divided between BNYM, as a fee for its services under the program, and the Fund, according to agreed-upon rates. Collateral on all securities loaned is accepted in cash and/or government securities and is maintained at a minimum level of 102% (105% in the case of certain foreign securities) of the market value, plus interest, if applicable, of investments on loan. It is the Fund’s policy to obtain additional

collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Under the terms of the Program, the Fund is indemnified for such losses by BNYM. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Collateral received in the form of cash is invested temporarily in the BNY Mellon Overnight Government Fund, formerly BNY Institutional Cash Reserves Fund (the “ICRF”), or other short-term investments as defined in the Securities Lending Agreement with BNYM.

Effective August 2, 2010, the Trust, on behalf of the Fund, entered into an agreement with BNYM and the Bank of New York Mellon Corporation (“BNYMC”) with respect to the Fund’s position in the ICRF, pursuant to which (i) BNYMC would support the value of certain defaulted securities issued by Lehman Brothers Holdings, Inc. (the “Lehman Securities”) and held by Series B of the ICRF, and (ii) once certain conditions were met, BNYMC would purchase the defaulted securities from the Fund. On October 17, 2011, after certifying that the Fund had met all necessary conditions, BNYMC purchased the Lehman Securities from the Fund at a predetermined price, which represented a premium over the fair market value of the Lehman Securities at that date.

 

5. Commitments and Contingencies

In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund has had no prior claims or losses and expects the risk of material loss to be remote.

 

6. New Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities.” ASU 2011- 11 requires disclosures to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of assets and liabilities as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, ASU 2011-11 requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. New disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is evaluating the impact of ASU 2011-11 on the Fund’s financial statements and disclosures.

 

 

 

 

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Notes to Financial Statements (continued)

 

 

7. Subsequent Events

The Fund has determined that no additional material events or transactions occurred through the issuance of the Fund’s financial statements, which require additional disclosure in or adjustment of the Fund’s financial statements.

 

 

 

 

21

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Annual Renewal of Investment Advisory Agreement (unaudited)

 

 

On June 21-22, 2012, the Board of Trustees, including a majority of the Trustees who are not “interested persons” of the Trust (the “Independent Trustees”), approved the Investment Management Agreement with the Investment Manager for the Managers Special Equity Fund (the “Fund”) and the Subadvisory Agreement for each Subadvisor of the Fund. The Independent Trustees were separately represented by independent counsel in connection with their consideration of the approval of these agreements. In considering the Investment Management and Subadvisory Agreements, the Trustees reviewed a variety of materials relating to the Fund, the Investment Manager and each Subadvisor, including comparative performance, fee and expense information for an appropriate peer group of similar mutual funds (the “Peer Group”), performance information for the relevant benchmark index (the “Fund Benchmark”) and, with respect to each Subadvisor, comparative performance information for an appropriate peer group of managed accounts, and, as to all other matters, other information provided to them on a periodic basis throughout the year, as well as information provided in connection with the meetings of June 21-22, 2012, regarding the nature, extent and quality of services provided by the Investment Manager and the Subadvisors under their respective agreements. Prior to voting, the Independent Trustees: (a) reviewed the foregoing information with their independent legal counsel and with management; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Investment Management Agreement and the Subadvisory Agreements; and (c) met with their independent legal counsel in private sessions at which no representatives of management were present.

Nature, extent, and quality of services.

In considering the nature, extent and quality of the services provided by the Investment Manager, the Trustees reviewed information relating to the Investment Manager’s operations and personnel. Among other things, the Investment Manager provided financial information, biographical information on its supervisory and professional staff and descriptions of its organizational and management structure. The Trustees also took into account information provided periodically throughout the previous year by the Investment Manager relating to the performance of its duties with respect to the Fund and the Trustees’ familiarity with the Investment Manager’s management through Board meetings, discussions and reports. In the course of their deliberations regarding the Investment Management Agreement, the Trustees evaluated, among other things: (a) the extent and quality of the Investment Manager’s oversight of the operation and management of the Fund; (b) the quality of the search, selection and monitoring services performed by the Investment Manager in overseeing the portfolio management responsibilities of the Subadvisors; (c) the Investment Manager’s ability to supervise the Fund’s other service providers; and (d) the Investment Manager’s compliance program. The Trustees also took into account the financial condition of the Investment Manager with respect to its ability to provide the

services required under the Investment Management Agreement and to maintain a contractual expense limitation for the Fund. The Trustees also considered the Investment Manager’s risk management processes.

The Trustees also reviewed information relating to each Subadvisor’s operations and personnel and the investment philosophy, strategies and techniques (for each Subadvisor, its “Investment Strategy”) used in managing the portion of the Fund for which the Subadvisor has portfolio management responsibility. Among other things, the Trustees reviewed biographical information on portfolio management and other professional staff, information regarding each Subadvisor’s organizational and management structure and each Subadvisor’s brokerage policies and practices. The Trustees considered specific information provided regarding the experience of the individual or individuals at each Subadvisor with portfolio management responsibility for the portion of the Fund managed by the Subadvisor, including the information set forth in the Fund’s prospectus and statement of additional information. The Trustees also noted information provided by the Investment Manager regarding the manner in which each Subadvisor’s Investment Strategy complements those utilized by the Fund’s other Subadvisors. In the course of their deliberations, the Trustees evaluated, among other things: (a) the services rendered by each Subadvisor in the past; (b) the qualifications and experience of the Subadvisor’s personnel; and (c) the Subadvisor’s compliance program. The Trustees also took into account the financial condition of each Subadvisor with respect to its ability to provide the services required under its Subadvisory Agreement. The Trustees also considered each Subadvisor’s risk management processes.

Performance.

Among other information relating to the Fund’s performance, the Trustees noted that the Fund’s performance for Managers Class shares for the 1-year, 3-year, 5-year and 10-year periods ended March 31, 2012 was above, above, below and below, respectively, the median performance of the Peer Group and above, above, below and below, respectively, the performance of the Fund Benchmark, the Russell 2000® Growth Index. The Trustees took into account management’s discussion of the Fund’s more recent performance, including the fact that the Fund ranked in the top quintile of the Peer Group over the 1 and 3 year periods. The Trustees also noted that the Fund’s longer-term performance is improving as a result of the Fund’s recent strong performance. The Trustees concluded that the Fund’s performance has been satisfactory.

As noted above, the Board considered the Fund’s net performance during relevant time periods as compared to the Fund’s Peer Group and Fund Benchmark and considered each Subadvisor’s performance as compared to an appropriate peer group of managed accounts and also considered the gross performance of the portion of the Fund managed by each Subadvisor as compared to the Subadvisor’s relevant performance composite that utilizes the same

 

 

 

 

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Annual Renewal of Investment Advisory Agreement (continued)

 

 

investment strategy and approach and noted that the Board reviews on a quarterly basis detailed information about the Fund’s performance results, portfolio composition and Investment Strategies, including with respect to the portion of the Fund managed by each Subadvisor. The Board noted the Investment Manager’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of each Subadvisor. The Board also noted each Subadvisor’s performance record with respect to the Fund. The Board was mindful of the Investment Manager’s attention to monitoring each Subadvisor’s performance with respect to the Fund and its discussions with management regarding the factors that contributed to the performance of the Fund.

Advisory and Subadvisory Fees and Profitability.

In considering the reasonableness of the advisory fee charged by the Investment Manager for managing the Fund, the Trustees noted that the Investment Manager, and not the Fund, is responsible for paying the fees charged by the Fund’s Subadvisors and, therefore, that the fees paid to the Investment Manager cover the cost of providing portfolio management services as well as the cost of providing search, selection and monitoring services in operating a “manager-of-managers” complex of mutual funds. The Trustees concluded that, in light of the additional high quality supervisory services provided by the Investment Manager and the fact that the subadvisory fees are paid out of the advisory fee, the advisory fee payable by the Fund to the Investment Manager can reasonably be expected to exceed the median advisory fee for the Peer Group, which consists of many funds that do not operate with a manager-of-managers structure. In this regard, the Trustees also noted that the Investment Manager has undertaken to maintain an expense limitation for the Fund.

In considering the reasonableness of the advisory fee payable to the Investment Manager, the Trustees also reviewed information provided by the Investment Manager setting forth all revenues and other benefits, both direct and indirect (including any so-called “fallout benefits” such as reputational value derived from the Investment Manager serving as Investment Manager to the Fund), received by the Investment Manager and its affiliates attributable to managing the Fund and all the mutual funds in the Managers Family of Funds, the cost of providing such services and the resulting profitability to the Investment Manager and its affiliates from these relationships. The Trustees also noted the current and potential asset levels of the Fund and the willingness of the Investment Manager to waive fees and pay expenses for the Fund from time to time as a means of limiting the total expenses of the Fund. The Trustees also considered management’s discussion of the current asset levels of the Fund, including the effect on assets attributable to the economic and market conditions since 2008, and considered the impact on profitability of the current asset levels and any future growth of assets of the Fund. The Board took into account management’s discussion of the advisory fee structure. In this regard, the Trustees noted that the Fund currently has four Subadvisors, each managing a portion of the

Fund’s portfolio. Based on the foregoing, the Trustees concluded that the profitability to the Investment Manager is reasonable and that the Investment Manager is not realizing material benefits from economies of scale that would warrant adjustments to the advisory fee at this time. With respect to economies of scale, the Trustees also noted that as the Fund’s assets increase over time, the Fund may realize other economies of scale to the extent that the increase in assets is proportionally greater than the increase in certain other expenses.

In considering the reasonableness of the fee payable by the Investment Manager to each Subadvisor, the Trustees relied on the ability of the Investment Manager to negotiate the terms of each Subadvisory Agreement at arm’s length as part of the manager-of-managers structure, noting that the Investment Manager is not affiliated with these Subadvisors. In addition, the Trustees considered other potential benefits of the subadvisory relationship to a Subadvisor, including, among others, the indirect benefits that the Subadvisor may receive from the Subadvisor’s relationship with the Fund, including any so-called “fallout benefits” to the Subadvisor, such as reputational value derived from the Subadvisor serving as Subadvisor to the Fund. In addition, the Trustees noted that the subadvisory fees are paid by the Investment Manager out of its advisory fee. As a consequence, the cost of services to be provided by each Subadvisor and the profitability to each Subadvisor of its relationship with the Fund were not material factors in the Trustees’ deliberations. For similar reasons, the Trustees did not consider potential economies of scale in the management of the Fund by the Subadvisors to be a material factor in their deliberations at this time.

The Trustees noted that the Fund’s advisory fees (which include both the advisory and administration fee) and total expenses (net of applicable expense waivers/reimbursements) as of March 31, 2012 were higher and lower, respectively, than the average for the Fund’s Peer Group. The Trustees took into account the fact that the Investment Manager has contractually agreed, through May 1, 2013, to limit the Fund’s net annual operating expenses (subject to certain excluded expenses) to 1.11%. The Trustees took into account management’s discussion of the Fund’s expenses, including reductions to the Fund’s expense limitation effected in 2011. The Trustees concluded that, in light of the nature, extent and quality of the services provided by the Investment Manager and the Subadvisors, the foregoing expense limitation and the considerations noted above with respect to the Subadvisors and the Investment Manager, the Fund’s advisory fees, including subadvisory fees, are reasonable.

*    *    *    *

After consideration of the foregoing, the Trustees also reached the following conclusions (in addition to the conclusions discussed above) regarding the Investment Management and Subadvisory Agreements: (a) the Investment Manager has demonstrated that it possesses the resources and capability to perform its duties under the Investment Management Agreement; (b) the Subadvisor has the resources to perform its duties under the Subadvisory Agreement

 

 

 

 

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Annual Renewal of Investment Advisory Agreement (continued)

 

 

and is qualified to manage the Fund’s assets in accordance with its investment objectives and policies; and (c) the Investment Manager and Subadvisor maintain appropriate compliance programs.

Based on all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the

same weight to each factor, the Trustees concluded that approval of the Investment Management Agreement and each Subadvisory Agreement would be in the best interests of the Fund and its shareholders. Accordingly, on June 21-22, 2012, the Trustees, including a majority of the Independent Trustees, voted to approve the Investment Management Agreement and the Subadvisory Agreements for the Fund.

 

 

 

 

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Investment Manager and Administrator

Managers Investment Group LLC

800 Connecticut Avenue

Norwalk, CT 06854

(800) 835-3879

Distributor

Managers Distributors, Inc.

800 Connecticut Avenue

Norwalk, CT 06854

(800) 835-3879

Custodian

The Bank of New York Mellon

2 Hanson Place

Brooklyn, NY 11217

Legal Counsel

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Attn: Managers

P.O. Box 9769

Providence, RI 02940

(800) 548-4539

For ManagersChoiceTM Only

Managers

c/o BNY Mellon Investment Servicing (US) Inc.

P.O. Box 9847

Providence, RI 02940-8047

(800) 358-7668

Trustees

Jack W. Aber

Bruce B. Bingham

Christine E. Carsman

William E. Chapman, II

Edward J. Kaier

Steven J. Paggioli

Eric Rakowski

Thomas R. Schneeweis

 

 

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Table of Contents

MANAGERS AND MANAGERS AMG FUNDS

 

EQUITY FUNDS

  

BALANCED FUNDS

 

CADENCE CAPITAL APPRECIATION

CADENCE FOCUSED GROWTH

CADENCE MID-CAP

CADENCE EMERGING COMPANIES

Cadence Capital Management, LLC

 

CHICAGO EQUITY PARTNERS MID-CAP

Chicago Equity Partners, LLC

 

ESSEX SMALL/MICRO CAP GROWTH

Essex Investment Management Co., LLC

 

FQ TAX-MANAGED U.S. EQUITY

FQ U.S. EQUITY

First Quadrant, L.P.

 

FRONTIER SMALL CAP GROWTH

Frontier Capital Management Company, LLC

 

GW&K SMALL CAP EQUITY

Gannett Welsh & Kotler, LLC

 

MICRO-CAP

Lord, Abbett & Co. LLC

WEDGE Capital Management L.L.P.

Next Century Growth Investors LLC

RBC Global Asset Management (U.S.) Inc.

  

 

REAL ESTATE SECURITIES

Urdang Securities Management, Inc.

 

RENAISSANCE LARGE CAP GROWTH

Renaissance Group LLC

 

SKYLINE SPECIAL EQUITIES

PORTFOLIO

Skyline Asset Management, L.P.

 

SPECIAL EQUITY

Ranger Investment Management, L.P.

Lord, Abbett & Co. LLC

Smith Asset Management Group, L.P.

Federated MDTA LLC

 

SYSTEMATIC VALUE

SYSTEMATIC MID CAP VALUE

Systematic Financial Management, L.P.

 

TIMESSQUARE MID CAP GROWTH

TIMESSQUARE SMALL CAP GROWTH

TSCM GROWTH EQUITY

TimesSquare Capital Management, LLC

 

TRILOGY GLOBAL EQUITY

TRILOGY EMERGING MARKETS EQUITY

TRILOGY INTERNATIONAL SMALL CAP

Trilogy Global Advisors, L.P.

 

YACKTMAN FUND

YACKTMAN FOCUSED FUND

Yacktman Asset Management L.P.

  

 

CHICAGO EQUITY PARTNERS BALANCED

Chicago Equity Partners, LLC

 

ALTERNATIVE FUNDS

 

FQ GLOBAL ALTERNATIVES

FQ GLOBAL ESSENTIALS

First Quadrant, L.P.

 

INCOME FUNDS

 

BOND (MANAGERS)

FIXED INCOME

GLOBAL INCOME OPPORTUNITY

Loomis, Sayles & Co., L.P.

 

BOND (MANAGERS PIMCO)

Pacific Investment Management Co. LLC

 

CALIFORNIA INTERMEDIATE TAX-FREE

Miller Tabak Asset Management LLC

 

GW&K MUNICIPAL BOND

GW&K MUNICIPAL ENHANCED YIELD

Gannett Welsh & Kotler, LLC

 

HIGH YIELD

J.P. Morgan Investment Management LLC

 

INTERMEDIATE DURATION GOVERNMENT

SHORT DURATION GOVERNMENT

Smith Breeden Associates, Inc.

 

This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by Managers Distributors, Inc., member FINRA.

 

A description of the policies and procedures each Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) Web site at www. sec.gov. For information regarding each Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC Web site at www.sec.gov.

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s Web site at www.sec.gov. A Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. To review a complete list of the Funds’ portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit www.managersinvest.com.

 

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www.managersinvest.com

 

      
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Table of Contents

SEMI-ANNUAL REPORT

Managers Funds

June 30, 2012

Managers Bond Fund

 

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Table of Contents

Table of Contents

Managers Bond Fund

 

Semi-Annual Report — June 30, 2012 (unaudited)

TABLE OF CONTENTS

 

      Page  

ABOUT YOUR FUND’S EXPENSES

      4   

FUND PERFORMANCE

      5   

FUND SNAPSHOTS AND SCHEDULE OF PORTFOLIO INVESTMENTS

      6   

NOTES TO SCHEDULE OF PORTFOLIO INVESTMENTS

      16   

FINANCIAL STATEMENTS

   

Statement of Assets and Liabilities

     18   

Balance sheet, net asset value (NAV) per share computation and cumulative undistributed amounts

   

Statement of Operations

     19   

Detail of sources of income, expenses, and realized and unrealized gains (losses) during the period

   

Statements of Changes in Net Assets

     20   

Detail of changes in assets for the past two periods

   

FINANCIAL HIGHLIGHTS

     21   

Historical net asset values per share, distributions, total returns, income and expense ratios, turnover ratios and net assets

   

NOTES TO FINANCIAL STATEMENTS

     22   

Accounting and distribution policies, details of agreements and transactions with Fund management and affiliates, and descriptions of certain investment risks

   

ANNUAL RENEWAL OF INVESTMENT ADVISORY AGREEMENT

     27   

Nothing contained herein is to be considered an offer, sale or solicitation of an offer to buy shares of any series of the Managers Family of Funds. Such offering is made only by Prospectus, which includes details as to offering price and other material information.

 

Table of Contents

 

About Your Fund’s Expenses (unaudited)

 

 

As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

Six Months Ended June 30, 2012

   Expense
Ratio
for the
Period		     Beginning
Account
Value
01/01/12		     Ending
Account
Value
06/30/12		     Expenses
Paid
During
the
Period*		  

Managers Bond Fund

        

Based on Actual Fund Return

     0.99 %    $ 1,000      $ 1,053      $ 5.05   

Hypothetical (5% return before expenses)

     0.99 %    $ 1,000      $ 1,020      $ 4.97   

 

* Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182), then divided by 366.
 

 

 

 

4

Table of Contents

 

Fund Performance

Periods ended June 30, 2012 (unaudited)

 

The table below shows the average annual total returns for the periods indicated for the Fund, as well as the Fund’s relative index for the same time periods.

 

Average Annual Total Returns1

    Six Months*     One Year     Five Years     Ten Years  

Managers Bond Fund2,3,4,5

      5.33 %      6.39 %      7.52 %      7.07 % 

Barclays U.S. Government Credit Bond Index6

      2.65 %      8.78 %      6.90 %      5.79 % 

 

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. For performance information through the most recent month end, please call (800) 835-3879 or visit our Web site at www.managersinvest.com.

Investors should carefully consider the Fund’s investment objectives, risks, charges, and expenses before investing. For this and other information, please call (800) 835-3879 or visit www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Funds are distributed by Managers Distributors, Inc., a member of FINRA.

 

* Not annualized.
1 

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. The listed returns on the Fund are net of expenses and based on the published NAV as of June 30, 2012. All returns are in U.S. dollars($).

2 

From time to time, the Fund’s advisor has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

3 

The Fund is subject to risks associated with investments in debt securities, such as default risk and fluctuations in the perception of the debtor’s ability to pay its creditors. Changing interest rates may adversely affect the value of a fixed income investment. An increase in interest rates typically causes the value of bonds and other fixed income securities to fall.

4 

Investments in international securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets.

5 

High yield bonds (also known as “junk bonds”) are subject to additional risks such as the risk of default.

6 

The Barclays U.S. Government/Credit Bond Index is an index of investment grade government and corporate bonds with a maturity rate of more than one year. Unlike the Fund, the Barclays U.S. Government/Credit Bond Index is unmanaged, is not available for investment, and does not incur expenses.

Not FDIC Insured, nor bank guaranteed. May lose value.

 

 

 

 

5

Table of Contents

 

Managers Bond Fund

Fund Snapshots

June 30, 2012

 

Portfolio Breakdown (unaudited)

 

Category

    Managers
Bond Fund**		     Barclays
U.S. Government/
Credit Bond Index		  

Corporate Bonds and Notes

      65.9 %      30.6 % 

U.S. Government and Agency Obligations

      19.0 %      61.3 % 

Foreign Government and Agency Obligations

      6.3 %      8.1 % 

Asset-Backed Securities

      2.4 %      0.0 % 

Mortgage-Backed Securities

      1.1 %      0.0 % 

Municipal Bonds

      1.0 %      0.0 % 

Preferred Stocks

      0.7 %      0.0 % 

Common Stocks

      0.7 %      0.0 % 

Bank Loan Obligations

      0.5 %      0.0 % 

Other Assets and Liabilities

      2.4 %      0.0 % 

 

** As a percentage of net assets

Rating

    Managers
Bond Fund**		     Barclays
U.S. Government/
Credit Bond Index		  

U.S. Treasury & Agency

      20.0 %      61.3 % 

Aaa

      5.4 %      3.7 % 

Aa

      2.7 %      4.3 % 

A

      20.4 %      16.4 % 

Baa

      42.1 %      14.3 % 

Ba & lower

      8.8 %      0.0 % 

Not Rated

      0.6 %      0.0 % 

 

** As a percentage of market value of fixed income securities Chart does not include equity securities.
 

 

Top Ten Holdings (unaudited)

 

Security Name

    % of
Net Assets		  

U.S. Treasury Note, 0.250%, 05/31/14

      9.7 % 

U.S. Treasury Note, 0.250%, 02/28/14

      6.5   

Southwestern Electric Power Co., 6.450%, 01/15/19*

      2.1   

Springleaf Finance Corp., MTN, Series J, 6.900%, 12/15/17*

      2.0   

Kinder Morgan Energy Partners, L.P., 5.950%, 02/15/18*

      1.8   

EQT Corp., 6.500%, 04/01/18*

      1.7   

Merrill Lynch & Co., Inc., 6.110%, 01/29/37*

      1.6   

Dun & Bradstreet Corp., The, 6.000%, 04/01/13*

      1.4   

Nisource Finance Corp., 6.400%, 03/15/18*

      1.4   

Panhandle Eastern Pipeline Co., L.P., 7.000%, 06/15/18*

      1.4   

Top Ten as a Group

      29.6 % 
  

 

 

  

 

* Top Ten Holding at December 31, 2011

 

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

 

 

6

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments

June 30, 2012 (unaudited)

 

           Principal Amount      Value  

Asset-Backed Securities - 2.4%

         

Chase Issuance Trust, Series 2007-B1, Class B-1, 0.492%, 04/15/19 (07/16/12)1

       $ 17,040,000       $ 16,861,978   

Marriott Vacation Club Owner Trust, Series 2009-2A, Class A, 4.809%, 07/20/31 (a)

         8,174,027         8,533,517   

Merrill Auto Trust Securitization, Series 2008-1, Class B, 6.750%, 04/15/15

         1,700,630         1,705,298   

Sierra Receivables Funding Co., LLC, Series 2010-2A, Class A, 3.840%, 11/20/25 (a)

         9,272,272         9,445,223   

Trinity Rail Leasing, L.P., Series 2009-1A, Class A, 6.657%, 11/16/39 (a)

         4,488,768         5,176,857   

Trip Rail Master Funding LLC, Series 2011-1A, Class A1A, 4.370%, 07/15/41 (a)

         13,274,504         13,513,037   

World Financial Network Credit Card Master Trust, Series 2010-A, 6.750%, 04/15/19

         1,000,000         1,107,384   

Total Asset-Backed Securities (cost $52,739,338)

            56,343,294   

Bank Loan Obligations - 0.5%

         

Flying Fortress, Inc., Term Loan, 5.000%, 06/30/17 (cost $11,325,600)

         11,440,000         11,454,300   
           Shares         

Common Stocks - 0.7%

         

PPG Industries, Inc. (Materials) (cost $10,696,329)

         145,736         15,465,504   
           Principal Amount         

Corporate Bonds and Notes - 65.9%

         

Financials - 25.8%

         

Ally Financial, Inc., 8.000%, 11/01/31

       $ 1,267,000         1,485,557   

Alta Wind Holdings LLC, 7.000%, 06/30/35 (a)

         8,217,432         9,237,380   

American International Group, Inc.,

         

8.175%, 05/15/582

         10,530,000         11,425,050   

MTN, 5.450%, 05/18/17

         485,000         526,509   

MTN, Series G, 5.850%, 01/16/18

         1,940,000         2,144,715   

Bank of America Corp.,

         

7.625%, 06/01/19

         2,906,000         3,417,110   

MTN, 5.000%, 05/13/21

         2,475,000         2,553,475   

Camden Property Trust, 5.700%, 05/15/17

         5,205,000         5,843,331   

Cantor Fitzgerald, L.P.,

         

6.375%, 06/26/15 (a)

         8,710,000         8,784,889   

7.875%, 10/15/19 (a)3

         10,805,000         10,665,367   

Citigroup, Inc.,

         

5.500%, 10/15/14

         21,385,000         22,641,775   

6.125%, 08/25/36

         10,760,000         10,583,289   

6.250%, 06/29/17

    NZD      37,108,000         29,649,865   

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA/Netherlands,

         

3.375%, 01/19/17

         7,295,000         7,507,919   

3.875%, 02/08/22

         5,885,000         5,986,416   

Crown Castle Towers LLC, 6.113%, 01/15/20 (a)

         13,725,000         15,888,280   

Duke Realty, L.P.,

         

5.950%, 02/15/17

         2,210,000         2,443,482   

6.500%, 01/15/18

         5,000,000         5,667,060   

Equifax, Inc., 7.000%, 07/01/37

         4,421,000         5,223,447   

Equity One, Inc., 6.000%, 09/15/17

         5,915,000         6,418,035   

 

 

The accompanying notes are an integral part of these financial statements.

7

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

           Principal Amount      Value  

Financials - 25.8% (continued)

         

ERP Operating, L.P.,

         

5.125%, 03/15/16

       $ 600,000       $ 661,454   

5.750%, 06/15/17

         925,000         1,067,230   

Export-Import Bank of Korea, The, 8.300%, 03/15/14 (a)

    IDR      1,400,000,000         150,322   

First Industrial, L.P., 5.950%, 05/15/17

         15,000,000         15,430,635   

General Electric Capital Corp.,

         

6.500%, 09/28/154

    NZD      15,265,000         12,899,542   

6.750%, 09/26/16

    NZD      6,390,000         5,496,239   

EMTN, 5.500%, 02/01/17

    NZD      6,250,000         5,214,670   

GMTN, 7.625%, 12/10/14

    NZD      9,365,000         8,041,516   

Goldman Sachs Group, Inc., The, 6.750%, 10/01/37

         14,590,000         14,298,973   

Hanover Insurance Group, Inc., The, 7.500%, 03/01/20

         6,475,000         7,511,447   

Highwoods Realty, L.P.,

         

5.850%, 03/15/17

         3,680,000         3,948,813   

7.500%, 04/15/18

         2,405,000         2,765,495   

ICICI Bank, Ltd., 6.375%, 04/30/22 (a)2

         900,000         801,000   

Instituto de Credito Oficial, MTN, 5.500%, 10/11/12

    AUD      3,735,000         3,796,956   

iStar Financial, Inc.,

         

5.700%, 03/01/14

         15,000         14,137   

5.850%, 03/15/17

         325,000         286,812   

5.875%, 03/15/16

         1,340,000         1,209,350   

6.050%, 04/15/15

         620,000         578,150   

JPMorgan Chase & Co.,

         

7.700%, 06/01/16 (a)

    IDR      19,000,000,000         2,095,715   

Series EMTN, 1.176%, 05/30/17 (07/31/12)1

    GBP      1,500,000         2,049,694   

Lloyds TSB Bank PLC, 6.500%, 09/14/20 (a)4

         17,940,000         17,670,039   

Marsh & McLennan Cos., Inc., 5.875%, 08/01/33

         10,360,000         12,118,962   

MBIA Insurance Corp., 14.000%, 01/15/33 (a)2

         525,000         283,500   

Merrill Lynch & Co., Inc.,

         

6.050%, 05/16/16

         900,000         930,500   

6.110%, 01/29/37

         38,050,000         35,853,107   

10.710%, 03/08/17

    BRL      2,500,000         1,282,051   

EMTN, 4.625%, 09/14/18

    EUR      1,750,000         2,032,835   

MTN, Series C, 6.050%, 06/01/34

         22,100,000         21,051,598   

Morgan Stanley,

         

0.947%, 10/15/15 (07/16/12)1

         300,000         267,254   

3.450%, 11/02/15

         2,360,000         2,285,292   

4.750%, 04/01/144

         8,355,000         8,428,541   

5.500%, 07/24/20

         29,000,000         28,372,614   

5.750%, 01/25/21

         400,000         394,417   

GMTN, 5.500%, 01/26/20

         500,000         489,710   

MTN, 0.916%, 10/18/16 (07/18/12)1

         2,000,000         1,743,056   

MTN, 5.625%, 09/23/19

         7,500,000         7,422,750   

MTN, 6.250%, 08/09/26

         11,000,000         10,837,431   

 

 

The accompanying notes are an integral part of these financial statements.

8

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

           Principal Amount      Value  

Financials - 25.8% (continued)

         

Morgan Stanley,

         

MTN, 6.625%, 04/01/18

       $ 3,095,000       $ 3,236,033   

Series GMTN, 8.000%, 05/09/174

    AUD      8,100,000         8,626,412   

Mutual of Omaha Insurance Co., 6.800%, 06/15/36 (a)

         13,925,000         15,700,827   

National City Bank of Indiana, 4.250%, 07/01/18

         6,310,000         6,731,912   

National City Corp., 6.875%, 05/15/19

         1,905,000         2,299,204   

National Life Insurance Co., 10.500%, 09/15/39 (a)

         5,000,000         6,657,945   

Nationwide Mutual Insurance Co., 6.600%, 04/15/34 (a)

         3,325,000         3,246,969   

Newfield Exploration Co., 5.625%, 07/01/24

         6,320,000         6,462,200   

Old Republic International Corp., 3.750%, 03/15/185

         11,795,000         10,615,500   

Penn Mutual Life Insurance Co., The, 7.625%, 06/15/40 (a)

         8,885,000         10,960,696   

ProLogis, L.P.,

         

5.625%, 11/15/15

         345,000         375,997   

5.750%, 04/01/16

         280,000         305,773   

Realty Income Corp.,

         

5.750%, 01/15/21

         1,435,000         1,604,110   

6.750%, 08/15/19

         6,240,000         7,351,800   

Santander Financial Issuances, Ltd., 7.250%, 11/01/15

         500,000         486,991   

Santander Issuances SAU,

         

5.911%, 06/20/16 (a)

         1,100,000         1,015,553   

6.500%, 08/11/19 (a)2

         900,000         778,682   

Simon Property Group, L.P., 5.750%, 12/01/15

         445,000         497,200   

Sirius International Group Ltd., 6.375%, 03/20/17 (a)

         4,555,000         4,820,976   

SLM Corp.,

         

5.000%, 04/15/15

         50,000         50,460   

5.375%, 05/15/14

         300,000         310,489   

8.450%, 06/15/18

         18,665,000         20,904,800   

Societe Generale SA, 5.200%, 04/15/21 (a)

         7,000,000         6,689,634   

Springleaf Finance Corp.,

         

MTN, 5.400%, 12/01/15

         5,000,000         4,162,500   

MTN, Series J, 6.900%, 12/15/17

         57,315,000         45,744,248   

WEA Finance LLC / WT Finance Australia Pty., Ltd., 6.750%, 09/02/19 (a)

         8,325,000         9,822,443   

Willis North America, Inc.,

         

6.200%, 03/28/17

         5,350,000         6,018,825   

7.000%, 09/29/19

         2,860,000         3,314,308   

Total Financials

            596,667,245   

Industrials - 30.6%

         

Agilent Technologies, Inc., 6.500%, 11/01/17

         3,525,000         4,232,954   

Alcatel-Lucent USA, Inc.,

         

6.450%, 03/15/29

         4,335,000         2,947,800   

6.500%, 01/15/28

         305,000         205,875   

APL, Ltd., 8.000%, 01/15/243

         250,000         171,250   

 

 

The accompanying notes are an integral part of these financial statements.

9

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

      Principal Amount      Value  

Industrials - 30.6% (continued)

      

ArcelorMittal,

      

5.500%, 03/01/214

    $ 150,000       $ 141,978   

6.125%, 06/01/18

      4,580,000         4,643,877   

6.250%, 02/25/22

      1,600,000         1,567,053   

6.750%, 03/01/41

      10,230,000         9,548,590   

7.000%, 10/15/39

      6,604,000         6,410,186   

AT&T Corp., 6.500%, 03/15/29

      6,415,000         7,651,440   

BellSouth Corp., 6.000%, 11/15/34

      2,370,000         2,633,153   

Canadian Pacific Railway Co., 5.750%, 03/15/33

      195,000         216,200   

CenturyLink, Inc.,

      

6.450%, 06/15/21

      13,395,000         13,938,516   

Series P, 7.600%, 09/15/39

      9,335,000         9,014,912   

Chesapeake Energy Corp.,

      

2.500%, 05/15/374,5

      1,100,000         941,875   

2.750%, 11/15/354,5

      600,000         548,250   

6.625%, 08/15/204

      55,000         54,450   

6.875%, 11/15/20

      40,000         39,400   

Choice Hotels International, Inc., 5.700%, 08/28/20

      11,900,000         12,258,261   

Cigna Corp., 6.150%, 11/15/36

      6,830,000         8,006,884   

Continental Airlines, Inc.,

      

1999-1 Class B Pass Through Trust, Series 991B, 6.795%, 08/02/18

      21,135         20,924   

2000-1 Class A-1 Pass Through Trust, Series 00A1, 8.048%, 11/01/20

      83,143         91,457   

2007-1 Class A Pass Through Trust, Series 071A, 5.983%, 04/19/22

      16,539,160         17,944,988   

2007-1 Class B Pass Through Trust, Series 071B, 6.903%, 04/19/22

      5,337,143         5,390,514   

Corning, Inc.,

      

6.850%, 03/01/29

      9,142,000         10,960,143   

7.250%, 08/15/36

      1,185,000         1,463,865   

Cummins, Inc.,

      

5.650%, 03/01/98

      11,235,000         11,564,601   

6.750%, 02/15/27

      2,853,000         3,539,306   

Cytec Industries, Inc., 6.000%, 10/01/15

      875,000         960,964   

Darden Restaurants, Inc., 6.000%, 08/15/35

      2,635,000         2,846,891   

Delta Air Lines, Inc.,

      

2007-1 Class B Pass Through Trust, Series 071B, 8.021%, 08/10/22

      10,839,635         10,962,123   

2010-1 Class A Pass Through Trust, Series 1A, 6.200%, 07/02/18

      4,653,796         5,037,734   

Dillard’s, Inc., 7.000%, 12/01/28

      225,000         216,562   

DP World, Ltd., 6.850%, 07/02/37 (a)

      28,350,000         27,853,875   

Dun & Bradstreet Corp., The, 6.000%, 04/01/13

      32,120,000         33,307,027   

Embarq Corp., 7.995%, 06/01/36

      5,830,000         6,089,989   

Energy Transfer Partners, L.P.,

      

6.125%, 02/15/17

      700,000         786,752   

6.625%, 10/15/36

      1,805,000         1,917,592   

Enterprise Products Operating LLC, 4.050%, 02/15/22

      8,450,000         8,960,938   

EQT Corp., 6.500%, 04/01/18

      35,420,000         40,265,916   

 

 

The accompanying notes are an integral part of these financial statements.

10

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

      Principal Amount      Value  

Industrials - 30.6% (continued)

      

ERAC USA Finance LLC,

      

6.375%, 10/15/17 (a)

    $ 4,910,000       $ 5,738,887   

6.700%, 06/01/34 (a)

      1,250,000         1,434,841   

7.000%, 10/15/37 (a)

      19,033,000         22,943,120   

Express Scripts Holding Co., 4.750%, 11/15/21 (a)

      7,525,000         8,327,007   

Foot Locker, Inc., 8.500%, 01/15/22

      570,000         617,737   

Ford Motor Co., 6.375%, 02/01/29

      1,990,000         2,142,259   

Georgia-Pacific LLC, 5.400%, 11/01/20 (a)

      5,175,000         6,004,910   

Intel Corp.,

      

2.950%, 12/15/355

      8,030,000         9,083,937   

3.250%, 08/01/395

      15,000,000         20,193,750   

Intuit, Inc., 5.750%, 03/15/17

      3,560,000         4,074,263   

Kinder Morgan Energy Partners, L.P.,

      

5.300%, 09/15/20

      8,100,000         8,972,249   

5.800%, 03/15/35

      3,360,000         3,558,405   

5.950%, 02/15/18

      36,530,000         42,360,517   

Marks & Spencer PLC, 7.125%, 12/01/37 (a)

      4,725,000         4,993,829   

Masco Corp.,

      

5.850%, 03/15/17

      8,150,000         8,543,148   

6.500%, 08/15/32

      955,000         918,002   

7.125%, 03/15/20

      8,815,000         9,726,118   

7.750%, 08/01/29

      1,070,000         1,121,073   

Mead Corp., The, 7.550%, 03/01/47

      970,000         1,024,950   

Methanex Corp.,

      

5.250%, 03/01/22

      350,000         363,128   

6.000%, 08/15/15

      3,825,000         4,054,270   

Micron Technology, Inc., 1.875%, 06/01/145

      200,000         196,000   

Missouri Pacific Railroad Co., 5.000%, 01/01/453

      825,000         731,915   

New Albertsons, Inc.,

      

6.625%, 06/01/28

      1,015,000         700,350   

7.450%, 08/01/29

      3,195,000         2,348,325   

7.750%, 06/15/26

      915,000         722,850   

NGPL PipeCo LLC, 7.119%, 12/15/17 (a)4

      21,980,000         21,980,000   

Northwest Airlines, 2007-1 Class B Pass Through Trust, Series 41091, 8.028%, 11/01/17

      5,126,882         5,178,151   

ONEOK, Inc., 6.000%, 06/15/35

      9,210,000         10,050,716   

Owens & Minor, Inc., 6.350%, 04/15/163

      1,355,000         1,479,371   

Owens Corning,

      

6.500%, 12/01/16

      4,560,000         5,070,360   

7.000%, 12/01/36

      9,175,000         9,750,685   

Panhandle Eastern Pipeline Co., L.P.,

      

6.200%, 11/01/17

      5,520,000         6,318,093   

7.000%, 06/15/18

      26,505,000         31,411,288   

 

 

The accompanying notes are an integral part of these financial statements.

11

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

      Principal Amount      Value  

Industrials - 30.6% (continued)

      

Plains All American Pipeline L.P./PAA Finance Corp.,

      

6.125%, 01/15/17

    $ 2,770,000       $ 3,220,383   

6.500%, 05/01/18

      8,975,000         10,767,999   

PulteGroup, Inc.,

      

6.000%, 02/15/35

      10,320,000         8,256,000   

6.375%, 05/15/33

      4,670,000         3,852,750   

Qwest Capital Funding, Inc.,

      

6.500%, 11/15/18

      620,000         658,960   

6.875%, 07/15/28

      1,190,000         1,147,304   

7.625%, 08/03/21

      2,135,000         2,207,443   

Qwest Corp.,

      

6.875%, 09/15/33

      7,209,000         7,172,955   

7.200%, 11/10/26

      435,000         439,350   

7.250%, 09/15/25

      1,185,000         1,300,360   

7.250%, 10/15/35

      2,165,000         2,181,237   

7.500%, 06/15/23

      739,000         743,064   

Reliance Holdings USA, Inc., 5.400%, 02/14/22 (a)

      3,250,000         3,249,802   

Reynolds American, Inc.,

      

6.750%, 06/15/17

      8,170,000         9,808,657   

7.250%, 06/15/37

      2,000,000         2,416,914   

Rowan Cos., Inc., 7.875%, 08/01/19

      4,710,000         5,685,742   

RR Donnelley & Sons Co., 8.250%, 03/15/19

      2,230,000         2,185,400   

Samsung Electronics Co., Ltd., 7.700%, 10/01/27 (a)

      3,520,000         4,266,733   

Telecom Italia Capital SA,

      

6.000%, 09/30/34

      4,790,000         3,676,325   

6.375%, 11/15/33

      3,870,000         3,037,950   

Telekom Malaysia Bhd, 7.875%, 08/01/25 (a)

      250,000         338,954   

Texas Eastern Transmission, L.P., 6.000%, 09/15/17 (a)

      3,000,000         3,473,373   

Toro Co., The, 6.625%, 05/01/373

      6,810,000         7,211,960   

Transocean, Inc., 7.375%, 04/15/18

      500,000         587,624   

UAL, Series 2007-1, 6.636%, 07/02/22

      14,524,999         15,178,624   

United States Steel Corp.,

      

6.650%, 06/01/374

      3,595,000         2,804,100   

7.000%, 02/01/184

      7,310,000         7,218,625   

US Airways, 2011-1 Class A Pass Through Trust, Series 2011 A, 7.125%, 10/22/23

      3,781,265         4,008,141   

USG Corp., 6.300%, 11/15/16

      1,410,000         1,350,075   

Vale Overseas Ltd., 6.875%, 11/21/36

      3,665,000         4,251,231   

Verizon Maryland, Inc., 5.125%, 06/15/33

      505,000         522,651   

Verizon New England, Inc., 7.875%, 11/15/29

      2,390,000         2,925,802   

Verizon Pennsylvania, Inc., 6.000%, 12/01/28

      1,335,000         1,458,497   

Western Union Co., The,

      

6.200%, 11/17/36

      1,180,000         1,255,961   

6.200%, 06/21/40

      130,000         141,399   

 

 

The accompanying notes are an integral part of these financial statements.

12

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

           Principal Amount      Value  

Industrials - 30.6% (continued)

         

Weyerhaeuser Co.,

         

6.875%, 12/15/33

       $ 12,890,000       $ 13,587,362   

7.375%, 10/01/194

         3,915,000         4,627,326   

7.375%, 03/15/32

         1,930,000         2,155,677   

White Pine Hydro LLC,

         

6.310%, 07/10/17 (a)3

         1,700,000         1,417,222   

6.960%, 07/10/37 (a)3

         1,645,000         1,121,676   

Wyndham Worldwide Corp.,

         

5.750%, 02/01/18

         950,000         1,056,267   

6.000%, 12/01/16

         6,430,000         7,152,655   

7.375%, 03/01/20

         7,220,000         8,582,031   

Total Industrials

            706,192,130   

Utilities - 9.5%

         

Abu Dhabi National Energy Co., 7.250%, 08/01/18 (a)

         21,130,000         25,065,462   

Ameren Energy Generating Co., Series H, 7.000%, 04/15/184

         15,300,000         13,234,500   

Ameren Illinois Co., 6.250%, 04/01/18

         26,000,000         30,767,542   

Bruce Mansfield Unit, 6.850%, 06/01/34

         9,994,601         10,408,378   

Cleveland Electric Illuminating Co., The, 5.950%, 12/15/36

         8,360,000         9,451,365   

DCP Midstream LLC, 6.450%, 11/03/36 (a)

         870,000         1,031,621   

Endesa SA/Cayman Islands, 7.875%, 02/01/27

         2,900,000         3,570,863   

Enel Finance International N.V.,

         

5.125%, 10/07/19 (a)

         3,700,000         3,534,473   

6.000%, 10/07/39 (a)

         18,672,000         14,658,603   

ITC Holdings Corp., 5.875%, 09/30/16 (a)

         2,410,000         2,769,321   

Mackinaw Power LLC, 6.296%, 10/31/23 (a)3

         8,014,200         8,159,017   

Nisource Finance Corp.,

         

6.400%, 03/15/18

         27,910,000         32,601,615   

6.800%, 01/15/19

         11,625,000         13,936,329   

Southwestern Electric Power Co., 6.450%, 01/15/19

         39,195,000         47,286,063   

Tenaga Nasional Bhd, 7.500%, 11/01/25 (a)

         2,000,000         2,540,456   

Total Utilities

            219,015,608   

Total Corporate Bonds and Notes (cost $1,390,072,686)

            1,521,874,983   

Foreign Government and Agency Obligations - 6.3%

         

Alberta Notes, Province of, 5.930%, 09/16/16

    CAD      95,135         102,668   

Brazil Bonds, Republic of, 10.250%, 01/10/28

    BRL      5,750,000         3,557,070   

Brazilian Government International Bond, 8.500%, 01/05/24

    BRL      6,650,000         3,608,912   

Canadian Government Notes,

         

1.750%, 03/01/13

    CAD      400,000         394,889   

2.500%, 06/01/15

    CAD      14,775,000         15,089,192   

3.000%, 12/01/15

    CAD      15,225,000         15,864,746   

3.500%, 06/01/13

    CAD      5,964,000         5,991,005   

European Bank for Reconstruction & Development Notes, 9.250%, 09/10/12

    BRL      2,000,000         997,560   

 

 

The accompanying notes are an integral part of these financial statements.

13

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

             Principal Amount      Value  

Foreign Government and Agency Obligations - 6.3% (continued)

         

European Investment Bank,

         

Bonds, 5.778%, 03/10/216

      AUD         5,000,000       $ 3,318,979   

Notes, 6.675%, 04/24/13 (a)6

      IDR         50,074,770,000         4,990,363   

Notes, 11.250%, 02/14/13

      BRL         13,490,000         6,893,769   

Iceland Government International Bonds, 5.875%, 05/11/22

         5,800,000         5,624,730   

Inter-American Development Bank,

         

Bonds, 6.000%, 12/15/17

      NZD         4,215,000         3,749,292   

Notes, 6.269%, 05/20/136

      IDR         45,580,000,000         4,565,037   

Notes, EMTN, 6.393%, 09/23/136

      IDR         33,430,000,000         3,265,587   

International Bank for Reconstruction & Development Notes, GDIF, 1.430%, 03/05/14

      SGD         5,800,000         4,624,616   

Ireland Government Bonds,

         

4.500%, 04/18/20

      EUR         1,655,000         1,862,933   

5.000%, 10/18/20

      EUR         995,000         1,146,449   

Manitoba Bonds, Province of, 6.375%, 09/01/15

      NZD         5,450,000         4,700,489   

Mexican Fixed Rate Bonds, 8.000%, 12/07/23

      MXN         141,360,000         12,812,304   

New South Wales Treasury Corp., Series 813, 5.500%, 08/01/13

      AUD         21,225,000         22,271,000   

Norway Government Bonds, 6.500%, 05/15/13

      NOK         53,065,000         9,297,849   

Queensland Treasury Corp. Bonds, 7.125%, 09/18/17 (a)

      NZD         7,500,000         6,859,958   

Singapore Government Bond, 1.375%, 10/01/14

      SGD         4,400,000         3,566,989   

Total Foreign Government and Agency Obligations (cost $139,108,567)

            145,156,386   

Mortgage-Backed Securities - 1.1%

         

Community Program Loan Trust, Series 87-A, Class A5, 4.500%, 04/01/29

         3,257,968         3,294,327   

Credit Suisse Mortgage Capital Certificates, Series 2007-C5, Class A4, 5.695%, 09/15/402

         1,704,000         1,827,547   

Extended Stay America Trust, Series 2010 ESHA, Class C, 4.860%, 11/05/27 (a)

         19,090,000         19,299,570   

JPMorgan Chase Commercial Mortgage Securities Corp., Series 2007-LD11, Class A4, 6.009%, 06/15/492

         80,000         87,824   

Total Mortgage-Backed Securities (cost $22,967,500)

            24,509,268   

Municipal Bonds - 1.0%

         

Buckeye Tobacco Settlement Financing Authority, Series 2007 A-2, 5.875%, 06/01/473

         5,035,000         3,853,990   

Chicago Illinois O’Hare International Airport Revenue Bond, Series 2008-A, 4.500%, 01/01/38 (AGM Insured)7

         315,000         322,223   

Illinois State General Obligation, Series 2003, 5.100%, 06/01/33

         2,880,000         2,722,176   

Michigan Tobacco Settlement Finance Authority, Series 2006 A, 7.309%, 06/01/343

         2,950,000         2,185,862   

San Jose, California Redevelopment Agency Tax Allocation, Series 2006 C, 3.750%, 08/01/28 (NATL-RE Insured)7

         765,000         626,902   

San Jose, California Redevelopment Agency Tax Allocation, Series 2006 C, 3.750%, 08/01/28 (BHAC Insured)7

         280,000         260,711   

Virginia Tobacco Settlement Financing Corp., Series 2007 A-1, 6.706%, 06/01/463

         21,620,000         13,821,882   

Total Municipal Bonds (cost $32,358,680)

            23,793,746   
             Shares         

Preferred Stocks - 0.7%

         

Consumer Discretionary - 0.2%

         

Newell Financial Trust I, 5.250%5

         90,628         4,554,057   

 

 

The accompanying notes are an integral part of these financial statements.

14

Table of Contents

 

Managers Bond Fund

Schedule of Portfolio Investments (continued)

 

      Shares      Value  

Preferred Stocks - 0.7% (continued)

      

Financials - 0.5%

      

Bank of America Corp., 6.375%

      20,000       $ 488,000   

Bank of America Corp., Series L, 7.250%5

      7,808         7,612,800   

SLM Corp., 6.000%

      41,250         895,950   

Sovereign Capital Trust IV, 4.375%5

      34,236         1,737,477   

Total Financials

         10,734,227   

Utilities - 0.0%#

      

Entergy New Orleans, Inc., 4.750%

      482         46,031   

Entergy New Orleans, Inc., 5.560%

      100         9,925   

Wisconsin Electric Power Co., 3.600%

      3,946         318,146   

Total Utilities

         374,102   

Total Preferred Stocks (cost $13,659,783)

         15,662,386   
      Principal Amount         

U.S. Government and Agency Obligations - 19.0%

      

Federal Home Loan Banks - 0.7%

      

FHLB, 1.875%, 06/21/13

    $ 16,600,000         16,859,840   

Federal Home Loan Mortgage Corporation - 1.8%

      

FHLMC, 1.625%, 04/15/13

      16,595,000         16,772,749   

FHLMC, 2.125%, 09/21/12

      24,895,000         25,002,820   

FHMLC Gold, 5.000%, 12/01/31

      77,106         83,127   

Total Federal Home Loan Mortgage Corporation

         41,858,696   

Federal National Mortgage Association - 0.3%

      

FNMA, 3.000%, 07/01/27

      5,000,000         5,247,360   

FNMA, 4.000%, 10/01/18

      1,145,929         1,227,651   

FNMA, 6.000%, 07/01/29

      6,150         6,900   

Total Federal National Mortgage Association

         6,481,911   

U.S. Treasury Obligations - 16.2%

      

U.S. Treasury Notes, 0.250%, 02/28/14

      150,000,000         149,847,600   

U.S. Treasury Notes, 0.250%, 05/31/14

      225,000,000         224,718,750   

Total U.S. Treasury Obligations

         374,566,350   

Total U.S. Government and Agency Obligations (cost $439,284,047)

         439,766,797   
      Shares         

Other Investment Companies - 4.4%8

      

BNY Mellon Overnight Government Fund, 0.18%9

      69,181,345         69,181,345   

Dreyfus Cash Management Fund,
Institutional Class Shares, 0.08%

      32,644,313         32,644,313   

Total Other Investment Companies

(cost $101,825,658)

         101,825,658   

Total Investments - 102.0% (cost $2,214,038,188)

         2,355,852,322   

Other Assets, less Liabilities - (2.0)%

         (46,941,967 ) 

Net Assets - 100.0%

       $ 2,308,910,355   

 

 

The accompanying notes are an integral part of these financial statements.

15

Table of Contents

 

Notes to Schedule of Portfolio Investments (unaudited)

 

The following footnotes and abbreviations should be read in conjunction with the Schedule of Portfolio Investments previously presented in this report.

Based on the approximate cost of investments of $2,214,038,188 for Federal income tax purposes at June 30, 2012, the aggregate gross unrealized appreciation and depreciation were $177,965,337 and $36,151,203, respectively, resulting in net unrealized appreciation of investments of $141,814,134.

 

# 

Rounds to less than 0.1%.

(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2012, the value of these securities amounted to $363,991,924, or 15.7% of net assets.
1 

Floating Rate Security. The rate listed is as of June 30, 2012. Date in parentheses represents the security’s next coupon rate reset.

2 

Variable Rate Security. The rate listed is as of June 30, 2012, and is periodically reset subject to terms and conditions set forth in the debenture.

3 

Illiquid Security. A security not readily convertible into cash such as a stock, bond or commodity that is not actively traded and would be difficult to sell in a current sale. The Fund may not invest more than 15% of its net assets in illiquid securities. Illiquid securities at December 31, 2011, amounted to $50,819,512, or 2.2% of net assets.

4 

Some or all of these securities, amounting to a market value of $66,683,381, or 2.9% of net assets, were out on loan to various brokers.

5 

Convertible Security. A corporate bond or preferred stock, usually a junior debenture, that can be converted, at the option of the holder, for a specific number of shares of the company’s preferred stock or common stock. Convertible Bonds and Convertible Preferred Stocks at June 30, 2012, amounted to $41,579,312, or 1.8% of net assets, and $13,904,334, or 0.6% of net assets, respectively.

6 

Represents yield to maturity at June 30, 2012.

7 

Securities in the portfolio backed by insurance of financial institutions and financial guaranty assurance agencies amounted to $1,209,836, or 0.1% of net assets.

8 

Yield shown represents the June 30, 2012, seven-day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage.

9 

Collateral received from brokers for securities lending was invested in this short-term investment.

The following table summarizes the inputs used to value the Fund’s net assets by the fair value hierarchy levels as of June 30, 2012: (See Note 1(a) in the Notes to the Financial Statements.)

 

      Quoted Prices in Active
Markets for Identical
Investments
Level 1		      Significant Other
Observable Inputs
Level 2		      Significant Unobservable Inputs
Level 3		      Total  

Managers Bond Fund

            

Investments in Securities

            

Asset-Backed Securities

      —         $ 56,343,294         —         $ 56,343,294   

Bank Loan Obligations

      —           11,454,300         —           11,454,300   

Common Stocks†

    $ 15,465,504         —           —           15,465,504   

Corporate Bonds and Notes††

      —           1,521,874,983         —           1,521,874,983   

Foreign Government and Agency Obligations

      —           145,156,386         —           145,156,386   

Mortgage-Backed Securities

      —           24,509,268         —           24,509,268   

Municipal Bonds

      —           23,793,746         —           23,793,746   

Preferred Stocks†

      15,662,386         —           —           15,662,386   

U.S. Government and Agency Obligations††

      —           439,766,797         —           439,766,797   

Other Investment Companies

      101,825,658         —           —           101,825,658   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Investments in Securities

    $ 132,953,548       $ 2,222,898,774         —         $ 2,355,852,322   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

† 

All common stocks and preferred stocks held in the Fund are level 1 securities. For a detailed breakout of these securities, please refer to the Schedule of Portfolio Investments.

††

All corporate bonds, notes and U.S. government and agency obligations held in the Fund are level 2 securities. For a detailed breakout of the corporate bonds and notes and U.S. government and agency obligations by major industry or agency classification, please refer to the Schedule of Portfolio Investments.

As of June 30, 2012, the Fund had no transfers between Level 1 and Level 2 from the beginning of the reporting period.

 

 

The accompanying notes are an integral part of these financial statements.

16

Table of Contents

 

Notes to Schedule of Portfolio Investments (continued)

 

 

Investment Abbreviations and Definitions:

 

AGM:    Assured Guaranty Municipal Corp.
BHAC:    Berkshire Hathaway Assurance Corp.
EMTN:    European Medium-Term Note
FHLB:    Federal Home Loan Bank
FHLMC:    Federal Home Loan Mortgage Corp.
FNMA:    Federal National Mortgage Association
GMTN:    Global Multi-Currency Notes
MBIA:    MBIA Insurance Corp.
MTN:    Medium-Term Note
NATL-RE:    National Public Finance Guarantee Corporation

Currency abbreviations have been used throughout the portfolio to indicate amounts shown in currencies other than the U.S. dollar (USD):

 

AUD:    Australian Dollar
BRL:    Brazilian Real
CAD:    Canadian Dollar
EUR:    Euro
IDR:    Indonesian Rupiah
MXN:    Mexican Peso
NOK:    Norwegian Krone
NZD:    New Zealand Dollar
SGD:    Singapore Dollar

 

 

The accompanying notes are an integral part of these financial statements.

17

Table of Contents

 

Statement of Assets and Liabilities

June 30, 2012 (unaudited)

 

 

Assets:

   

Investments at value* (including securities on loan valued at $66,683,381)

    $ 2,355,852,322   

Dividends, interest and other receivables

      25,146,319   

Receivable for Fund shares sold

      5,603,376   

Receivable for investments sold

      3,648,312   

Receivable from affiliate

      121,909   

Prepaid expenses

      147,404   

Total assets

      2,390,519,642   

Liabilities:

   

Payable upon return of securities loaned

      69,181,345   

Payable for investments purchased

      6,147,895   

Payable for Fund shares repurchased

      3,592,752   

Foreign currency payable (cost $410,576)

      428,586   

Accrued expenses:

   

Investment advisory and management fees

      1,172,954   

Administrative fees

      469,981   

Other

      615,774   

Total liabilities

      81,609,287   

Net Assets

    $ 2,308,910,355   

Net Assets Represent:

   

Paid-in capital

    $ 2,199,026,250   

Undistributed net investment income

      210,156   

Accumulated net realized loss from investments and foreign currency transactions

      (32,081,305 ) 

Net unrealized appreciation of investments and foreign currency translations

      141,755,254   

Net Assets

    $ 2,308,910,355   

Shares outstanding

      86,134,839   

Net asset value, offering and redemption price per share

    $ 26.81   

* Investments at cost

    $ 2,214,038,188   

 

 

 

The accompanying notes are an integral part of these financial statements.

18

Table of Contents

 

Statement of Operations

For the six months ended June 30, 2012 (unaudited)

 

 

Investment Income:

   

Interest income

    $ 54,637,094   

Dividend income

      943,172   

Securities lending income

      308,058   

Total investment income

      55,888,324   

Expenses:

   

Investment advisory and management fees

      6,931,910   

Administrative fees

      2,772,764   

Transfer agent

      1,297,749   

Professional fees

      156,598   

Custodian

      149,386   

Reports to shareholders

      126,375   

Trustees fees and expenses

      87,014   

Registration fees

      76,615   

Miscellaneous

      43,592   

Total expenses before offsets

      11,642,003   

Expense reimbursements

      (661,569 ) 

Fee waivers

      (23,617 ) 

Expense reductions

      (288 ) 

Net expenses

      10,956,529   

Net investment income

      44,931,795   

Net Realized and Unrealized Gain (Loss):

   

Net realized gain on investments

      28,549,880   

Net realized gain on foreign currency transactions

      1,109,903   

Net change in unrealized appreciation (depreciation) of investments

      39,325,151   

Net change in unrealized appreciation (depreciation) of foreign currency translations

      (219,903 ) 

Net realized and unrealized gain

      68,765,031   

Net increase in net assets resulting from operations

    $ 113,696,826   

 

 

The accompanying notes are an integral part of these financial statements.

19

Table of Contents

 

Statements of Changes in Net Assets

For the six months ended June 30, 2012 (unaudited) and the year ended December 31, 2011

 

 

      2012     2011  

Increase (Decrease) in Net Assets From Operations:

     

Net investment income

    $ 44,931,795      $ 89,187,692   

Net realized gain on investments and foreign currency transactions

      29,659,783        24,677,946   

Net change in unrealized appreciation (depreciation) of investments and foreign currency translations

      39,105,248        3,364,692   

Net increase in net assets resulting from operations

      113,696,826        117,230,330   

Distributions to Shareholders:

     

From net investment income

      (44,865,597 )      (91,439,318 ) 

From Capital Share Transactions:

     

Proceeds from sale of shares

      347,007,633        675,736,563   

Reinvestment of dividends and distributions

      40,531,746        83,384,606   

Cost of shares repurchased

      (268,951,121 )      (649,797,137 ) 

Net increase from capital share transactions

      118,588,258        109,324,032   

Total increase in net assets

      187,419,487        135,115,044   

Net Assets:

     

Beginning of period

      2,121,490,868        1,986,375,824   

End of period

    $ 2,308,910,355      $ 2,121,490,868   

End of period undistributed net investment income

    $ 210,156      $ 143,958   
  

 

 

    

 

 

  

Share Transactions:

     

Sale of shares

      13,015,546        25,821,719   

Shares issued in connection with reinvestments of dividends and distributions

      1,520,577        3,201,464   

Shares repurchased

      (10,105,613 )      (24,893,267 ) 

Net increase in shares

      4,430,510        4,129,916   

 

 

The accompanying notes are an integral part of these financial statements.

20

Table of Contents

 

Managers Bond Fund

Financial Highlights

For a share outstanding throughout each period

 

 

      For the six
months ended
June 30, 2012
(unaudited)		     For the year ended December 31,  
     2011     2010     2009     2008     2007  

Net Asset Value, Beginning of Year

    $ 25.97      $ 25.61      $ 24.29      $ 19.65      $ 25.34      $ 24.84   

Income from Investment Operations:

             

Net investment income1

      0.54        1.14        1.16        1.30        1.42        1.22   

Net realized and unrealized gain (loss) on investments1

      0.84        0.39        1.34        4.62        (5.42 )      0.49   

Total from investment operations

      1.38        1.53        2.50        5.92        (4.00 )      1.71   

Less Distributions to Shareholders from:

             

Net investment income

      (0.54 )      (1.17 )      (1.18 )      (1.28 )      (1.41 )      (1.21 ) 

Net realized gain on investments

      —          —          —          —          (0.28 )      (0.00 )# 

Total distributions to shareholders

      (0.54 )      (1.17 )      (1.18 )      (1.28 )      (1.69 )      (1.21 ) 

Net Asset Value, End of Year

    $ 26.81      $ 25.97      $ 25.61      $ 24.29      $ 19.65      $ 25.34   

Total Return2

      5.33 %5      6.06 %      10.47 %4      31.12 %4      (16.31 )%      7.06 % 

Ratio of net expenses to average net assets

      0.99 %6      0.99 %      0.99 %      0.99 %      0.99 %      0.99 % 

Ratio of net investment income to average net assets2

      4.05 %6      4.36 %      4.59 %      5.93 %      6.10 %      4.91 % 

Portfolio turnover

      14 %5      17 %      17 %      23 %      39 %      21 % 

Net assets at end of year (000’s omitted)

    $ 2,308,910      $ 2,121,491      $ 1,986,376      $ 2,193,702      $ 1,888,919      $ 2,022,891   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ratios absent expense offsets:3

             

Ratio of total expenses to average net assets

      1.05 %6      1.05 %      1.06 %      1.10 %      1.10 %      0.99 % 

Ratio of net investment income to average net assets

      3.99 %6      4.30 %      4.52 %      5.82 %      5.99 %      4.91 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

 

Notes to Financial Highlights (unaudited)

 

The following footnotes should be read in conjunction with the Financial Highlights of the Fund previously presented in this report.

 

# 

Rounds to less than $0.01 per share or 0.01%.

1 

Per share numbers have been calculated using average shares.

2 

Total returns and net investment income would have been lower had certain expenses not been reduced. (See Note 1(c) of Notes to Financial Statements.)

3 

Excludes the impact of expense reimbursements or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest and taxes. (See Note 1(c) of Notes to Financial Statements.)

4 

The Total Return is based on the Financial Statement Net Asset Values as shown above.

5 

Not annualized.

6 

Annualized.

 

 

 

21

Table of Contents

 

Notes to Financial Statements

June 30, 2012 (unaudited)

 

 

1. Summary of Significant Accounting Policies

The Managers Funds (the “Trust”) is an 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 consists of a number of different funds, each having distinct investment management objectives, strategies, risks, and policies. Included in this report is the Managers Bond Fund (the “Fund”).

The Fund’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require management to make estimates and assumptions that affect the reported amounts 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 period. Actual results could differ from those estimates and such differences could be material. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:

 

a. Valuation of Investments

Equity securities traded on a domestic or international securities exchange are valued at the last quoted sale price, or, lacking any sales, at the last quoted bid price. Over-the-counter securities are valued at the Nasdaq Official Closing Price, if one is available. Lacking any sales, over-the-counter securities are valued at the last quoted bid price. The Fund’s investments are generally valued based on market quotations provided by third-party pricing services approved by the Board of Trustees of the Fund (the “Board”).

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 generally valued at amortized cost, which approximates market value. Investments in other open-end regulated investment companies are valued at their end of day net asset value per share.

Under certain circumstances, the value of certain Fund investments (including derivatives) may be based on an evaluation of fair value, pursuant to procedures established by and under the general supervision of the Board. The Pricing Committee is the committee formed by the Board to make fair value determinations for such investments. When determining the fair value of an investment, the Pricing Committee seeks to determine the price that the Fund might reasonably expect to receive from a current sale of that investment in an arm’s-length transaction. Fair value determinations shall be

based upon consideration of all available facts and information, including, but not limited to (i) attributes specific to the investment; (ii) fundamental analytical data and press releases relating to the investment and its issuer; (iii) the value of comparable securities or relevant financial instruments, including derivative securities, traded on other markets or among dealers; and (iv) other factors, such as future cash flows, interest rates, yield curves, volatilities, credit risks and/or default rates. The Board will be presented with a quarterly report comparing fair values determined by the Pricing Committee against subsequent market valuations for those securities. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. The Fund may use the fair value of a portfolio investment to calculate its net asset value (“NAV”) when, for example, (1) market quotations are not readily available because a portfolio investment is not traded in a public market or the principal market in which the investment trades is closed, (2) trading in a portfolio investment is suspended and has not resumed before the Fund calculates its NAV, (3) a significant event affecting the value of a portfolio investment is determined to have occurred between the time of the market quotation provided for a portfolio investment and the time as of which the Fund calculates its NAV, (4) an investment’s price has remained unchanged over a period of time (often referred to as a “stale price”), or (5) Managers Investment Group LLC (the “Investment Manager”) determines that a market quotation is inaccurate. Portfolio investments that trade primarily on foreign markets are priced based upon the market quotation of such securities as of the close of their respective principal markets, as adjusted to reflect the Investment Manager’s determination of the impact of events occurring subsequent to the close of such markets but prior to the time as of which the Fund calculates its NAV. Under certain circumstances, the Investment Manager may adjust such prices based on its determination of the impact of events occurring subsequent to the close of such markets but prior to the time as of which the Fund calculates its NAV. The Funds may invest in securities that may be thinly traded. The Board has adopted procedures to adjust prices of thinly traded securities that are judged to be stale so that they reflect fair value. An investment valued on the basis of its fair value may be valued at a price higher or lower than available market quotations. An investment’s valuation may differ depending on the method used and the factors considered in determining value according to the Fund’s fair value procedures.

 

 

 

 

22

Table of Contents

 

Notes to Financial Statements (continued)

 

 

U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized below:

Level 1 – inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies)

Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs) (e.g., debt securities, government securities, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities with observable inputs)

Level 3 – inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., fair valued securities with unobservable inputs)

Changes in inputs or methodologies used for valuing investments may result in a transfer in or out of levels within the fair value hierarchy. Transfers between different levels in the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.

 

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. Dividend income on foreign securities is recorded net of any withholding tax. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. 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 Fund are apportioned among the Funds in the Trust and in some cases other affiliated funds based upon their relative average net assets or number of shareholders.

The Fund has a “balance credit” agreement with The Bank of New York Mellon (“BNYM”), the Fund’s custodian, whereby the Fund is credited with an interest factor equal to 0.75% below the effective 90-day T-Bill rate for account balances left uninvested overnight. If the T-Bill rate falls below 0.75%, no credits will be earned. These credits serve to reduce custody expenses that would otherwise be charged to the Fund. For the six months ended June 30, 2012, the custodian expense was not reduced.

Overdrafts will cause a reduction of any earnings credits, computed at 2% above the Federal funds rate on the day of the overdraft. For the six months ended June 30, 2012, the Fund had no overdraft fees.

The Fund also has a balance credit arrangement with its Transfer Agent, BNY Mellon Investment Servicing (US) Inc., whereby earnings credits are used to offset banking charges and other out-of-pocket expenses. For the six months ended June 30, 2012, the transfer agent expense was reduced by $288.

The Investment Manager has agreed to waive a portion of its management fee in consideration of shareholder servicing fees that it has received from JPMorgan Distribution Services, Inc., with respect to short-term cash investments the Fund has made in JPMorgan Liquid Assets Money Market Fund, Capital Shares. For the six months ended June 30, 2012, the management fee was reduced by $23,617.

Total returns and net investment income for the Fund would have been lower had certain expenses not been offset. Total expenses before offsets exclude the impact of expense reimbursements or fee waivers and expense offsets such as brokerage recapture credits, but include non-reimbursable expenses, if any, such as interest and taxes.

 

d. Dividends and Distributions

Dividends resulting from net investment income, if any, normally will be declared daily and paid monthly. 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 U.S. GAAP. These differences are primarily due to differing treatments for losses deferred due to wash sales, equalization accounting for tax purposes, foreign currency, options, futures and market discount transactions. Permanent book and tax basis differences, if any, relating to shareholder distributions will result in reclassifications to paid-in capital.

 

 

 

 

23

Table of Contents

 

Notes to Financial Statements (continued)

 

 

e. Federal Taxes

The 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.

Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for the foreign jurisdictions in which it invests, the Fund will provide for foreign taxes, and where appropriate, deferred foreign taxes.

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (tax years ended December 31, 2008-2011), and has concluded that no provision for federal income tax is required in the Fund’s financial statements. Additionally, the Fund is not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), post-enactment capital losses may be carried forward for an unlimited time period. However, any new losses incurred will be required to be utilized prior to any loss carryovers incurred in pre-enactment taxable years, which generally expire eight years following the close of the taxable year in which they were incurred. As a result of this ordering rule, pre-enactment capital loss carryovers may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward retain their tax character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

 

f. Capital Loss Carryovers and Deferrals

As of June 30, 2012, the Fund had accumulated net realized capital loss carryovers from securities transactions for Federal income tax purposes as shown in the following chart. The amounts may be used to offset future realized capital gains, if any, through the expiration dates listed or in the case of post-enactment losses, for an unlimited time period.

 

      Capital Loss Carryover
Amounts		      Expires
December  31,		  
      Short-Term      Long-Term     

(Pre-Enactment)

    $ 46,433,792         —           2017   

(Pre-Enactment)

      15,307,296         —           2018   
  

 

 

     

 

 

     

Totals

    $ 61,741,088         —        
  

 

 

     

 

 

     

 

g. 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. The Fund records sales and repurchases of its capital stock on the trade date. The cost of securities contributed to the Fund in connection with the issuance of shares is based on the valuation of those securities in accordance with the Fund’s policy on investment valuation. Dividends and distributions to shareholders are recorded on the ex-dividend date.

At June 30, 2012, certain unaffiliated shareholders of record, specifically omnibus accounts, individually or collectively held greater than 10% of the outstanding shares of the Fund as follows: three collectively own 64%. Transactions by these shareholders may have a material impact on the Fund.

 

h. Foreign Currency Translation

The books and records of the Fund are maintained in U.S. dollars. The value of investments, assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon current foreign exchange rates. Purchases and sales of foreign investments, 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.

The Fund does not isolate the net realized and unrealized gain or loss resulting from changes in exchange rates from the fluctuations in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

i. Foreign Securities

The Fund invests in securities of foreign entities and in instruments denominated in foreign currencies which involve risks not typically associated with investments in domestic securities. Non-domestic securities carry special risks, such as exposure to currency fluctuations, less developed or less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards, and, potentially, less liquidity.

Realized gains in certain countries may be subject to foreign taxes at the Fund level, at rates ranging from approximately 10% to 15%. The Fund would pay such foreign taxes on net realized gains at the appropriate rate for each jurisdiction.

 

2. Agreements and Transactions with Affiliates

The Trust has entered into an Investment Management Agreement under which the Investment Manager, a subsidiary of Affiliated Managers Group, Inc. (“AMG”), serves as investment manager to the Fund and is responsible for the Fund’s overall administration. The Investment Manager selects subadvisors for the Fund (subject to Board approval) and monitors the subadvisor’s investment programs and results. The Fund’s investment portfolio is managed by a portfolio manager who serves pursuant to a subadvisory agreement with the Investment Manager.

Investment management fees are paid directly by the Fund to the Investment Manager based on average net assets. The annual investment management fee rate, as a percentage of average daily net assets, for the six months ended June 30, 2012, was 0.625%.

The Investment Manager has contractually agreed, through at least May 1, 2013, to waive management fees and/or reimburse Fund expenses in order to limit total annual Fund operating expenses

 

 

 

 

24

Table of Contents

 

Notes to Financial Statements (continued)

 

 

after fee waiver and expense reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts), brokerage commissions and other transaction costs, acquired fund fees and expenses, and extraordinary expenses) to 0.99% of the Fund’s average daily net assets subject to later reimbursement by the Fund in certain circumstances.

The Fund is obligated to repay the Investment Manager such amounts waived, paid or reimbursed in future years provided that the repayment occurs within thirty-six (36) months after the waiver or reimbursement and that such repayment would not cause the Fund’s total operating expenses in any such future year to exceed the Fund’s expense cap. For the six months ended June 30, 2012, the Fund’s components of reimbursement available are detailed in the following chart:

 

Reimbursement Available - 12/31/11

    $ 5,150,846   

Additional Reimbursements

      661,569   

Repayments

      —     

Expired Reimbursements

      (1,166,684 ) 
  

 

 

  

Reimbursement Available - 6/30/12

    $ 4,645,731   
  

 

 

  

The Fund has entered into an Administration and Shareholder Servicing Agreement under which the Investment Manager serves as the Fund’s administrator (the “Administrator”) and is responsible for all aspects of managing the Fund’s operations, including administration and shareholder services to the 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 Fund’s shareholders. The Fund pays a fee to the Administrator at the rate of 0.25% per annum of the Fund’s average daily net assets for this service.

The aggregate annual retainer paid to each Independent Trustee of the Board is $80,000, plus $5,000 or $2,500 for each regular or special meeting attended, respectively. The Independent Chairman of the Trust receives an additional payment of $20,000 per year. The Chairman of the Audit Committee receives an additional payment of $8,000 per year. The Trustees’ fees and expenses are allocated among all of the funds for which the Investment Manager serves as the advisor (the “Managers Funds”) based on the relative net assets of such funds. The “Trustees fees and expenses” shown in the financial statements represents the Fund’s allocated portion of the total fees and expenses paid by the Managers Funds.

The Fund is distributed by Managers Distributors, Inc. (the “Distributor” or “MDI”), a wholly-owned subsidiary of the Investment Manager. MDI serves as the distributor and underwriter for the Fund and is a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Shares of the Fund will be continuously offered and will be sold directly to prospective purchasers through brokers, dealers or other financial intermediaries who have executed selling agreements with MDI. Subject to the compensation arrangement discussed below, generally MDI bears all or a portion of the expenses of providing services pursuant to the distribution agreement, including the payment of the expenses relating to the distribution of prospectuses for sales purposes and any advertising or sales literature. Certain Trustees

and Officers of the Fund are Officers and/or Directors of the Investment Manager, AMG and/or the Distributor.

The Securities and Exchange Commission granted an exemptive order that permits the Fund to lend and borrow money for certain temporary purposes directly to and from other eligible Managers Funds. Participation in this interfund lending program is voluntary for both borrowing and lending funds, and an interfund loan is only made if it benefits each participating fund. The Investment Manager administers the program according to procedures approved by the Board, and the Board monitors the operation of the program. An interfund loan must comply with certain conditions set out in the exemptive order, which are designed to assure fairness and protect all participating funds. For the six months ended June 30, 2012, the Fund lent to other Managers Funds varying amounts up to $18,086,305 for 5 days earning interest of $615. The interest earned is included in the Statement of Operations as interest income. For the same period, the Fund did not borrow from any other Managers Funds.

 

3. Purchases and Sales of Securities

Purchases and sales of securities (excluding short-term securities and U.S. Government obligations) for the six months ended June 30, 2012, were $203,399,674 and $212,750,737, respectively. Purchases and sales of U.S. Government obligations for the six months ended June 30, 2012, were $441,445,403 and $75,591,262, respectively.

 

4. Portfolio Securities Loaned

The Fund participates in a securities lending program offered by BNYM (the “Program”), providing for the lending of securities to qualified brokers. Securities lending income include earnings of such temporary cash investments, plus or minus any rebate to a borrower. These earnings (after any rebate) are then divided between BNYM, as a fee for its services under the program, and the Fund, according to agreed-upon rates. Collateral on all securities loaned is accepted in cash and/or government securities and is maintained at a minimum level of 102% (105% in the case of certain foreign securities) of the market value, plus interest, if applicable, of investments on loan. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Under the terms of the Program, the Fund is indemnified for such losses by BNYM. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Collateral received in the form of cash is invested temporarily in the BNY Mellon Overnight Government Fund, formerly the BNY Institutional Cash Reserves Fund (the “ICRF”), or other short-term investments as defined in the Securities Lending Agreement with BNYM.

Effective August 2, 2010, the Trust, on behalf of the Fund, entered into an agreement with BNYM and the Bank of New York Mellon Corporation (“BNYMC”) with respect to the Fund’s position

 

 

 

 

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Notes to Financial Statements (continued)

 

 

in ICRF, pursuant to which (i) BNYMC would support the value of certain defaulted securities issued by Lehman Brothers Holdings, Inc. (the “Lehman Securities”) and held by Series B of the ICRF, and (ii) once certain conditions were met, BNYMC would purchase the defaulted securities from the Fund. On October 17, 2011, after certifying that the Fund had met all necessary conditions, BNYMC purchased the Lehman Securities from the Fund at a predetermined price, which represented a premium over the fair market value of the Lehman Securities at that date.

 

5. Commitments and Contingencies

In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has had no prior claims or losses and expects the risk of material loss to be remote.

 

6. Risks Associated with High Yield Securities

Investing in high yield securities involves greater risks and considerations not typically associated with U.S. Government and other high quality/investment grade securities. High Yield securities are generally below investment grade securities and do not have an established retail secondary market. Economic downturns may disrupt the high yield market and impair the issuer’s ability to repay principal and interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations and could cause the securities to become less liquid.

 

7. Forward Commitments

Certain transactions, such as futures and forward transactions, dollar roll agreements, or purchases of when-issued or delayed delivery securities may have a similar effect on the Fund’s net asset value as if the Fund had created a degree of leverage in its portfolio. However, if the Fund enters into such a transaction, the Fund will establish a segregated account with its custodian in which it will maintain cash, U.S. government securities or other liquid securities equal in value to its obligations in respect to such transaction. Securities and other assets held in the segregated account may not be sold while the transaction is outstanding, unless other suitable assets are substituted.

 

8. Derivative Instruments

The following disclosures contain information on how and why the Fund uses derivative instruments, the credit risk and how derivative instruments affect the Fund’s financial position, results of operations and cash flows. The location and fair value amounts of these instruments would be on the Statement of Assets and Liabilities and the realized and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative

contract, are included in a table in the Schedule of Portfolio Investments. The derivative instruments outstanding as of June 30, 2012, as disclosed in the Statement of Assets and Liabilities and the realized and unrealized changes in gains and losses on derivative instruments during the six months ended June 30, 2012, as disclosed in the Statement of Operations serve as indicators of the volume of derivative activity for the Fund.

 

9. Forward Foreign Currency Contracts

During the six months ended June 30, 2012, the Fund invested in forward foreign currency contracts to facilitate transactions in foreign securities and to hedge against foreign currency exchange rate risk on its non-U.S. dollar denominated investment securities.

A forward foreign currency contract is an agreement between a fund and another party to buy or sell a currency at a set price at a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily, and the change in market value is recorded as an unrealized gain or loss. Gain or loss on the purchase or sale of contracts having the same settlement date, amount and counterparty is realized on the date of offset, otherwise gain or loss is realized on the settlement date.

Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

 

10. New Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11,

“Disclosures about Offsetting Assets and Liabilities.” ASU 2011- 11 requires disclosures to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of assets and liabilities as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, ASU 2011-11 requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. New disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is evaluating the impact of ASU 2011-11 on the Fund’s financial statements and disclosures.

 

11. Subsequent Events

The Fund has determined that no material events or transactions occurred through the issuance date of the Fund’s financial statements, which require additional disclosure in or adjustment of the Fund’s financial statements.

 

 

 

 

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Annual Renewal of Investment Advisory Agreement (unaudited)

 

On June 21-22, 2012, the Board of Trustees, including a majority of the Trustees who are not “interested persons” of the Trust (the “Independent Trustees”), approved the Investment Management Agreement with the Investment Manager for the Managers Bond Fund (the “Fund”) and the Subadvisory Agreement for the Subadvisor of the Fund. The Independent Trustees were separately represented by independent counsel in connection with their consideration of the approval of these agreements. In considering the Investment Management and Subadvisory Agreements, the Trustees reviewed a variety of materials relating to the Fund, the Investment Manager and the Subadvisor, including comparative performance, fee and expense information for an appropriate peer group of similar mutual funds (the “Peer Group”), performance information for the relevant benchmark index (the “Fund Benchmark”) and, with respect to the Subadvisor, comparative performance information for an appropriate peer group of managed accounts, and, as to all other matters, other information provided to them on a periodic basis throughout the year, as well as information provided in connection with the meetings of June 21-22, 2012, regarding the nature, extent and quality of services provided by the Investment Manager and the Subadvisor under their respective agreements. Prior to voting, the Independent Trustees: (a) reviewed the foregoing information with their independent legal counsel and with management; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Investment Management Agreement and the Subadvisory Agreement; and (c) met with their independent legal counsel in private sessions at which no representatives of management were present.

Nature, extent and quality of services.

In considering the nature, extent and quality of the services provided by the Investment Manager, the Trustees reviewed information relating to the Investment Manager’s operations and personnel. Among other things, the Investment Manager provided financial information, biographical information on its supervisory and professional staff and descriptions of its organizational and management structure. The Trustees also took into account information provided periodically throughout the previous year by the Investment Manager relating to the performance of its duties with respect to the Fund and the Trustees’ familiarity with the Investment Manager’s management through Board meetings, discussions and reports. In the course of their deliberations regarding the Investment Management Agreement, the Trustees evaluated, among other things: (a) the extent and quality of the Investment Manager’s oversight of the operation and management of the Fund; (b) the quality of the search, selection and monitoring services performed by the Investment Manager in overseeing the portfolio management responsibilities of the Subadvisor; (c) the Investment Manager’s ability to supervise the Fund’s other service providers; and (d) the Investment Manager’s compliance program. The Trustees also took into account the financial condition of the Investment Manager with respect to its ability to provide the services required under the Investment Management Agreement

and to maintain a contractual expense limitation for the Fund. The Trustees also considered the Investment Manager’s risk management processes.

The Trustees also reviewed information relating to the Subadvisor’s operations and personnel and the investment philosophy, strategies and techniques (the “Investment Strategy”) used in managing the Fund. Among other things, the Trustees reviewed biographical information on portfolio management and other professional staff, information regarding the Subadvisor’s organizational and management structure and the Subadvisor’s brokerage policies and practices. The Trustees considered specific information provided regarding the experience of the individual or individuals at the Subadvisor with portfolio management responsibility for the Fund, including the information set forth in the Fund’s prospectus and statement of additional information. In the course of their deliberations, the Trustees evaluated, among other things: (a) the services rendered by the Subadvisor in the past; (b) the qualifications and experience of the Subadvisor’s personnel; and (c) the Subadvisor’s compliance program. The Trustees also took into account the financial condition of the Subadvisor with respect to its ability to provide the services required under the Subadvisory Agreement. The Trustees also considered the Subadvisor’s risk management processes.

Performance.

Among other information relating to the Fund’s performance, the Trustees noted that the Fund’s performance for the 1-year, 3-year, 5-year and 10-year periods ended March 31, 2012 was above the median performance of the Peer Group and below, above, above and above, respectively, the performance of the Fund Benchmark, the Barclays U.S. Government/Credit Bond Index. The Board took into account management’s discussion of the Fund’s performance, including the reasons for the Fund’s recent underperformance relative to its benchmark. The Trustees also noted that the Fund’s intermediate and long-term performance has been strong relative to the Fund Benchmark and the Peer Group. The Trustees concluded that the Fund’s overall performance has been satisfactory.

As noted above, the Board considered the Fund’s net performance during relevant time periods as compared to the Fund’s Peer Group and Fund Benchmark and considered the Subadvisor’s performance as compared to an appropriate peer group of managed accounts and also considered the gross performance of the Fund as compared to the Subadvisor’s relevant performance composite that utilizes the same investment strategy and approach and noted that the Board reviews on a quarterly basis detailed information about the Fund’s performance results, portfolio composition and Investment Strategies. The Board noted the Investment Manager’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Investment Manager’s attention to monitoring the Subadvisor’s performance with respect to the Fund and its discussions with management regarding the factors that contributed to the performance of the Fund.

 

 

 

 

27

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Annual Renewal of Investment Advisory Agreement (continued)

 

 

Advisory and Subadvisory Fees and Profitability.

In considering the reasonableness of the advisory fee charged by the Investment Manager for managing the Fund, the Trustees noted that the Investment Manager, and not the Fund, is responsible for paying the fees charged by the Fund’s Subadvisor and, therefore, that the fees paid to the Investment Manager cover the cost of providing portfolio management services as well as the cost of providing search, selection and monitoring services in operating a “manager-of-managers” complex of mutual funds. The Trustees concluded that, in light of the additional high quality supervisory services provided by the Investment Manager and the fact that the subadvisory fees are paid out of the advisory fee, the advisory fee payable by the Fund to the Investment Manager can reasonably be expected to exceed the median advisory fee for the Peer Group, which consists of many funds that do not operate with a manager-of-managers structure. In this regard, the Trustees also noted that the Investment Manager has undertaken to maintain an expense limitation for the Fund.

In considering the reasonableness of the advisory fee payable to the Investment Manager, the Trustees also reviewed information provided by the Investment Manager setting forth all revenues and other benefits, both direct and indirect (including any so-called “fallout benefits” such as reputational value derived from the Investment Manager serving as Investment Manager to the Fund), received by the Investment Manager and its affiliates attributable to managing the Fund and all the mutual funds in the Managers Family of Funds, the cost of providing such services and the resulting profitability to the Investment Manager and its affiliates from these relationships. The Trustees also noted the current and potential asset levels of the Fund and the willingness of the Investment Manager to waive fees and pay expenses for the Fund from time to time as a means of limiting the total expenses of the Fund. The Trustees also considered management’s discussion of the current asset level of the Fund, including the effect on assets attributable to the economic and market conditions since 2008, and considered the impact on profitability of the current asset level and any future growth of assets of the Fund. The Board took into account management’s discussion of the current advisory fee structure. Based on the foregoing, the Trustees concluded that the profitability to the Investment Manager is reasonable and that the Investment Manager is not realizing material benefits from economies of scale that would warrant adjustments to the advisory fees for the Fund at this time. With respect to economies of scale, the Trustees also noted that as the Fund’s assets increase over time, the Fund may realize other economies of scale to the extent that the increase in assets is proportionally greater than the increase in certain other expenses.

In considering the reasonableness of the fee payable by the Investment Manager to the Subadvisor, the Trustees relied on the ability of the Investment Manager to negotiate the terms of the Subadvisory Agreement at arm’s length as part of the manager-of-managers structure, noting that the Subadvisor is not affiliated with the Investment Manager. In addition, the Trustees considered

other potential benefits of the subadvisory relationship to the Subadvisor, including, among others, the indirect benefits that the Subadvisor may receive from the Subadvisor’s relationship with the Fund, including any so-called “fallout benefits” to the Subadvisor, such as reputational value derived from the Subadvisor serving as Subadvisor to the Fund. In addition, the Trustees noted that the subadvisory fees are paid by the Investment Manager out of its advisory fee. As a consequence, the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Fund were not material factors in the Trustees’ deliberations. For similar reasons, the Trustees did not consider potential economies of scale in the management of the Fund by the Subadvisor to be a material factor in their deliberations at this time.

The Trustees noted that the Fund’s advisory fees (which include both the advisory and administration fee) and total expenses (net of applicable expense waivers/reimbursements) as of March 31, 2012 were both higher than the average for the Peer Group. The Trustees took into account the fact that the Investment Manager has contractually agreed, through May 1, 2013, to limit the Fund’s net annual operating expenses (subject to certain excluded expenses) to 0.99%. The Trustees took into account management’s discussion of the Fund’s expenses. The Trustees concluded that, in light of the nature, extent and quality of the services provided by the Investment Manager and the Subadvisor, the foregoing expense limitation and the considerations noted above with respect to the Subadvisor and the Investment Manager, the Fund’s advisory fees, including subadvisory fees, are reasonable.

*    *    *    *

After consideration of the foregoing, the Trustees also reached the following conclusions (in addition to the conclusions discussed above) regarding the Investment Management Agreement and the Subadvisory Agreement: (a) the Investment Manager and the Subadvisor have demonstrated that they possess the capability and resources to perform the duties required of them under the Investment Management Agreement and the Subadvisory Agreement; (b) the Subadvisor’s Investment Strategy is appropriate for pursuing the Fund’s investment objectives; and (c) the Investment Manager and the Subadvisor maintain appropriate compliance programs.

Based on all of the above-mentioned factors and related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the same weight to each factor, the Trustees concluded that approval of the Investment Management Agreement and the Subadvisory Agreement would be in the best interests of the Fund and its shareholders. Accordingly, on June 21-22, 2012, the Trustees, including a majority of the Independent Trustees, voted to approve the Investment Management Agreement and the Subadvisory Agreement for the Fund.

 

 

 

 

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Investment Manager and Administrator

Managers Investment Group LLC

800 Connecticut Avenue

Norwalk, CT 06854

(800) 835-3879

Distributor

Managers Distributors, Inc.

800 Connecticut Avenue

Norwalk, CT 06854

(800) 835-3879

Custodian

The Bank of New York Mellon

2 Hanson Place

Brooklyn, NY 11217

Legal Counsel

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Attn: Managers

P.O. Box 9769

Providence, RI 02940

(800) 548-4539

For ManagersChoice™ Only

Managers

c/o BNY Mellon Investment Servicing (US) Inc.

P.O. Box 9847

Providence, RI 02940-8047

(800) 358-7668

Trustees

Jack W. Aber

Bruce B. Bingham

Christine C. Carsman

William E. Chapman, II

Edward J. Kaier

Steven J. Paggioli

Eric Rakowski

Thomas R. Schneeweis

 

 

 

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Table of Contents

MANAGERS AND MANAGERS AMG FUNDS

 

EQUITY FUNDS

  

BALANCED FUNDS

 

CADENCE CAPITAL APPRECIATION

CADENCE FOCUSED GROWTH

CADENCE MID-CAP

CADENCE EMERGING COMPANIES

Cadence Capital Management, LLC

 

CHICAGO EQUITY PARTNERS MID-CAP

Chicago Equity Partners, LLC

 

ESSEX SMALL/MICRO CAP GROWTH

Essex Investment Management Co., LLC

 

FQ TAX-MANAGED U.S. EQUITY

FQ U.S. EQUITY

First Quadrant, L.P.

 

FRONTIER SMALL CAP GROWTH

Frontier Capital Management Company, LLC

 

GW&K SMALL CAP EQUITY

Gannett Welsh & Kotler, LLC

 

MICRO-CAP

Lord, Abbett & Co. LLC

WEDGE Capital Management L.L.P.

Next Century Growth Investors LLC

RBC Global Asset Management (U.S.) Inc.

  

 

REAL ESTATE SECURITIES

Urdang Securities Management, Inc.

 

RENAISSANCE LARGE CAP GROWTH

Renaissance Group LLC

 

SKYLINE SPECIAL EQUITIES

PORTFOLIO

Skyline Asset Management, L.P.

 

SPECIAL EQUITY

Ranger Investment Management, L.P.

Lord, Abbett & Co. LLC

Smith Asset Management Group, L.P.

Federated MDTA LLC

 

SYSTEMATIC VALUE

SYSTEMATIC MID CAP VALUE

Systematic Financial Management, L.P.

 

TIMESSQUARE MID CAP GROWTH

TIMESSQUARE SMALL CAP GROWTH

TSCM GROWTH EQUITY

TimesSquare Capital Management, LLC

 

TRILOGY GLOBAL EQUITY

TRILOGY EMERGING MARKETS EQUITY

TRILOGY INTERNATIONAL SMALL CAP

Trilogy Global Advisors, L.P.

 

YACKTMAN FUND

YACKTMAN FOCUSED FUND

Yacktman Asset Management L.P.

  

 

CHICAGO EQUITY PARTNERS BALANCED

Chicago Equity Partners, LLC

 

ALTERNATIVE FUNDS

 

FQ GLOBAL ALTERNATIVES

FQ GLOBAL ESSENTIALS

First Quadrant, L.P.

 

INCOME FUNDS

 

BOND (MANAGERS)

FIXED INCOME

GLOBAL INCOME OPPORTUNITY

Loomis, Sayles & Co., L.P.

 

BOND (MANAGERS PIMCO)

Pacific Investment Management Co. LLC

 

CALIFORNIA INTERMEDIATE TAX-FREE

Miller Tabak Asset Management LLC

 

GW&K MUNICIPAL BOND

GW&K MUNICIPAL ENHANCED YIELD

Gannett Welsh & Kotler, LLC

 

HIGH YIELD

J.P. Morgan Investment Management LLC

 

INTERMEDIATE DURATION GOVERNMENT

SHORT DURATION GOVERNMENT

Smith Breeden Associates, Inc.

 

This report is prepared for the Fund’s shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by Managers Distributors, Inc., member FINRA.

 

A description of the policies and procedures each Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) Web site at www. sec.gov. For information regarding each Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC Web site at www.sec.gov.

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s Web site at www.sec.gov. A Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. To review a complete list of the Fund’s portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit www.managersinvest.com.

 

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www.managersinvest.com

 

     
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Table of Contents

SEMI-ANNUAL REPORT

Managers Funds

June 30, 2012

Managers Global Income Opportunity Fund

(formerly Managers Global Bond Fund)

 

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Table of Contents

Managers Global Income Opportunity Fund

 

Semi-Annual Report — June 30, 2012 (unaudited)

TABLE OF CONTENTS

 

      Page  

ABOUT YOUR FUND’S EXPENSES

     4   

FUND PERFORMANCE

      5   

FUND SNAPSHOTS AND SCHEDULE OF PORTFOLIO INVESTMENTS

      6   

NOTES TO THE SCHEDULE OF PORTFOLIO INVESTMENTS

      12   

FINANCIAL STATEMENTS

   

Statement of Assets and Liabilities

     15   

Balance sheet, net asset value (NAV) per share computation and cumulative undistributed amounts

   

Statement of Operations

     16   

Detail of sources of income, expenses, and realized and unrealized gains (losses) during the period

   

Statements of Changes in Net Assets

     17   

Detail of changes in assets for the past two periods

   

FINANCIAL HIGHLIGHTS

     18   

Historical net asset values per share, distributions, total returns, income and expense ratios, turnover ratios and net assets

   

NOTES TO FINANCIAL STATEMENTS

     19   

Accounting and distribution policies, details of agreements and transactions with Fund management and affiliates, and descriptions of certain investment risks

   

ANNUAL RENEWAL OF INVESTMENT ADVISORY AGREEMENT

     24   

Nothing contained herein is to be considered an offer, sale or solicitation of an offer to buy shares of any series of the Managers Family of Funds. Such offering is made only by Prospectus, which includes details as to offering price and other material information.

 

Table of Contents

 

About Your Fund’s Expenses (unaudited)

 

 

As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

Six Months Ended June 30, 2012

   Expense
Ratio
for the
Period		     Beginning
Account
Value
01/01/12		     Ending
Account
Value
06/30/12		     Expenses
Paid
During
the
Period*		  

Managers Global Income Opportunity Fund

        

Based on Actual Fund Return

     1.10 %    $ 1,000      $ 1,040      $ 5.58   

Hypothetical (5% return before expenses)

     1.10 %    $ 1,000      $ 1,019      $ 5.52   

 

* Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent half-year (182), then divided by 366.
 

 

 

 

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Fund Performance

Periods ended June 30, 2012 (unaudited)

 

The table below shows the average annual total returns for the periods indicated for the Fund, as well as the Fund’s relative index for the same time periods.

 

Average Annual Total Returns1

    Six Months*     One Year     Five Years     Ten Years  

Managers Global Income Opportunity Fund2,3,4,5,6

      3.99 %      2.43 %      6.67 %      7.48 % 

Barclays Global Aggregate Bond Index®7

      1.50 %      2.73 %      6.70 %      6.49 % 

 

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. For performance information through the most recent month end, please call (800) 835-3879 or visit our Web site at www.managersinvest.com.

Investors should carefully consider the amount they plan to invest, their investment objectives, the Fund’s investment objectives, risks, charges, and expenses before investing. For this and other information, please call (800) 835-3879 or visit our Web site at www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member of FINRA.

 

* Not annualized.
1 

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. The listed returns on the Fund are net of expenses and based on the published NAV as of June 30, 2012. All returns are in U.S. dollars($).

2 

The Fund is subject to the risks associated with investments in debt securities, such as default risk and fluctuations in the perception of the debtor’s ability to pay its creditors.

3 

From time to time, the Fund’s advisor has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

4 

Changing interest rates may adversely affect the value of a fixed income investment. An increase in interest rates typically causes the value of bonds and other fixed income securities to fall. The Fund is subject to the risks associated with investments in debt securities, such as default risk and fluctuations in the perception of the debtor’s ability to pay its creditors.

5 

Investments in foreign securities are subject to additional risks such as changing market conditions, economic and political instability, and currency exchange rate fluctuations. The Fund is subject to currency risk resulting from fluctuations in exchange rates that may affect the total loss or gain on a non- U.S. dollar security when converted back to U.S. dollars.

6 

The Fund may invest in below investment grade debt securities and unrated securities of similar credit quality (commonly known as “junk bond” or “high yield securities”) which may be subject to greater levels of interest rate, credit, and liquidity risk.

7 

The Barclays Global Aggregate Bond Index provides a broad-based measure of the global investment-grade fixed income markets. The three major components of this index are the U.S. Aggregate, the Pan-European Aggregate, and the Asian-Pacific Aggregate Indices. The Index also includes Eurodollar and Euro-Yen corporate bonds, Canadian government, agency and corporate securities, and USD investment-grade 144A securities. Unlike the Fund, the Barclays Global Aggregate Bond Index is unmanaged, is not available for investment, and does not incur fees.

Not FDIC Insured, nor bank guaranteed. May lose value.

 

 

 

 

5

Table of Contents

 

Managers Global Income Opportunity Fund

Fund Snapshots

June 30, 2012

 

Portfolio Breakdown (unaudited)

 

Category

   Managers
Global
Income
Opportunity
Fund**		     Barclays
Global
Aggregate
Bond
Index		  

Foreign Government and Agency Obligations

     40.8 %      51.7 % 

Corporate Bonds and Notes

     38.6 %      15.7 % 

U.S. Government Obligations

     11.6 %      16.1 % 

Asset-Backed Securities

     2.9 %      0.2 % 

Mortgage-Backed Securities

     1.5 %      16.3 % 

Municipal Bonds

     0.2 %      0.0 % 

Other Assets and Liabilities

     4.4 %      0.0 % 

 

** As a percentage of net assets.

Rating

    Managers
Global
Income
Opportunity
Fund†		     Barclays
Global
Aggregate
Bond
Index		  

U.S. Treasury & Agency

      12.2 %      28.1 % 

Aaa

      23.3 %      22.4 % 

Aa

      8.1 %      25.4 % 

A

      23.9 %      14.7 % 

Baa

      22.8 %      9.4 % 

Ba & lower

      9.1 %      0.0 % 

Not Rated

      0.6 %      0.0 % 

 

† 

As a percentage of market value of fixed income securities. Chart does not include equity securities.

 

 

Top Ten Holdings (unaudited)

 

Security Name

    % of
Net Assets		  

U.S. Treasury Notes, 0.250%, 02/15/15

      8.5 % 

Mexican Fixed Rate Notes, 7.750%, 12/14/17

      3.2   

Japan Government Notes, Series 84, 0.700%, 06/20/14*

      2.9   

Canadian Government Notes, 3.000%, 12/01/15*

      2.3   

Bundesrepublik Deutschland Bonds, Series 06, 3.750%, 01/04/17

      2.2   

Mexican Fixed Rate Bonds, 8.000%, 12/07/23*

      2.0   

U.S. Treasury Notes, 2.250%, 03/31/16

      1.9   

International Bank for Reconstruction & Development Notes, GMTN, 2.300%, 02/26/13

      1.7   

Norway Government Bonds, Series 473, 4.500%, 05/22/19*

      1.6   

Singapore Government Notes, 1.625%, 04/01/13*

      1.4   
  

 

 

  

Top Ten as a Group

      27.7 % 
  

 

 

  

 

* Top Ten Holding at December 31, 2011

 

 

 

 

 

 

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

 

 

6

Table of Contents

 

Managers Global Income Opportunity Fund

Schedule of Portfolio Investments

June 30, 2012 (unaudited)

 

 

 

          Principal Amount      Value  

Asset-Backed Securities - 2.9%

         

Avis Budget Rental Car Funding AESOP LLC, Series 2009-2A, Class A, 5.680%, 02/20/14 (a)

       $ 100,000       $ 102,091   

Capital One Multi-Asset Execution Trust, Series 2004-B7, Class B7, 1.243%, 08/17/17 (07/18/12)1

    EUR      100,000         120,162   

Hertz Vehicle Financing LLC, Series 2009-2A, Class A1, 4.260%, 03/25/14 (a)

         100,000         101,802   

Hyundai Capital Auto Funding, Ltd., Series 2010-8A, Class A, 1.243%, 09/20/16 (07/18/12) (a)1

         200,000         196,747   

MBNA Credit Card Master Note Trust, Series 2005-B3, Class B3, 1.050%, 03/19/18 (07/18/12)1

    EUR      100,000         117,152   

Santander Drive Auto Receivables Trust, Series 2011-S2A, Class D, 3.350%, 06/15/17 (a)

         55,248         55,248   

Trinity Rail Leasing, L.P., Series 2010-1A, Class A, 5.194%, 10/16/40 (a)

         94,295         98,094   

World Financial Network Credit Card Master Trust, Series 2010-A, Class A, 3.960%, 04/15/19

         95,000         102,701   

Total Asset-Backed Securities (cost $877,282)

            893,997   

Corporate Bonds and Notes - 38.6%

         

Financials - 17.2%

         

Allianz Finance II, B.V., EMTN, 5.750%, 07/08/412

    EUR      100,000         113,980   

AXA SA, 7.125%, 12/15/20

    GBP      100,000         160,890   

Banco Latinoamericano de Comercio Exterior SA, 3.750%, 04/04/17 (a)

         150,000         149,250   

Banco Santander Chile, 6.500%, 09/22/20 (a)

    CLP      100,000,000         190,854   

Banco Votorantim SA, 6.250%, 05/16/16 (a)

    BRL      300,000         166,064   

Bank of America Corp.,

         

4.750%, 05/06/192

    EUR      100,000         106,935   

5.700%, 01/24/22

         140,000         154,181   

Barclays Bank PLC, 6.050%, 12/04/17

         100,000         101,044   

BBVA Bancomer SA, 6.500%, 03/10/21 (a)

         100,000         101,000   

BNP Paribas SA, Series BKNT, 5.000%, 01/15/21

         75,000         76,989   

BNZ International Funding, Ltd., EMTN, 4.000%, 03/08/17

    EUR      100,000         133,890   

Braskem Finance, Ltd., 5.750%, 04/15/21 (a)

         200,000         205,500   

Citigroup, Inc.,

         

5.500%, 02/15/17

         85,000         88,820   

6.250%, 06/29/17

    NZD      200,000         159,803   

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, EMTN, 4.375%, 01/22/14

    EUR      85,000         112,884   

Crown Castle Towers LLC, 6.113%, 01/15/20 (a)

         100,000         115,762   

General Electric Capital Corp., Series A, 7.125%, 12/15/492,3

         200,000         211,292   

HSBC Bank PLC, 4.125%, 08/12/20 (a)

         100,000         104,230   

Hutchison Whampoa International 11, Ltd., 3.500%, 01/13/17 (a)

         200,000         207,381   

Hyundai Capital Services, Inc., 3.500%, 09/13/17 (a)

         200,000         201,687   

JPMorgan Chase & Co., 4.400%, 07/22/20

         75,000         79,105   

Lloyds TSB Bank PLC, 6.500%, 09/14/20 (a)

         100,000         98,495   

Morgan Stanley,

         

5.375%, 11/14/13

    GBP      40,000         63,924   

5.500%, 07/24/20

         100,000         97,837   

MTN, 7.250%, 05/26/15

    AUD      200,000         206,829   

National Australia Bank, Ltd., GMTN, 4.750%, 07/15/16

    EUR      100,000         140,002   

Network Rail Infrastructure Finance PLC, EMTN, 3.500%, 06/17/13

         300,000         308,592   

Shinhan Bank, 4.375%, 07/27/17 (a)

         200,000         213,300   

Sirius International Group, Ltd., 6.375%, 03/20/17 (a)

         140,000         148,175   

 

 

The accompanying notes are an integral part of these financial statements.

7

Table of Contents

 

Managers Global Income Opportunity Fund

Schedule of Portfolio Investments (continued)

 

 

 

          Principal Amount      Value  

Financials - 17.2% (continued)

         

SLM Corp., MTN, Series A, 5.000%, 10/01/13

       $ 150,000       $ 154,500   

VTB Bank OJSC Via VTB Capital, S.A., 6.000%, 04/12/17 (a)

         200,000         203,000   

Wells Fargo & Co., 4.625%, 11/02/35

    GBP      50,000         81,416   

Westpac Banking Corp., 2.450%, 11/28/16 (a)

         200,000         205,700   

Yapi ve Kredi Bankasi Via Unicredit Luxembourg SA, 5.188%, 10/13/15 (a)

         200,000         201,500   

Zurich Finance USA, Inc.,

         

EMTN, 4.500%, 06/15/252

    EUR      100,000         126,310   

EMTN, 5.750%, 10/02/232

    EUR      100,000         127,496   

Total Financials

            5,318,617   

Industrials - 18.7%

         

Asciano Finance, Ltd., 4.625%, 09/23/20 (a)

         125,000         124,359   

Avnet, Inc., 5.875%, 06/15/20

         60,000         66,131   

Bell Aliant Regional Communications LP, 5.410%, 09/26/16

    CAD      160,000         170,273   

Bell Canada,

         

MTN, 7.300%, 02/23/32 (a)

    CAD      130,000         164,761   

Series M-17, 6.100%, 03/16/35 (a)

    CAD      45,000         52,312   

BRF - Brasil Foods, S.A., 5.875%, 06/06/22 (a)

         200,000         206,000   

British Telecommunications PLC, 5.750%, 12/07/28

    GBP      100,000         173,977   

CSN Resources, S.A., 6.500%, 07/21/20 (a)

         100,000         108,330   

Delta Air Lines, Inc., 2007-1 Class B Pass Through Trust, Series 071B, 8.021%, 08/10/22

         81,526         82,447   

Desarrolladora Homex, S.A.B. de C.V., 9.750%, 03/25/20 (a)

         200,000         210,000   

DP World, Ltd., 6.850%, 07/02/37 (a)

         250,000         245,625   

Dubai Electricity & Water Authority, 6.375%, 10/21/16 (a)

         200,000         215,750   

Edcon Proprietary, Ltd., 3.912%, 06/15/14 (09/15/12) (a)1

    EUR      150,000         172,513   

ERAC USA Finance LLC, 6.700%, 06/01/34 (a)

         120,000         137,745   

Fibria Overseas Finance, Ltd., 6.750%, 03/03/21 (a)

         150,000         149,700   

Finmeccanica S.p.A., 4.875%, 03/24/25

    EUR      100,000         98,415   

HCA, Inc.,

         

6.375%, 01/15/15

         35,000         37,188   

6.500%, 02/15/16

         80,000         86,200   

7.690%, 06/15/25

         15,000         14,438   

MTN, 7.580%, 09/15/25

         10,000         9,550   

Hyatt Hotels Corp., 5.375%, 08/15/21

         90,000         98,875   

International Paper Co., 6.000%, 11/15/41

         50,000         56,371   

Korea National Oil Corp., 3.125%, 04/03/17 (a)

         200,000         203,944   

Lafarge SA, Series 2010, EMTN, 6.625%, 11/29/18

    EUR      50,000         64,857   

Lotte Shopping Co., Ltd., 3.375%, 05/09/17 (a)

         200,000         203,364   

Methanex Corp., 5.250%, 03/01/22

         285,000         295,690   

Nabors Industries, Inc., 4.625%, 09/15/21

         75,000         77,929   

NII Capital Corp., 7.625%, 04/01/21

         95,000         81,462   

Noble Group, Ltd., 6.750%, 01/29/20 (a)

         200,000         193,000   

Odebrecht Drilling VIII/IX, Ltd., 6.350%, 06/30/21 (a)4

         98,000         102,655   

 

 

The accompanying notes are an integral part of these financial statements.

8

Table of Contents

 

Managers Global Income Opportunity Fund

Schedule of Portfolio Investments (continued)

 

 

 

            Principal Amount      Value  

Industrials - 18.7% (continued)

         

OGX Austria GmbH, 8.500%, 06/01/18 (a)

       $ 200,000       $ 178,000   

Oi SA, 9.750%, 09/15/16 (a)

      BRL         600,000         312,920   

Owens-Illinois, Inc., 7.800%, 05/15/18

         125,000         142,344   

Portugal Telecom International Finance, B.V., EMTN, 5.000%, 11/04/19

      EUR         50,000         51,588   

Qwest Corp., 7.250%, 10/15/35

         158,000         159,185   

Reliance Holdings USA, Inc., 5.400%, 02/14/22 (a)

         250,000         249,985   

Rowan Companies, Inc., 5.000%, 09/01/17

         60,000         64,587   

Telecom Italia Capital SA,

         

6.375%, 11/15/33

         45,000         35,325   

7.200%, 07/18/36

         20,000         16,950   

Telefonica Emisiones, S.A.U.,

         

5.134%, 04/27/20

         75,000         64,604   

7.045%, 06/20/36

         75,000         65,571   

Transportadora de Gas del Sur SA, 7.875%, 05/14/17 (a)

         235,000         163,325   

Urbi Desarrollos Urbanos, S.A.B. de C.V., 9.750%, 02/03/22 (a)

         200,000         211,000   

Valeant Pharmaceuticals International, 6.750%, 08/15/21 (a)4

         60,000         58,800   

Voto-Votorantim, Ltd., 6.750%, 04/05/21 (a)

         100,000         109,000   

Total Industrials

            5,787,045   

Utilities - 2.7%

         

Axtel, S.A.B. de C.V.,

         

7.625%, 02/01/17 (a)

         55,000         36,025   

9.000%, 09/22/19 (a)

         45,000         29,700   

CEZ A.S., 4.250%, 04/03/22 (a)

         200,000         204,914   

Deutsche Telekom International Finance, B.V., EMTN, 4.875%, 04/22/25

      EUR         50,000         72,841   

DPL, Inc., 6.500%, 10/15/16 (a)

         90,000         97,200   

EDP Finance, B.V., EMTN, 8.625%, 01/04/24

      GBP         50,000         69,302   

Emgesa SA ESP, 8.750%, 01/25/21 (a)

      COP         120,000,000         74,424   

Iberdrola Finance Ireland, Ltd., 5.000%, 09/11/19 (a)

         75,000         69,266   

Listrindo Capital, B.V., 6.950%, 02/21/19 (a)

         200,000         204,632   

Total Utilities

            858,304   

Total Corporate Bonds and Notes (cost $11,806,215)

            11,963,966   

Foreign Government and Agency Obligations - 40.8%

         

Australian Government Index Linked Bonds, Series 2009-25CI, 3.000%, 09/20/25

      AUD         180,000         254,329   

Bundesrepublik Deutschland Bonds,

         

Bonds, 3.000%, 07/04/20

      EUR         60,000         85,928   

Series 05, 4.000%, 01/04/37

      EUR         110,000         182,189   

Series 06, 3.750%, 01/04/17

      EUR         465,000         672,049   

Canadian Government,

         

Bonds, 4.000%, 06/01/16

      CAD         260,000         282,514   

Notes, 3.000%, 12/01/15

      CAD         675,000         703,363   

Central American Bank for Economic Integration Notes, 3.875%, 02/09/17 (a)

         280,000         289,438   

Corp. Andina de Fomento, Notes, 4.375%, 06/15/22

         280,000         286,001   

 

 

The accompanying notes are an integral part of these financial statements.

9

Table of Contents

 

Managers Global Income Opportunity Fund

Schedule of Portfolio Investments (continued)

 

 

 

            Principal Amount      Value  

Foreign Government and Agency Obligations - 40.8% (continued)

         

Eksportfinans ASA Notes, 2.000%, 09/15/15

       $ 120,000       $ 107,393   

Empresas Publicas de Medellin ESP Notes, 8.375%, 02/01/21 (a)

      COP         180,000,000         109,253   

European Investment Bank,

         

Bonds, 2.375%, 07/10/20

      CHF         165,000         189,071   

Notes, 6.675%, 04/24/13 (a)5

      IDR         1,842,000,000         183,570   

Export-Import Bank of Korea Notes, 4.000%, 11/26/15 (a)

      PHP         5,000,000         118,714   

Iceland Government International Notes, 5.875%, 05/11/22

         300,000         290,934   

Inter-American Development Bank Notes, 6.827%, 08/20/155

      IDR         750,000,000         65,853   

International Bank for Reconstruction & Development Notes, GMTN, 2.300%, 02/26/13

      KRW         600,000,000         520,180   

Italy Buoni Poliennali Del Tesoro Bonds, 5.000%, 03/01/22

      EUR         125,000         150,921   

Japan Government,

         

Bonds, Series 299, 1.300%, 03/20/19

      JPY         22,500,000         297,904   

Notes, Series 84, 0.700%, 06/20/14

      JPY         71,850,000         909,482   

Korea Treasury Notes, Series 1409, 5.000%, 09/10/14

      KRW         430,000,000         388,680   

Malaysian Government Bonds, Series 1/06, 4.262%, 09/15/16

      MYR         375,000         123,253   

Mexican Fixed Rate,

         

Bonds, 8.000%, 12/07/23

      MXN         6,800,000         616,325   

Bonds, Series M-30, 8.500%, 11/18/38

      MXN         4,500,000         408,128   

Bonds, Series M, 6.500%, 06/10/21

      MXN         3,350,000         271,612   

Notes, 7.750%, 12/14/17

      MXN         11,650,000         989,753   

Notes, Series M 10, 8.500%, 12/13/18

      MXN         1,600,000         142,468   

New South Wales Treasury Corp. Bonds, Series 2007 CIB1, 2.750%, 11/20/25

      AUD         70,000         90,046   

New Zealand Government Bonds, Series 521, 6.000%, 05/15/21

      NZD         335,000         322,418   

Norway Government Bonds, Series 473, 4.500%, 05/22/19

      NOK         2,570,000         509,874   

Poland Government,

         

Bonds, 5.000%, 03/23/22

         250,000         272,875   

Notes, EMTN, 3.000%, 09/23/14

      CHF         65,000         71,379   

Republic of Latvia Notes, 5.250%, 02/22/17

         200,000         206,500   

Singapore Government,

         

Bonds, 2.250%, 07/01/13

      SGD         120,000         96,682   

Bonds, 2.250%, 06/01/21

      SGD         210,000         177,117   

Notes, 1.625%, 04/01/13

      SGD         535,000         426,661   

Spain Government Notes, 4.250%, 10/31/16

      EUR         150,000         179,863   

U.K. Gilt,

         

Bonds, 4.000%, 03/07/22

      GBP         145,000         272,630   

Bonds, 4.250%, 03/07/36

      GBP         120,000         231,708   

Bonds, 4.750%, 03/07/20

      GBP         90,000         175,543   

Bonds, 5.000%, 03/07/25

      GBP         110,000         228,300   

Notes, 1.750%, 01/22/17

      GBP         220,000         359,892   

Uruguay Government International Bonds,

         

3.700%, 06/26/37

      UYU         800,000         52,818   

4.375%, 12/15/28

      UYU         1,630,109         85,734   

5.000%, 09/14/18

      UYU         3,000,000         231,379   

Total Foreign Government and Agency Obligations (cost $12,082,647)

            12,630,724   

 

 

The accompanying notes are an integral part of these financial statements.

10

Table of Contents

 

Managers Global Income Opportunity Fund

Schedule of Portfolio Investments (continued)

 

 

 

     Principal Amount      Value  

Mortgage-Backed Securities - 1.5%

      

Extended Stay America Trust, Series 2010-ESHA, Class D, 5.498%, 11/05/27 (a)

    $ 135,000       $ 136,256   

Greenwich Capital Commercial Funding Corp., Series 2007-GG11, Class A4, 5.736%, 12/10/49

      75,000         83,111   

GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.979%, 08/10/452

      91,000         100,993   

Morgan Stanley Capital I, Inc., Series 2007-IQ14, Class A4, 5.692%, 04/15/492

      50,000         55,031   

Wachovia Bank Commercial Mortgage Trust, Series 2007-C30, Class A5, 5.342%, 12/15/43

      75,000         80,933   

Total Mortgage-Backed Securities (cost $444,037)

         456,324   

Municipal Bonds - 0.2%

      

California Statewide Communities Development Authority Revenue, Series 2007 A, 4.750%, 04/01/33 (cost $45,871)

      55,000         56,142   

U.S. Government Obligations - 11.6%

      

U.S. Treasury Notes,

      

0.250%, 02/15/15

      2,650,000         2,640,683   

1.375%, 11/30/15

      120,000         123,534   

1.500%, 07/31/166

      240,000         248,644   

2.250%, 03/31/16

      540,000         574,257   

Total U.S. Government Obligations (cost $3,575,706)

         3,587,118   
     Shares         

Other Investment Companies - 1.7%7

      

BNY Mellon Overnight Government Fund, 0.18%8

      163,210         163,210   

Dreyfus Cash Management Fund,
Institutional Class Shares, 0.08%

      352,945         352,945   

Total Other Investment Companies (cost $516,155)

         516,155   

Total Investments - 97.3% (cost $29,347,913)

         30,104,426   

Other Assets, less Liabilities - 2.7%

         846,020   

Net Assets - 100.0%

       $ 30,950,446   

 

 

The accompanying notes are an integral part of these financial statements.

11

Table of Contents

 

Notes to Schedule of Portfolio Investments (unaudited)

 

The following footnotes and abbreviations should be read in conjunction with the Schedule of Portfolio Investments previously presented in this report.

Based on the approximate cost of investments of $29,348,174 for Federal income tax purposes at June 30, 2012, the aggregate gross unrealized appreciation and depreciation were $1,204,532 and $448,280, respectively, resulting in net unrealized appreciation of investments of $756,252.

 

* Non-income-producing security.

 

(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified buyers. At June 30, 2012, the value of these securities amounted to $8,392,360, or 27.1% of net assets.

 

1 

Floating Rate Security. The rate listed is as of June 30, 2012. Date in parentheses represents the security’s next coupon rate reset.

2 

Variable Rate Security. The rate listed is as of June 30, 2012, and is periodically reset subject to terms and conditions set forth in the debenture.

3 

Perpetuity Bond. The date shown is the final call date.

4 

Some or all of these securities, amounting to a market value of $155,373, or 0.5% of net assets, were out on loan to various brokers.

5 

Represents yield to maturity at June 30, 2012.

6 

Some or all of this security is held as collateral for futures contracts, amounting to a market value of $25,900, or 0.1% of net assets.

7 

Yield shown represents the June 30, 2012, seven-day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage.

8 

Collateral received from brokers for securities lending was invested in this short-term investment.

The following tables summarize the inputs used to value the Fund’s net assets by the above fair value hierarchy levels as of June 30, 2012. (See Note 1(a) in the Notes to the Financial Statements.)

 

    Quoted Prices in  Active
Markets for Identical
Investments
Level 1		     Significant Other
Observable  Inputs
Level 2		     Significant Unobservable Inputs
Level 3		     Total  

Investments in Securities

                        

Asset-Backed Securities

     —        $ 893,997        —        $ 893,997   

Corporate Bonds and Notes†

     —          11,963,966        —          11,963,966   

Foreign Government and Agency Obligations

     —          12,630,724        —          12,630,724   

Mortgage-Backed Securities

     —          456,324        —          456,324   

Municipal Bonds

     —          56,142        —          56,142   

U.S. Government Obligations†

     —          3,587,118        —          3,587,118   

Other Investment Companies

   $ 516,155        —          —          516,155   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Investments in Securities

   $ 516,155      $ 29,588,271        —        $ 30,104,426   
 

 

 

    

 

 

    

 

 

    

 

 

  

Financial Derivative Instruments-Assets††

        

Foreign Exchange Contracts

     —        $ 27,783        —        $ 27,783   

Interest Rate Contracts

   $ 1,637        —          —          1,637   
 

 

 

    

 

 

    

 

 

    

 

 

  
    1,637        27,783        —          29,420   
 

 

 

    

 

 

    

 

 

    

 

 

  

Financial Derivative Instruments-Liabilities††

        

Foreign Exchange Contracts

     —          (40,919 )      —          (40,919 ) 

Interest Rate Contracts

     (2,878 )      —          —          (2,878 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  
    (2,878 )      (40,919 )      —          (43,797 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total Financial Derivative Instruments

   $ (1,241 )    $ (13,136 )      —        $ (14,377 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

 

† 

All corporate bonds and notes and U.S. government and agency obligations held in the Fund are level 2 securities. For a detailed breakout of the corporate bonds and notes and U.S. government and agency obligations by major industry or agency classification, please refer to the Schedule of Portfolio Investments.

†† 

Derivative instruments, such as futures and forwards contracts, are not reflected in the Schedule of Portfolio Investments and are valued at the unrealized appreciation/depreciation of the instrument.

As of June 30, 2012, the Fund had no transfers between Level 1 and Level 2 from the beginning of the reporting period.

 

 

The accompanying notes are an integral part of these financial statements.

12

Table of Contents

 

Notes to Schedule of Portfolio Investments (continued)

 

 

The following schedule is the fair value of derivative instruments at June 30, 2012:

 

    

Asset Derivatives

     

Liability Derivatives

  

Derivatives not accounted for as hedging
instruments

   

Statement of Assets and Liabilities
Location

    Fair Value     

Statement of Assets and Liabilities
Location

    Fair Value  

Interest rate contracts

    Variation margin receivable*    $ 2,695       Variation margin payable*    $ 3,750   

Foreign exchange contracts

    Unrealized appreciation of foreign currency contracts      27,783       Unrealized depreciation of foreign currency contracts      40,919   
     

 

 

        

 

 

  

Totals

       $ 30,478          $ 44,669   
     

 

 

        

 

 

  

 

* Includes only the June 30, 2012 futures variation margin. Prior futures variation margin movements have been reflected in cash on the Statement of Assets and Liabilities upon receipt or payment.

For the six months ended June 30, 2012, the effect of derivative instruments on the Statement of Operations and the amount of realized gain/(loss) on derivatives recognized in income were as follows:

 

Derivatives not accounted for as hedging instruments

    Futures     Forward Currency
Contracts		     Total  

Interest rate contracts

    $ (8,351 )      —        $ (8,351 ) 

Foreign exchange contracts

      —        $ (57,457 )      (57,457 ) 
  

 

 

    

 

 

    

 

 

  

Totals

    $ (8,351 )    $ (57,457 )    $ (65,808 ) 
  

 

 

    

 

 

    

 

 

  

The change in unrealized gain/(loss) on derivatives recognized in income were as follows:

 

Derivatives not accounted for as hedging instruments

    Futures      Forward Currency
Contracts		     Total  

Interest rate contracts

    $ 2,504         —        $ 2,504   

Foreign exchange contracts

      —         $ (10,977 )      (10,977 ) 
  

 

 

     

 

 

    

 

 

  

Totals

    $ 2,504       $ (10,977 )    $ (8,473 ) 
  

 

 

     

 

 

    

 

 

  

At June 30, 2012, the Fund had the following futures contracts:

(See Note 9 in the Notes to the Financial Statements.)

 

Type

    Number of Contracts      Position      Expiration Date      Unrealized Gain/(Loss)  

10-Year U.S. Treasury Note

      3         Short         09/19/12       $ (1,775 ) 

5-Year U.S. Treasury Note

      5         Short         09/28/12         (1,103 ) 

U.S. Treasury Long Bond

      2         Long         09/19/12         1,637   
           

 

 

  

Total

             $ (1,241 ) 
           

 

 

  

 

 

The accompanying notes are an integral part of these financial statements.

13

Table of Contents

 

Notes to Schedule of Portfolio Investments (continued)

 

 

At June 30, 2012, the Fund had the following forward foreign currency contracts (in U.S. dollars):

(See Note 8 in the Notes to Financial Statements.)

 

Foreign Currency

   

Position

   

Settlement Date

   

Counterparty

    Receivable
Amount		      Payable Amount      Unrealized
Gain/
(Loss)		  

Brazilian Real

    Long    08/06/12 to 11/13/12    CS    $ 296,638       $ 304,439       $ (7,801 ) 

Euro

    Long    09/12/12    DDB      229,021         225,428         3,592   

Malaysian Ringgit

    Long    09/21/12    MSC      266,326         267,481         (1,155 ) 

South Korean Won

    Long    09/10/12    BRC      505,991         491,535         14,457   

South Korean Won

    Long    09/10/12    CS      147,704         143,363         4,341   

Australian Dollar

    Short    08/29/12    CS      488,780         508,751         (19,971 ) 

Canadian Dollar

    Short    09/07/12    CS      455,581         460,913         (5,332 ) 

New Zealand Dollar

    Short    07/31/12    BRC      308,245         303,529         4,716   

Norwegian Krone

    Short    09/12/12    DDB      225,428         231,339         (5,911 ) 

Pound Sterling

    Short    09/28/12    BRC      266,859         266,182         677   

Swiss Franc

    Short    09/19/12    UBS      62,601         63,350         (749 ) 
           

 

 

     

 

 

     

 

 

  

Totals

             $ 3,253,174       $ 3,266,310       $ (13,136 ) 
           

 

 

     

 

 

     

 

 

  

 

Investments Definitions and Abbreviations:

EMTN:    European Medium-Term Notes
ESHA:    Extended Stay Hotels America
GMTN:    Global Multi-Currency Notes
MTN:    Medium-Term Note

 

Counterparty Abbreviations:

BRC:    Barclays Bank PLC
CS:    Credit Suisse
DDB:    Den Danske Bank
MSC:    Morgan Stanley
UBS:    UBS Securities

Currency abbreviations have been used throughout the portfolio to indicate amounts shown in currencies other than the U.S. dollar (USD):

 

AUD:    Australian Dollar
BRL:    Brazilian Real
CAD:    Canadian Dollar
CHF:    Swiss Franc
CLP:    Chilean Peso
COP:    Colombian Peso
EUR:    Euro
GBP:    British Pound
IDR:    Indonesian Rupiah
JPY:    Japanese Yen
KRW:    South Korean Won
MXN:    Mexican Peso
MYR:    Malaysia Ringgit
NOK:    Norwegian Krone
NZD:    New Zealand Dollar
PHP:    Philippine Peso
SGD:    Singapore Dollar
UYU:    Uruguayan Peso

 

 

The accompanying notes are an integral part of these financial statements.

14

Table of Contents

 

Statement of Assets and Liabilities

June 30, 2012 (unaudited)

 

 

Assets:

   

Investments at value* (including securities on loan valued at $155,373)

    $ 30,104,426   

Foreign currency**

      764,750   

Dividends, interest and other receivables

      300,643   

Receivable for Fund shares sold

      42,204   

Unrealized appreciation on foreign currency contracts

      27,783   

Receivable from affiliate

      6,213   

Variation margin receivable

      2,695   

Prepaid expenses

      10,516   

Total assets

      31,259,230   

Liabilities:

   

Payable upon return of securities loaned

      163,210   

Unrealized depreciation on foreign currency contracts

      40,919   

Payable for Fund shares repurchased

      37,787   

Variation margin payable

      3,750   

Accrued expenses:

   

Investment advisory and management fees

      17,594   

Administrative fees

      5,027   

Custodian

      18,886   

Professional fees

      18,357   

Other

      3,254   

Total liabilities

      308,784   

Net Assets

    $ 30,950,446   

Net Assets Represent:

   

Paid-in capital

    $ 32,874,776   

Undistributed net investment income

      682,920   

Accumulated net realized loss from investments, futures contracts and foreign currency transactions

      (3,353,200 ) 

Net unrealized appreciation of investments, futures contracts and foreign currency translations

      745,950   

Net Assets

    $ 30,950,446   

Shares outstanding

      1,542,558   

Net asset value, offering and redemption price per share

    $ 20.06   

* Investments at cost

    $ 29,347,913   

** Foreign currency at cost

    $ 758,897   

 

 

The accompanying notes are an integral part of these financial statements.

15

Table of Contents

 

Statement of Operations

For the six months ended June 30, 2012 (unaudited)

 

 

  

Interest income

    $ 528,263   

Securities lending income

      1,900   

Dividend income

      1,113   

Foreign withholding tax

      (5,512 ) 

Total investment income

      525,764   

Expenses:

   

Investment advisory and management fees

      101,541   

Administrative fees

      29,012   

Custodian

      22,561   

Professional fees

      19,881   

Registration fees

      12,544   

Transfer agent

      6,263   

Reports to shareholders

      6,245   

Trustees fees and expenses

      1,139   

Insurance

      417   

Miscellaneous

      188   

Total expenses before offsets

      199,791   

Expense reimbursements

      (40,223 ) 

Expense reductions

      (4 ) 

Net expenses

      159,564   

Net investment income

      366,200   

Net Realized and Unrealized Gain (Loss):

   

Net realized gain on investments and futures contracts

      386,207   

Net realized loss on foreign currency transactions

      (62,962 ) 

Net change in unrealized appreciation (depreciation) of investments, futures contracts and foreign currency translations

      308,980   

Net realized and unrealized gain

      632,225   

Net increase in net assets resulting from operations

    $ 998,425   

 

 

The accompanying notes are an integral part of these financial statements.

16

Table of Contents

 

Statements of Changes in Net Assets

For the six months ended June 30, 2012 (unaudited) and for the year ended December 31, 2011

 

 

     2012     2011  

Increase (Decrease) in Net Assets From Operations:

     

Net investment income

    $ 366,200      $ 671,037   

Net realized gain on investments, futures contracts and foreign currency transactions

      323,245        739,119   

Net change in unrealized appreciation (depreciation) of investments, futures contracts and foreign currency translations

      308,980        (565,124 ) 

Net increase in net assets resulting from operations

      998,425        845,032   

Distributions to Shareholders:

     

From net investment income

      —          (850,157 ) 

From Capital Share Transactions:

     

Proceeds from sale of shares

      9,023,080        9,189,578   

Reinvestment of dividends and distributions

      —          751,971   

Cost of shares repurchased

      (3,678,948 )      (11,050,797 ) 

Net increase (decrease) from capital share transactions

      5,344,132        (1,109,248 ) 

Total increase (decrease) in net assets

      6,342,557        (1,114,373 ) 

Net Assets:

     

Beginning of period

      24,607,889        25,722,262   

End of period

    $ 30,950,446      $ 24,607,889   

End of period undistributed net investment income

    $ 682,920      $ 316,720   
  

 

 

    

 

 

  

Share Transactions:

     

Sale of shares

      452,815        459,246   

Reinvested shares from dividends and distributions

      —          39,104   

Shares repurchased

      (185,258 )      (554,249 ) 

Net increase (decrease) in shares

      267,557        (55,899 ) 

 

 

The accompanying notes are an integral part of these financial statements.

17

Table of Contents

 

Managers Global Income Opportunity Fund

Financial Highlights

For a share outstanding throughout each period

 

 

     For the six
months ended
June 30, 2012
(unaudited)		     For the year ended December 31,  
     2011     2010     2009     2008     2007  

Net Asset Value, Beginning of Period

    $ 19.30      $ 19.33      $ 18.82      $ 16.93      $ 21.31      $ 21.17   

Income from Investment Operations:

             

Net investment income1

      0.25        0.53        0.50        0.89        0.76        0.70   

Net realized and unrealized gain (loss) on investments1

      0.51        0.12        0.87        3.22        (2.93 )      0.88   

Total from investment operations

      0.76        0.65        1.37        4.11        (2.17 )      1.58   

Less Distributions to Shareholders from:

             

Net investment income

      —          (0.68 )      (0.86 )      (2.22 )      (2.18 )      (1.43 ) 

Net realized gain on investments

      —          —          —          —          (0.03 )      (0.01 ) 

Total distributions to shareholders

      —          (0.68 )      (0.86 )      (2.22 )      (2.21 )      (1.44 ) 

Net Asset Value, End of Period

    $ 20.06      $ 19.30      $ 19.33      $ 18.82      $ 16.93      $ 21.31   

Total Return2

      3.94 %4,5      3.39 %      7.27 %      24.27 %4      (10.07 )%4      7.52 %4 

Ratio of net expenses to average net assets

      1.10 %6      1.10 %      1.10 %      1.10 %      1.10 %      1.19 % 

Ratio of net investment income to average net assets2

      2.52 %6      2.63 %      2.57 %      4.82 %      3.62 %      3.25 % 

Portfolio turnover

      35 %5      91 %      131 %      102 %      56 %      152 % 

Net assets at end of period (000’s omitted)

    $ 30,950      $ 24,608      $ 25,722      $ 26,146      $ 47,735      $ 92,124   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ratios absent expense offsets:3

             

Ratio of total expenses to average net assets

      1.38 %6      1.39 %      1.43 %      1.32 %      1.25 %      1.25 % 

Ratio of net investment income to average net assets

      2.24 %6      2.34 %      2.24 %      4.60 %      3.47 %      3.18 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

 

Notes to Financial Highlights (unaudited)

 

The following footnotes should be read in conjunction with the Financial Highlights of the Fund previously presented in this report.

 

1 

Per share numbers have been calculated using average shares.

2 

Total returns and net investment income would have been lower had certain expenses not been reduced. (See Note 1(c) of Notes to Financial Statements.)

3 

Excludes the impact of interest expense (reimbursements)/recoupment and expense reductions such as brokerage credits, but includes non-reimbursable expenses, if any, such as interest and taxes. (See Note 1(c) of Notes to Financial Statements.)

4 

The Total Return is based on the Financial Statement Net Asset Values as shown above.

5

Not Annualized.

6 

Annualized.

 

 

 

18

Table of Contents

 

Notes to Financial Statements

June 30, 2012 (unaudited)

 

 

1. Summary of Significant Accounting Policies

The Managers Funds (the “Trust”) is an 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 consists of a number of different funds, each having distinct investment management objectives, strategies, risks and policies. Included in this report is the Managers Global Income Opportunity Fund (formerly Managers Global Bond Fund) (the “Fund”). The Fund will deduct a 1.00% redemption fee from the proceeds of any redemption (including a redemption by exchange) of shares if the redemption occurs within 60 days of the purchase of those shares.

The Fund’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require management to make estimates and assumptions that affect the reported amounts 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 period. Actual results could differ from those estimates and such differences could be material. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:

 

a. Valuation of Investments

Equity securities traded on a domestic or international securities exchange are valued at the last quoted sale price, or, lacking any sales, at the last quoted bid price. Over-the-counter securities are valued at the Nasdaq Official Closing Price, if one is available. Lacking any sales, over-the-counter securities are valued at the last quoted bid price. The Fund’s investments are generally valued based on market quotations provided by third-party pricing services approved by the Board of Trustees of the Fund (the “Board”).

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. Futures contracts for which market quotations are readily available are valued at the settlement price as of the close of the futures exchange. Short-term investments having a remaining maturity of 60 days or less are generally valued at amortized cost, which approximates market value. Investments in other open-end regulated investment companies are valued at their end of day net asset value per share.

Under certain circumstances, the value of certain Fund investments (including derivatives) may be based on an evaluation of fair value, pursuant to procedures established by and under the general supervision of the Board. The Pricing Committee is the committee formed by the Board to make fair value determinations for such investments. When determining the fair value of an investment, the

Pricing Committee seeks to determine the price that the Fund might reasonably expect to receive from a current sale of that investment in an arm’s-length transaction. Fair value determinations shall be based upon consideration of all available facts and information, including, but not limited to (i) attributes specific to the investment; (ii) fundamental analytical data and press releases relating to the investment and its issuer; (iii) the value of comparable securities or relevant financial instruments, including derivative securities, traded on other markets or among dealers; and (iv) other factors, such as future cash flows, interest rates, yield curves, volatilities, credit risks and/or default rates. The Board will be presented with a quarterly report comparing fair values determined by the Pricing Committee against subsequent market valuations for those securities. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. The Fund may use the fair value of a portfolio investment to calculate its net asset value (“NAV”) when, for example, (1) market quotations are not readily available because a portfolio investment is not traded in a public market or the principal market in which the investment trades is closed, (2) trading in a portfolio investment is suspended and has not resumed before the Fund calculates its NAV, (3) a significant event affecting the value of a portfolio investment is determined to have occurred between the time of the market quotation provided for a portfolio investment and the time as of which the Fund calculates its NAV, (4) an investment’s price has remained unchanged over a period of time (often referred to as a “stale price”), or (5) Managers Investment Group LLC (the “Investment Manager”) determines that a market quotation is inaccurate. Portfolio investments that trade primarily on foreign markets are priced based upon the market quotation of such securities as of the close of their respective principal markets, as adjusted to reflect the Investment Manager’s determination of the impact of events occurring subsequent to the close of such markets but prior to the time as of which the Fund calculates its NAV. Under certain circumstances, the Investment Manager may adjust such prices based on its determination of the impact of events occurring subsequent to the close of such markets but prior to the time as of which the Fund calculates its NAV. The Fund may invest in securities that may be thinly traded. The Board has adopted procedures to adjust prices of thinly traded securities that are judged to be stale so that they reflect fair value. An investment valued on the basis of its fair value may be valued at a price higher or lower than available market quotations. An investment’s valuation may differ depending on the method used and the factors considered in determining value according to the Fund’s fair value procedures.

 

 

 

 

19

Table of Contents

 

Notes to Financial Statements (continued)

 

 

U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a framework for measuring fair value, and a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation.

The three-tier hierarchy of inputs is summarized below:

Level 1 – inputs are quoted prices in active markets for identical investments (e.g., equity securities, open-end investment companies, futures contracts, options contracts)

Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs) (e.g., debt securities, government securities, swap contracts, foreign currency exchange contracts, foreign securities utilizing international fair value pricing, broker-quoted securities, fair valued securities with observable inputs)

Level 3 – inputs are significant unobservable inputs (including the Fund’s own assumptions used to determine the fair value of investments) (e.g., fair valued securities with unobservable inputs)

Changes in inputs or methodologies used for valuing investments may result in a transfer in or out of levels within the fair value hierarchy. Transfers between different levels in the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments.

 

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. Dividend income on foreign securities is recorded net of any withholding tax. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. 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 Fund are apportioned among the Funds in the Trust and in some cases other affiliated funds based upon their relative average net assets or number of shareholders.

The Fund has a “balance credit” arrangement with The Bank of New York Mellon (“BNYM”), the Fund’s custodian, whereby the Fund is credited with an interest factor equal to 0.75% below the effective 90-day T-Bill rate for account balances left uninvested overnight. If the T-Bill rate falls below 0.75%, no credits will be earned. These credits serve to reduce custody expenses that would otherwise be charged to the Fund. For the six months ended June 30, 2012, the custodian expense was not reduced.

Overdrafts will cause a reduction of any earnings credits, computed at 2% above the effective Federal funds rate on the day of the over-draft. For the six months ended June 30, 2012, the Fund did not have any overdraft fees.

The Fund also has a balance credit arrangement with its Transfer Agent, BNY Mellon Investment Servicing (US) Inc., whereby earnings credits are used to offset banking charges and other out-of-pocket expenses. For the six months ended June 30, 2012, the transfer agent expense was reduced by $4.

Total returns and net investment income for the Fund would have been lower had certain expenses not been offset. Total expenses before offsets exclude the impact of expense reimbursements or fee waivers and expense reductions such as brokerage recapture credits, but include non-reimbursable expenses, if any, such as interest and taxes.

 

d. Dividends and Distributions

Dividends resulting from net investment income and distributions of capital gains, if any, normally will be declared and paid annually 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 U.S. GAAP. These differences are primarily due to differing treatments for losses deferred due to wash sales, equalization accounting for tax purposes, foreign currency, futures 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

The Fund intends to comply with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, 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.

Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for the foreign jurisdictions in which it invests, the Fund will provide for foreign taxes, and where appropriate, deferred foreign taxes.

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (tax years ended December 31, 2008-2011), and has concluded that no provision for federal income tax is required in the Fund’s financial statements.

 

 

 

 

20

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Notes to Financial Statements (continued)

 

 

Additionally, the Fund is not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), post-enactment capital losses may be carried forward for an unlimited time period. However, any new losses incurred will be required to be utilized prior to any loss carryovers incurred in pre-enactment taxable years, which generally expire eight years following the close of the taxable year in which they were incurred. As a result of this ordering rule, pre-enactment capital loss carryovers may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward retain their tax character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.

 

f. Capital Loss Carryover and Deferrals

As of June 30, 2012, the Fund had accumulated net realized capital loss carryovers from security transactions for Federal income tax purposes as shown in the following chart. These amounts may be used to offset future realized capital gains, if any, through the expiration dates listed, or in the case of post-enactment losses, for an unlimited time period.

 

    Capital Loss Carryover
Amounts		     Expires  
    Short-Term     Long-Term     December 31,  

(Pre-Enactment)

   $ 450,209        —          2016   

(Pre-Enactment)

     2,196,208        —          2017   

(Pre-Enactment)

     1,033,512        —          2018   
 

 

 

    

 

 

    

Totals

   $ 3,679,929        —       
 

 

 

    

 

 

    

 

g. 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. The Fund records sales and repurchases of its capital stock on the trade date. The cost of securities contributed to the Fund in connection with the issuance of shares is based on the valuation of those securities in accordance with the Fund’s policy on investment valuation. Dividends and distributions to shareholders are recorded on the ex-dividend date.

At June 30, 2012, certain unaffiliated shareholders of record, specifically omnibus accounts, individually or collectively held greater than 10% of the outstanding shares of the Fund as follows: one collectively owns 23%. Transactions by this shareholder may have a material impact on the Fund.

 

h. Foreign Currency Translation

The books and records of the Fund are maintained in U.S. dollars. The values 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, 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.

The Fund does not isolate the net realized and unrealized gain or loss resulting from changes in exchange rates from the fluctuations in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

 

i. Foreign Securities

The Fund invests in securities of foreign entities and in instruments denominated in foreign currencies which involve risks not typically associated with investments in domestic securities. Non-domestic securities carry special risks, such as exposure to currency fluctuations, less developed or less efficient trading markets, political instability, a lack of company information, differing auditing and legal standards, and, potentially, less liquidity.

Realized gains in certain countries may be subject to foreign taxes at the Fund level, at rates ranging from approximately 10% to 15%. The Fund would pay such foreign taxes at the appropriate rate for each jurisdiction.

 

2. Agreements and Transactions with Affiliates

The Trust has entered into an Investment Management Agreement under which the Investment Manager, a subsidiary of Affiliated Managers Group, Inc. (“AMG”), serves as investment manager to the Fund and is responsible for the Fund’s overall administration. The Investment Manager selects subadvisors for the Fund (subject to Board approval) and monitors the subadvisor’s investment performance, security holdings and investment strategies. The Fund’s investment portfolio is managed by one or more portfolio managers who serve pursuant to a subadvisory agreement with the Investment Manager.

Investment management fees are paid directly by the Fund to the Investment Manager based on average daily net assets. For the six months ended June 30, 2012, the annual investment management fee rate, as a percentage of average daily net assets, was 0.70%.

The Investment Manager has contractually agreed, through at least May 1, 2013, to waive fees and pay or reimburse Fund expenses in order to limit total annual Fund operating expenses after fee waiver and expense reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts), brokerage commissions and other transaction costs, acquired fund fees and expenses and extraordinary expenses) to 1.10% of the Fund’s average daily net assets.

The Fund is obligated to repay the Investment Manager such amounts waived, paid or reimbursed in future years provided that the repayment occurs within thirty-six (36) months after the waiver or reimbursement and that such repayment would not cause the Fund’s total operating expenses in any such future year to exceed the Fund’s expense cap.

 

 

 

 

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Notes to Financial Statements (continued)

 

 

For the six months ended June 30, 2012, the Fund’s components of reimbursement available are detailed in the following chart:

 

Reimbursement Available - 12/31/11

    $ 211,934   

Additional Reimbursements

      40,223   

Repayments

      —     

Expired Reimbursements

      (29,084 ) 
  

 

 

  

Reimbursement Available - 6/30/12

    $ 223,073   
  

 

 

  

The Fund has entered into an Administration and Shareholder Servicing Agreement under which the Investment Manager serves as the Fund’s administrator (the “Administrator”) and is responsible for all aspects of managing the Fund’s operations, including administration and shareholder services to the 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 Fund’s shareholders. The Fund pays a fee to the Administrator at the rate of 0.20% per annum of the Fund’s average daily net assets for this service.

The aggregate annual retainer paid to each Independent Trustee of the Board is $80,000, plus $5,000 or $2,500 for each regular or special meeting attended, respectively. The Independent Chairman of the Trust receives an additional payment of $20,000 per year. The Chairman of the Audit Committee receives an additional payment of $8,000 per year. The Trustees’ fees and expenses are allocated among all of the funds for which the Investment Manager serves as the advisor (the “Managers Funds”) based on the relative net assets of such funds. The “Trustees fees and expenses” shown in the financial statements represents the Fund’s allocated portion of the total fees and expenses paid by the Managers Funds.

The Fund is distributed by Managers Distributors, Inc. (the “Distributor” or “MDI”), a wholly-owned subsidiary of the Investment Manager. MDI serves as the distributor and underwriter for the Fund and is a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Shares of the Fund will be continuously offered and will be sold directly to prospective purchasers through brokers, dealers or other financial intermediaries who have executed selling agreements with MDI. Subject to the compensation arrangement discussed below, generally MDI bears all or a portion of the expenses of providing services pursuant to the distribution agreement, including the payment of the expenses relating to the distribution of prospectuses for sales purposes and any advertising or sales literature. Certain Trustees and Officers of the Fund are Officers and/or Directors of the Investment Manager, AMG and/or the Distributor.

The Securities and Exchange Commission granted an exemptive order that permits the Fund to lend and borrow money for certain temporary purposes directly to and from other eligible Managers Funds. Participation in this interfund lending program is voluntary for both borrowing and lending funds, and an interfund loan is only made if it benefits each participating fund. The Investment Manager administers the program according to procedures approved by the Board, and the Board monitors the operation of the program. An interfund loan must comply with certain conditions set out in the exemptive order, which are designed to assure fairness and protect

all participating funds. For the six months ended June 30, 2012, the Fund lent to other Managers Funds varying amounts up to $1,032,942, for 5 days earning interest of $125. The interest earned is included in the Statement of Operations as interest income. For the same period, the Fund did not borrow from any other Managers Funds.

 

3. Purchases and Sales of Securities

Purchases and sales of securities (excluding short-term securities and U.S. Government obligations) for the six months ended June 30, 2012, were $12,034,357 and $8,411,985, respectively. Purchases and sales of U.S. Government obligations for the six months ended June 30, 2012, were $3,451,092 and $708,470, respectively.

 

4. Portfolio Securities Loaned

The Fund participates in a securities lending program offered by BNYM (the “Program”), providing for the lending of securities to qualified brokers. Securities lending income include earnings of such temporary cash investments, plus or minus any rebate to a borrower. These earnings (after any rebate) are then divided between BNYM, as a fee for its services under the program, and the Fund, according to agreed-upon rates. Collateral on all securities loaned is accepted in cash and/or government securities and is maintained at a minimum level of 102% (105% in the case of certain foreign securities) of the market value, plus interest, if applicable, of investments on loan. It is the Fund’s policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. Under the terms of the Program, the Fund is indemnified for such losses by BNYM. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Collateral received in the form of cash is invested temporarily in the BNY Mellon Overnight Government Fund, formerly BNY Institutional Cash Reserves Fund (the “ICRF”), or other short-term investments as defined in the Securities Lending Agreement with BNYM.

Effective August 2, 2010, the Trust, on behalf of the Fund, entered into an agreement with BNYM and the Bank of New York Mellon Corporation (“BNYMC”) with respect to the Fund’s position in ICRF, pursuant to which (i) BNYMC would support the value of certain defaulted securities issued by Lehman Brothers Holdings, Inc. (the “Lehman Securities”) and held by Series B of the ICRF, and (ii) once certain conditions were met, BNYMC would purchase the defaulted securities from the Fund. On October 17, 2011, after certifying that the Fund had met all necessary conditions, BNYMC purchased the Lehman Securities from the Fund at a predetermined price, which represented a premium over the fair market value of the Lehman Securities at that date.

 

5. Commitments and Contingencies

In the normal course of business, the Fund may enter into contracts and agreements that contain a variety of representations and

 

 

 

 

22

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Notes to Financial Statements (continued)

 

 

warranties, which provide general indemnifications. The maximum exposure to the Fund under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has had no prior claims or losses and expects the risk of material loss to be remote.

 

6. Forward Commitments

Certain transactions, such as futures and forward transactions, dollar roll agreements, or purchases of when-issued or delayed delivery securities may have a similar effect on the Fund’s net asset value as if the Fund had created a degree of leverage in its portfolio. However, if the Fund enters into such a transaction, the Fund will establish a segregated account with its custodian in which it will maintain cash, U.S. government securities or other liquid securities equal in value to its obligations in respect to such transaction. Securities and other assets held in the segregated account may not be sold while the transaction is outstanding, unless other suitable assets are substituted.

 

7. Derivative Instruments

The following disclosures contain information on how and why the Fund uses derivative instruments, the credit risk and how derivative instruments affect the Fund’s financial position, results of operations and cash flows. The location and fair value amounts of these instruments on the Statement of Assets and Liabilities and the realized and changes in unrealized gains and losses on the Statement of Operations, each categorized by type of derivative contract, are included in a table in the Schedule of Portfolio Investments. The derivative instruments outstanding as of the fiscal year end as disclosed in the Statement of Assets and Liabilities and the realized and unrealized changes in gains and losses on derivative instruments during the six months as disclosed in the Statement of Operations serve as indicators of the volume of derivative activity for the Fund.

 

8. Forward Foreign Currency Contracts

During the six months ended June 30, 2012, the Fund invested in forward foreign currency contracts to facilitate transactions in foreign securities and to hedge against foreign currency exchange rate risk on its non-U.S. dollar denominated investment securities.

A forward foreign currency contract is an agreement between a fund and another party to buy or sell a currency at a set price at a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily, and the change in market value is recorded as an unrealized gain or loss. Gain or loss on the purchase or sale of contracts having the same settlement date, amount and counterparty is realized on the date of offset, otherwise gain or loss is realized on the settlement date.

Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

 

9. Futures Contracts

The Fund entered into futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows

from capital shares transactions. There are certain risks associated with futures contracts. Prices may not move as expected or the Fund may not be able to close out the contract when it desires to do so, resulting in losses.

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 Fund recognizes 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. Futures are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the financial statements. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures contracts.

 

10. New Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 requires disclosures to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under IFRS. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of assets and liabilities as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, ASU 2011-11 requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. New disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Management is evaluating the impact of ASU 2011-11 on the Fund’s financial statements and disclosures.

 

11. Subsequent Events

At a meeting held on June 21-22, 2012, the Trust’s Board of Trustees approved a new contractual expense limitation with respect to the Fund. Effective July 1, 2012, Managers Investment Group LLC has contractually agreed until at least May 1, 2014, to limit the Fund’s total annual operating expenses (exclusive of taxes interest (including interest incurred in connection with bank and custody overdrafts), brokerage commissions and other transaction costs, acquired fund fees and expenses, and extraordinary expenses) to 0.99% of average daily net assets of the Fund. Immediately prior to July 1, 2012, the Fund had a contractual expense limitation of 1.10%.

The Fund has determined that no additional material events or transactions occurred through the issuance of the Fund’s financial statements, which require additional disclosure in the Fund’s financial statements.

 

 

 

 

23

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Annual Renewal of Investment Advisory Agreement or Agreements (unaudited)

 

On June 21-22, 2012, the Board of Trustees, including a majority of the Trustees who are not “interested persons” of the Trust (the “Independent Trustees”), approved the Investment Management Agreement with the Investment Manager for the Managers Global Income Opportunity Fund formerly, Managers Global Bond Fund, (the “Fund”) and the Subadvisory Agreement for the Subadvisor of the Fund. The Independent Trustees were separately represented by independent counsel in connection with their consideration of the approval of these agreements. In considering the Investment Management and Subadvisory Agreements, the Trustees reviewed a variety of materials relating to the Fund, the Investment Manager and the Subadvisor, including comparative performance, fee and expense information for an appropriate peer group of similar mutual funds (the “Peer Group”), performance information for the relevant benchmark index (the “Fund Benchmark”) and, with respect to the Subadvisor, comparative performance information for an appropriate peer group of managed accounts, and, as to all other matters, other information provided to them on a periodic basis throughout the year, as well as information provided in connection with the meetings of June 21-22, 2012, regarding the nature, extent and quality of services provided by the Investment Manager and the Subadvisor under their respective agreements. Prior to voting, the Independent Trustees: (a) reviewed the foregoing information with their independent legal counsel and with management; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Investment Management Agreement and the Subadvisory Agreement; and (c) met with their independent legal counsel in private sessions at which no representatives of management were present.

Nature, extent, and quality of services.

In considering the nature, extent and quality of the services provided by the Investment Manager, the Trustees reviewed information relating to the Investment Manager’s operations and personnel. Among other things, the Investment Manager provided financial information, biographical information on its supervisory and professional staff and descriptions of its organizational and management structure. The Trustees also took into account information provided periodically throughout the previous year by the Investment Manager relating to the performance of its duties with respect to the Fund and the Trustees’ knowledge of the Investment Manager’s management and the quality of the performance of its duties through Board meetings, discussions and reports. In the course of their deliberations regarding the Investment Management Agreement, the Trustees evaluated, among other things: (a) the extent and quality of the Investment Manager’s oversight of the operation and management of the Fund; (b) the quality of the search, selection and monitoring services performed by the Investment Manager in overseeing the portfolio management responsibilities of the Subadvisor; (c) the Investment Manager’s ability to supervise the Fund’s other service providers; and (d) the Investment Manager’s compliance program. The Trustees also took into account the financial condition of the

Investment Manager with respect to its ability to provide the services required under the Investment Management Agreement and to maintain a contractual expense limitation for the Fund. The Trustees also considered the Investment Manager’s risk management processes.

The Trustees also reviewed information relating to the Subadvisor’s operations and personnel and the investment philosophy, strategies and techniques (the “Investment Strategy”) used in managing the Fund. Among other things, the Trustees reviewed biographical information on portfolio management and other professional staff, information regarding the Subadvisor’s organizational and management structure and the Subadvisor’s brokerage policies and practices. The Trustees considered specific information provided regarding the experience of the individual or individuals at the Subadvisor with portfolio management responsibility for the Fund, including the information set forth in the Fund’s prospectus and statement of additional information. In the course of their deliberations, the Trustees evaluated, among other things: (a) the services rendered by the Subadvisor in the past; (b) the qualifications and experience of the Subadvisor’s personnel; and (c) the Subadvisor’s compliance program. The Trustees also took into account the financial condition of the Subadvisor with respect to its ability to provide the services required under the Subadvisory Agreement. The Trustees also considered the Subadvisor’s risk management processes.

Performance.

Among other information relating to the Fund’s performance, the Trustees noted that the Fund’s performance for the 1-year, 3-year, 5-year and 10-year periods ended March 31, 2012 was above the median performance of the Peer Group and above the performance of the Fund Benchmark, the Barclays Global Aggregate Bond Index. The Trustees noted changes to the Fund that took effect on February 1, 2012 and took into account management’s discussion of the Fund’s more recent performance. The Trustees concluded that the Fund’s performance has been satisfactory.

As noted above, the Board considered the Fund’s net performance during relevant time periods as compared to the Fund’s Peer Group and Fund Benchmark and considered the Subadvisor’s performance as compared to an appropriate peer group of managed accounts and also considered the gross performance of the Fund as compared to the Subadvisor’s relevant performance composite that utilizes the same investment strategy and approach and noted that the Board reviews on a quarterly basis detailed information about the Fund’s performance results, portfolio composition and Investment Strategies. The Board noted the Investment Manager’s expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board also noted the Subadvisor’s performance record with respect to the Fund. The Board was mindful of the Investment Manager’s attention to monitoring the Subadvisor’s performance with respect to the Fund and its discussions with management regarding the factors that contributed to the performance of the Fund.

 

 

 

 

 

24

Table of Contents

 

Annual Renewal of Investment Advisory Agreement or Agreements (continued)

 

 

Advisory and Subadvisory Fees and Profitability.

In considering the reasonableness of the advisory fee charged by the Investment Manager for managing the Fund, the Trustees noted that the Investment Manager, and not the Fund, is responsible for paying the fees charged by the Fund’s Subadvisor and, therefore, that the fees paid to the Investment Manager cover the cost of providing portfolio management services as well as the cost of providing search, selection and monitoring services in operating a “manager-of-managers” complex of mutual funds. The Trustees concluded that, in light of the additional high quality supervisory services provided by the Investment Manager and the fact that the subadvisory fees are paid out of the advisory fee, the advisory fee payable by the Fund to the Investment Manager can reasonably be expected to exceed the median advisory fee for the Peer Group, which consists of many funds that do not operate with a manager-of-managers structure. In this regard, the Trustees also noted that the Investment Manager has undertaken to maintain an expense limitation for the Fund.

In considering the reasonableness of the advisory fee payable to the Investment Manager, the Trustees also reviewed information provided by the Investment Manager setting forth all revenues and other benefits, both direct and indirect (including any so-called “fallout benefits” such as reputational value derived from the Investment Manager serving as Investment Manager to the Fund), received by the Investment Manager and its affiliates attributable to managing the Fund and all the mutual funds in the Managers Family of Funds, the cost of providing such services and the resulting profitability to the Investment Manager and its affiliates from these relationships. The Trustees also noted the current and potential asset levels of the Fund and the willingness of the Investment Manager to waive fees and pay expenses for the Fund from time to time as a means of limiting total expenses. The Trustees also considered management’s discussion of the current asset level of the Fund, including the effect on assets attributable to the economic and market conditions since 2008, and considered the impact on profitability of the current asset level and any future growth of assets of the Fund. The Board took into account management’s discussion of the current advisory fee structure. In this regard, the Trustees noted that, unlike a mutual fund that is managed by a single investment adviser, the Fund operates in a manager-of-managers structure. Based on the foregoing, the Trustees concluded that the profitability to the Investment Manager is reasonable and that the Investment Manager is not realizing material benefits from economies of scale that would warrant adjustments to the advisory fees for the Fund at this time. With respect to economies of scale, the Trustees also noted that as the Fund’s assets increase over time, the Fund may realize other economies of scale to the extent that the increase in assets is proportionally greater than the increase in certain other expenses.

In considering the reasonableness of the fee payable by the Investment Manager to the Subadvisor, the Trustees relied on the ability of the Investment Manager to negotiate the terms of the Subadvisory Agreement at arm’s length as part of the manager-of-managers structure, noting that the Subadvisor is not affiliated with the Investment Manager. In addition, the Trustees considered other potential benefits of the subadvisory relationship to the Subadvisor, including, among others, the indirect benefits that the Subadvisor may receive from the Subadvisor’s relationship with the Fund, including any so-called “fallout benefits” to the Subadvisor, such as reputational value derived from the Subadvisor serving as Subadvisor to the Fund. In addition, the Trustees noted that the subadvisory fees are paid by the Investment Manager out of its advisory fee. As a consequence, the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Fund were not material factors in the Trustees’ deliberations. For similar reasons, the Trustees did not consider potential economies of scale in the management of the Fund by the Subadvisor to be a material factor in their deliberations at this time.

The Trustees noted that the Fund’s advisory fees (which include both the advisory and administration fee) and total expenses (net of applicable expense waivers/reimbursements) as of March 31, 2012 were both higher than the average for the Peer Group. The Trustees took into account the fact that the Investment Manager has contractually agreed to lower the Fund’s contractual expense limitation from 1.10% to 0.99% of the Fund’s net annual operating expenses (subject to certain excluded expenses) effective July 1, 2012 through at least May 1, 2014. The Board took into account management’s discussion of the Fund’s expenses and the current size of the Fund. The Trustees concluded that, in light of the nature, extent and quality of the services provided by the Investment Manager and the Subadvisor, the Fund’s performance, the foregoing expense limitation and the considerations noted above with respect to the Subadvisor and the Investment Manager, the Fund’s advisory fees, including subadvisory fees, are reasonable.

*    *    *    *

After consideration of the foregoing, the Trustees also reached the following conclusions (in addition to the conclusions discussed above) regarding the Investment Management Agreement and the Subadvisory Agreement: (a) the Investment Manager and the Subadvisor have demonstrated that they possess the capability and resources to perform the duties required of them under the Investment Management Agreement and the Subadvisory Agreement; (b) the Subadvisor’s Investment Strategy is appropriate for pursuing the Fund’s investment objectives; and (c) the Investment Manager and the Subadvisor maintain appropriate compliance programs.

 

 

 

 

25

Table of Contents

 

Annual Renewal of Investment Advisory Agreement or Agreements (continued)

 

 

Based on all of the above-mentioned factors and related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the same weight to each factor, the Trustees concluded that approval of the Investment Management Agreement and the Subadvisory Agreement would be in the best interests of the Fund and its

shareholders. Accordingly, on June 21-22, 2012, the Trustees, including a majority of the Independent Trustees, voted to approve the Investment Management Agreement and the Subadvisory Agreement for the Fund.

 

 

 

 

26

Table of Contents

 

Investment Manager and Administrator

Managers Investment Group LLC

800 Connecticut Avenue

Norwalk, CT 06854

(800) 835-3879

Distributor

Managers Distributors, Inc.

800 Connecticut Avenue

Norwalk, CT 08654

(800) 835-3879

Custodian

The Bank of New York Mellon

2 Hanson Place

Brooklyn, NY 11217

Legal Counsel

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Attn: Managers

P.O. Box 9769

Providence, RI 02940

(800) 548-4539

For ManagersChoice™ Only

Managers

c/o BNY Mellon Investment Servicing (US) Inc.

P.O. Box 9847

Providence, RI 02940-8047

(800) 358-7668

Trustees

Jack W. Aber

Bruce B. Bingham

Christine C. Carsman

William E. Chapman, II

Edward J. Kaier

Steven J. Paggioli

Eric Rakowski

Thomas R. Schneeweis

 

 

LOGO

Table of Contents

MANAGERS AND MANAGERS AMG FUNDS

 

EQUITY FUNDS

  

BALANCED FUNDS

 

CADENCE CAPITAL APPRECIATION

CADENCE FOCUSED GROWTH

CADENCE MID-CAP

CADENCE EMERGING COMPANIES

Cadence Capital Management, LLC

 

CHICAGO EQUITY PARTNERS MID-CAP

Chicago Equity Partners, LLC

 

ESSEX SMALL/MICRO CAP GROWTH

Essex Investment Management Co., LLC

 

FQ TAX-MANAGED U.S. EQUITY

FQ U.S. EQUITY

First Quadrant, L.P.

 

FRONTIER SMALL CAP GROWTH

Frontier Capital Management Company, LLC

 

GW&K SMALL CAP EQUITY

Gannett Welsh & Kotler, LLC

 

MICRO-CAP

Lord, Abbett & Co. LLC

WEDGE Capital Management L.L.P.

Next Century Growth Investors LLC

RBC Global Asset Management (U.S.) Inc.

 

REAL ESTATE SECURITIES

Urdang Securities Management, Inc.

 

 

RENAISSANCE LARGE CAP GROWTH

Renaissance Group LLC

 

SKYLINE SPECIAL EQUITIES

PORTFOLIO

Skyline Asset Management, L.P.

 

SPECIAL EQUITY

Ranger Investment Management, L.P.

Lord, Abbett & Co. LLC

Smith Asset Management Group, L.P.

Federated MDTA LLC

 

SYSTEMATIC VALUE

SYSTEMATIC MID CAP VALUE

Systematic Financial Management, L.P.

 

TIMESSQUARE MID CAP GROWTH

TIMESSQUARE SMALL CAP GROWTH

TSCM GROWTH EQUITY

TimesSquare Capital Management, LLC

 

TRILOGY GLOBAL EQUITY

TRILOGY EMERGING MARKETS EQUITY

TRILOGY INTERNATIONAL SMALL CAP

Trilogy Global Advisors, L.P.

 

YACKTMAN FUND

YACKTMAN FOCUSED FUND

Yacktman Asset Management L.P.

  

 

CHICAGO EQUITY PARTNERS BALANCED

Chicago Equity Partners, LLC

 

ALTERNATIVE FUNDS

 

FQ GLOBAL ALTERNATIVES

FQ GLOBAL ESSENTIALS

First Quadrant, L.P.

 

INCOME FUNDS

 

BOND (MANAGERS)

FIXED INCOME

GLOBAL INCOME OPPORTUNITY

Loomis, Sayles & Co., L.P.

 

BOND (MANAGERS PIMCO)

Pacific Investment Management Co. LLC

 

CALIFORNIA INTERMEDIATE TAX-FREE

Miller Tabak Asset Management LLC

 

GW&K MUNICIPAL BOND

GW&K MUNICIPAL ENHANCED YIELD

Gannett Welsh & Kotler, LLC

 

HIGH YIELD

J.P. Morgan Investment Management LLC

 

INTERMEDIATE DURATION GOVERNMENT

SHORT DURATION GOVERNMENT

Smith Breeden Associates, Inc.

 

This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by Managers Distributors, Inc., member FINRA.

 

A description of the policies and procedures each Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) Web site at www.sec.gov. For information regarding each Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC Web site at www.sec.gov.

 

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at www.sec.gov. A Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. To review a complete list of the Funds’ portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit www.managersinvest.com.

 

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Item 2. CODE OF ETHICS

Not applicable for the semi-annual shareholder report.

 

Item 3. AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable for the semi-annual shareholder report.

 

Item 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable for the semi-annual shareholder report.

 

Item 5. AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

 

Item 6. SCHEDULE OF INVESTMENTS

The schedule of investments in unaffiliated issuers as of the close of the reporting period is included as part of the shareholder report contained in Item 1 hereof.

 

Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not applicable.

 

Item 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not applicable.

 

Item 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS

Not applicable.

 

Item 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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Item 11. CONTROLS AND PROCEDURES

 

  (a) The registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

  (b) There were no changes in the registrant’s internal control over financial reporting during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

 

Item 12. EXHIBITS

 

(a) (1)    Not applicable.
(a) (2)    Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 - Filed herewith.
(a) (3)    Not applicable.
(b)    Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 - Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

THE MANAGERS FUNDS
By:  

/s/ Keitha L. Kinne

  Keitha L. Kinne, President
Date:   September 4, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Keitha L. Kinne

  Keitha L. Kinne, President
Date:   September 4, 2012
By:  

/s/ Donald S. Rumery

  Donald S. Rumery, Chief Financial Officer
Date:   September 4, 2012