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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-06431 |
MANAGERS TRUST II
(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, 2008 – DECEMBER 31, 2008 (Annual Shareholder Report)
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Item 1. | Reports to Shareholders |
Table of Contents
ANNUAL REPORT
Managers Trust II Funds
December 31, 2008
Managers AMG Chicago Equity Partners Mid-Cap Fund
Managers AMG Chicago Equity Partners Balanced Fund
Managers High Yield Fund
Managers Fixed Income Fund
Managers Short Duration Government Fund
Managers Intermediate Duration Government Fund
AR002-1208
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Annual Report – December 31, 2008
TABLE OF CONTENTS
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1 | ||
4 | ||
INVESTMENT MANAGERS’ COMMENTS AND SCHEDULES OF PORTFOLIO INVESTMENTS | ||
6 | ||
12 | ||
21 | ||
31 | ||
43 | ||
51 | ||
58 | ||
FINANCIAL STATEMENTS: | ||
60 | ||
Fund balance sheets, net asset value (NAV) per share computations and cumulative undistributed amounts | ||
62 | ||
Detail of sources of income, Fund expenses, and realized and unrealized gains (losses) during the year | ||
63 | ||
Detail of changes in Fund assets for the past two years | ||
67 | ||
Historical net asset values per share, distributions, total returns, expense ratios, turnover ratios and net assets | ||
77 | ||
Accounting and distribution policies, details of agreements and transactions with Fund management and affiliates, and descriptions of certain investment risks | ||
89 | ||
90 |
Nothing contained herein is to be considered an offer, sale or solicitation of an offer to buy shares of The Managers Funds or Managers AMG Funds. Such offering is made only by Prospectus, which includes details as to offering price and other material information.
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Dear Shareholder:
2008 will go down in the history books as one of the most challenging investment periods in decades. Equities sank and Treasuries soared amid ongoing reports of deteriorating credit conditions and weakening economic growth in both the U.S. and abroad. The epicenter of the crisis continued to be in the financial sector, where escalating concerns about toxic mortgage assets culminated in a crisis of confidence in the strength of our most prominent financial institutions. As the trust that is so sorely needed between counterparties across the global financial system evaporated, so did the availability of credit. The scarce availability of credit, along with high levels of leverage, led to numerous firm mergers, bailouts and failures. While the total number of financial firm failures fell well short of levels reached during previous periods of crises, the casualties among the largest and most well-regarded corporations has been unprecedented. The list of firms included the likes of Bear Stearns, Lehman Brothers, Countrywide Financial, Washington Mutual, American International Group, Wachovia, Fannie Mae, Freddie Mac, Citigroup and others.
Meanwhile, the U.S. Government, along with other global leaders, took unprecedented steps to assist in resolving the credit crisis, contain the damage to real economies, and attempt to restore investor confidence. While the previous U.S. administration, via the Treasury and the Federal Reserve, acted aggressively in an attempt to alleviate the problems associated with the crisis, their efforts will likely require more time before we start to see meaningful results.
The impact of the credit crisis on the equity markets was widespread and severe across all market capitalizations. For the period, the Russell 1000® (large cap), Russell 2000® (small cap), and the Russell 3000® (all cap) Indices returned -37.6%, -33.8% and -37.3%, respectively. In contrast to calendar year 2007, value indices outperformed their growth counterparts for the period, with the Russell 3000® Value Index falling -36.3% while the Russell 3000® Growth Index declining -38.4%. Within the Russell 3000® Index, all sectors declined sharply, with financials leading the way, dropping -49.8%, followed by materials, which fell -47.1%. The more defensive sectors such as consumer staples and health care held up the best, losing -16.6% and -23.4%, respectively.
Within the fixed income markets, performance varied notably along the credit spectrum, as higher-quality securities easily outperformed lower-quality issues. For the year, the Barclays Capital U.S. Government-Treasury Index gained +13.7% while the Barclays Capital U.S. High Yield Index returned -26.2%. Broader fixed income indexes held up reasonably well, with the Barclays Capital U.S. Aggregate Index and the Barclays Capital Global Aggregate Ex-U.S. Dollar Index gaining +5.2% and +4.4%, respectively.
Against this backdrop, the Managers AMG Chicago Equity Partners Mid Cap Fund, Managers AMG Chicago Equity Partners Balanced Fund, Managers High Yield Fund, Managers Fixed Income Fund, Managers Short Duration Government Fund and the Managers Intermediate Duration Government Fund (each a “Fund” and collectively the “Funds”), generated mostly disappointing absolute returns in this challenging environment, as detailed below.
Periods Ended 12/31/08 | 6 Months | 1 Year | 3 Years | 5 Years | 10 Years | Since Inception | Inception Date | |||||||||||||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | ||||||||||||||||||||||
-Class A | No Load | (38.83 | )% | (42.28 | )% | (14.15 | )% | (3.83 | )% | 3.57 | % | 6.07 | % | 1/2/1997 | ||||||||
-Class A | With Load | (42.36 | )% | (45.58 | )% | (15.83 | )% | (4.96 | )% | 2.96 | % | 5.55 | % | 1/2/1997 | ||||||||
-Class B | No Load | (39.05 | )% | (42.67 | )% | (14.81 | )% | (4.50 | )% | 2.98 | % | 4.06 | % | 1/28/1998 | ||||||||
-Class B | With Load | (42.10 | )% | (45.54 | )% | (15.61 | )% | (4.86 | )% | 2.98 | % | 4.06 | % | 1/28/1998 | ||||||||
-Class C | No Load | (39.09 | )% | (42.71 | )% | (14.87 | )% | (4.55 | )% | 2.99 | % | 3.39 | % | 2/19/1998 | ||||||||
-Class C | With Load | (39.69 | )% | (43.28 | )% | (14.87 | )% | (4.55 | )% | 2.99 | % | 3.39 | % | 2/19/1998 | ||||||||
-Institutional Class | (38.77 | )% | (42.13 | )% | (14.03 | )% | (3.59 | )% | 3.98 | % | 6.51 | % | 1/2/1997 | |||||||||
S&P Mid Cap 400 Index | (33.64 | )% | (36.23 | )% | (8.76 | )% | (0.08 | )% | 4.46 | % | 7.83 | % | 1/2/1997 |
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Letter to Shareholders (continued)
Periods Ended 12/31/08 | 6 Months | 1 Year | 3 Years | 5 Years | 10 Years | Since Inception | Inception Date | |||||||||||||||
Managers AMG Chicago Equity Partners Balanced Fund | ||||||||||||||||||||||
-Class A | No Load | (14.50 | )% | (18.68 | )% | (1.09 | )% | 2.00 | % | 4.53 | % | 6.18 | % | 1/2/1997 | ||||||||
-Class A | With Load | (19.43 | )% | (23.34 | )% | (3.01 | )% | 0.79 | % | 3.91 | % | 5.65 | % | 1/2/1997 | ||||||||
-Class B | No Load | (14.90 | )% | (19.38 | )% | (1.88 | )% | 1.27 | % | 3.92 | % | 4.22 | % | 2/10/1998 | ||||||||
-Class B | With Load | (19.12 | )% | (23.35 | )% | (2.82 | )% | 0.89 | % | 3.92 | % | 4.22 | % | 2/10/1998 | ||||||||
-Class C | No Load | (14.89 | )% | (19.36 | )% | (1.86 | )% | 1.27 | % | 3.92 | % | 4.16 | % | 2/13/1998 | ||||||||
-Class C | With Load | (15.74 | )% | (20.15 | )% | (1.86 | )% | 1.27 | % | 3.92 | % | 4.16 | % | 2/13/1998 | ||||||||
-Institutional Class | (14.45 | )% | (18.51 | )% | (0.87 | )% | 2.31 | % | 4.96 | % | 6.62 | % | 1/2/1997 | |||||||||
60% S&P 500/40% Barclays Capital U.S. Aggregate | (15.33 | )% | (20.91 | )% | (2.17 | )% | 1.10 | % | 1.97 | % | 5.15 | % | 1/2/1997 | |||||||||
Managers High Yield Fund | ||||||||||||||||||||||
-Class A | No Load | (28.53 | )% | (29.76 | )% | (7.25 | )% | (2.01 | )% | 1.99 | % | 2.39 | % | 1/2/1998 | ||||||||
-Class A | With Load | (31.60 | )% | (32.78 | )% | (8.59 | )% | (2.87 | )% | 1.55 | % | 1.99 | % | 1/2/1998 | ||||||||
-Class B | No Load | (28.78 | )% | (30.22 | )% | (7.98 | )% | (2.72 | )% | 1.36 | % | 1.35 | % | 2/19/1998 | ||||||||
-Class B | With Load | (32.16 | )% | (33.43 | )% | (8.74 | )% | (3.00 | )% | 1.36 | % | 1.35 | % | 2/19/1998 | ||||||||
-Class C | No Load | (28.73 | )% | (30.27 | )% | (7.99 | )% | (2.72 | )% | 1.37 | % | 1.34 | % | 2/19/1998 | ||||||||
-Class C | With Load | (29.41 | )% | (30.91 | )% | (7.99 | )% | (2.72 | )% | 1.37 | % | 1.34 | % | 2/19/1998 | ||||||||
-Institutional Class | (28.34 | )% | (29.54 | )% | (7.03 | )% | (1.71 | )% | 2.43 | % | 2.37 | % | 3/2/1998 | |||||||||
Barclays Capital U.S. Corporate High Yield | (25.18 | )% | (26.16 | )% | (5.59 | )% | (0.80 | )% | 2.17 | % | N/A | 1/2/1998 | ||||||||||
Managers Fixed Income Fund | ||||||||||||||||||||||
-Class A | No Load | (10.43 | )% | (10.45 | )% | 0.40 | % | 1.84 | % | 4.30 | % | 4.93 | % | 1/2/1997 | ||||||||
-Class A | With Load | (14.27 | )% | (14.28 | )% | (1.04 | )% | 0.96 | % | 3.85 | % | 4.55 | % | 1/2/1997 | ||||||||
-Class B | No Load | (10.79 | )% | (11.13 | )% | (0.37 | )% | 1.14 | % | 3.71 | % | 3.90 | % | 3/20/1998 | ||||||||
-Class B | With Load | (15.13 | )% | (15.36 | )% | (1.24 | )% | 0.81 | % | 3.71 | % | 3.90 | % | 3/20/1998 | ||||||||
-Class C | No Load | (10.70 | )% | (11.11 | )% | (0.34 | )% | 1.13 | % | 3.72 | % | 4.03 | % | 3/5/1998 | ||||||||
-Class C | With Load | (11.57 | )% | (11.96 | )% | (0.34 | )% | 1.13 | % | 3.72 | % | 4.03 | % | 3/5/1998 | ||||||||
-Institutional Class | (10.27 | )% | (10.23 | )% | 0.66 | % | 2.15 | % | 4.75 | % | 5.41 | % | 1/2/1997 | |||||||||
Barclays Capital U.S. Aggregate Bond Index | 4.07 | % | 5.24 | % | 5.51 | % | 4.65 | % | 5.63 | % | 6.25 | % | 1/2/1997 | |||||||||
Short Duration Government Fund | (2.26 | )% | (1.19 | )% | 2.73 | % | 2.61 | % | 3.61 | % | 4.36 | % | 3/31/1992 | |||||||||
Merrill Lynch Six-Month T-Bill Index | 1.93 | % | 3.58 | % | 4.67 | % | 3.65 | % | 3.80 | % | 4.27 | % | 3/31/1992 | |||||||||
Intermediate Duration Government Fund | 0.82 | % | 0.85 | % | 3.92 | % | 3.49 | % | 4.81 | % | 6.19 | % | 3/31/1992 | |||||||||
Citigroup Mortgage Index | 6.51 | % | 8.49 | % | 6.87 | % | 5.62 | % | 6.10 | % | 6.69 | % | 3/31/1992 |
For the year ended December 31, 2008, the Managers AMG Chicago Equity Partners Mid Cap Fund (Institutional Class) returned -42.13% versus its benchmark, the S&P Mid Cap 400 Index, which returned -36.23%. 2008 was among the worst years in capital market history, with a global recession, constricting credit markets and astronomical market volatility challenging investors. The dislocations in the market over the past several quarters continue to place signi3 cant negative pressure on the top-rated stocks in the model utilized by the Funds’ subadvisor, Chicago Equity Partners, LLC. The majority of the Fund’s relative underperformance during the year was due to stock-selection results in three sectors; industrials, utilities, and financials. On a positive note, stock-selection results within the health care sector helped to modestly improve performance results.
For the year ended December 31, 2008, the Managers AMG Chicago Equity Partners Balanced Fund (Institutional Class) returned -18.51%. This compares to the blended Composite Index (comprised of 60% S&P 500, 40% Barclays Capital U.S. Aggregate) return of -20.91% for the year. For the majority of the year, the Fund was underweight equities until it moved to a neutral position in the fourth quarter. The majority of outperformance this year came from asset-allocation decisions, security selection in the equity portion, and a combination of security selection and avoidance of lower performing sectors in the fixed income portion.
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Letter to Shareholders (continued)
For the year ended December 31, 2008, the Managers High Yield Fund (Institutional Class) returned - -29.54%, compared with a return of -26.16% for the Barclays Capital U.S. Corporate High Yield Index. Last year was the worst year on record for the high yield market as absolute bond yields and spreads relative to comparable U.S. Treasuries reached record highs. The Fund’s disappointing absolute and relative returns were mostly due to poor security selection across several sectors. In particular, relative exposure to technology, consumer products, and chemicals hurt performance last year. Historically, the Fund’s investment style tends to add alpha versus the Index and its peers in trending environments, with negative performance when prices depreciate sharply, for example in September, October, and November of this past year. The Fund did have positive contributions from the telecommunications, gaming, and banking sectors, particularly during the latter half of December.
For the year ended December 31, 2008, Managers Fixed Income Fund (Institutional Class) returned -10.23% in 2008 compared with a return of +5.24% for the Barclays Capital U.S. Aggregate Bond Index. The Fund’s performance relative to the Index during 2008 was primarily driven by an overweight in corporate bonds and a related underweight in U.S. Treasuries. Throughout the year, as yield spreads widened and valuations on corporate bonds declined, Loomis Sayles & Company, L.P. (“Loomis”), the Fund’s subadvisor, shifted the Fund’s assets away from Treasuries into corporate bonds. In hindsight, the timing of this shift was premature. A sizeable portion of the Fund’s corporate exposure is in BBB-rated securities, which are at the lower end of the investment-grade credit scale, and this hurt performance since there was a direct correlation between credit quality and performance throughout the year. Loomis still feels strongly that corporate bonds are severely undervalued and thinks that the Fund’s current allocation should be well positioned for strong excess performance as spreads narrow further. In addition to the sector-allocation decisions, security selection had a modest impact on performance. While exposure to the headline names was modest, the Fund did hold positions in Lehman Brothers, as well as Fannie Mae and Freddie Mac. Lastly, the Fund’s non-U.S. holdings were negatively impacted by the rally in the Dollar relative to most major currencies. The Dollar was pushed higher as investors view this as another safe haven.
For the year ended December 31, 2008, the Managers Short Duration Government Fund returned -1.19%, while the Merrill Lynch Six-Month Treasury Bill Index returned +3.58%. Most of the Fund’s underperformance for the year is attributed to the agency fixed-rate mortgages backed securities (MBS) exposure. While this sector was not subject to the credit risk of bonds backed by subprime mortgages, both 15-year and 30-year agency MBS widened 50 to 100 basis points in option-adjusted spreads, as interest in U.S. MBS from overseas investors dissipated. Additionally, the realized volatility in interest and mortgage rates dramatically increased, which elevated the hedging costs of these longer-maturity securities. Collateralized mortgage obligations (CMOs) accounted for the majority of the remaining underperformance, while agency interest-only (IO) returns also hampered performance due to the decrease in interest rates, which increased the refinance ability of conventional mortgages. Favorable effects from positioning the Fund with a bias to the front end of the yield curve partially mitigated the adverse effects from fixed-rate MBS and CMOs.
For the year ended December 31, 2008, the Managers Intermediate Duration Government Fund returned +0.85%, compared to +8.49% for its benchmark, the Citigroup Mortgage Index. Despite relatively modest exposure to non-agency adjustable rate mortgages (ARMs), this sector accounted for more than half of the underperformance of the portfolio. The vast majority of the rest of the underperformance came from exposure to other AAA-rated non-agency fixed-rate mortgages (FRMs) and collateralized mortgage obligations (CMOs). The Fund’s agency exposure faired relatively well in terms of its contribution to portfolio returns, with the exception of the agency interest-only (IO) positions. The dramatic decrease in interest rates, which increased the ability to refinance conventional mortgages, decreased the value of the IO positions. However, favorable effects from positioning the Fund with a bias to the front end of the yield curve partially mitigated the adverse effects of widening non-agency mortgage spreads.
The following report covers the year ended December 31, 2008. Should you have any questions about this report, or if you’d like to receive a prospectus and additional information, including fees and expenses for these or any of the other Funds in our family, please feel free to contact us at 1-800-835-3879, or visit our Web site at www.managersinvest.com. As always, please read the prospectus carefully before you invest or send money.
If you are curious about how you can better diversify your investment program, visit the Knowledge Center on our Web site and view our articles in the investment strategies section. You can rest assured that under all market conditions our team is focused on delivering excellent investment management services for your benefit.
We thank you for your continued confidence and investment in The Managers Funds.
Respectfully, |
![]() |
John H. Streur |
Senior Managing Partner Managers Investment Group LLC |
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As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; reinvested dividends or other distributions; 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 an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Fund Return
The first line of the table below provides information about 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 table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year 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. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the 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. In addition, if these transactional costs were included, your costs would have been higher.
Six Months Ended December 31, 2008 | Expense Ratio for the Period | Beginning Account Value 7/1/2008 | Ending Account Value 12/31/2008 | Expenses Paid During Period* | ||||||||
Managers AMG Chicago Equity Partners Mid-Cap Fund Class A | ||||||||||||
Based on Actual Fund Return | 1.24 | % | $ | 1,000 | $ | 612 | $ | 5.02 | ||||
Based on Hypothetical 5% Annual Return | 1.24 | % | $ | 1,000 | $ | 1,019 | $ | 6.29 | ||||
Managers AMG Chicago Equity Partners Mid-Cap Fund Class B | ||||||||||||
Based on Actual Fund Return | 1.99 | % | $ | 1,000 | $ | 610 | $ | 8.05 | ||||
Based on Hypothetical 5% Annual Return | 1.99 | % | $ | 1,000 | $ | 1,015 | $ | 10.08 | ||||
Managers AMG Chicago Equity Partners Mid-Cap Fund Class C | ||||||||||||
Based on Actual Fund Return | 1.99 | % | $ | 1,000 | $ | 609 | $ | 8.04 | ||||
Based on Hypothetical 5% Annual Return | 1.99 | % | $ | 1,000 | $ | 1,015 | $ | 10.08 | ||||
Managers AMG Chicago Equity Partners Mid-Cap Fund Institutional Class | ||||||||||||
Based on Actual Fund Return | 0.99 | % | $ | 1,000 | $ | 612 | $ | 4.01 | ||||
Based on Hypothetical 5% Annual Return | 0.99 | % | $ | 1,000 | $ | 1,020 | $ | 5.03 | ||||
Managers AMG Chicago Equity Partners Balanced Fund Class A | ||||||||||||
Based on Actual Fund Return | 1.25 | % | $ | 1,000 | $ | 855 | $ | 5.83 | ||||
Based on Hypothetical 5% Annual Return | 1.25 | % | $ | 1,000 | $ | 1,019 | $ | 6.34 | ||||
Managers AMG Chicago Equity Partners Balanced Fund Class B | ||||||||||||
Based on Actual Fund Return | 2.00 | % | $ | 1,000 | $ | 851 | $ | 9.31 | ||||
Based on Hypothetical 5% Annual Return | 2.00 | % | $ | 1,000 | $ | 1,015 | $ | 10.13 | ||||
Managers AMG Chicago Equity Partners Balanced Fund Class C | ||||||||||||
Based on Actual Fund Return | 2.00 | % | $ | 1,000 | $ | 851 | $ | 9.31 | ||||
Based on Hypothetical 5% Annual Return | 2.00 | % | $ | 1,000 | $ | 1,015 | $ | 10.13 | ||||
Managers AMG Chicago Equity Partners Balanced Fund Institutional Class | ||||||||||||
Based on Actual Fund Return | 1.00 | % | $ | 1,000 | $ | 856 | $ | 4.66 | ||||
Based on Hypothetical 5% Annual Return | 1.00 | % | $ | 1,000 | $ | 1,020 | $ | 5.08 |
* | 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 (184), then divided by 366. |
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About Your Fund’s Expenses (continued)
Six Months Ended December 31, 2008 | Expense Ratio for the Period | Beginning Account Value 7/1/2008 | Ending Account Value 12/31/2008 | Expenses Paid During Period* | ||||||||
Managers High Yield Fund Class A | ||||||||||||
Based on Actual Fund Return | 1.15 | % | $ | 1,000 | $ | 715 | $ | 4.96 | ||||
Based on Hypothetical 5% Annual Return | 1.15 | % | $ | 1,000 | $ | 1,019 | $ | 5.84 | ||||
Managers High Yield Fund Class B | ||||||||||||
Based on Actual Fund Return | 1.90 | % | $ | 1,000 | $ | 712 | $ | 8.18 | ||||
Based on Hypothetical 5% Annual Return | 1.90 | % | $ | 1,000 | $ | 1,016 | $ | 9.63 | ||||
Managers High Yield Fund Class C | ||||||||||||
Based on Actual Fund Return | 1.90 | % | $ | 1,000 | $ | 713 | $ | 8.18 | ||||
Based on Hypothetical 5% Annual Return | 1.90 | % | $ | 1,000 | $ | 1,016 | $ | 9.63 | ||||
Managers High Yield Fund Institutional Class | ||||||||||||
Based on Actual Fund Return | 0.90 | % | $ | 1,000 | $ | 717 | $ | 3.88 | ||||
Based on Hypothetical 5% Annual Return | 0.90 | % | $ | 1,000 | $ | 1,021 | $ | 4.57 | ||||
Managers Fixed Income Fund Class A | ||||||||||||
Based on Actual Fund Return | 0.84 | % | $ | 1,000 | $ | 896 | $ | 4.00 | ||||
Based on Hypothetical 5% Annual Return | 0.84 | % | $ | 1,000 | $ | 1,021 | $ | 4.27 | ||||
Managers Fixed Income Fund Class B | ||||||||||||
Based on Actual Fund Return | 1.59 | % | $ | 1,000 | $ | 892 | $ | 7.56 | ||||
Based on Hypothetical 5% Annual Return | 1.59 | % | $ | 1,000 | $ | 1,017 | $ | 8.06 | ||||
Managers Fixed Income Fund Class C | ||||||||||||
Based on Actual Fund Return | 1.59 | % | $ | 1,000 | $ | 893 | $ | 7.57 | ||||
Based on Hypothetical 5% Annual Return | 1.59 | % | $ | 1,000 | $ | 1,017 | $ | 8.06 | ||||
Managers Fixed Income Fund Institutional Class | ||||||||||||
Based on Actual Fund Return | 0.59 | % | $ | 1,000 | $ | 897 | $ | 2.81 | ||||
Based on Hypothetical 5% Annual Return | 0.59 | % | $ | 1,000 | $ | 1,022 | $ | 3.00 | ||||
Managers Short Duration Government Fund | ||||||||||||
Based on Actual Fund Return | 0.84 | % | $ | 1,000 | $ | 977 | $ | 4.18 | ||||
Based on Hypothetical 5% Annual Return | 0.84 | % | $ | 1,000 | $ | 1,021 | $ | 4.27 | ||||
Managers Intermediate Duration Government Fund | ||||||||||||
Based on Actual Fund Return | 0.89 | % | $ | 1,000 | $ | 1,008 | $ | 4.49 | ||||
Based on Hypothetical 5% Annual Return | 0.89 | % | $ | 1,000 | $ | 1,021 | $ | 4.52 |
* | 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 fiscal half-year (184), then divided by 366. |
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Managers AMG Chicago Equity Partners Mid-Cap Fund
Portfolio Manager’s Comments
Managers AMG Chicago Equity Partners Mid-Cap Fund (the “Fund”) seeks long-term capital appreciation through a diversified portfolio of medium-capitalization U.S. companies. The Fund is subadvised by a team led by James Miller of Chicago Equity Partners, LLC (“CEP”). CEP has managed the Fund since December 2000.
The Portfolio Managers
James Miller and the investment team at CEP believe fundamentals drive stock prices. That is, companies with favorable valuations and earnings expectations will outperform their peers. They utilize a systematic ranking system to identify attractive stocks and construct their portfolios through a disciplined process that minimizes portfolio risks like sector, capitalization, and style exposures.
They use their proprietary model daily to evaluate the expectations, valuations, and quality attributes of 3,000 stocks. Over time they’ve refined this model, adding and deleting factors as well as changing their weightings, in an effort to consistently identify solid stocks by sector and industry.
CEP’s team of analysts reviews and confirms the model’s daily rankings, paying special attention to any changes in rank. Each analyst follows a specific sector, focusing on the timing and nature of earnings releases, legal and regulatory exposures of companies, and any other factors the model may not capture. The analysts use an objective, systematic approach to choose the best risk-adjusted stocks within their sector.
Once the analysts have identified stocks with the highest potential to outperform their peers, they construct portfolios that neutralize risk elements that are not consistently rewarded, such as style tilts, industry weightings, and market capitalization.
CEP’s analysts review the portfolios daily, meeting at least once per month on a formal basis, to evaluate portfolio holdings, monitor risk, and rebalance as necessary. Once any necessary trades are identified, they implement them using a mix of trading strategies designed to minimize commissions and market impact.
The result of CEP’s disciplined process is a portfolio of 125 to 250 securities that they believe will generate solid excess returns over the S&P MidCap 400 Index (the “Index”) at a moderate risk level.
The Year in Review
The Fund’s Institutional class returned -42.13% for 2008, versus the Index at -36.23%. 2008 was among the worst years in capital market history, with a global recession, constricting credit markets and astronomical market volatility challenging investors. The dislocations in the market over the past several quarters continue to be a significant cause of the model’s inverse behavior from top-ranked stocks.
The National Bureau of Economic Research (NBER) declared the United States formally entered a recession in December 2007. This recession already stands as one of the longest since World War II with annualized forecasted contractions for the fourth quarter of 2008 and the first quarter of 2009 are at levels not seen since the 1970s. Unemployment continued to rocket upward, hitting a 16-year high of 7.2% in December and many economists expect it could rise to more than 10% in 2009.
Housing prices maintained their free fall, with the S&P/Case-Shiller Home Price Index falling over 18% on a year-over-year basis since the third quarter of 2007. On a positive note, the National Association of Realtors reported the national supply of homes was 9.9 months, a 1.3 month improvement since September. Mortgage rates, as measured by the average 30-year conforming loan, tumbled to record lows, near 5.0%. Oil closed the year at just under $40, down nearly 70% from its all-time high of $147 per barrel in July. Plummeting oil prices, driven by a collapse in demand, led to the biggest retail gas price cut in the history of the market.
The Federal Reserve was extremely active in 2008. In the fourth quarter alone, the Fed eased by more than 200 basis points, after pushing the Federal funds rate to an all-time low “target range” of 0% to 0.25%. The Fed also implemented several unorthodox measures to help stimulate the economy, including purchasing mortgage-related and Treasury securities in an effort to push down long-term borrowing costs. Through the creation and expansion of lending programs, the Fed’s balance sheet has grown from approximately $900 billion to more than $2 trillion.
CEP expects its model to successfully discriminate top-performing stocks in a challenging environment, as investors typically focus on at least one of the factor groups (valuation, quality, momentum, growth). However, CEP did not experience these results from its mid-cap model/factor groups during 2008. The majority of the Fund’s relative underperformance during the year was due to stock-selection results in three sectors – industrials, utilities, and financials. On a positive note, stock-selection results within the health care sector helped to modestly improve performance results and sector allocations also helped relative performance. It is now becoming quite apparent that the challenges of the current environment are anything but “typical.” The convergence of several issues (such as years of excess liquidity, resulting in over-leveraging and increasing defaults, etc.) is now the center of attention. This has created an environment in which macro events are driving stock market performance rather than company-specific fundamentals. As a result, continued short-term performance volatility could be expected. CEP believes that the stocks it holds in the Fund are attractive and should outperform over the long term as the market returns to focus on fundamentals and not emotion.
Looking Forward
CEP’s research and experience have shown that periods of underperformance have been known to lead to longer periods of outperformance. The dislocations in the current market bring great opportunities for the future. CEP remains strong, it continues to have stability in its investment team, and its investment process has historically produced results.
Similar to our past experiences, CEP is confident that the market will return to a focus on long-term fundamentals. The Fund, with its emphasis on quality, will likely again generate performance results consistent with those CEP has demonstrated throughout its longstanding history.
This commentary reflects the viewpoints of the portfolio manager, Chicago Equity Partners, as of January 26, 2009.
Cumulative Total Return Performance
Mid-Cap’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all dividends and distributions were reinvested. The S&P MidCap 400 Index is the most widely used index for mid-size companies and covers approximately 7% of the U.S. equities market. The Index assumes reinvestment of dividends. Unlike the Fund, the Index is unmanaged, is not available for investment and does not incur expenses. This chart
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Table of Contents
Managers AMG Chicago Equity Partners Mid-Cap Fund
Portfolio Manager’s Comments (continued)
Cumulative Total Return Performance (continued)
compares a hypothetical $10,000 investment made in the Fund’s Class A Shares on December 31, 1998, with a $10,000 investment made in the S&P Mid Cap 400 for the same time period. Performance for periods longer than one year is annualized. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. Past performance is not indicative of future results. The listed returns for the Fund are net of expenses and the returns for the index exclude expenses.
The table below shows the average annualized total returns for the Mid-Cap Fund and the S&P Mid Cap 400 Index from December 31, 1998 through December 31, 2008.
Average Annual Total Returns1 | 1 Year | 5 Years | 10 Years | Inception Date | |||||||||||
Mid-Cap2,3 | -Class A | No Load | (42.28 | )% | (3.83 | )% | 3.57 | % | 01/02/97 | ||||||
-Class A | With Load | (45.58 | )% | (4.96 | )% | 2.96 | % | 01/02/97 | |||||||
-Class B | No Load | (42.67 | )% | (4.50 | )% | 2.98 | % | 01/28/98 | |||||||
-Class B | With Load | (45.54 | )% | (4.86 | )% | 2.98 | % | 01/28/98 | |||||||
-Class C | No Load | (42.71 | )% | (4.55 | )% | 2.99 | % | 02/19/98 | |||||||
-Class C | With Load | (43.28 | )% | (4.55 | )% | 2.99 | % | 02/19/98 | |||||||
-Institutional Class | No Load | (42.13 | )% | (3.59 | )% | 3.98 | % | 01/02/97 | |||||||
S&P Mid Cap 400 Index | (36.23 | )% | (0.08 | )% | 4.46 | % |
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 the principal value of an investment 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.
Performance differences among the share classes are due to differences in sales charge structures and class expenses. Returns shown reflect maximum sales charge of 5.75% on Class A, as well as the applicable contingent deferred sales charge (CDSC) on both Class B and C shares. The Class B shares’ CDSC declines annually between years 1 through 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge is assessed after year six. Class C shares held for less than one year are subject to a 1% CDSC.
In choosing a Fund, 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 www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member FINRA.
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 December 31, 2008. All returns are in U.S. dollars($). |
2 | The Fund is subject to risks associated with investments in mid-capitalization companies, such as erratic earnings patterns, competitive conditions, limited earnings history, and a reliance on a limited number of products. |
3 | From time to time, the Fund’s advisor has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns. |
Not FDIC insured, nor bank guaranteed. May lose value.
7
Table of Contents
Managers AMG Chicago Equity Partners Mid-Cap Fund
Fund Snapshots
December 31, 2008
Portfolio Breakdown
Industry | Mid-Cap** | S&P Mid Cap 400 Index | ||||
Financials | 20.7 | % | 20.4 | % | ||
Information Technology | 15.3 | % | 13.1 | % | ||
Consumer Discretionary | 14.3 | % | 14.0 | % | ||
Industrials | 12.1 | % | 14.3 | % | ||
Health Care | 10.9 | % | 11.3 | % | ||
Utilities | 8.8 | % | 8.8 | % | ||
Energy | 6.2 | % | 6.3 | % | ||
Materials | 5.9 | % | 6.7 | % | ||
Consumer Staples | 4.6 | % | 4.5 | % | ||
Telecommunication Services | 1.2 | % | 0.6 | % | ||
Other Assets and Liabilities | 0.0 | % | 0.0 | % |
** | As a percentage of net assets |
Top Ten Holdings
Top Ten Holdings | % of Net Assets | ||
Arch Capital Group, Ltd. | 2.2 | % | |
Alliant Energy Corp. | 1.9 | ||
Ross Stores, Inc. | 1.9 | ||
AGCO Corp.* | 1.8 | ||
BJ’s Wholesale Club, Inc. | 1.6 | ||
Mack-Cali Realty Corp. | 1.6 | ||
Flowserve Corp.* | 1.5 | ||
Sybase, Inc. | 1.4 | ||
Energen Corp.* | 1.4 | ||
Owens & Minor, Inc. | 1.4 | ||
Top Ten as a Group | 16.7 | % | |
* | Top Ten Holding at June 30, 2008 |
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.
8
Table of Contents
Managers AMG Chicago Equity Partners Mid-Cap Fund
Schedule of Portfolio Investments
December 31, 2008
Shares | Value | |||||
Common Stocks—100.0% | ||||||
Consumer Discretionary—14.3% | ||||||
Aeropostale, Inc.* | 10,600 | $ | 170,660 | |||
Blyth, Inc. | 11,700 | 91,728 | ||||
Bob Evans Farms, Inc. | 10,600 | 216,558 | ||||
Borg Warner, Inc. | 6,200 | 134,974 | ||||
Callaway Golf Co. | 6,300 | 58,527 | ||||
Corinthian Colleges, Inc.* | 5,000 | 81,850 | ||||
DeVry, Inc. | 5,200 | 298,532 | ||||
Dollar Tree, Inc.* | 6,000 | 250,800 | ||||
Foot Locker, Inc. | 15,700 | 115,238 | ||||
Hasbro, Inc. | 7,200 | 210,024 | ||||
ITT Educational Services, Inc.* | 1,400 | 132,972 | ||||
Jarden Corp.* | 7,900 | 90,850 | ||||
Leggett & Platt, Inc. | 10,200 | 154,938 | ||||
Lennar Corp., Class A | 12,200 | 105,774 | ||||
Marvel Entertainment, Inc.* | 6,600 | 202,950 | ||||
Net3ix, Inc.* | 6,700 | 2 | 200,263 | |||
NVR, Inc.* | 300 | 136,875 | ||||
priceline.com, Inc.* | 1,400 | 103,110 | ||||
Ross Stores, Inc. | 19,600 | 582,708 | ||||
Scholastic Corp. | 9,600 | 130,368 | ||||
Strayer Education, Inc. | 1,900 | 407,379 | ||||
Toll Brothers, Inc.* | 7,400 | 158,582 | ||||
Tupperware Brands Corp. | 5,400 | 122,580 | ||||
Warnaco Group, Inc., The* | 8,000 | 157,040 | ||||
Weight Watchers International, Inc. | 5,700 | 167,694 | ||||
Total Consumer Discretionary | 4,482,974 | |||||
Consumer Staples—4.6% | ||||||
BJ’s Wholesale Club, Inc.* | 14,300 | 489,918 | ||||
Brown—Forman Corp., Class B | 1,700 | 87,533 | ||||
Corn Products International, Inc. | 7,000 | 201,950 | ||||
Hansen Natural Corp.* | 2,500 | 2 | 83,825 | |||
Herbalife, Ltd. | 7,300 | 158,264 | ||||
Hormel Foods Corp. | 8,400 | 261,072 | ||||
Lancaster Colony Corp. | 4,200 | 144,060 | ||||
Total Consumer Staples | 1,426,622 | |||||
Energy—6.2% | ||||||
Bill Barrett Corp.* | 5,400 | 114,102 | ||||
Cimarex Energy Co. | 12,600 | 337,428 | ||||
Encore Acquisition Co.* | 5,200 | 132,704 | ||||
FMC Technologies, Inc.* | 12,100 | 288,343 | ||||
Helmerich & Payne, Inc. | 5,300 | 120,575 | ||||
Mariner Energy, Inc.* | 5,900 | 60,180 | ||||
Noble Energy, Inc. | 2,300 | 113,206 | ||||
Oil States International, Inc.* | 6,300 | 117,747 | ||||
Overseas Shipholding Group, Inc. | 2,800 | 117,908 | ||||
Pride International, Inc.* | 4,700 | 75,106 | ||||
Sunoco, Inc. | 6,100 | 265,106 | ||||
Tidewater, Inc. | 4,900 | 197,323 | ||||
Total Energy | 1,939,728 | |||||
Financials—20.7% | ||||||
Annaly Capital Management, Inc. | 18,900 | 2 | 299,943 | |||
Apartment Investment & Management Co. | 552 | 6,376 | ||||
Apollo Investment Corp. | 15,400 | 143,374 | ||||
Arch Capital Group, Ltd.* | 9,700 | 679,970 | ||||
Associated Bank Corp. | 18,700 | 2 | 391,391 | |||
Astoria Financial Corp. | 10,500 | 173,040 | ||||
Axis Capital Holdings, Ltd. | 3,500 | 101,920 | ||||
Bank of Hawaii Corp. | 8,800 | 397,496 | ||||
Capitol Federal Financial | 3,900 | 177,840 | ||||
Cullen/Frost Bankers, Inc. | 3,100 | 157,108 | ||||
Digital Realty Trust, Inc. | 6,900 | 226,665 | ||||
Federal Realty Investment Trust | 3,000 | 2 | 186,240 | |||
Health Care REIT, Inc. | 3,600 | 2 | 151,920 | |||
Hospitality Properties Trust | 24,100 | 358,367 | ||||
HRPT Properties Trust | 50,100 | 168,837 | ||||
Investors Bancorp, Inc.* | 10,400 | 139,672 | ||||
Mack-Cali Realty Corp. | 19,900 | 487,550 | ||||
Nationwide Health Properties, Inc. | 6,900 | 198,168 | ||||
New York Community Bancorp, Inc. | 6,300 | 75,348 | ||||
PartnerRe Ltd. | 3,900 | 2 | 277,953 | |||
Platinum Underwriter Holdings, Ltd. | 4,700 | 169,576 | ||||
Potlatch Corp. | 14,400 | 374,544 | ||||
Raymond James Financial, Inc. | 20,000 | 2 | 342,600 | |||
Reinsurance Group of America, Inc. | 3,700 | 158,434 | ||||
SL Green Realty Corp. | 5,000 | 2 | 129,500 | |||
Stancorp Financial Group, Inc. | 5,100 | 213,027 | ||||
Westamerica Bancorporation | 5,500 | 2 | 281,325 | |||
Total Financials | 6,468,184 | |||||
Health Care—10.9% | ||||||
Advanced Medical Optics, Inc.* | 21,400 | 2 | 141,454 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers AMG Chicago Equity Partners Mid-Cap Fund
Schedule of Portfolio Investments (continued)
Shares | Value | |||||
Health Care—10.9% (continued) | ||||||
Facet Biotech Corp.* | 4,360 | $ | 41,812 | |||
Gen-Probe, Inc.* | 3,800 | 162,792 | ||||
Health Management Associates, Inc.* | 43,000 | 76,970 | ||||
Health Net, Inc.* | 30,200 | 328,878 | ||||
Kindred Healthcare, Inc.* | 14,500 | 188,790 | ||||
Life Technologies Corp.* | 14,706 | 342,797 | ||||
Lifepoint Hospitals, Inc.* | 12,200 | 2 | 278,648 | |||
Lincare Holdings, Inc.* | 5,200 | 140,036 | ||||
Masimo Corp.* | 3,400 | 101,422 | ||||
Omnicare, Inc. | 8,600 | 238,736 | ||||
Owens & Minor, Inc. | 11,600 | 436,740 | ||||
PDL BioPharma, Inc.* | 21,800 | 134,724 | ||||
ResMed, Inc.* | 5,000 | 187,400 | ||||
Techne Corp. | 3,500 | 225,820 | ||||
Valeant Pharmaceuticals International* | 17,500 | 2 | 400,750 | |||
Total Health Care | 3,427,769 | |||||
Industrials—12.1% | ||||||
Acuity Brands, Inc. | 4,500 | 157,095 | ||||
AGCO Corp.* | 23,300 | 549,647 | ||||
Alaska Airgroup, Inc.* | 5,800 | 169,650 | ||||
Alliant Techsystems, Inc.* | 2,200 | 2 | 188,672 | |||
Brink’s Co., The | 10,200 | 274,176 | ||||
Bucyrus International, Inc. | 7,800 | 144,456 | ||||
Flowserve Corp. | 8,800 | 453,200 | ||||
GrafTech International, Ltd.* | 6,400 | 53,248 | ||||
Granite Construction, Inc. | 3,400 | 2 | 149,362 | |||
Jacobs Engineering Group, Inc.* | 3,100 | 149,110 | ||||
Joy Global, Inc. | 13,300 | 304,437 | ||||
KBR, Inc. | 14,700 | 223,440 | ||||
Lincoln Electric Holdings, Inc. | 4,100 | 208,813 | ||||
Oshkosh Truck Corp. | 12,900 | 114,681 | ||||
Wabtec Corp. | 6,500 | 258,375 | ||||
Werner Enterprises, Inc. | 23,300 | 2 | 404,022 | |||
Total Industrials | 3,802,384 | |||||
Information Technology—15.3% | ||||||
3Com Corp.* | 55,200 | 125,856 | ||||
ACI Worldwide, Inc.* | 5,300 | 84,270 | ||||
Affiliated Computer Services, Inc.* | 1,900 | 87,305 | ||||
Alliance Data Systems Corp.* | 4,500 | 209,385 | ||||
Amkor Technology, Inc.* | 34,000 | 74,120 | ||||
ANSYS, Inc.* | 3,100 | 86,459 | ||||
Arrow Electronics, Inc.* | 2,925 | 55,107 | ||||
Atmel Corp.* | 29,400 | 92,022 | ||||
Avnet, Inc.* | 9,800 | 178,458 | ||||
Broadridge Financial Solutions, Inc. | 6,700 | 84,018 | ||||
DST Systems, Inc.* | 4,600 | 2 | 174,708 | |||
F5 Networks, Inc.* | 5,700 | 130,302 | ||||
FLIR Systems, Inc.* | 4,700 | 144,196 | ||||
Gartner, Inc.* | 5,300 | 94,499 | ||||
Global Payments, Inc. | 3,900 | 127,881 | ||||
Hewitt Associates, Inc., Class A* | 14,800 | 420,024 | ||||
Ingram Micro, Inc., Class A* | 30,200 | 404,378 | ||||
Lender Processing Services, Inc. | 3,700 | 108,965 | ||||
Lexmark International, Inc.* | 4,300 | 115,670 | ||||
ManTech International Corp., Class A* | 1,600 | 86,704 | ||||
Metavante Technologies, Inc.* | 7,300 | 117,603 | ||||
NCR Corp.* | 22,500 | 318,150 | ||||
Plantronics, Inc. | 9,200 | 121,440 | ||||
SAIC, Inc.* | 9,100 | 177,268 | ||||
Silicon Laboratories, Inc.* | 7,800 | 193,284 | ||||
Sohu.com, Inc.* | 2,600 | 123,084 | ||||
Sybase, Inc.* | 18,100 | 448,337 | ||||
Tech Data Corp.* | 10,900 | 194,456 | ||||
Western Digital Corp.* | 9,700 | 111,065 | ||||
Wind River Systems, Inc.* | 11,000 | 99,330 | ||||
Total Information Technology | 4,788,344 | |||||
Materials—5.9% | ||||||
CF Industries Holdings, Inc. | 1,500 | 73,740 | ||||
Clearwater Paper Corp.* | 1,614 | 13,541 | ||||
Compass Minerals International, Inc. | 3,700 | 217,042 | ||||
Crown Holdings, Inc.* | 9,400 | 180,480 | ||||
FMC Corp. | 9,300 | 415,989 | ||||
MeadWestvaco Corp. | 7,500 | 83,925 | ||||
Olin Corp. | 17,000 | 307,360 | ||||
Terra Industries, Inc. | 12,100 | 201,707 | ||||
The Valspar Corp. | 5,900 | 106,731 | ||||
Worthington Industries, Inc. | 22,400 | 246,848 | ||||
Total Materials | 1,847,363 | |||||
Telecommunication Services—1.2% | ||||||
CenturyTel, Inc. | 5,600 | 153,048 | ||||
Telephone & Data Systems, Inc. | 7,200 | 228,600 | ||||
Total Telecommunication Services | 381,648 |
The accompanying notes are an integral part of these financial statements.
10
Table of Contents
Managers AMG Chicago Equity Partners Mid-Cap Fund
Schedule of Portfolio Investments (continued)
Shares | Value | ||||||
Utilities—8.8% | |||||||
Alliant Energy Corp. | 20,800 | $ | 606,944 | ||||
Energen Corp. | 14,900 | 437,017 | |||||
Hawaiian Electric Industries, Inc. | 15,800 | 349,812 | |||||
Idacorp, Inc. | 6,200 | 182,590 | |||||
Nicor, Inc. | 2,400 | 2 | 83,376 | ||||
Piedmont Natural Gas Co. | 8,800 | 278,696 | |||||
Puget Energy, Inc. | 4,300 | 117,261 | |||||
Vectren Corp. | 10,300 | 257,603 | |||||
Wisconsin Energy Corp. | 10,300 | 432,394 | |||||
Total Utilities | 2,745,693 | ||||||
Total Common Stocks (cost $41,973,794) | 31,310,709 | ||||||
Other Investment Companies—9.1%1 | |||||||
BNY Institutional Cash Reserves Fund, Series A, 0.07%3 | 2,571,005 | 2,571,005 | |||||
BNY Institutional Cash Reserves Fund, Series B*3,10 | 159,721 | 14,375 | |||||
BNY Institutional Cash Reserves Fund, Series C*3,11 | 116,065 | 116,065 | |||||
Dreyfus Cash Management Fund, Institutional Class Shares, 1.53%12 | 139,964 | 139,964 | |||||
Total Other Investment Companies (cost $2,986,755) | 2,841,409 | ||||||
Total Investments—109.1% (cost $44,960,549) | 34,152,118 | ||||||
Other Assets, less Liabilities—(9.1)% | (2,836,234 | ) | |||||
Net Assets—100.0% | $ | 31,315,884 |
The accompanying notes are an integral part of these financial statements.
11
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Portfolio Manager’s Comments
For 2008, the Managers AMG Chicago Equity Partners Balanced Fund (Institutional class) (the “Fund”) returned -18.51%, compared with the blended Composite Index (comprised of 60% S&P 500 & 40% Barclays Capital U.S. Aggregate) return of -20.91%. For the majority of the year, the Fund was underweight equities until Chicago Equity Partners LLC (“CEP”), the Fund’s subadvisor, moved to a neutral position in the fourth quarter. The majority of outperformance this year came from CEP’s asset allocation decisions, security selection in the equity portion, and a combination of security selection and avoidance of lower performing sectors in the fixed income portion.
The National Bureau of Economic Research (NBER) declared that the United States formally entered a recession in December 2007. This recession already stands as one of the longest since World War II, with annualized forecasted contractions for the fourth quarter of 2008 and the first quarter of 2009 at levels not seen since the 1970s. Unemployment continued to rocket upward, hitting a 16-year high of 7.2% in December and many economists expect it could rise to more than 10% in 2009.
The U.S. Federal Reserve was extremely active in 2008. In the fourth quarter alone, the Fed eased by more than 200 basis points, pushing the Federal funds rate to an all-time low “target range” of 0% and 0.25%. The Fed also implemented several unorthodox measures to help stimulate the economy, including purchasing mortgage-related and Treasury securities in an effort to push down long-term borrowing costs. Through the creation and expansion of lending programs, the Fed’s balance sheet has grown from approximately $900 billion to more than $2 trillion. Consumer confidence plunged to the lowest reading since the survey’s creation in 1987. November retail sales sank 7.4% on a year-over-year basis, led by cratering auto sales. Excluding auto sales, retail sales still were down 2.9%, the first negative reading since 1987. The automakers received a $14 billion “bridge loan” from the government in an effort to stave off bankruptcy.
The S&P 500 returned -37.0% in 2008, its worst year since 1931’s 43.3% loss. No sector produced positive returns in 2008, and the well-publicized problems in the financial industry led to a return of -55.3% for the financials sector. Operating earnings remained in negative territory on a year-over-year basis, with a trailing one-year figure of -20.6% on a per-share basis. Additionally, 2008 saw increased volatility that peaked in the fourth quarter, where the S&P 500 experienced intraday moves greater than 1% during more than 80% of the trading days. The year did end on a positive note, though, with the S&P 500 rallying 13.3% between November 21 and the end of the year.
The equity portion of the Fund outperformed its benchmark for the year. Over the last twelve months, the large-cap model successfully discriminated between the highest- and lowest-ranked names. The market rewarded quality, momentum, and growth factors, while the model’s valuation factors were negative for most of 2008 until price-to-earnings and price-to-book showed great performance in December.
The Fund’s overall relative performance benefited both from the stocks that it owned, as well as CEP’s successful avoidance of many lower-quality names. The Fund saw broad contributions to returns from a wide number of stocks over the trailing one year, with CEP’s model discriminating well. The Fund’s equity holdings in the financials sector were the biggest contributor to relative performance. Conversely, the Fund’s consumer staples stocks hurt relative performance and trailed those in the Index.
The fixed income markets saw unprecedented corporate spread levels, declining rates and a significant “steepening” of the yield curve in 2008. Interest rates continued to fall during the fourth quarter, and the 90-day Treasury bill briefly traded at negative yields. This indicates investors were willing to take no return in exchange for the backing of the U.S. Government. Corporate spreads hit an all-time high of 618 basis points (6.18%) on December 3, while high-yield spreads, as measured by the Merrill Lynch High Yield Master II, finished 2008 at 1812 basis points (18.12%), an all-time high. Although the Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Index returned 5.2% in 2008, the underlying sectors experienced a massive return divergence. The Barclays Capital U.S. Aggregate’s Treasury component returned 13.7%, while its corporate sector provided a return of -4.9%.
With regard to the fixed income portion of the portfolio, the biggest contributor to excess returns in 2008 was attributable to security selection. In the fourth quarter, corporate spreads continued to widen to all-time highs and we began to increase our corporate credit allocation by adding high-quality names during the quarter. CEP maintained a yield advantage to the benchmark mainly through agency-backed mortgage exposure, while extending the duration of the Fund slightly by purchasing longer-maturity Treasuries. The Fund’s agency and mortgage-backed securities holdings also helped increase the yield of the portfolio. CEP added to these positions in the fourth quarter. The Fund’s underweight to Commercial Mortgage Backed Securities (CMBS) had a positive impact and the avoidance of holdings in Lehman Brothers, AIG, and Washing-ton Mutual significantly aided performance in 2008.
This commentary reflects the viewpoints of the portfolio manager, Chicago Equity Partners, as of January 26, 2009.
Cumulative Total Return Performance
The Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all dividends and distributions were reinvested. The benchmark is a combination of the S&P 500 Index and the Barclays Capital U.S. Aggregate Index (formerly the Lehman Brothers U.S. Aggregate Index). The S&P 500 Index is a capitalization-weighted index of 500 stocks. The S&P 500 Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Barclays Capital U.S. Aggregate Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. Unlike the Fund, the S&P 500 Index and the Barclays Capital U.S. Aggregate Index are unmanaged, are not available for investment, and do not incur expenses. The chart illustrates the performance of a hypothetical $10,000 investment made in the Fund’s Class A Shares on December 31, 1998, to a $10,000 investment made in the benchmark for the same time period. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. Performance for periods
12
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Portfolio Manager’s Comments (continued)
Cumulative Total Return Performance (continued)
longer than one year is annualized. The listed returns for the Fund are net of expenses and the returns for the indices exclude expenses. Total returns for the Fund would have been lower had certain expenses not been reduced.
The table below shows the average annualized total returns for the Balanced Fund and 60% S&P 500 / 40% Barclays Capital U.S. Aggregate Index from December 31, 1998 through December 31, 2008.
Average Annual Total Returns1 | 1 Year | 5 Years | 10 Years | Inception Date | |||||||||||
Balanced2,3 | -Class A | No Load | (18.68 | )% | 2.00 | % | 4.53 | % | 01/02/97 | ||||||
-Class A | With Load | (23.34 | )% | 0.79 | % | 3.91 | % | 01/02/97 | |||||||
-Class B | No Load | (19.38 | )% | 1.27 | % | 3.92 | % | 02/10/98 | |||||||
-Class B | With Load | (23.35 | )% | 0.89 | % | 3.92 | % | 02/10/98 | |||||||
-Class C | No Load | (19.36 | )% | 1.27 | % | 3.92 | % | 02/13/98 | |||||||
-Class C | With Load | (20.15 | )% | 1.27 | % | 3.92 | % | 02/13/98 | |||||||
-Institutional Class | No Load | (18.51 | )% | 2.31 | % | 4.96 | % | 01/02/97 | |||||||
60% S&P 500 Index & 40% Barclays Capital U.S. Aggregate Index | (20.91 | )% | 1.10 | % | 1.97 | % |
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 the principal value of an investment 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.
Performance differences among the share classes are due to differences in sales charge structures and class expenses. Returns shown reflect maximum sales charge of 5.75% on Class A, as well as the applicable contingent deferred sales charge (CDSC) on both Class B and C shares. The Class B shares’ CDSC declines annually between years 1 through 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge is assessed after year six. Class C shares held for less than one year are subject to a 1% CDSC.
In choosing a Fund, 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 www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member FINRA.
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 December 31, 2008. All returns are in U.S. dollars($). |
2 | 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 their 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. |
Not FDIC insured, nor bank guaranteed. May lose value.
13
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Fund Snapshots
December 31, 2008
Portfolio Breakdown
Industry | Balanced** | ||
U. S. Government and Agency Obligations | 28.1 | % | |
Industrials | 10.8 | % | |
Financials | 10.3 | % | |
Information Technology | 9.5 | % | |
Health Care | 8.5 | % | |
Consumer Staples | 7.7 | % | |
Energy | 7.6 | % | |
Consumer Discretionary | 4.8 | % | |
Utilities | 3.9 | % | |
Telecommunication Services | 2.1 | % | |
Materials | 1.7 | % | |
Asset-Backed Securities | 1.1 | % | |
Mortgage-Backed Securities | 0.7 | % | |
Other Assets and Liabilities | 3.2 | % |
** | As a percentage of net assets |
Top Ten Holdings
Top Ten Holdings | % of Net Assets | ||
FNMA, 5.500%, 02/01/37* | 7.2 | % | |
FNMA, 5.000%, 02/01/36* | 5.0 | ||
Exxon Mobil Corp.* | 3.7 | ||
FNMA, 6.000%, 03/01/37* | 3.4 | ||
U.S. Treasury Notes, 5.250%, 02/15/29 | 3.0 | ||
Johnson & Johnson* | 2.3 | ||
FHLMC, 4.375%, 07/17/15* | 2.2 | ||
Pfizer, Inc. | 1.9 | ||
Hewlett-Packard Co. | 1.7 | ||
FNMA, 4.500%, 09/01/35* | 1.6 | ||
Top Ten as a Group | 32.0 | % | |
* | Top Ten Holding at June 30, 2008 |
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.
14
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments
December 31, 2008
Security Description | Shares | Value | ||||
Common Stocks—58.3% | ||||||
Consumer Discretionary—4.8% | ||||||
Apollo Group, Inc., Class A* | 1,100 | $ | 84,282 | |||
Big Lots, Inc.* | 1,500 | 21,735 | ||||
Comcast Corp., Class A | 8,000 | 135,040 | ||||
Genuine Parts Co. | 500 | 18,930 | ||||
H&R Block, Inc. | 1,900 | 43,168 | ||||
Leggett & Platt, Inc. | 5,100 | 77,469 | ||||
McDonald’s Corp. | 4,050 | 251,869 | ||||
Omnicom Group, Inc. | 2,400 | 64,608 | ||||
Ross Stores, Inc. | 3,200 | 95,136 | ||||
TJX Cos., Inc., The | 6,350 | 130,620 | ||||
Walt Disney Co., The | 4,150 | 94,164 | ||||
Total Consumer Discretionary | 1,017,021 | |||||
Consumer Staples—7.7% | ||||||
Altria Group, Inc. | 5,320 | 80,119 | ||||
Archer-Daniels-Midland Co. | 2,500 | 72,075 | ||||
Avon Products, Inc. | 4,350 | 104,530 | ||||
Bunge, Ltd. | 2,100 | 2 | 108,717 | |||
Colgate-Palmolive Co. | 700 | 47,978 | ||||
Herbalife, Ltd. | 4,000 | 86,720 | ||||
Kroger Co., The | 6,250 | 165,062 | ||||
Lorillard, Inc. | 800 | 45,081 | ||||
Pepsi Bottling Group, Inc. | 2,900 | 65,279 | ||||
PepsiCo, Inc. | 3,650 | 199,910 | ||||
Philip Morris International, Inc. | 2,820 | 122,698 | ||||
Procter & Gamble Co., The | 2,414 | 149,233 | ||||
Sysco Corp. | 4,300 | 98,642 | ||||
Wal-Mart Stores, Inc. | 5,200 | 291,512 | ||||
Total Consumer Staples | 1,637,556 | |||||
Energy—7.6% | ||||||
Chevron Corp. | 1,050 | 77,668 | ||||
Cimarex Energy Co. | 3,000 | 80,340 | ||||
ConocoPhillips Co. | 2,100 | 108,780 | ||||
Devon Energy Corp. | 1,600 | 105,136 | ||||
Ensco International, Inc. | 2,600 | 73,814 | ||||
Exxon Mobil Corp. | 9,820 | 783,931 | ||||
FMC Technologies, Inc.* | 3,200 | 76,256 | ||||
Massey Energy Co. | 5,100 | 70,329 | ||||
Southwestern Energy Co.* | 1,100 | 31,867 | ||||
Tesoro Corp. | 6,200 | 81,654 |
The accompanying notes are an integral part of these financial statements.
15
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
Security Description | Shares | Value | |||
Energy—7.6% (continued) | |||||
Tidewater, Inc. | 2,000 | $ | 80,540 | ||
Valero Energy Corp. | 2,800 | 60,592 | |||
Total Energy | 1,630,907 | ||||
Financials—7.8% | |||||
Aflac, Inc. | 2,000 | 91,680 | |||
Annaly Capital Management, Inc. | 4,100 | 65,067 | |||
Bank of America Corp. | 5,300 | 74,624 | |||
Bank of Hawaii Corp. | 1,900 | 85,823 | |||
Boston Properties, Inc. | 1,000 | 55,000 | |||
Charles Schwab Corp., The | 5,500 | 88,935 | |||
Chubb Corp., The | 4,650 | 237,150 | |||
Citigroup, Inc. | 6,600 | 44,286 | |||
Goldman Sachs Group, Inc. | 1,650 | 139,244 | |||
Health Care REIT, Inc. | 1,900 | 80,180 | |||
JPMorgan Chase & Co. | 8,298 | 261,636 | |||
Merrill Lynch & Co., Inc. | 5,100 | 59,364 | |||
Northern Trust Corp. | 2,300 | 119,922 | |||
Raymond James Financial, Inc. | 1,600 | 27,408 | |||
SunTrust Banks, Inc. | 1,900 | 56,126 | |||
UnumProvident Corp. | 2,800 | 52,080 | |||
Wells Fargo & Co. | 4,500 | 132,660 | |||
Total Financials | 1,671,185 | ||||
Health Care—8.5% | |||||
Abbott Laboratories Co. | 1,700 | 90,729 | |||
AmerisourceBergen Corp. | 4,900 | 174,734 | |||
Amgen, Inc.* | 3,800 | 219,450 | |||
Baxter International, Inc. | 950 | 50,910 | |||
Express Scripts, Inc.* | 2,600 | 142,948 | |||
Genentech, Inc.* | 450 | 37,310 | |||
Gilead Sciences, Inc.* | 1,900 | 97,166 | |||
Humana, Inc.* | 2,700 | 100,656 | |||
Johnson & Johnson | 8,330 | 498,384 | |||
Pfzer, Inc. | 23,290 | 412,466 | |||
Total Health Care | 1,824,753 | ||||
Industrials—6.0% | |||||
AGCO Corp.* | 7,000 | 165,130 | |||
Emerson Electric Co. | 7,750 | 283,727 | |||
Fluor Corp. | 2,900 | 130,123 | |||
Grainger (W.W.), Inc. | 1,900 | 149,796 | |||
Honeywell International, Inc. | 1,100 | 36,113 | |||
Lockheed Martin Corp. | 2,450 | 205,996 |
The accompanying notes are an integral part of these financial statements.
16
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
Security Description | Shares | Value | |||
Industrials—6.0% (continued) | |||||
Norfolk Southern Corp. | 2,500 | $ | 117,625 | ||
Raytheon Co. | 2,400 | 122,496 | |||
Southwest Airlines Co. | 8,000 | 68,960 | |||
Total Industrials | 1,279,966 | ||||
Information Technology—9.5% | |||||
Accenture Ltd., Class A | 7,450 | 244,286 | |||
Activision Blizzard, Inc.* | 4,200 | 36,288 | |||
Adobe Systems, Inc.* | 5,200 | 110,708 | |||
Altera Corp. | 7,100 | 118,641 | |||
Hewitt Associates, Inc., Class A* | 4,800 | 136,224 | |||
Hewlett-Packard Co. | 9,950 | 361,086 | |||
Intel Corp. | 10,300 | 150,998 | |||
International Business Machines Corp. | 1,550 | 130,448 | |||
Juniper Networks, Inc.* | 5,500 | 96,305 | |||
MasterCard, Inc., Class A | 450 | 64,318 | |||
Microsoft Corp. | 7,900 | 153,576 | |||
NCR Corp.* | 5,350 | 75,649 | |||
QUALCOMM, Inc. | 4,100 | 146,903 | |||
Symantec Corp.* | 7,400 | 100,048 | |||
Tech Data Corp.* | 4,300 | 76,712 | |||
Yahoo!, Inc.* | 1,600 | 19,520 | |||
Total Information Technology | 2,021,710 | ||||
Materials—1.7% | |||||
AK Steel Holding Corp. | 4,400 | 41,008 | |||
FMC Corp. | 2,800 | 125,244 | |||
Mosaic Co., The | 3,400 | 117,640 | |||
Owens-Illinois, Inc.* | 2,700 | 73,791 | |||
Total Materials | 357,683 | ||||
Telecommunication Services—2.1% | |||||
CenturyTel, Inc. | 2,300 | 62,859 | |||
Telephone & Data Systems, Inc. | 2,600 | 82,550 | |||
Verizon Communications, Inc. | 5,650 | 191,535 | |||
Windstream Corp. | 13,400 | 123,280 | |||
Total Telecommunication Services | 460,224 | ||||
Utilities—2.6% | |||||
Alliant Energy Corp. | 8,050 | 234,899 | |||
Dominion Resources, Inc. | 6,950 | 249,088 | |||
Energen Corp. | 2,400 | 70,392 | |||
Total Utilities | 554,379 | ||||
Total Common Stocks (cost $14,460,625) | 12,455,384 |
The accompanying notes are an integral part of these financial statements.
17
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Asset-Backed Securities—1.1% | |||||||
Harley-Davidson Motorcycle Trust 2006-2, Class A2, 5.350%, 03/15/13 | $ | 151,867 | $ | 147,884 | |||
John Deere Owner Trust 2007, Class A4, 5.070%, 04/15/14 | 100,000 | 95,287 | |||||
Total Asset-Backed Securities (cost $251,748) | 243,171 | ||||||
Mortgage-Backed Securities—0.7% | |||||||
Bank of America Commercial Mortgage Inc., Series 2004-3, Class A3, 4.875%, 06/10/39 | 46,585 | 46,169 | |||||
GE Capital Commercial Mortgage Corp., 4.970%, 08/11/36 | 29,277 | 28,080 | |||||
Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A2, 5.117%, 04/10/37 | 90,000 | 81,826 | |||||
Total Mortgage-Backed Securities (cost $165,431) | 156,075 | ||||||
U.S. Government and Agency Obligations—28.1% | |||||||
Federal Home Loan Mortgage Corporation—3.9% | |||||||
FHLMC, 4.375%, 07/17/15 | 435,000 | 2 | 477,321 | ||||
FHLMC, 4.500%, 01/15/14 | 90,000 | 2 | 99,383 | ||||
FHLMC, 5.000%, 12/01/20 to 12/15/22 | 252,062 | 257,575 | |||||
Total Federal Home Loan Mortgage Corporation | 834,279 | ||||||
Federal National Mortgage Association—21.2% | |||||||
FNMA, 4.000%, 10/01/20 to 12/01/21 | 75,749 | 76,699 | |||||
FNMA, 4.375%, 04/15/15 | 41,977 | 42,448 | |||||
FNMA, 4.500%, 11/01/19 to 09/01/35 | 440,490 | 448,518 | |||||
FNMA, 5.000%, 02/01/36 | 1,044,697 | 1,068,247 | |||||
FNMA, 5.500%, 02/01/22 to 02/01/37 | 1,565,876 | 1,607,675 | |||||
FNMA, 6.000%, 03/01/37 to 08/01/37 | 944,165 | 973,256 | |||||
FNMA, 6.500%, 03/01/37 | 294,106 | 305,870 | |||||
Total Federal National Mortgage Association | 4,522,713 | ||||||
United States Treasury Securities—3.0% | |||||||
U.S. Treasury Notes, 5.250%, 02/15/29 | 480,000 | 636,675 | |||||
Total U.S. Government and Agency Obligations (cost $5,764,848) | 5,993,667 | ||||||
Corporate Bonds—8.6% | |||||||
Financials—2.5% | |||||||
Bank of America Corp., 5.750%, 12/01/17 | 55,000 | 55,009 | |||||
Berkshire Hathaway Finance Corp., 4.850%, 01/15/15 | 85,000 | 85,253 | |||||
Chubb Corp., The, 6.500%, 05/15/38 | 25,000 | 23,942 | |||||
Citigroup, Inc., 5.500%, 04/11/13 | 50,000 | 48,730 | |||||
General Electric Capital Corp., Series MTNA, 6.750%, 03/15/32 | 32,000 | 34,125 | |||||
Goldman Sachs Group, Inc., 5.950%, 01/18/18 | 45,000 | 42,741 | |||||
JPMorgan Chase & Co., 6.000%, 01/15/18 | 60,000 | 63,442 | |||||
Marsh & McLennan Companies, Inc., 5.375%, 07/15/14 | 20,000 | 17,764 | |||||
Merrill Lynch & Co., Inc., 5.450%, 02/05/13 | 30,000 | 28,863 | |||||
Travelers Companies, Inc., The, 5.375%, 06/15/12 | 40,000 | 39,944 | |||||
U.S. Bank NA, 4.950%, 10/30/14 | 70,000 | 70,898 | |||||
Wachovia Bank, NA, 5.850%, 02/01/37 | 25,000 | 24,489 | |||||
Total Financials | 535,200 |
The accompanying notes are an integral part of these financial statements.
18
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||
Industrials—4.8% | ||||||
Abbott Laboratories, 5.875%, 05/15/16 | $ | 48,000 | $ | 52,065 | ||
Altria Group, Inc., 8.500%, 11/10/13 | 15,000 | 15,551 | ||||
Archer-Daniels-Midland Co., 5.450%, 03/15/18 | 45,000 | 44,373 | ||||
AT&T, Inc., 5.100%, 09/15/14 | 65,000 | 63,972 | ||||
Burlington Northern Santa Fe Corp., 5.900%, 07/01/12 | 35,000 | 34,606 | ||||
Cardinal Health, Inc., 5.500%, 06/15/13 | 25,000 | 23,656 | ||||
Coca-Cola Enterprises, Inc., 7.375%, 03/03/14 | 30,000 | 32,979 | ||||
Comcast Corp., 5.875%, 02/15/18 | 20,000 | 18,985 | ||||
E.I. du Pont de Nemours & Co., 5.000%, 01/15/13 | 40,000 | 40,398 | ||||
GlaxoSmithKline Capital, Inc., 6.375%, 05/15/38 | 25,000 | 28,346 | ||||
Hewlett-Packard Co., 4.500%, 03/01/13 | 55,000 | 55,882 | ||||
Honeywell International, Inc., 4.250%, 03/01/13 | 55,000 | 54,946 | ||||
IBM Corp., 4.750%, 11/29/12 | 60,000 | 62,022 | ||||
Kellogg Co., 7.450%, 04/01/31 | 25,000 | 30,636 | ||||
Kimberly-Clark Corp., 6.125%, 08/01/17 | 40,000 | 42,687 | ||||
Kraft Foods, Inc., 6.875%, 01/26/39 | 25,000 | 25,124 | ||||
Kroger Co., 6.750%, 04/15/12 | 40,000 | 40,404 | ||||
Lockheed Martin Corp., 7.650%, 05/01/16 | 65,000 | 75,023 | ||||
McDonald’s Corp., 4.300%, 03/01/13 | 40,000 | 40,881 | ||||
McDonald’s Corp., 6.300%, 10/15/37 | 25,000 | 27,542 | ||||
Northrop Grumman Corp., 7.750%, 02/15/31 | 25,000 | 30,619 | ||||
TransCanada Pipelines Ltd., 4.875%, 01/15/15 | 45,000 | 40,806 | ||||
Union Pacific Corp., 6.250%, 05/01/34 | 23,000 | 21,739 | ||||
United Parcel Service, Inc., 6.200%, 01/15/38 | 25,000 | 27,659 | ||||
Verizon Communications, Inc., 6.400%, 02/15/38 | 20,000 | 21,346 | ||||
Wal-Mart Stores, Inc., 6.500%, 08/15/37 | 25,000 | 29,788 | ||||
Wyeth Co., 5.500%, 03/15/13 | 40,000 | 40,783 | ||||
Total Industrials | 1,022,818 | |||||
Utilities—1.3% | ||||||
Consolidated Edison, Inc., 5.375%, 12/15/15 | 75,000 | 73,721 | ||||
Exelon Generation Co. LLC, 6.200%, 10/01/17 | 45,000 | 38,763 | ||||
Florida Power & Light Co., 4.850%, 02/01/13 | 45,000 | 44,717 | ||||
Midamerican Energy Co., 5.750%, 11/01/35 | 25,000 | 22,165 | ||||
Pacific Gas & Electric Co., 8.250%, 10/15/18 | 55,000 | 66,196 | ||||
Virginia Electric and Power Co., 8.875%, 11/15/38 | 25,000 | 31,736 | ||||
Total Utilities | 277,298 | |||||
Total Corporate Bonds (cost $1,792,288) | 1,835,316 |
The accompanying notes are an integral part of these financial statements.
19
Table of Contents
Managers AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
Security Description | Shares | Value | ||||
Other Investment Companies—5.8%1 | ||||||
BNY Institutional Cash Reserves Fund, Series A, 0.07%3 | 647,001 | $ | 647,001 | |||
BNY Institutional Cash Reserves Fund, Series B*3,10 | 28,392 | 2,555 | ||||
BNY Institutional Cash Reserves Fund, Series C*3,11 | 32,909 | 32,909 | ||||
Dreyfus Cash Management Fund, Institutional Class Shares, 1.53%12 | 547,028 | 547,028 | ||||
Total Other Investment Companies (cost $1,255,330) | 1,229,493 | |||||
Total Investments—102.6% (cost $23,690,270) | 21,913,106 | |||||
Other Assets, less Liabilities—(2.6)% | (555,060 | ) | ||||
Net Assets—100.0% | $ | 21,358,046 |
The accompanying notes are an integral part of these financial statements.
20
Table of Contents
Portfolio Manager’s Comments
The Managers High Yield Fund (the “Fund”) seeks a high level of current income, with a secondary objective of capital appreciation.
The Fund currently employs a single subadvisor, J.P. Morgan Investment Management Inc. (“JPMorgan”), to manage the assets of the Fund. The investment philosophy at JPMorgan is based on the belief that security selection produces superior risk-adjusted returns. Thus, they place an emphasis on relative value, using a bottom-up research approach to look for opportunities where the market price of a security does not accurately reflect its intrinsic value.
The investment team at JPMorgan believes that the best investment ideas are generated collaboratively from their research analysts, traders, and portfolio managers. Research analysts perform “grass roots” fundamental research on all companies that they consider for investment.
The ideal investment exhibits the following traits:
• | Strong corporate fundamentals and understandable business plan |
• | Healthy capital structure to ensure priority of debt obligations |
• | Attractive bond yield relative to opportunity set |
Portfolio management:
�� | • | Selects securities using a bottom-up process drawing from investment opportunities identified by asset-class teams |
• | Seeks value in the context of long-term horizon |
• | Balances deep value to provide capital appreciation with relative value to provide income and stability |
• | Diversifies broadly, limiting issues and industry concentrations |
The JP Morgan investment team will make a sell decision when:
• | Security no longer possesses attractive risk/return dynamic |
• | Attractive swap candidate emerges |
• | Analyst uncovers deteriorating fundamentals not reflected in security price |
• | Portfolio rebalancing is required |
The Year in Review
The Fund’s Institutional Class shares returned -29.54% in 2008, compared with -26.16% for the Barclays Capital U.S. Corporate High Yield Index (“Index”).
The high yield market experienced its worst year on record in 2008, a far worse drop than the prior annual record of -9.59% set in 1990. The year began poorly as the high yield market posted three consecutive negative months during the first quarter. April ushered in a slight rebound as the market posted one of its best monthly returns ever, but after modestly positive performance in May, the macro background weakened significantly and high yield bonds struggled through mid-December. July and August were the calm before the storm, as September, October and November marked the three worst months of performance ever for the high yield market. During this three-month time period the high yield market lost almost a third of its value and returned -28.92%. After bottoming in mid-December, the high yield market rallied through year-end to post its second best month on record. Overall, it was a challenging and volatile year for the high yield market as it under-performed the Barclays Capital U.S. Government – Treasury Index (+13.74%), but held up better than the S&P 500 Index (-37.00%).
The consistent flow of negative news during the trailing 12-month period and continuing uncertainty made many investors flock towards the safest of assets. As would be expected in a flight-to-quality environment, higher rated bonds performed better than lower rated issues. Specifically, the Barclays Capital Ba High Yield Index returned -17.53% last year, compared to -26.65% for the Barclays Capital B High Yield Index and -44.35% for the Barclays Capital Caa High Yield Index. Though all high yield sectors ended the year in negative territory, environmental and railroads were the best performing sectors and the worst returns were experienced by the publishing, broadcasting, and financial sectors.
Since investors preferred the safety of U.S. Treasuries, the yield spread between U.S. Treasuries and high yield bonds increased drastically last year. U.S. Treasuries were one of a very few asset classes to appreciate last year and this contributed to record yield spreads. Absolute yields are also at record highs and the spread between U.S. Treasuries and high yield bonds exceeded 20% for the first time ever. The default rate also gradually increased during 2008 and contributed somewhat to the widening yield spread. During the year, the 12-month trailing domestic default rate increased from its record low of 0.34% at the end of 2007 to 2.25% at the end of 2008. This level, though, is still well below the historical average of 4.34%. The default rate is likely to increase during 2009, but it is hard to predict how much, given the fluidity of the current economic environment and the amount of uncertainty that still remains.
The Fund’s underperformance was principally due to its overweights to the technology, consumer products, and chemicals sectors. In particular, overweights to Simmons, Open Solutions, Dex Media, NXP BV/NXP Funding, and Ineos Group Holdings were the most significant detractors. Market liquidity also negatively impacted performance as hedge funds were forced to quickly liquidate securities at unfavorable prices and investor appetite for risk shrunk. JPMorgan’s investment process also tends to favor the most liquid high yield securities. As a result, the strategy will often lead the Index and peers in trending markets, which was certainly the case the last four months of the year, because the most liquid securities more quickly reflect market sentiment than less frequently traded securities. This hurt relative performance as the market was trending downward from September to mid-December, but helped relative performance during the last few weeks of December.
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Table of Contents
Managers High Yield Fund
Portfolio Manager’s Comments (continued)
Conversely, the Fund’s relative performance was aided by favorable security selection in the telecommunications, banking, and gaming sectors. The largest positive contributions came from overweights in GMAC, DirecTV, MetroPCS Wireless, and Arch Western Finance.
As of year end, the Fund is overweight in the consumer products, telecommunications, and automotive sectors. Conversely, the Portfolio remains underweight in the electric, natural gas and home construction sectors. Sector weights are driven by JPMorgan’s view of the relative value opportunities in those sectors, its credit research, and its bottom-up security selection process.
Looking Forward
In the short term, JPMorgan expects volatility to remain elevated, reflecting the uncertain economic environment. However, it believes current valuations already factor in substantial weakness and will ultimately prove attractive. JPMorgan feels current yields are overly pessimistic and incorporate an unlikely expectation for future defaults. JPMorgan expects that protracted economic weakness will drive the default rate higher in 2009, but believes it will remain below market expectations due to low refinancing requirements, flexible debt terms, and reasonable corporate cash flows. Also, the forced selling pressure of hedge fund de-leveraging in October and November should abate and attractive valuations should create significant demand for the asset class. Lastly, security and sector selection will be extremely important as JPMorgan manages through 2009 and it will continue to rely on its bottom-up security selection process to capitalize on dislocations in relative value.
Cumulative Total Return Performance
High Yield’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all distributions were reinvested. The Barclays Capital U.S. Corporate High Yield Index (formerly the Lehman Brothers U.S. Corporate High Yield Index) is a total return performance benchmark for fixed income securities having a maximum quality rating of Ba1 (as determined by Moody’s Investors Service). Unlike the Fund, the Barclays Capital U.S. Corporate High Yield Index is unmanaged, is not available for investment, and does not incur expenses. The chart illustrates the performance of a hypothetical $10,000 investment made in the Fund’s Class A Shares on December 31, 1998 to a $10,000 investment made in the Barclays Capital U.S. Corporate High Yield Index for the same time period. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. Performance for periods longer than
22
Table of Contents
Managers High Yield Fund
Portfolio Manager’s Comments (continued)
Cumulative Total Return Performance (continued)
one year is annualized. The listed returns for the Fund are net of expenses and the returns for the index exclude expenses. Total returns for the Fund would have been lower had certain expenses not been reduced.
The table below shows the average annualized total returns for the High Yield Fund and the Barclays Capital U.S. Corporate High Yield Index from December 31, 1998 through December 31, 2008.
Average Annual Total Returns1 | 1 Year | 5 Years | 10 Years | Inception Date | |||||||||||
High Yield2,3 | -Class A | No Load | (29.76 | )% | (2.01 | )% | 1.99 | % | 01/02/98 | ||||||
-Class A | With Load | (32.78 | )% | (2.87 | )% | 1.55 | % | 01/02/98 | |||||||
-Class B | No Load | (30.22 | )% | (2.72 | )% | 1.36 | % | 02/19/98 | |||||||
-Class B | With Load | (33.43 | )% | (3.00 | )% | 1.36 | % | 02/19/98 | |||||||
-Class C | No Load | (30.27 | )% | (2.72 | )% | 1.37 | % | 02/19/98 | |||||||
-Class C | With Load | (30.91 | )% | (2.72 | )% | 1.37 | % | 02/19/98 | |||||||
-Institutional Class | No Load | (29.54 | )% | (1.71 | )% | 2.43 | % | 03/02/98 | |||||||
Barclays Capital U.S. Corporate High Yield Index | (26.16 | )% | (0.80 | )% | 2.17 | % |
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 the principal value of an investment 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.
Performance differences among the share classes are due to differences in sales charge structures and class expenses. Returns shown reflect maximum sales charge of 5.75% on Class A, as well as the applicable contingent deferred sales charge (CDSC) on both Class B and C shares. The Class B shares’ CDSC declines annually between years 1 through 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge is assessed after year six. Class C shares held for less than one year are subject to a 1% CDSC.
In choosing a Fund, 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 www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member FINRA.
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 December 31, 2008. 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. |
Not FDIC insured, nor bank guaranteed. May lose value.
23
Table of Contents
Managers High Yield Fund
Fund Snapshots
December 31, 2008
Portfolio Breakdown
Industry | High Yield** | ||
Industrials | 69.2 | % | |
Finance | 12.9 | % | |
Utilities | 3.1 | % | |
Materials | 0.2 | % | |
Information Technology | 0.1 | % | |
Other Assets and Liabilities | 14.5 | % |
** | As a percentage of net assets |
Top Ten Holdings
Top Ten Holdings | % of Net Assets | ||
HCA, Inc., 9.625%, 11/15/16* | 2.8 | % | |
GMAC LLC, 6.875%, 08/28/12* | 1.7 | ||
Sprint Capital Corp., 6.900%, 05/01/19* | 1.5 | ||
Visant Holding Corp., 10.250%, 12/01/13* | 1.4 | ||
EchoStar Communications Corp., 7.125%, 02/01/16* | 1.4 | ||
DirectTV Holdings LLC, 6.375%, 06/15/15* | 1.4 | ||
Biomet, Inc., 10.375%, 10/15/17 | 1.3 | ||
EchoStar DBS Corp., 7.750%, 05/31/15 | 1.2 | ||
MetroPCS Wireless, Inc., 9.250%, 11/01/14 | 1.2 | ||
Sungard Data Systems, Inc., 10.250%, 08/15/15 | 1.1 | ||
Top Ten as a Group | 15.0 | % | |
* | Top Ten Holding at June 30, 2008 |
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.
24
Table of Contents
Managers High Yield Fund
Schedule of Portfolio Investments
December 31, 2008
Security Description | Principal Amount | Value | |||||
Corporate Bonds—85.2% | |||||||
Financials—12.9% | |||||||
AAC Group Holding Corp., 10.250%, 10/01/12 (a) (b) | $ | 140,000 | 2 | $ | 93,100 | ||
Aeroflex, Inc. Term Loan B1, 5.438%, 08/15/14, (02/17/09)5 | 98,464 | 62,032 | |||||
Allison Transmission, Inc., Term Loan, 4.190%, 08/07/14, (01/12/09)5 | 16,523 | 9,312 | |||||
Allison Transmission, Inc., Term Loan, 4.580%, 08/07/14, (01/09/09)5 | 72,702 | 40,973 | |||||
Allison Transmission, Inc., Term Loan, 4.640%, 08/07/14, (01/08/09)5 | 108,492 | 61,143 | |||||
Allison Transmission, Inc., Term Loan, 6.750%, 08/07/14, (01/08/09)5 | 512 | 289 | |||||
Arch Western Finance, LLC, 6.750%, 07/01/13 | 235,000 | 205,625 | |||||
DJO Finance LLC, 10.875%, 11/15/14 | 80,000 | 58,000 | |||||
Dresser, Inc., 2nd Lien Term Loan, 7.986%, 05/04/14, (02/18/09)5 | 195,000 | 112,612 | |||||
First Data Corp. Term Loan B1, 3.211%, 09/24/14, (01/02/09)5 | 10,533 | 6,820 | |||||
First Data Corp. Term Loan B1, 5.926%, 09/24/14, (01/02/09)5 | 154,762 | 100,208 | |||||
First Data Corp. Term Loan B1, 5.950%, 09/24/14, (03/24/09)5 | 4,705 | 3,046 | |||||
Ford Motor Credit Co., 6.322%, 01/15/10, (01/15/09)5 | 140,000 | 112,175 | |||||
Ford Motor Credit Co., 7.000%, 10/01/13 | 193,000 | 133,471 | |||||
Ford Motor Credit Co., 7.250%, 10/25/11 | 75,000 | 54,820 | |||||
Ford Motor Credit Co., 7.800%, 06/01/12 | 375,000 | 263,268 | |||||
Ford Motor Credit Co., 8.000%, 12/15/16 | 280,000 | 182,615 | |||||
GMAC LLC, 6.625%, 05/15/12 | 110,000 | 85,670 | |||||
GMAC LLC, 6.750%, 12/01/14 | 17,000 | 11,692 | |||||
GMAC LLC, 6.875%, 08/28/12 | 566,000 | 434,779 | |||||
Harrah’s Operating Co., Term B-3 Loan, 4.459%, 01/28/15, (03/31/09)5 | 49,372 | 29,024 | |||||
Harrah’s Operating Co., Term B-3 Loan, 6.535%, 01/28/15, (01/27/09)5 | 99,874 | 58,712 | |||||
Harrah’s Operating Co., Term B-3 Loan, 6.762%, 01/28/15, (12/31/08)5 | 754 | 443 | |||||
Hawker Beechcraft Acquisition Co., LLC, 8.875%, 04/01/15 6 | 225,000 | 77,625 | |||||
Hawker Beechcraft Acquisition Co., LLC, 9.750%, 04/01/17 | 30,000 | 8,250 | |||||
Host Hotels & Resorts, L.P., 6.375%, 03/15/15 | 205,000 | 153,750 | |||||
Host Hotels & Resorts, L.P., 6.875%, 11/01/14 | 50,000 | 38,750 | |||||
Host Hotels & Resorts, L.P., 7.125%, 11/01/13 | 45,000 | 36,450 | |||||
Idearc, Inc., 8.000%, 11/15/16 | 180,000 | 14,400 | |||||
INEOS Group Holdings, Term B Loan, 5.727%, 12/14/14 | 765 | 340 | |||||
INEOS Group Holdings, Term C Loan, 6.227%, 12/14/14 | 765 | 339 | |||||
INEOS Group Holdings, Term B Loan, 8.202%, 12/14/13, (03/27/09)5 | 74,235 | 32,942 | |||||
INEOS Group Holdings, Term C Loan, 8.702%, 12/14/14, (03/27/09)5 | 74,235 | 32,911 | |||||
KAR Holdings, Inc., 8.750%, 05/01/14 | 140,000 | 62,300 | |||||
Lyondell Chemical, B2 Term Loan, 7.000%, 12/20/14, (12/31/08)5 | 149,250 | 66,043 | |||||
Neiman Marcus Group, Inc., The, Term Loan, 3.943%, 04/26/13, (03/06/09)5 | 60,000 | 38,509 | |||||
Nuveen Investments, Inc., 10.500%, 11/15/15 (a) | 160,000 | 36,200 | |||||
Petroplus Finance, Ltd., 6.750%, 05/01/14 (a) | 175,000 | 112,000 | |||||
Petroplus Finance, Ltd., 7.000%, 05/01/17 (a) | 160,000 | 98,400 |
The accompanying notes are an integral part of these financial statements.
25
Table of Contents
Managers High Yield Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Financials—12.9% (continued) | |||||||
Rainbow National Services LLC, 8.750%, 09/01/12 (a) | $ | 100,000 | $ | 90,500 | |||
Sensata Technologies Finance Co. LLC, 3.161%, 04/27/13 | 371 | 191 | |||||
Sensata Technologies Finance Co. LLC, Term B Loan, 5.258%, 04/27/13, (1/29/09)5 | 144,629 | 74,484 | |||||
Simmons Bedding Co., Term Loan, 7.698%, 12/19/11 | 3,656 | 1,983 | |||||
Simmons Bedding Co., Term Loan, 7.698%, 12/19/11 | 34,914 | 18,941 | |||||
Simmons Bedding Co., Term Loan, 9.160%, 12/19/11, (01/28/09)5 | 23,855 | 12,941 | |||||
Simmons Bedding Co., Term Loan, 9.223%, 12/19/11, (02/27/09)5 | 7,952 | 4,314 | |||||
Simmons Bedding Co., Term Loan, 10.660%, 12/19/11, (12/31/08)5 | 18,280 | 9,917 | |||||
Simmons Holding Co., Inc., Term Loan, 9.095%, 02/15/12, (02/17/09)5 | 120,000 | 3,180 | |||||
Texas Competitive Electric Holdings Co., Term Loan, 3.961%, 10/10/14, (01/30/09)5 | 850 | 594 | |||||
Texas Competitive Electric Holdings Co., Term Loan, 5.368%, 10/10/14, (01/09/09)5 | 63,621 | 44,402 | |||||
UCI Holdco, Inc., 9.412%, 12/15/13, (03/16/09)5 | 131,869 | 23,077 | |||||
Wind Acquisition Term Loan, 11.753%, 12/07/11, (01/20/09)5 | 246,503 | 154,064 | |||||
Total Financials | 3,367,626 | ||||||
Industrials—69.2% | |||||||
Acco Brands Corp., 7.625%, 08/15/15 | 430,000 | 225,750 | |||||
Advanced Micro Devices, Inc., 7.750%, 11/01/12 | 170,000 | 2 | 75,225 | ||||
Alliance Laundry Corp., 8.500%, 01/15/13 | 225,000 | 174,375 | |||||
Allied Waste North America, Inc., 7.250%, 03/15/15 | 205,000 | 190,881 | |||||
Alltel Communications, Inc., Term Loan, 4.371%, 05/15/15, (03/17/09)5 | 59,699 | 58,788 | |||||
Ames True Temper, Inc., 8.752%, 01/15/12, (01/15/09)5 | 180,000 | 110,700 | |||||
Ames True Temper, Inc.,10.000%, 07/15/12 | 85,000 | 2 | 30,175 | ||||
ArvinMeritor, Inc., 8.750%, 03/01/12 | 235,000 | 2 | 128,075 | ||||
Ashtead Capital, Inc., 9.000%, 08/15/16 (a) | 270,000 | 140,400 | |||||
Atlas Energy Resources LLC, 10.750%, 02/01/18 (a) | 150,000 | 92,250 | |||||
Baldor Electric Co., 8.625%, 02/15/17 | 165,000 | 123,750 | |||||
Beazer Homes USA, Inc., 6.500%, 11/15/13 | 115,000 | 2 | 39,675 | ||||
Beazer Homes USA, Inc., 8.375%, 04/15/12 | 80,000 | 32,400 | |||||
Biomet, Inc., 10.375%, 10/15/17 6 | 415,000 | 329,925 | |||||
Boyd Gaming Corp., 7.125%, 02/01/16 | 125,000 | 74,375 | |||||
CCH II Capital Corp., 10.250%, 10/01/13 (a) | 123,000 | 42,435 | |||||
CCO Holdings LLC, 8.750%, 11/15/13 | 365,000 | 2 | 231,775 | ||||
Chaparral Energy, Inc., 8.875%, 02/01/17 | 115,000 | 23,575 | |||||
Charter Communications, Inc., 11.000%, 10/01/15 | 220,000 | 39,600 | |||||
Chesapeake Energy Corp., 7.000%, 08/15/14 | 200,000 | 167,000 | |||||
Chiquita Brands International, Inc., 8.875%, 12/01/15 | 125,000 | 89,375 | |||||
Citizens Communications Co., 6.625%, 03/15/15 | 70,000 | 51,450 | |||||
Claire’s Stores, Inc., 9.625%, 06/01/15 6 | 215,634 | 20,485 | |||||
Community Health Systems, Inc., 8.875%, 07/15/15 | 245,000 | 226,625 | |||||
Constellation Brands, Inc., 7.250%, 09/01/16 | 255,000 | 242,250 | |||||
Cooper Companies, Inc., 7.125%, 02/15/15 | 120,000 | 101,400 |
The accompanying notes are an integral part of these financial statements.
26
Table of Contents
Managers High Yield Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Industrials—69.2% (continued) | |||||||
Copano Energy LLC, 7.750%, 06/01/18 (a) | $ | 120,000 | $ | 81,600 | |||
Cricket Communications I, 9.375%, 11/01/14 (a) | 260,000 | 235,300 | |||||
Del Monte Corp., 6.750%, 02/15/15 | 195,000 | 168,675 | |||||
Denbury Resources, Inc., 7.500%, 04/01/13 | 145,000 | 110,925 | |||||
Dex Media West LLC, 9.875%, 08/15/13 | 130,000 | 31,200 | |||||
Dex Media, Inc., 8.000%, 11/15/13 | 125,000 | 23,750 | |||||
Dex Media, Inc., 9.000%, 11/15/13 (b) | 270,000 | 51,300 | |||||
Digicel Group, Ltd., 8.875%, 01/15/15 (a) | 100,000 | 2 | 65,500 | ||||
Digicel Group, Ltd., 9.125%, 01/15/15 (a)6 | 104,000 | 66,040 | |||||
Digicel Ltd., 9.250%, 09/01/12 (a) | 50,000 | 42,750 | |||||
DirectTV Holdings LLC, 6.375%, 06/15/15 | 380,000 | 352,450 | |||||
Dynegy Holdings, Inc., 7.500%, 06/01/15 | 185,000 | 130,425 | |||||
EchoStar Communications Corp., 7.125%, 02/01/16 | 445,000 | 373,800 | |||||
EchoStar DBS Corp., 7.750%, 05/31/15 | 355,000 | 303,525 | |||||
El Paso Corp., 7.000%, 06/15/17 | 55,000 | 43,318 | |||||
El Paso Natural Gas Co., 7.250%, 06/01/18 | 90,000 | 71,881 | |||||
Fairpoint Communications, Inc., 13.125%, 04/01/18 (a) | 190,000 | 92,150 | |||||
First Data Corp., 9.875%, 09/24/15 | 250,000 | 152,500 | |||||
FMG Finance Property, Ltd., 10.625%, 09/01/16 (a) | 180,000 | 105,300 | |||||
Ford Motor Co., 6.500%, 08/01/18 | 295,000 | 72,275 | |||||
Forest Oil Corp., 7.250%, 06/15/19 (a) | 85,000 | 62,475 | |||||
Forest Oil Corp., 7.750%, 05/01/14 | 40,000 | 33,800 | |||||
Freeport-McMoRan Copper & Gold, Inc., 8.250%, 04/01/15 | 125,000 | 106,372 | |||||
Freeport-McMoRan Copper & Gold, Inc., 8.375%, 04/01/17 | 80,000 | 65,691 | |||||
Freescale Semiconductor, Inc., 8.875%, 12/15/14 | 55,000 | 24,475 | |||||
Freescale Semiconductor, Inc., 9.125%, 12/15/14 6 | 310,000 | 72,850 | |||||
General Motors Corp., 7.125%, 07/15/13 | 300,000 | 2 | 56,250 | ||||
General Motors Corp., 8.250%, 07/15/23 | 175,000 | 2 | 29,750 | ||||
General Motors Corp., 8.375%, 07/15/33 | 235,000 | 42,300 | |||||
Georgia-Pacific Corp., 7.000%, 01/15/15 (a) | 165,000 | 141,075 | |||||
Georgia-Pacific Corp., 7.700%, 06/15/15 | 225,000 | 172,125 | |||||
Goodyear Tire & Rubber Co., The, 9.000%, 07/01/15 | 25,000 | 20,250 | |||||
Graham Packaging Co., 9.875%, 10/15/14 | 275,000 | 170,500 | |||||
Hanesbrands, Inc., 8.784%, 12/15/14, (05/15/09)5 | 360,000 | 255,600 | |||||
Harrah’s Operating Companies, Inc., 10.750%, 02/01/16 (a) | 375,000 | 108,750 | |||||
HCA, Inc., 9.625%, 11/15/16 6 | 940,000 | 735,550 | |||||
Helix Energy Solutions Group, Inc., 9.500%, 01/15/16 (a) | 185,000 | 98,975 | |||||
Hertz Corp., 8.875%, 01/01/14 | 310,000 | 192,200 | |||||
Host Hotels & Resorts, Inc., 6.750%, 06/01/16 | 75,000 | 55,125 | |||||
Huntsman International LLC, 7.875%, 11/15/14 | 155,000 | 83,700 | |||||
Ineos Group Holdings PLC, 8.500%, 02/15/16 (a) | 285,000 | 27,075 |
The accompanying notes are an integral part of these financial statements.
27
Table of Contents
Managers High Yield Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Industrials—69.2% (continued) | |||||||
Intelsat Bermuda, Ltd., 11.250%, 06/15/16 | $ | 285,000 | 2 | $ | 173,850 | ||
Intelsat Jackson Holdings, 9.500%, 06/15/16, (a) | 90,000 | 83,250 | |||||
Intelsat Subsidiary Holding Company, Ltd., 8.875%, 01/15/15 (a) | 50,000 | 45,750 | |||||
Interline Brands, Inc., 8.125%, 06/15/14 | 55,000 | 43,725 | |||||
IPCS, Inc., 5.317%, 05/01/13, (02/01/09)5 | 90,000 | 64,350 | |||||
IPCS, Inc., 6.442%, 05/01/14, (02/01/09)5 | 230,000 | 141,450 | |||||
Jarden Corp., 7.500%, 05/01/17 | 345,000 | 237,188 | |||||
K. Hovnanian Enterprises, Inc., 8.625%, 01/15/17 | 195,000 | 49,725 | |||||
L-3 Communications Corp., 5.875%, 01/15/15 | 110,000 | 99,550 | |||||
L-3 Communications Corp., 6.375%, 10/15/15 | 150,000 | 141,000 | |||||
MarkWest Energy Partners LP, 8.750%, 04/15/18 | 160,000 | 100,000 | |||||
MetroPCS Wireless, Inc., 9.250%, 11/01/14 | 335,000 | 301,500 | |||||
MGM Mirage, 6.750%, 04/01/13 | 405,000 | 273,375 | |||||
MGM Mirage, 6.875%, 04/01/16 | 155,000 | 98,812 | |||||
MGM Mirage, 7.500%, 06/01/16 | 175,000 | 2 | 111,781 | ||||
Nalco Co., 8.875%, 11/15/13 | 130,000 | 110,500 | |||||
Newfield Exploration Co., 6.625%, 04/15/16 | 175,000 | 140,000 | |||||
Noranda Aluminium Acquisition Co., 6.595%, 05/15/15, (05/15/09)5 | 195,000 | 67,275 | |||||
Nordic Telephone Co., 8.875%, 05/01/16 (a) | 315,000 | 222,075 | |||||
NXP BV, 7.875%, 10/15/14 | 180,000 | 71,100 | |||||
NXP BV, 9.500%, 10/15/15 | 265,000 | 51,012 | |||||
Open Solutions, Inc., 9.750%, 02/01/15 (a) | 380,000 | 58,900 | |||||
OPTI Canada, Inc., 7.875%, 12/15/14 | 30,000 | 15,450 | |||||
OPTI Canada, Inc., 8.250%, 12/15/14 | 120,000 | 65,400 | |||||
Packaging Dynamics, Inc., 10.000%, 05/01/16 (a) | 160,000 | 73,600 | |||||
Paetec Holding Corp., 9.500%, 07/15/15 | 200,000 | 120,000 | |||||
Petrohawk Energy Corp., 7.875%, 06/01/15 (a) | 120,000 | 89,400 | |||||
Petrohawk Energy Corp., 9.125%, 07/15/13 | 175,000 | 142,625 | |||||
Petroprod Ltd., 10.850%, 05/24/13 (a) | 100,000 | 17,500 | |||||
PolyOne Corp., 8.875%, 05/01/12 | 275,000 | 143,000 | |||||
Quebecor Media, Inc., 7.750%, 03/15/16 | 270,000 | 183,600 | |||||
Quebecor World, Inc., 8.750%, 03/15/16* (a)8 | 165,000 | 13,819 | |||||
Quicksilver Resources, Inc., 8.250%, 08/01/15 | 160,000 | 102,400 | |||||
Qwest Corp., 7.500%, 10/01/14 | 105,000 | 87,675 | |||||
Qwest Corp., 8.875%, 03/15/12 | 215,000 | 199,950 | |||||
RBS Global & Rexnord Corp., 8.875%, 09/01/16 | 175,000 | 103,250 | |||||
Reichhold Industries, Inc., 9.000%, 08/15/14 (a) | 190,000 | 126,350 | |||||
Rental Service Corp., 9.500%, 12/01/14 | 255,000 | 141,525 | |||||
R.H. Donnelley, Inc., 11.750%, 05/15/15 (a) | 71,000 | 17,750 | |||||
Rite Aid Corp., 7.500%, 03/01/17 | 50,000 | 32,750 | |||||
Rite Aid Corp., 9.500%, 06/15/17 | 150,000 | 52,875 |
The accompanying notes are an integral part of these financial statements.
28
Table of Contents
Managers High Yield Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Industrials—69.2% (continued) | |||||||
Royal Caribbean Cruises, Ltd., 7.000%, 06/15/13 | $ | 90,000 | $ | 51,750 | |||
Royal Caribbean Cruises, Ltd., 7.250%, 06/15/16 | 50,000 | 27,500 | |||||
Sally Holdings LLC, 9.250%, 11/15/14 | 235,000 | 2 | 203,275 | ||||
Sally Holdings LLC, 10.500%, 11/15/16 | 30,000 | 20,550 | |||||
Sand Ridge Energy, Inc., 8.000%, 06/01/18 (a) | 140,000 | 78,400 | |||||
Sealy Mattress Co., 8.250%, 06/15/14 | 440,000 | 261,800 | |||||
Sensata Technologies BV, 8.000%, 05/01/14 | 380,000 | 172,900 | |||||
Service Corp. International, 6.750%, 04/01/15 | 225,000 | 178,875 | |||||
Simmons Co., 6.227%, 12/15/14 (b) | 559,000 | 67,080 | |||||
Smurfit-Stone Container Enterprises, Inc., 8.375%, 07/01/12 | 230,000 | 39,100 | |||||
Spectrum Brands, Inc., 7.375%, 02/01/15 | 205,000 | 38,438 | |||||
Sprint Capital Corp., 6.900%, 05/01/19 | 555,000 | 394,698 | |||||
Sprint Capital Corp., 8.750%, 03/15/32 | 75,000 | 50,720 | |||||
Starwood Hotels & Resorts Worldwide, Inc. 6.750%, 05/15/18 | 150,000 | 82,618 | |||||
Steel Dynamics, Inc., 7.750%, 04/15/16 (a) | 70,000 | 48,825 | |||||
Steinway Musical Instruments, Inc., 7.000%, 03/01/14 (a) | 225,000 | 157,500 | |||||
Stewart Enterprises, Inc., 6.250%, 02/15/13 | 120,000 | 93,600 | |||||
Sun Media Corp., 7.625%, 02/15/13 | 115,000 | 93,150 | |||||
Sungard Data Systems, Inc., 10.250%, 08/15/15 | 425,000 | 282,625 | |||||
Surgical Care Affiliates, Inc., 8.875%, 07/15/15 (a)6 | 135,000 | 83,025 | |||||
Tenet Healthcare Corp., 9.250%, 02/01/15 | 340,000 | 2 | 275,400 | ||||
Tenneco Automotive, Inc., 8.625%, 11/15/14 | 295,000 | 113,575 | |||||
Tenneco, Inc., 8.125%, 11/15/15 | 25,000 | 11,625 | |||||
Terex Corp., 8.000%, 11/15/17 | 290,000 | 247,950 | |||||
Tesoro Corp., 6.625%, 11/01/15 | 150,000 | 87,750 | |||||
The Goodyear Tire & Rubber Co., 8.625%, 12/01/11 | 83,000 | 2 | 69,305 | ||||
The Neiman Marcus Group, Inc., 9.000%, 10/15/15 6 | 290,000 | 129,050 | |||||
Titan International Inc., 8.000%, 01/15/12 | 200,000 | 149,000 | |||||
Travelport LLC, 6.827%, 09/01/14, (03/02/09)5 | 80,000 | 24,000 | |||||
Travelport LLC, 9.875%, 09/01/14 | 100,000 | 38,000 | |||||
Travelport LLC, 11.875%, 09/01/16 | 110,000 | 31,350 | |||||
TRW Automotive, Inc., 7.000%, 03/15/14 (a) | 150,000 | 80,250 | |||||
TRW Automotive, Inc., 7.250%, 03/15/17 (a) | 150,000 | 77,250 | |||||
United Components, Inc., 9.375%, 06/15/13 | 60,000 | 25,500 | |||||
United Rentals, Inc., 6.500%, 02/15/12 | 125,000 | 99,375 | |||||
United Surgical Partners International, Inc., 8.875%, 05/01/17 | 55,000 | 37,950 | |||||
United Surgical Partners International, Inc., 9.250%, 05/01/17 6 | 185,000 | 114,700 | |||||
Vail Resorts, Inc., 6.750%, 02/15/14 | 280,000 | 210,000 | |||||
Vedanta Resources PLC, 9.500%, 07/18/18 (a) | 120,000 | 63,000 | |||||
Venoco, Inc., 8.750%, 12/15/11 | 190,000 | 92,150 | |||||
Videotron, Ltd., 6.875%, 01/15/14 | 123,000 | 109,470 |
The accompanying notes are an integral part of these financial statements.
29
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Managers High Yield Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Industrials—69.2% (continued) | |||||||
Visant Holding Corp., 10.250%, 12/01/13 (b) | $ | 505,000 | $ | 376,225 | |||
Vitro, S.A.B. de C.V., 9.125%, 02/01/17 | 405,000 | 123,525 | |||||
West Corp., 9.500%, 10/15/14 | 150,000 | 83,250 | |||||
Wind Acquisition Finance, S.A., 10.750%, 12/01/15 (a) | 150,000 | 129,750 | |||||
Windstream Corp., 8.125%, 08/01/13 | 60,000 | 55,500 | |||||
Windstream Corp., 8.625%, 08/01/16 | 165,000 | 146,850 | |||||
Total Industrials | 18,035,532 | ||||||
Utilities—3.1% | |||||||
Edison Mission Energy, 7.000%, 05/15/17 | 160,000 | 140,000 | |||||
Energy Future Holdings Corp., 10.875%, 11/01/17 (a) | 275,000 | 196,625 | |||||
Mirant North America LLC, 7.375%, 12/31/13 | 45,000 | 43,425 | |||||
NRG Energy, Inc., 7.250%, 02/01/14 | 145,000 | 135,938 | |||||
NRG Energy, Inc., 7.375%, 02/01/16 | 80,000 | 74,600 | |||||
Texas Competitive Electric Holdings Co., 10.250%, 11/01/15 (a) | 265,000 | 189,475 | |||||
Texas Competitive Electric Holdings Co., Term Loan, 5.888%, 10/10/14, (02/09/09)5 | 47,787 | 33,351 | |||||
Total Utilities | 813,414 | ||||||
Total Corporate Bonds (cost $35,429,067) | 22,216,572 | ||||||
Shares | |||||||
Common Stocks—0.3% | |||||||
Information Technology—0.1% | |||||||
Flextronics International, Ltd. | 13,000 | 33,280 | |||||
Materials—0.2% | |||||||
Huntsman Corp. | 12,603 | 43,355 | |||||
Total Common Stocks (cost $216,202) | 76,635 | ||||||
Preferred Stock—0.1% | |||||||
Preferred Blocker, Inc., 9.000% (cost $36,750) | 147 | 36,750 | |||||
Other Investment Companies—14.8%1 | |||||||
BNY Institutional Cash Reserves Fund, Series A, 0.07%3 | 1,462,003 | 1,462,003 | |||||
BNY Institutional Cash Reserves Fund, Series B*3,10 | 87,750 | 7,897 | |||||
BNY Institutional Cash Reserves Fund, Series C*3,11 | 70,194 | 70,194 | |||||
Dreyfus Cash Management Fund, Institutional Class Shares, 1.53%12 | 2,317,651 | 2,317,651 | |||||
Total Other Investment Companies (cost $3,937,598) | 3,857,745 | ||||||
Total Investments—100.4% (cost $39,619,617) | 26,187,702 | ||||||
Other Assets, less Liabilities—(0.4)% | (99,491 | ) | |||||
Net Assets—100.0% | $ | 26,088,211 |
The accompanying notes are an integral part of these financial statements.
30
Table of Contents
Portfolio Manager’s Comments
The Managers Fixed Income Fund’s (the “Fund”) investment objective is to achieve the highest level of income, consistent with the preservation of capital. The Fund’s benchmark is the Barclays Capital U.S. Aggregate Bond Index.
The Fund currently employs a subadvisor, Loomis Sayles & Company, L.P. (“Loomis”), to manage the assets of the Fund. The investment team at Loomis believes that there are inherent inefficiencies in bond markets, hence the greatest opportunities to add value reside in the pricing of credit risk. Loomis’s philosophy is to identify attractively valued issues through fundamental research. Portfolio manager Dan Fuss and his investment team at Loomis are focused on issue selection rather than interest rate timing. They employ a “bond picker’s” approach, capitalizing on the firm’s commitment to credit research. Mr. Fuss and his team research debt offerings in the same way equity analysts research stocks, looking for undervalued bonds where they see a yield premium, the potential for price appreciation, or both. They analyze the company’s financial condition in detail, as well as the terms of specific bond offerings. They believe price appreciation can come from a variety of catalysts, including improving company fundamentals that would lead to credit upgrades, changing market supply-and-demand forces, and improving sector or economic trends.
The ideal investment typically exhibits some of the following traits:
• | An attractive yield, both absolute and relative to Loomis’ credit research expectations |
• | Good call protection, particularly when prevailing rates are low |
• | Stable or improving fundamentals (for corporate bonds) |
• | Non-market relatedness to counter the impact of systematic risk |
In deciding which securities to buy, the investment team will consider:
• | The financial strength of the issuer of the security |
• | Current interest rates and the asset manager’s expectations regarding general trends in interest rates |
• | Comparisons of the level of risk associated with particular investments with the asset manager’s expectations concerning the potential return of those investments |
The portfolio:
• | Primarily holds securities rated BBB/Baa or better, but may hold a small portion in below-investment-grade and unrated bonds |
• | Can be invested up to 10% in non-U.S. Dollar-denominated bonds |
In order to mitigate some of the interest rate risk, the portfolio may be structured with counter-cyclical elements. In doing so, Loomis may utilize convertible bonds, municipal bonds, preferred stocks, and foreign corporate and government bonds, in addition to domestic corporate bonds, which are used for alpha generation. In addition, Mr. Fuss seeks bonds with call protection, either through the terms of the bond structure or through deep price discounts relative to the call price.
The investment team may make a sell decision when:
• | There is a change in sovereign, industry, or company fundamentals |
• | The issuer is downgraded by Loomis’ research |
• | Relative valuation is not consistent with its expected rating category |
• | Other securities or sectors offer greater total return potential |
The Year in Review
Managers Fixed Income Fund (Institutional Class) returned -10.23% in 2008 compared with a return of 5.24% for the Barclays Capital U.S. Aggregate Bond Index (“Index”).
For investors, 2008 turned out to be a year that many would rather soon forget. The fixed-income markets were no exception, marred by widening of credit spreads to historic levels, and credit markets struggling to function normally. In the first half of the year, the markets seemed to be tussling with the typical bear market challenges. The second half, though, proved to be anything but normal. Policymakers responded with immediate and aggressive action, recognizing the importance of keeping credit 3 owing through the markets. With no playbook to follow, there were stumbles along the way and some inconsistent application of policy. Investors shunned risky assets, preferring instead the safe haven of U.S. Government securities. This flight to quality persisted even though, as it turns out, investors were paid little to nothing as Treasury bill yields moved toward zero. For the year, investment-grade corporate bonds underperformed Treasury securities by nearly 20%. That differential grew wider with a decline in credit quality, with high-yield securities underperforming Treasuries by 38% for the year. By the end of the fourth quarter, there were some tentative signs that the damage was being contained. Short rates began to ease, a few new issues came to market, and corporate spreads narrowed marginally.
The Fund’s performance relative to the Index during 2008 was primarily driven by an overweight in corporate bonds and a related underweight in U.S. Treasuries. Throughout the year, as yield spreads widened and valuations on corporate bonds declined, Loomis shifted the Fund’s assets away from Treasuries into corporate bonds. A sizeable portion of the Fund’s corporate exposure is in BBB-rated securities, which are at the lower end of the investment-grade credit scale. As mentioned above, there was a direct correlation between credit quality and performance throughout the year. In hindsight, the timing of this shift was premature. However, Loomis still feels strongly that corporate bonds are severely undervalued, and that the Fund’s current allocation has it well positioned for strong excess performance as spreads narrow further. In addition to the sector allocation decisions, security selection had a modest impact on performance. While exposure to the headline names was modest, the Fund did hold positions in Lehman Brothers, as well as Fannie Mae and Freddie Mac. Lastly, the Fund’s non-U.S. holdings were negatively impacted by the rally in the Dollar relative to most major currencies. The Dollar was pushed higher as investors viewed this as another safe haven.
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Managers Fixed Income Fund
Portfolio Manager’s Comments (continued)
Looking Forward
With a weak and eventually recovering economy, central banks around the globe are expected to remain accommodative throughout the coming year. Treasury yields could fall further in the near term, but Loomis believes the bias will be for stable-to-higher yields later in the year as the economy begins to improve, credit demands rise, and the flight to safety reverses. Risky assets are priced at extremely wide spreads relative to Treasuries. This is true partly because Treasury yields are so low, but a good portion of the gap reflects illiquid market conditions and fear of deteriorating fundamentals. Valuations are so cheap now that spreads would not need to tighten further for the Fund to earn an attractive yield. Loomis believes yield spreads can narrow in the coming year if the economy begins to move out of recession and lending patterns begin to normalize. The timing of such a move is uncertain, as there are a number of hurdles to clear. Investors need to see more clarity surrounding policymakers’ intentions, especially with a new administration coming on board. Additionally, investors need to develop more confidence that the government will succeed in stabilizing housing and restoring lending. The global corporate bond markets are likely to remain volatile, and there could certainly be increases in defaults and downgrades. Despite this, Loomis believes the Fund is positioned to deliver attractive returns by maintaining its well-diversified exposure to the credit markets, and by leveraging their experience and research resources to avoid the credit blow-ups in the market.
Cumulative Total Return Performance
Managers Fixed Income Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all distributions were reinvested. The Barclays Capital U.S. Aggregate Index (formerly the Lehman Brothers U.S. Aggregate Index) is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. Unlike the Fund, the Barclays Capital U.S. Aggregate Bond Index is unmanaged, is not available for investment, and does not incur expenses. The chart illustrates the performance of a hypothetical $10,000 investment made in the Fund’s Class A Shares on December 31, 1998, with a $10,000 investment made in the Barclays Capital U.S. Aggregate Bond Index for the same time periods. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. Performance for periods
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Managers Fixed Income Fund
Portfolio Manager’s Comments (continued)
Cumulative Total Return Performance (continued)
longer than one year is annualized. The listed returns for the Fund are net of expenses and the returns for the Index exclude expenses. Total returns for the Fund would have been lower had certain expenses not been reduced.
The table below shows the average annualized total returns for the Fixed Income Fund and the Barclays Capital U.S. Aggregate Bond Index from December 31, 1998 through December 31, 2008.
Average Annual Total Returns1 | 1 Year | 5 Years | 10 Years | Inception | |||||||||||
Fixed Income2,3 | -Class A | No Load | (10.45 | )% | 1.84 | % | 4.30 | % | 01/02/97 | ||||||
-Class A | With Load | (14.28 | )% | 0.96 | % | 3.85 | % | 01/02/97 | |||||||
-Class B | No Load | (11.13 | )% | 1.14 | % | 3.71 | % | 03/20/98 | |||||||
-Class B | With Load | (15.36 | )% | 0.81 | % | 3.71 | % | 03/20/98 | |||||||
-Class C | No Load | (11.11 | )% | 1.13 | % | 3.72 | % | 03/05/98 | |||||||
-Class C | With Load | (11.96 | )% | 1.13 | % | 3.72 | % | 03/05/98 | |||||||
-Institutional Class | No Load | (10.23 | )% | 2.15 | % | 4.75 | % | 01/02/97 | |||||||
Barclays Capital U.S. Aggregate Bond Index | 5.24 | % | 4.65 | % | 5.63 | % |
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 the principal value of an investment 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.
Performance differences among the share classes are due to differences in sales charge structures and class expenses. Returns shown reflect maximum sales charge of 5.75% on Class A, as well as the applicable contingent deferred sales charge (CDSC) on both Class B and C shares. The Class B shares’ CDSC declines annually between years 1 through 6 according to the following schedule: 5, 4, 3, 3, 2, 1%. No sales charge is assessed after year six. Class C shares held for less than one year are subject to a 1% CDSC.
In choosing a Fund, 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 www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member FINRA.
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 December 31, 2008. 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. |
Not FDIC insured, nor bank guaranteed. May lose value.
33
Table of Contents
Managers Fixed Income Fund
Fund Snapshots
December 31, 2008
Portfolio Breakdown
Industry | Fixed Income** | ||
Industrials | 45.0 | % | |
Finance | 15.9 | % | |
U.S. Government and Agency Obligations | 11.3 | % | |
Utilities | 9.8 | % | |
Foreign Government | 6.3 | % | |
Asset-Backed Securities | 2.5 | % | |
Municipal Bonds | 1.9 | % | |
Mortgage-Backed Securities | 1.1 | % | |
Preferred Stocks | 0.4 | % | |
Other Assets and Liabilities | 5.8 | % |
** | As a percentage of net assets |
Top Ten Holdings
Top Ten Holdings | % of Net Assets | ||
U.S. Treasury Notes, 4.875%, 05/31/09* | 9.2 | % | |
Merrill Lynch & Co., Inc., 6.110%, 01/29/37* | 2.4 | ||
Inter-American Development Bank, 6.000%, 12/15/17* | 2.0 | ||
Kinder Morgan Energy Partners, L.P., 5.950%, 02/15/18* | 1.8 | ||
PPG Industries, Inc., 6.650%, 03/15/18* | 1.7 | ||
Equitable Resources, Inc., 6.500%, 04/01/18* | 1.5 | ||
Telefonica Emisiones SAU, 7.045%, 06/20/36 | 1.5 | ||
Time Warner Cable, Inc., 6.750%, 07/01/18 | 1.3 | ||
Qantas Airways, Ltd., 6.050%, 04/15/16 | 1.3 | ||
Questar Market Resources, Inc., 6.800%, 04/01/18 | 1.2 | ||
Top Ten as a Group | 23.9 | % | |
* | Top Ten Holding at June 30, 2008 |
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.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments
December 31, 2008
Security Description | Principal Amount | Value | |||||||
Corporate Bonds—70.7% | |||||||||
Finance—15.9% | |||||||||
American General Finance Corp., Series MTN, 6.900%, 12/15/17 | $ | 2,770,000 | $ | 1,200,274 | |||||
ASIF Global Financial, 2.380%, 02/26/09 (a) | SGD | 1,000,000 | 506,775 | ||||||
Bank of America Capital Trust VI, 5.625%, 03/08/35 | 295,000 | 248,563 | |||||||
Barclays Capital Corp., 4.160%, 02/22/10 (a) | THB | 6,000,000 | 177,023 | ||||||
Bear Stearns Companies, Inc., The, 4.650%, 07/02/18 | 480,000 | 440,474 | |||||||
Bear Stearns Companies, Inc., The, 5.300%, 10/30/15 | 25,000 | 24,086 | |||||||
Bear Stearns Companies, Inc., The, 6.400%, 10/02/17 | 65,000 | 67,659 | |||||||
CIGNA Corp., 6.150%, 11/15/36 | 240,000 | 183,133 | |||||||
CIT Group, Inc., 7.625%, 11/30/12 | 1,043,000 | 2 | 881,172 | ||||||
CIT Group, Inc., 12.000%, 12/18/18 (a) | 1,604,000 | 1,235,080 | |||||||
Colonial Realty, L.P., 4.800%, 04/01/11 | 625,000 | 498,496 | |||||||
Colonial Realty, L.P., 5.500%, 10/01/15 | 190,000 | 107,172 | |||||||
Developers Diversified Realty Corp., 3.875%, 01/30/09 | 200,000 | 195,494 | |||||||
Duke Realty, L.P., 5.950%, 02/15/17 | 35,000 | 17,509 | |||||||
Equity One, Inc., 3.875%, 04/15/09 | 150,000 | 146,307 | |||||||
ERAC USA Finance Co., 6.375%, 10/15/17 (a) | 240,000 | 166,814 | |||||||
ERAC USA Finance Co., 6.700%, 06/01/34 (a) | 65,000 | 35,792 | |||||||
ERAC USA Finance Co., 7.000%, 10/15/37 (a) | 925,000 | 510,480 | |||||||
ERP Operating, L.P., 5.125%, 03/15/16 | 15,000 | 10,627 | |||||||
ERP Operating, L.P., 5.750%, 06/15/17 | 70,000 | 48,391 | |||||||
Ford Motor Credit Company LLC, 5.700%, 01/15/10 | 15,000 | 12,750 | |||||||
Ford Motor Credit Company LLC, 7.000%, 10/01/13 | 135,000 | 93,361 | |||||||
Ford Motor Credit Company LLC, 9.750%, 09/15/10 | 309,000 | 247,286 | |||||||
GE Capital Australia Funding Pty., Ltd., Series EMTN, 8.000%, 02/13/12 | AUD | 260,000 | 173,958 | ||||||
Highwoods Realty, L.P., 5.850%, 03/15/17 | 30,000 | 18,584 | |||||||
Highwoods Realty, L.P., 7.500%, 04/15/18 | 350,000 | 227,446 | |||||||
Hospitality Properties Trust, 6.750%, 02/15/13 | 465,000 | 288,041 | |||||||
iStar Financial, Inc., 1.959%, 10/01/12, (04/01/09)5 | 325,000 | 96,688 | |||||||
Kinder Morgan Finance Co., 5.150%, 03/01/15 | 75,000 | 56,250 | |||||||
Kinder Morgan Finance Co., 5.700%, 01/05/16 | 165,000 | 123,750 | |||||||
Korea Development Bank, 3.875%, 03/02/09 | 425,000 | 422,886 | |||||||
Lehman Brothers Holdings, Inc., 6.000%, 05/03/32*8 | 70,000 | 7 | |||||||
Lehman Brothers Holdings, Inc., 6.875%, 07/17/37*8 | 885,000 | 88 | |||||||
Marsh & McLennan Companies, Inc., 5.375%, 07/15/14 | 410,000 | 364,163 | |||||||
Marsh & McLennan Companies, Inc., 5.750%, 09/15/15 | 652,000 | 581,533 | |||||||
Marsh & McLennan Companies, Inc., 5.875%, 08/01/33 | 730,000 | 539,275 | |||||||
MBIA Insurance Corp., 14.000%, 01/15/33 (a)7 | 25,000 | 12,760 | |||||||
Merrill Lynch & Co., Inc., 6.110%, 01/29/37 | 2,900,000 | 2,615,104 | |||||||
Morgan Stanley, 5.550%, 04/27/17 | 300,000 | 248,127 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||||
Finance—15.9% (continued) | ||||||||
Morgan Stanley, 5.950%, 12/28/17 | $ | 100,000 | $ | 83,135 | ||||
Morgan Stanley, 6.625%, 04/01/18 | 920,000 | 808,440 | ||||||
Morgan Stanley, 6.750%, 04/15/11 | 65,000 | 63,988 | ||||||
Mutual of Omaha Insurance Co., 6.800%, 06/15/36 (a) | 620,000 | 572,796 | ||||||
PNC Bank, N.A., 6.875%, 04/01/18 | 395,000 | 420,989 | ||||||
ProLogis Trust, 5.625%, 11/15/15 | 15,000 | 7,474 | ||||||
ProLogis Trust, 5.750%, 04/01/16 | 15,000 | 7,490 | ||||||
Rabobank Nederland, 12.500%, 02/17/09 | ISK | 20,000,000 | 165,249 | |||||
SLM Corp., 8.450%, 06/15/18 | 845,000 | 669,068 | ||||||
Sovereign Bank, 5.125%, 03/15/13 | 335,000 | 280,915 | ||||||
Toll Brothers Finance Corp., 5.150%, 05/15/15 | 555,000 | 399,235 | ||||||
Travelers Cos., Inc., 6.250%, 06/15/37 | 755,000 | 728,265 | ||||||
Travelers Property Casualty Corp., 6.375%, 03/15/33 | 330,000 | 313,237 | ||||||
XL Capital (Europe) PLC, 6.500%, 01/15/12 | 105,000 | 65,634 | ||||||
Total Finance | 17,409,293 | |||||||
Industrials—45.0% | ||||||||
Anadarko Petroleum Corp., 5.950%, 09/15/16 | 485,000 | 429,042 | ||||||
Anadarko Petroleum Corp., 6.450%, 09/15/36 | 360,000 | 284,773 | ||||||
Anheuser-Busch Companies, Inc., 5.950%, 01/15/33 | 330,000 | 274,851 | ||||||
Anheuser-Busch Companies, Inc., 6.450%, 09/01/37 | 420,000 | 379,394 | ||||||
Apache Corp., 6.000%, 01/15/37 | 630,000 | 612,928 | ||||||
AstraZeneca PLC, 6.450%, 09/15/37 | 905,000 | 1,032,288 | ||||||
AT&T Corp., 6.500%, 03/15/29 | 775,000 | 752,713 | ||||||
AT&T Wireless Services, Inc., 8.750%, 03/01/31 | 310,000 | 388,590 | ||||||
AT&T, Inc., 6.150%, 09/15/34 | 185,000 | 190,761 | ||||||
AT&T, Inc., 6.700%, 11/15/13 | 855,000 | 906,659 | ||||||
Avnet, Inc., Convertible 2.000%, 03/15/34 | 100,000 | 98,875 | ||||||
Avnet, Inc., 6.000%, 09/01/15 | 720,000 | 552,038 | ||||||
Avnet, Inc., 6.625%, 09/15/16 | 140,000 | 107,913 | ||||||
BellSouth Corp., 6.000%, 11/15/34 | 935,000 | 921,393 | ||||||
BellSouth Corp., 6.550%, 06/15/34 | 55,000 | 55,943 | ||||||
Bowater, Inc., 6.500%, 06/15/13 | 170,000 | 17,850 | ||||||
Camden Property Trust, 5.700%, 05/15/17 | 255,000 | 136,822 | ||||||
Canadian Pacific Railway Co., 5.950%, 05/15/37 | 410,000 | 289,928 | ||||||
Cardinal Health, Inc., 4.000%, 06/15/15 | 320,000 | 268,644 | ||||||
Charter Communications Operating LLC, 8.000%, 04/30/12 (a) | 245,000 | 202,125 | ||||||
Chartered Semiconductor Manufacturing, Ltd., 6.250%, 04/04/13 | 715,000 | 453,862 | ||||||
Coca-Cola HBC Finance, B.V., 5.125%, 09/17/13 | 265,000 | 259,041 | ||||||
Comcast Corp., 5.650%, 06/15/35 | 265,000 | 236,353 | ||||||
Comcast Corp., 6.450%, 03/15/37 | 795,000 | 793,673 | ||||||
Comcast Corp., 6.500%, 11/15/35 | 460,000 | 459,255 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||
Industrials—45.0% (continued) | ||||||
Comcast Corp., 6.950%, 08/15/37 | $ | 240,000 | $ | 253,539 | ||
Continental Airlines, Inc., 5.983%, 04/19/22 | 85,000 | 56,950 | ||||
Continental Airlines, Inc., Series B, 6.903%, 04/19/22 | 94,000 | 53,580 | ||||
Corning, Inc., 6.850%, 03/01/29 | 600,000 | 464,689 | ||||
Covidien International Finance, S.A., 6.000%, 10/15/17 | 295,000 | 291,509 | ||||
Covidien International Finance, S.A., 6.550%, 10/15/37 | 300,000 | 305,368 | ||||
CSX Corp., 6.000%, 10/01/36 | 570,000 | 452,793 | ||||
Cummins Engine Co., Inc., 6.750%, 02/15/27 | 153,000 | 115,082 | ||||
D.R. Horton, Inc., 5.250%, 02/15/15 | 420,000 | 266,700 | ||||
Delta Air Lines, Inc., 8.021%, 08/10/22 | 771,956 | 408,172 | ||||
Desarrolladora Homex, S.A. de C.V., 7.500%, 09/28/15 | 245,000 | 177,625 | ||||
DP World, Ltd., 6.850%, 07/02/37 (a) | 1,420,000 | 734,193 | ||||
Dun & Bradstreet Corp., The, 6.000%, 04/01/13 | 790,000 | 746,874 | ||||
El Paso Corp., 6.950%, 06/01/28 | 165,000 | 100,569 | ||||
Energy Transfer Partners, L.P., 6.125%, 02/15/17 | 65,000 | 53,760 | ||||
Energy Transfer Partners, L.P., 6.625%, 10/15/36 | 145,000 | 101,749 | ||||
Equifax, Inc., 7.000%, 07/01/37 | 280,000 | 175,580 | ||||
Equitable Resources, Inc., 6.500%, 04/01/18 | 1,730,000 | 1,618,661 | ||||
Federated Retail Holdings, Inc., 6.375%, 03/15/37 | 820,000 | 462,766 | ||||
General Motors Corp., 8.250%, 07/15/23 | 35,000 | 5,950 | ||||
Georgia-Pacific Corp., 7.250%, 06/01/28 | 70,000 | 43,050 | ||||
HCA, Inc., 6.250%, 02/15/13 | 5,000 | 3,150 | ||||
HCA, Inc., 6.375%, 01/15/15 | 5,000 | 3,075 | ||||
HCA, Inc., 6.750%, 07/15/13 | 5,000 | 3,175 | ||||
HCA, Inc., 7.050%, 12/01/27 | 750,000 | 320,842 | ||||
HCA, Inc., 7.190%, 11/15/15 | 5,000 | 2,794 | ||||
HCA, Inc., 7.500%, 12/15/23 | 5,000 | 2,373 | ||||
HCA, Inc., 7.500%, 11/06/33 | 75,000 | 35,250 | ||||
HCA, Inc., 7.690%, 06/15/25 | 315,000 | 149,452 | ||||
HCA, Inc., 7.750%, 07/15/36 | 5,000 | 2,242 | ||||
HCA, Inc., 8.360%, 04/15/24 | 40,000 | 20,673 | ||||
HCA, Inc., 8.750%, 09/01/10 | 625,000 | 603,125 | ||||
International Paper Co., 4.000%, 04/01/10 | 300,000 | 288,778 | ||||
International Paper Co., 4.250%, 01/15/09 | 300,000 | 299,898 | ||||
International Paper Co., 5.500%, 01/15/14 | 635,000 | 475,234 | ||||
Intuit, Inc., 5.750%, 03/15/17 | 210,000 | 155,529 | ||||
J.C. Penney Co., Inc., 5.750%, 02/15/18 | 25,000 | 16,621 | ||||
J.C. Penney Co., Inc., 6.375%, 10/15/36 | 580,000 | 351,892 | ||||
J.C. Penney Co., Inc., 7.400%, 04/01/37 | 20,000 | 13,197 | ||||
J.C. Penney Co., Inc., 7.625%, 03/01/97 | 25,000 | 16,535 | ||||
Johnson & Johnson, 5.950%, 08/15/37 | 810,000 | 992,622 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||
Industrials—45.0% (continued) | ||||||
Kinder Morgan Energy Partners, L.P., 5.950%, 02/15/18 | $ | 2,335,000 | $ | 1,996,182 | ||
KLA Instruments Corp., 6.900%, 05/01/18 | 1,135,000 | 859,785 | ||||
Koninklijke Philips Electronics, N.V., 6.875%, 03/11/38 | 1,090,000 | 1,037,745 | ||||
Kraft Foods, Inc., 6.500%, 11/01/31 | 310,000 | 298,391 | ||||
Kroger Co., 7.000%, 05/01/18 | 460,000 | 481,886 | ||||
Lennar Corp., 5.600%, 05/31/15 | 400,000 | 246,000 | ||||
Lennar Corp., 6.500%, 04/15/16 | 280,000 | 172,200 | ||||
Liberty Media Corp., 5.700%, 05/15/13 | 190,000 | 125,510 | ||||
Lubrizol Corp., 6.500%, 10/01/34 | 880,000 | 716,099 | ||||
Macy’s Retail Holdings, Inc., 6.790%, 07/15/27 | 80,000 | 43,520 | ||||
Macy’s Retail Holdings, Inc., 6.900%, 04/01/29 | 30,000 | 16,399 | ||||
Marks & Spencer Group PLC, 7.125%, 12/01/37 (a) | 300,000 | 142,660 | ||||
Masco Corp., 5.850%, 03/15/17 | 350,000 | 226,724 | ||||
Medco Health Solutions, Inc., 7.125%, 03/15/18 | 1,260,000 | 1,166,260 | ||||
Medco Health Solutions, Inc., 7.250%, 08/15/13 | 420,000 | 407,613 | ||||
Missouri Pacific Railroad Co., 5.000%, 01/01/45 9 | 200,000 | 94,000 | ||||
Motorola, Inc., 5.220%, 10/01/97 | 40,000 | 13,322 | ||||
Motorola, Inc., 6.625%, 11/15/37 | 95,000 | 44,731 | ||||
Motorola, Inc., 6.500%, 09/01/25 | 15,000 | 7,438 | ||||
Motorola, Inc., 6.500%, 11/15/28 | 70,000 | 30,977 | ||||
New England Telephone & Telegraph Co., 7.875%, 11/15/29 | 95,000 | 83,698 | ||||
News America, Inc., 6.200%, 12/15/34 | 350,000 | 320,370 | ||||
News America, Inc., 6.400%, 12/15/35 | 425,000 | 394,013 | ||||
News America, Inc., 7.280%, 06/30/28 | 225,000 | 217,069 | ||||
News America, Inc., 7.625%, 11/30/28 | 460,000 | 462,564 | ||||
Nextel Communications, Inc., 5.950%, 03/15/14 | 710,000 | 298,469 | ||||
Nextel Communications, Inc., 6.875%, 10/31/13 | 5,000 | 2,126 | ||||
Nextel Communications, Inc., 7.375%, 08/01/15 | 20,000 | 8,404 | ||||
NGPL Pipeline LLC, 7.768%, 12/15/37 (a) | 940,000 | 767,655 | ||||
Northwest Airlines, Inc., 8.028%, 11/01/17 | 475,000 | 209,000 | ||||
Owens & Minor, Inc., 6.350%, 04/15/16 9 | 125,000 | 105,480 | ||||
PPG Industries, Inc., 6.650%, 03/15/18 | 1,935,000 | 1,909,313 | ||||
Pulte Homes, Inc., 6.000%, 02/15/35 | 1,265,000 | 651,475 | ||||
Pulte Homes, Inc., 6.375%, 05/15/33 | 465,000 | 248,775 | ||||
Pulte Homes, Inc., Series $, 5.200%, 02/15/15 | 405,000 | 277,425 | ||||
Qantas Airways, Ltd., 6.050%, 04/15/16 (a) | 1,500,000 | 1,373,750 | ||||
Questar Market Resources, Inc., 6.800%, 04/01/18 | 1,365,000 | 1,315,621 | ||||
Qwest Corp., 6.875%, 09/15/33 | 20,000 | 12,000 | ||||
Safeway, Inc., 6.350%, 08/15/17 | 400,000 | 396,124 | ||||
Samsung Electronics Co., Ltd., 7.700%, 10/01/27 (a) | 570,000 | 597,945 | ||||
Simon Property Group, L.P., 5.750%, 12/01/15 | 20,000 | 13,081 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Industrials—45.0% (continued) | |||||||
Sprint Capital Corp., 6.875%, 11/15/28 | $ | 30,000 | $ | 17,886 | |||
Sprint Capital Corp., 6.900%, 05/01/19 | 20,000 | 14,223 | |||||
Telecom Italia Capital S.p.A., 6.000%, 09/30/34 | 40,000 | 27,673 | |||||
Telecom Italia Capital S.p.A., 6.375%, 11/15/33 | 105,000 | 73,686 | |||||
Tele-Communications, Inc., 9.800%, 02/01/12 | 350,000 | 369,215 | |||||
Telefonica Emisiones SAU, 7.045%, 06/20/36 | 1,475,000 | 1,615,126 | |||||
Tennessee Gas Pipeline Co., 7.000%, 10/15/28 | 240,000 | 2 | 184,833 | ||||
Texas Eastern Transmission, L.P., 7.000%, 07/15/32 | 255,000 | 236,379 | |||||
TGT Pipeline LLC, 5.200%, 06/01/18 | 465,000 | 362,009 | |||||
Time Warner Cable, Inc., 6.750%, 07/01/18 | 1,500,000 | 1,446,686 | |||||
Time Warner, Inc., 6.625%, 05/15/29 | 270,000 | 240,064 | |||||
Time Warner, Inc., 6.950%, 01/15/28 | 120,000 | 110,950 | |||||
Time Warner, Inc., 7.625%, 04/15/31 | 80,000 | 78,833 | |||||
Time Warner, Inc., 7.700%, 05/01/32 | 685,000 | 687,695 | |||||
Toro Co., The, 6.625%, 05/01/37 9 | 365,000 | 287,102 | |||||
Union Pacific Corp., 5.375%, 06/01/33 | 50,000 | 40,050 | |||||
V.F. Corp., 6.450%, 11/01/37 | 412,000 | 325,040 | |||||
Verizon Global Funding Corp., 5.850%, 09/15/35 | 1,095,000 | 1,093,129 | |||||
Verizon Maryland, Inc., 5.125%, 06/15/33 | 295,000 | 215,410 | |||||
Verizon New England, Inc., 4.750%, 10/01/13 | 300,000 | 266,244 | |||||
Verizon New England, Inc., 6.500%, 09/15/11 | 530,000 | 526,438 | |||||
Verizon New York, Inc., Series B, 7.375%, 04/01/32 | 195,000 | 163,289 | |||||
Viacom, Inc., 6.875%, 04/30/36 | 470,000 | 372,416 | |||||
Vodafone Group PLC, 6.150%, 02/27/37 | 650,000 | 644,610 | |||||
Walt Disney Co., The, 7.000%, 03/01/32 | 190,000 | 224,119 | |||||
Watson Pharmaceuticals, Inc., Convertible 1.750%, 03/15/23 | 65,000 | 60,775 | |||||
Western Union Co., 6.200%, 11/17/36 | 635,000 | 493,439 | |||||
Weyerhaeuser Co., 6.875%, 12/15/33 | 645,000 | 429,329 | |||||
XTO Energy, Inc., 6.750%, 08/01/37 | 300,000 | 281,822 | |||||
Total Industrials | 49,431,599 | ||||||
Utilities—9.8% | |||||||
Abu Dhabi National Energy Co., 7.250%, 08/01/18 (a) | 1,040,000 | 894,916 | |||||
Ameren Energy Generating Co., 7.000%, 04/15/18 | 1,200,000 | 1,105,693 | |||||
Bruce Mansfield Unit, 6.850%, 06/01/34 9 | 285,000 | 242,985 | |||||
CILCORP, Inc., 8.700%, 10/15/09 | 315,000 | 291,375 | |||||
Cleveland Electric Illuminating Co., The, 5.950%, 12/15/36 | 715,000 | 554,669 | |||||
Commonwealth Edison Co., 4.700%, 04/15/15 | 510,000 | 457,784 | |||||
Commonwealth Edison Co., 5.875%, 02/01/33 | 620,000 | 519,747 | |||||
Dominion Resources, Inc., 5.950%, 06/15/35 | 90,000 | 77,134 | |||||
Empresa Nacional de Electricidad, Yankee, 7.875%, 02/01/27 | 900,000 | 968,690 | |||||
Illinois Power Co., 6.250%, 04/01/18 | 1,370,000 | 1,225,612 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Utilities—9.8% (continued) | |||||||
ITC Holdings Corp., 5.875%, 09/30/16 (a) | $ | 225,000 | $ | 214,889 | |||
ITC Holdings Corp., 6.375%, 09/30/36 (a) | 300,000 | 275,033 | |||||
Methanex Corp., 6.000%, 08/15/15 | 320,000 | 210,256 | |||||
MidAmerican Energy Holdings Co., 6.500%, 09/15/37 | 340,000 | 332,950 | |||||
NiSource Finance Corp., 6.400%, 03/15/18 | 1,645,000 | 1,028,153 | |||||
NiSource Finance Corp., 6.800%, 01/15/19 | 900,000 | 566,758 | |||||
Pacific Gas and Electric Co., 6.050%, 03/01/34 | 500,000 | 532,788 | |||||
Southwestern Electric Power Co., 6.450%, 01/15/19 | 1,225,000 | 1,200,686 | |||||
Total Utilities | 10,700,118 | ||||||
Total Corporate Bonds (cost $91,184,998) | 77,541,010 | ||||||
U.S. Government and Agency Obligations—11.3% | |||||||
U.S. Treasury Notes, 4.500%, 09/30/11 | 750,000 | 2 | 823,184 | ||||
U.S. Treasury Notes, 4.750%, 05/15/14 | 835,000 | 2 | 982,887 | ||||
U.S. Treasury Notes, 4.875%, 05/31/09 | 9,940,000 | 2 | 10,132,597 | ||||
U.S. Treasury Inflation Indexed Bonds, 2.000%, 01/15/14 | 515,891 | 488,968 | |||||
Total U.S. Government and Agency Obligations (cost $12,047,508) | 12,427,636 | ||||||
Foreign Government Obligations—6.3% | |||||||
Brazil, Republic of, 10.250%, 01/10/28 | BRL | 750,000 | 291,059 | ||||
Canadian Government, 3.750%, 06/01/12 | CAD | 135,000 | 117,448 | ||||
Canadian Government, 4.250%, 09/01/09 | CAD | 1,000,000 | 828,667 | ||||
Canadian Government, 5.250%, 06/01/12 | CAD | 390,000 | 355,003 | ||||
Export-Import Bank of Korea, 4.125%, 02/10/09 (a) | 485,000 | 484,524 | |||||
Inter-American Development Bank, 6.000%, 12/15/17 | NZD | 3,500,000 | 2,231,822 | ||||
Inter-American Development Bank, 11.500%, 02/05/09 | ISK | 5,700,000 | 46,476 | ||||
International Bank for Reconstruction & Development, 9.500%, 05/27/10 | ISK | 3,300,000 | 26,122 | ||||
Mexican Fixed Rate Bonds, 8.000%, 12/07/23 | MXN | 3,500,000 | 247,832 | ||||
Mexican Government, 9.000%, 12/20/12 | MXN | 12,000,000 | 907,766 | ||||
New South Wales Treasury Corp., Series 12RG, 6.000%, 05/01/12 | AUD | 260,000 | 189,039 | ||||
New South Wales Treasury Corp., Series 10RG, 7.000%, 12/01/10 | AUD | 995,000 | 731,227 | ||||
Queensland Treasury Corp., Series 11G, 6.000%, 06/14/11 | AUD | 665,000 | 482,717 | ||||
Total Foreign Government Obligations (cost $7,853,443) | 6,939,702 | ||||||
Municipal Bonds—1.9% | |||||||
Alabama Public School & College Authority, Capital Improvement Bond, 4.500%, 12/01/26 | 30,000 | 26,946 | |||||
Buckeye Ohio Tobacco Settlement Financing Authority, Asset-A-2, 5.875%, 06/01/47 9 | 250,000 | 135,728 | |||||
Chicago Illinois Board of Education, Dedicated-Series B, 4.750%, 12/01/31 (FSA Insured) | 50,000 | 43,704 | |||||
Chicago Illinois O’Hare International Airport Revenue Bond, Series A, 4.500%, 01/01/38 (FSA Insured) | 15,000 | 11,653 | |||||
Decatur Texas Hospital Authority Hospital Revenue, 7.750%, 09/01/09 | 60,000 | 60,485 | |||||
District of Columbia, Series A, 4.750%, 06/01/36 (MBIA Insured) | 30,000 | 24,910 | |||||
Eufaula Alabama, Series C, 4.000%, 08/15/12 (AMBAC Insured) | 285,000 | 282,107 | |||||
Florida State Turnpike Authority, Revenue Bond, Department of Transportation, Series A, 3.500%, 07/01/27 (MBIA Insured) | 30,000 | 21,674 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||
Municipal Bonds—1.9% (continued) | ||||||
Green Bay Wisconsin, Water System Revenue Refunding Bonds, 3.500%, 11/01/26 (FSA Insured) | $ | 20,000 | $ | 15,487 | ||
Green Bay Wisconsin, Water System Revenue Refunding Bonds, 3.500%, 11/01/29 (FSA Insured) | 20,000 | 14,719 | ||||
Grosse Pointe Michigan Public School System, 3.000%, 05/01/27 (MBIA Insured) | 15,000 | 10,454 | ||||
Harris County Texas, Road Bonds, Series B, 4.500%, 10/01/31 | 85,000 | 76,161 | ||||
JEA Florida Water & Sewer System Revenue Bond, Series B, 4.750%, 10/01/41 (MBIA Insured) | 45,000 | 37,138 | ||||
Louisiana State, Series C, 3.250%, 05/01/26 (FSA Insured) | 30,000 | 21,115 | ||||
Massachusetts State School Building Authority Sales Tax Revenue Bond, Series A, 4.750%, 08/15/32 (AMBAC Insured) | 30,000 | 26,219 | ||||
Michigan Tobacco Settlement Financial Authority, Series A, 7.309%, 06/01/34 9 | 395,000 | 229,203 | ||||
Omaha Nebraska Public Power District Electric System Subordinated Revenue Bonds, Series AA, 4.500%, 02/01/34 (MBIA Insured) | 70,000 | 58,796 | ||||
San Diego California United School District, Refunding Bonds, Election 1998, Series F-1, 4.500%, 07/01/29 (FSA Insured) | 30,000 | 25,432 | ||||
San Jose California Redevelopment Agency Tax Allocation, Series C, 3.750%, 08/01/28 (MBIA Insured) | 35,000 | 21,186 | ||||
San Jose California Redevelopment Agency, 3.750%, 08/01/28 (BHAC Insured) | 15,000 | 9,562 | ||||
State of California, 4.500%, 08/01/27 (AMBAC Insured) | 45,000 | 37,096 | ||||
State of California, 4.500%, 10/01/29 | 130,000 | 104,989 | ||||
State of California, 4.500%, 08/01/30 (ABMAC Insured) | 35,000 | 27,899 | ||||
State of California, 4.500%, 08/01/30 | 30,000 | 23,913 | ||||
State of California, Variable Purpose Bond, 3.250%, 12/01/27 (MBIA Insured) | 25,000 | 16,327 | ||||
State of California, Variable Purpose Bond, 4.500%, 12/01/33 (AMBAC Insured) | 110,000 | 84,779 | ||||
Virginia Tobacco Settlement Financing Corp., 6.706%, 06/01/46 9 | 1,075,000 | 587,767 | ||||
University of California Regents Medical Center, Series A, 4.750%, 05/15/31 (MBIA Insured) | 10,000 | 8,627 | ||||
Wisconsin Housing & Economic Development Authority, Revenue Bonds, Series E, 4.900%, 11/01/35 | 10,000 | 7,880 | ||||
Total Municipal Bonds (cost $2,890,163) | 2,051,956 | |||||
Asset-Backed Securities—2.5% | ||||||
ARG Funding Corp., Series 2005-2A, Class A5, 2.639%, 05/20/11, (01/20/09) (a) 5 | 385,000 | 324,772 | ||||
Capital One Auto Finance Trust 2006-C A4, 1.225%, 05/15/13, (01/15/09)5 | 735,000 | 511,157 | ||||
Citibank Credit Card Issuance Trust, Series 2008-C6, Class C6, 6.300%, 06/20/14 | 780,000 | 512,043 | ||||
Centex Home Equity Loan, Series 2004-A, Class AF6, 4.270%, 01/25/34 7 | 260,139 | 233,794 | ||||
Chase Issuance Trust, Series 2007-B1, Class B1, 1.445%, 04/15/19, (01/15/09)5 | 845,000 | 262,945 | ||||
Chase Issuance Trust, Series 2005-C1, Class C1, 1.565%, 11/15/12, (01/15/09)5 | 56,000 | 44,980 | ||||
Community Program Loan Trust, Series 87-A, Class A4, 4.500%, 10/01/18 | 15,956 | 15,993 | ||||
Countrywide Home Loans, Series 2002-S1, Class A5, 6.460%, 05/25/32 (b) | 264,626 | 183,469 | ||||
MBNA Credit Card Master Note Trust, Series 2005-B2, Class B, 1.375%, 12/17/12, (01/15/09)5 | 535,000 | 441,304 | ||||
Merrill Auto Trust Securitization, Series 2008-1, Class B, 6.750%, 04/15/15 | 200,000 | 166,746 | ||||
Total Asset-Backed Securities (cost $3,720,851) | 2,697,203 | |||||
Mortgage-Backed Securities—1.1% | ||||||
Credit Suisse Mortgage Capital, Series 2007-C5, Class A4, 5.695%, 09/15/40 7 | 300,000 | 199,400 | ||||
CS First Boston Mortgage Securities Corp., Series 2005-7, Class 3A1, 5.000%, 08/25/20 | 313,244 | 243,954 | ||||
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2007-LDPX, Class A3, 5.420%, 01/15/49 | 110,000 | 78,107 | ||||
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2007-LD11, Class A4, 5.819%, 06/15/49 7 | 220,000 | 156,077 |
The accompanying notes are an integral part of these financial statements.
41
Table of Contents
Managers Fixed Income Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||||
Mortgage-Backed Securities—1.1% (continued) | ||||||||
LB-UBS Commercial Mortgage Trust, Series 2001-C3, Class A2, 6.365%, 12/15/28 | $ | 320,000 | $ | 311,798 | ||||
Morgan Stanley Dean Witter Capital, Inc., Series 2001-PPM, Class A2, 6.400%, 02/15/31 | 214,015 | 211,082 | ||||||
Total Mortgage-Backed Securities (cost $1,182,532) | 1,200,418 | |||||||
Shares | ||||||||
Preferred Stocks—0.4% | ||||||||
CIT Group, Inc., Series A, 6.350% | 5,365 | 69,208 | ||||||
FHLMC, Series F, 5.000%* | 750 | 405 | ||||||
FHLMC, Series K, 5.790%* | 2,250 | 1,665 | ||||||
FHLMC, Series O, 5.810%* | 750 | 412 | ||||||
FHLMC, Series P, 6.000%* | 1,000 | 650 | ||||||
FHLMC, Series R, 5.700%* | 1,200 | 636 | ||||||
FHLMC, Series T, 6.420%* | 700 | 420 | ||||||
FHLMC, Series U, 5.900%* | 1,700 | 527 | ||||||
FHLMC, Series V, 5.570%* | 11,750 | 3,525 | ||||||
FHLMC, Series W, 5.660%* | 3,450 | 1,725 | ||||||
FHLMC, Series Y, 6.550%* | 3,300 | 2 | 957 | |||||
FHLMC, Series Z, 8.375%* | 29,524 | 11,514 | ||||||
FNMA, Series H, 5.810%* | 450 | 549 | ||||||
FNMA, Series I, 5.375%* | 1,050 | 1,208 | ||||||
FNMA, Series L, 5.125%* | 550 | 550 | ||||||
FNMA, Series M, 4.750%* | 1,500 | 1,545 | ||||||
FNMA, Series Q, 6.750%* | 700 | 455 | ||||||
FNMA, Series S, 8.250%* | 52,775 | 2 | 43,803 | |||||
Lehman Brothers Holdings, Inc., Series P, 7.250%*8 | 385 | 192 | ||||||
Newell Financial Trust I, 5.250% | 13,455 | 353,194 | ||||||
Total Preferred Stocks (cost $3,243,454) | 493,140 | |||||||
Other Investment Companies—16.4%1 | ||||||||
BNY Institutional Cash Reserves Fund, Series A, 0.07%3 | 12,028,022 | 12,028,022 | ||||||
BNY Institutional Cash Reserves Fund, Series B*3,10 | 247,572 | 22,281 | ||||||
BNY Institutional Cash Reserves Fund, Series C*3,11 | 96,363 | 96,363 | ||||||
Dreyfus Cash Management Fund, Institutional Class Shares, 1.53%12 | 4,391,057 | 4,391,057 | ||||||
JPMorgan Liquid Assets Money Market Fund, Capital Shares, 2.02%13 | 1,508,808 | 1,508,808 | ||||||
Total Other Investment Companies (cost $18,271,822) | 18,046,531 | |||||||
Total Investments—110.6% (cost $140,394,771) | 121,397,596 | |||||||
Other Assets, less Liabilities—(10.6)% | (11,683,549 | ) | ||||||
Net Assets—100.0% | $ | 109,714,047 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Short Duration Government Fund
Portfolio Manager’s Comments
The Managers Short Duration Government Fund (the “Fund”) seeks to provide investors with a high level of current income, consistent with low volatility of net asset value.
The Fund seeks to achieve its objective by matching the duration, or interest-rate risk, of a portfolio that invests exclusively in six-month U.S. Treasury securities on a constant maturity basis. Under normal circumstances the Fund will invest at least 80% of its assets in debt securities issued by the U.S. government or its agencies and instrumentalities, and synthetic instruments or derivatives having economic characteristics similar to such debt securities.
The Fund typically employs hedging techniques using instruments such as interest rate futures, options, floors, caps, and swaps, designed to reduce the interest-rate risk of their fixed-income securities. The Fund’s benchmark is the Merrill Lynch Six-Month U.S. T-Bill Index.
The Portfolio Manager
Smith Breeden Associates, Inc.
Smith Breeden Associates, Inc. (“Smith Breeden”) is the subadvisor for the Fund. Smith Breeden, located at 280 South Mangum Street, Suite 301, Durham, NC., was founded in 1982. Smith Breeden is a money management and consulting firm involved in money management for separate accounts such as pensions and endowments, financial institution consulting and investment advice, and equity investments. The firm specializes in high-credit-quality fixed-income investments, interest-rate-risk management, and the application of option pricing to banking and investments. As of December 31, 2008, Smith Breeden advised or managed assets of approximately $18.4 billion.
Smith Breeden believes that innovative research provides critical insights into the fixed-income market. The firm’s experienced investment professionals apply these research insights to the management of investment portfolios designed to achieve their clients’ objectives. The key tenets of this market-tested investment philosophy are:
• | Over a market cycle, a portfolio of fixed income securities with wide risk-adjusted spreads produces an attractive total return in comparison with the market return. |
• | The incremental return available from security selection and sector allocation, based on careful relative-value analysis, quantitative research, and experienced market judgment, is more consistent than the incremental return from predicting the direction of interest rates. |
• | Within the investment-grade fixed-income market, the spread sectors, e.g., corporate bonds, mortgage-backed securities (MBS), commercial MBS (CMBS), and asset-backed securities (ABS) will tend to outperform Treasury securities over a market cycle. The mortgage, corporate, CMBS, and ABS sectors also offer the greatest active management opportunity for adding value through security selection. |
The portfolio management team at Smith Breeden specializes in analyzing and investing in mortgage securities. Through careful analysis and comparison of the characteristics of these securities, such as type of issuer, coupon, maturity, geographic structure, and prepayment rates, the portfolio manager seeks to structure a portfolio with risk characteristics similar to those of six-month U.S. Treasury securities, but with slightly higher returns. Because there is less certainty about the timing of principal payments to individual mortgage securities than for U.S. Treasury securities, they tend to carry a slightly higher yield. A properly structured portfolio of mortgage securities, however, can have a highly predictable cash flow while maintaining a yield advantage over Treasuries. Although the portfolio management team often purchases securities with maturities longer than six months, it does not attempt to increase returns by actively positioning the interest rate sensitivity of the Fund. Instead the team typically manages the weighted-average duration of the Fund so that it remains close to six months.
The ideal investment exhibits many of the following traits:
• | Yield advantage over Treasuries |
• | Very high quality (AAA or Government) |
• | Attractive value relative to other MBS opportunities |
The portfolio:
• | Seeks to optimize return per unit of risk |
• | Minimal exposure to credit risk and interest rate risk |
• | Consists of high quality MBS, CMBS, and ABS securities |
• | Will tend to have an interest-rate sensitivity similar to that of a six-month Treasury bill |
The Smith Breeden investment team will make a sell decision when:
• | They no longer view the bonds as attractive |
• | They deem it necessary to reallocate the Fund |
• | It will help maintain the Fund’s target duration |
The Year in Review
During the 12 months ended December 31, 2008, the Fund returned -1.19%, while the Merrill Lynch Six-Month Treasury Bill Index returned 3.58%.
The credit and financial crisis of 2008 was an exceptionally challenging time for fixed-income markets and was marked by a number of significant cant events including:
• | Federal Reserve assisted purchase of Bear Stearns by JPMorgan |
• | Fannie Mae and Freddie Mac taken into conservatorship |
• | Lehman Brothers filed for Chapter 11 bankruptcy |
• | Goldman Sachs and Morgan Stanley’s conversion to bank holding companies |
• | Federal Reserve purchases warrants for 80% equity stake of AIG |
• | FOMC cuts the Fed Funds Rate to a record 0-25 basis point range |
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Managers Short Duration Government Fund
Portfolio Manager’s Comments (continued)
As a result of the incredible market stress, all spread products, including the MBS, ABS, and CMBS in which Smith Breeden focuses, underperformed Treasuries as market participants largely executed a “flight-to-quality.” The resulting decrease in yields stemming from this increased demand for Treasuries was simply astounding. Three-month T-bills went from a 3.36% yield at the beginning of 2008 to a 0.11% yield by the end of the year. Thirty-year Treasury bond yields dropped from 4.45% to 2.69% over the same period, as market participants were willing to except lower returns in exchange for safety.
At the beginning of 2008, the Fund had a fairly modest allocation to non-agency adjustable rate mortgages (ARMs), ABS, and CMBS, with these combined positions representing roughly 10.7% of capital exposure. This exposure was positioned at the very top of the capital structure to provide maximum credit protection to the securities.
Most of the Fund’s underperformance for the year can be attributed to the agency fixed-rate MBS exposure. While this sector was not subject to the credit risk of bonds backed by subprime mortgages, both 15-year and 30-year agency MBS widened 50 (0.50%) to 100 (1.00%) basis points in option-adjusted spreads, as interest in U.S. MBS from overseas investors dissipated. Additionally, the realized volatility in interest and mortgage rates dramatically increased, which in turn elevated the hedging costs of these longer maturity securities. Collateralized mortgage obligations (CMOs) accounted for the majority of the remaining underperformance. Agency interest-only (IO) returns also hampered portfolio performance due to the decrease in interest rates, which increased the refinance ability of conventional mortgages. For most of the year, the Fund maintained positions in the front end of the yield curve. Favorable effects from yield curve positioning partially mitigated the adverse effects from fixed-rate MBS and CMOs.
Looking Forward
At year end, the Fund was positioned modestly shorter in duration than that of the benchmark and would likely benefit from a steepening yield curve. Also as of year-end, the Fund maintained almost no leverage in the portfolio. ABS, CMBS, and non-agency ARM exposures have been reduced by 32%, 17%, and 73%, respectively, on a market-value basis within the portfolio. The Fund maintains a small allocation to Treasury inflation protected securities (TIPS) and IO Strips. Smith Breeden believes that the high quality spread assets that are held in the portfolio are likely to lead the recovery, as government intervention and stimulus continue to target these types of assets. In Smith Breeden’s opinion, the portfolio is well positioned to benefit from this recovery.
Cumulative Total Return Performance
Managers Short Duration Government Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all distributions were reinvested. The Merrill Lynch Six-Month T-Bill Index is an unmanaged index that measures returns of six-month U.S. Treasury bills. Unlike the Fund, the Merrill Lynch Six-Month T-Bill Index is unmanaged, is not available for investment, and does not incur expenses. The chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on December 31, 1998 to a $10,000 investment made in the Merrill Lynch Six-Month T-Bill Index for the same time periods. Figures include reinvestment of capital gains and dividends. The listed returns for the Fund are net of expenses and the returns for the indices exclude expenses. Total returns for the Fund would have been lower had certain expenses not been reduced.
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Table of Contents
Managers Short Duration Government Fund
Portfolio Manager’s Comments (continued)
Cumulative Total Return Performance (continued)
The table below shows the average annualized total returns for the Managers Short Duration Government Fund and the Merrill Lynch Six-Month T-Bill Index from December 31, 1998 through December 31, 2008.
Average Annual Total Returns:1 | 1 Year | 5 Years | 10 Years | ||||||
Short Duration Government2,3,4 | (1.19 | )% | 2.61 | % | 3.61 | % | |||
Merrill Lynch Six-Month T-Bill Index | 3.58 | % | 3.65 | % | 3.80 | % |
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 the principal value of an investment 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.
In choosing a Fund, 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 www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member FINRA.
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 December 31, 2008. All returns are in U.S. dollars($). |
2 | Changing interest rates may adversely affect the value of an investment. An increase in interest rates typically causes the value of bonds and other fixed income securities to fall. |
3 | The Fund may use derivative instruments for hedging purposes or as part of its investment strategy. There is a risk that a derivative intended as a hedge may not perform as expected. The main risk with derivatives is that some types can amplify a gain or loss, potentially earning or losing substantially more money than the actual cost of the derivative or that the counterparty may fail to honor its contract terms, causing a loss for the Fund. Use of these instruments may also involve certain costs and risks such as liquidity risk, interest rate risk, market risk, credit risk, management risk and the risk that a fund could not close out a position when it would be most advantageous to do so. |
4 | Many bonds have call provisions which allow the debtors to pay them back before maturity. This is especially true with mortgage securities, which can be paid back anytime. Typically debtors prepay their debt when it is to their advantage (when interest rates drop making a new loan at current rates more attractive), and thus likely to the disadvantage of bondholders, who may have to reinvest prepayment proceeds in securities with lower yields. Prepayment risk will vary depending on the provisions of the security and current interest rates relative to the interest rate of the debt. |
Not FDIC insured, nor bank guaranteed. May lose value.
45
Table of Contents
Managers Short Duration Government Fund
Fund Snapshots
December 31, 2008
Portfolio Breakdown
Portfolio Breakdown | Short Duration Government Fund** | ||
U.S Government and Agency Obligations | 93.5 | % | |
Mortgage-Backed Securities | 7.8 | % | |
Asset-Backed Securities | 1.0 | % | |
Other Assets and Liabilities | (2.3 | )% |
** | As a percentage of net assets |
Top Ten Holdings
Top Ten Holdings | % of Net Assets | ||
FNMA, 6.000%, TBA | 12.2 | % | |
FHLMC, 5.953%, 02/01/37 | 4.2 | ||
FHLMC Gold Pool, 1.445%, 06/15/35 | 2.8 | ||
GMAC Commercial Mortgage Securities, Inc., Series 2000-C1, Class A2, 7.724%, 03/15/33* | 2.8 | ||
FHLMC, Series 2958, Class NB, 5.000%, 05/15/25 | 2.7 | ||
FNMA, 6.000%, 09/01/22 | 2.2 | ||
FNMA, Series 2006-57, Class PA, 5.500%, 08/25/27 | 2.1 | ||
FHLMC, Series 2725, Class PC, 4.500%, 05/15/28 | 2.1 | ||
FNMA Whole Loan, Series 2005-W2, Class A1, 0.671%, 05/25/35* | 2.0 | ||
FNMA, Series 1993-139, Class GA, 7.000%, 08/25/23 | 1.9 | ||
Top Ten as a Group | 35.0 | % | |
* | Top Ten Holding at June 30, 2008 |
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.
46
Table of Contents
Managers Short Duration Government Fund
Schedule of Portfolio Investments
December 31, 2008
Security Description | Principal Amount | Value | ||||
U.S. Government and Agency Obligations—93.5% | ||||||
Federal Home Loan Mortgage Corporation—45.5% | ||||||
FHLMC, 3.795%, 07/01/34, (06/01/09) 5 | $ | 766,162 | $ | 744,409 | ||
FHLMC, 3.810%, 05/01/34, (06/01/09) 5 | 479,904 | 466,306 | ||||
FHLMC, 4.000%, 09/15/15 | 830,828 | 836,100 | ||||
FHLMC, 4.513%, 10/01/33, (10/01/09) 5 | 3,099,980 | 3,078,522 | ||||
FHLMC, 4.674%, 03/01/38, (04/01/13) 5 | 1,934,791 | 1,959,807 | ||||
FHLMC, 4.903%, 12/01/35, (10/01/10) 5 | 1,735,201 | 1,749,411 | ||||
FHLMC, 5.000%, 06/01/09 to 06/15/27 | 8,922,221 | 9,103,795 | ||||
FHLMC, 5.953%, 02/01/37, (02/01/12) 5 | 10,073,632 | 10,324,416 | ||||
FHLMC, 6.000%, 10/15/26 to 07/01/37 | 1,911,280 | 1,960,138 | ||||
FHLMC, 6.000%, TBA | 28,700,000 | 29,704,500 | ||||
FHLMC Gold Pool, 1.445%, 06/15/35, (01/15/09) 5 | 7,058,980 | 6,926,181 | ||||
FHLMC Gold Pool, 3.750%, 11/15/25 | 3,362,386 | 3,364,146 | ||||
FHLMC Gold Pool, 4.000%, 12/01/20 | 3,974,185 | 4,017,511 | ||||
FHLMC Gold Pool, 5.000%, 06/01/09 to 08/01/19 | 3,722,654 | 3,840,948 | ||||
FHLMC Gold Pool, 5.500%, 08/01/19 to 12/01/17 | 1,874,534 | 1,938,294 | ||||
FHLMC Gold Pool, 6.000%, 09/01/37 | 530,419 | 546,987 | ||||
FHLMC Gold Pool, 7.500%, 04/01/15 to 04/01/29 | 640,830 | 672,696 | ||||
FHLMC Gold Pool, 8.500%, 12/01/25 | 89,454 | 96,529 | ||||
FHLMC Pool, 7.500%, 03/01/33 | 1,008,577 | 1,070,479 | ||||
FHLMC, Series 2697, Class LP, 4.500%, 10/15/19 | 884,826 | 895,316 | ||||
FHLMC, Series 2963, Class WL, 4.500%, 07/15/25 | 979,395 | 985,781 | ||||
FHLMC, Series 2691, Class TC, 4.500%, 07/15/26 | 4,289,934 | 4,331,231 | ||||
FHLMC, Series 2725, Class PC, 4.500%, 05/15/28 | 5,072,000 | 5,139,052 | ||||
FHLMC, Series 2958, Class NB, 5.000%, 05/15/25 | 6,425,620 | 6,476,225 | ||||
FHLMC, Series 2964, Class NA, 5.500%, 02/15/26 | 1,812,995 | 1,843,104 | ||||
FHLMC, Series 2984, Class NA, 5.500%, 04/15/26 | 3,924,890 | 3,994,385 | ||||
FHLMC, Series 3165, Class JA, 5.500%, 04/15/26 | 769,817 | 788,107 | ||||
FHLMC, Series 3138, Class PA, 5.500%, 02/15/27 | 3,538,577 | 3,618,939 | ||||
FHLMC Structured Pass Through Securities, 4.391%, 11/25/38 | 51,740 | 51,623 | ||||
FHLMC Structured Pass Through Securities, 7.500%, 02/25/42 | 138,052 | 144,696 | ||||
FHLMC Structured Pass Through Securities, Series T-51, Class 2A, 7.500%, 08/25/42 7 | 225,577 | 236,433 | ||||
Total Federal Home Loan Mortgage Corporation | 110,906,067 | |||||
Federal National Mortgage Association—39.6% | ||||||
FNMA, 0.791%, 11/25/30, (01/25/09) 5 | 2,847,395 | 2,695,648 | ||||
FNMA, 0.871%, 03/25/35, (01/25/09) 5 | 3,079,416 | 2,845,362 | ||||
FNMA, 3.781%, 06/01/34, (06/01/09) 5 | 2,818,735 | 2,711,568 | ||||
FNMA, 4.254%, 06/01/34, (05/01/09) 5 | 3,383,763 | 3,445,396 | ||||
FNMA, 4.449%, 08/01/34, (06/01/09) 5 | 1,723,863 | 1,732,776 | ||||
FNMA, 4.500%, TBA | 2,000,000 | 2,018,124 | ||||
FNMA, 4.554%, 08/01/34, (05/01/09) 5 | 1,125,506 | 1,120,987 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||
Federal National Mortgage Association—39.6% (continued) | ||||||
FNMA, 4.862%, 09/01/33, (09/01/09) 5 | $ | 1,168,004 | $ | 1,172,618 | ||
FNMA, 4.965%. 01/01/36, (11/01/10) 5 | 587,293 | 591,248 | ||||
FNMA, 5.000%, 07/01/18 to 03/25/24 | 2,909,091 | 2,977,770 | ||||
FNMA, 5.152%, 01/01/36, (12/01/10) 5 | 242,198 | 245,133 | ||||
FNMA, 5.299%, 06/01/37, (05/01/10) 5 | 1,738,602 | 1,762,117 | ||||
FNMA, 5.337%, 08/01/36, (05/01/11) 5 | 1,229,346 | 1,247,649 | ||||
FNMA, 5.357%, 02/01/37, (12/01/09) 5 | 2,179,688 | 2,159,354 | ||||
FNMA, 5.500%, 11/01/18 to 01/01/21 | 2,819,620 | 2,909,186 | ||||
FNMA, 5.504%, 05/01/36, (05/01/11) 5 | 773,312 | 787,656 | ||||
FNMA, 5.625%, 10/01/36, (04/01/11) 5 | 3,278,037 | 3,335,556 | ||||
FNMA, 5.722%, 01/01/33, (09/01/09) 5 | 124,660 | 125,429 | ||||
FNMA, 5.759%, 01/01/37, (01/01/12) 5 | 4,068,911 | 4,159,661 | ||||
FNMA, 5.874%, 09/01/37, (08/01/12) 5 | 1,745,722 | 1,794,351 | ||||
FNMA, 5.889%, 09/01/37, (09/01/12) 5 | 1,857,643 | 1,907,268 | ||||
FNMA, 5.997%, 11/01/37, (10/01/12) 5 | 2,696,484 | 2,782,775 | ||||
FNMA, 6.000%, 03/01/17 to 09/01/22 | 5,733,183 | 5,957,706 | ||||
FNMA, 6.500%, 04/01/17 to 08/01/32 | 2,294,087 | 2,395,083 | ||||
FNMA, 6.740%, 06/01/09 | 878,779 | 888,168 | ||||
FNMA, 7.000%, 09/01/14 | 1,208,565 | 1,255,997 | ||||
FNMA, 7.500%, 12/01/33 to 01/01/34 | 288,999 | 303,326 | ||||
FNMA, Series 2005-86, Class WH, 5.000%, 11/25/25 | 2,784,003 | 2,816,371 | ||||
FNMA, Series 2008-22, Class KA, 5.500%, 06/25/21 | 1,644,911 | 1,661,409 | ||||
FNMA, Series 2005-108, Class TA, 5.500%, 03/25/22 | 528,139 | 529,215 | ||||
FNMA, Series 2005-16, Class LY, 5.500%, 09/25/25 | 1,238,136 | 1,251,987 | ||||
FNMA, Series 2006-57, Class PA, 5.500%, 08/25/27 | 5,110,754 | 5,215,006 | ||||
FNMA, Series 2006-48, Class TA, 5.500%, 04/25/28 | 3,826,274 | 3,909,858 | ||||
FNMA, Series 2006-33, Class QA, 6.000%, 01/25/29 | 2,648,865 | 2,705,854 | ||||
FNMA, Series 2005-115, Class OC, 6.000%, 10/25/33 | 1,702,264 | 1,736,764 | ||||
FNMA, Series 1993-139, Class GA, 7.000%, 08/25/23 | 4,554,520 | 4,658,430 | ||||
FNMA Grantor Trust, Series 2002-T5, Class A1, 0.711%, 05/25/32, (01/26/09) 5 | 636,427 | 553,728 | ||||
FNMA Grantor Trust Pass Through, Series 2004-T1, Class 1A2, 6.500%, 01/25/44 | 889,447 | 910,294 | ||||
FNMA Pass Through Securities, Series 2002-33, Class A2, 7.500%, 06/25/32 | 136,610 | 141,775 | ||||
FNMA Whole Loan, Series 2005-W2, Class A1, 0.671%, 05/25/35, (01/25/09) 5 | 5,689,941 | 4,992,246 | ||||
FNMA Whole Loan, Series 2003-W8, Class 3F1, 0.871%, 05/25/42, (01/25/09) 5 | 2,152,656 | 2,049,756 | ||||
FNMA Whole Loan, Series 2004-W14, Class 1AF, 0.871%, 07/25/44, (01/25/09) 5 | 4,515,606 | 4,326,762 | ||||
FNMA Whole Loan, Series 2004-W5, Class F1, 0.921%, 02/25/47, (01/25/09) 5 | 1,069,655 | 1,040,958 | ||||
FNMA Whole Loan, Series 2002-W1, Class 2A, 7.500%, 02/25/42 7 | 664,916 | 700,033 | ||||
FNMA Whole Loan, Series 2002-W6, Class 2A, 7.500%, 06/25/42 | 568,944 | 598,992 | ||||
FNMA Whole Loan, Series 2003-W4, Class 4A, 7.500%, 10/25/42 | 1,132,051 | 1,191,838 | ||||
FNMA Whole Loan, Series 2003-W1, Class 2A, 7.500%, 12/25/42 | 36,374 | 38,295 | ||||
Total Federal National Mortgage Association | 96,357,483 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Government National Mortgage Association—7.2% | |||||||
GNMA, 3.625%, 03/20/37, (04/01/09) 5 | $ | 922,270 | $ | 885,067 | |||
GNMA, 4.500%, 07/20/35 to 09/20/35, (10/01/09) 5 | 4,805,493 | 4,659,850 | |||||
GNMA, 4.625%, 07/20/18 to 09/20/35, (10/01/09) 5 | 5,725,615 | 5,584,322 | |||||
GNMA, 4.750%, 01/20/32, (04/01/09) 5 | 189,064 | 185,814 | |||||
GNMA, 4.750%, 10/20/34, (01/01/10) 5 | 574,005 | 556,603 | |||||
GNMA, 5.000%, 10/20/32, (01/01/10) 5 | 384,428 | 378,672 | |||||
GNMA, 5.000%, 03/20/35, (04/01/09) 5 | 146,942 | 144,279 | |||||
GNMA, 5.000%, 06/20/35, (07/01/09) 5 | 180,342 | 178,031 | |||||
GNMA, 5.125%, 10/20/17 to 11/20/27, (01/01/10) 5 | 2,006,411 | 1,986,097 | |||||
GNMA, 5.250%, 01/20/28, (04/01/09) 5 | 97,363 | 96,685 | |||||
GNMA, 5.375%, 03/20/23, (04/01/09) 5 | 117,527 | 116,614 | |||||
GNMA, 5.375%, 03/20/21 to 05/20/33, (07/01/09) 5 | 1,858,241 | 1,858,789 | |||||
GNMA, 5.500%, 01/20/34, (04/01/09) 5 | 824,525 | 814,687 | |||||
GNMA, 9.500%, 07/15/09 to 12/15/17 | 16,091 | 17,400 | |||||
Total Government National Mortgage Association | 17,462,910 | ||||||
Interest Only Strips—0.7% | |||||||
FHLMC IO Strip, 4.500%, 08/15/35 to 09/15/35 | 870,487 | 145,943 | |||||
FHLMC IO Strip, 5.000%, 05/15/18 to 08/01/35 | 6,630,194 | 757,004 | |||||
FHLMC IO Strip, 5.905%, 11/15/30, (01/15/09) 5,9 | 296,960 | 17,108 | |||||
FHLMC IO Strip, 7.500%, 10/01/27 | 54,960 | 9,717 | |||||
FHLMC IO Strip, 8.000%, 06/01/31 | 12,689 | 2,181 | |||||
FNMA IO Strip, 5.000%, 02/01/35 to 12/01/35 | 7,089,203 | 803,337 | |||||
FNMA IO Strip, 6.781%, 01/25/24, (01/25/09) 5 | 106,745 | 13,424 | |||||
FNMA IO Strip, 7.500%, 11/18/14 | 78,501 | 5,011 | |||||
FNMA IO Strip, 8.000%, 08/25/22 to 05/01/30 | 210,582 | 40,832 | |||||
FNMA IO Strip, 9.000%, 12/15/16 | 48,026 | 9,192 | |||||
Total Interest Only Strips | 1,803,749 | ||||||
U.S. Treasury Notes—0.5% | |||||||
U.S. Treasury Inflation Linked Notes, 2.375%, 04/15/11 | 1,272,666 | 1,242,937 | |||||
Total U.S. Government and Agency Obligations (cost $229,658,794) | 227,773,146 | ||||||
Mortgage-Backed Securities and Interest Only Strips—7.8% | |||||||
Mortgage-Backed Securities—7.7% | |||||||
Countrywide Home Loans, Inc., 0.971%, 02/25/35, (01/26/09) 5,9 | 1,557,435 | 446,372 | |||||
Deutsche Alt-A Securities, Inc. Mortgage Loan, 6.250%, 07/25/36 7,9 | 481,568 | 421,355 | |||||
Fannie Mae Trust, Series 2005-30, Class BU, 5.000%, 03/25/24 | 810,467 | 813,446 | |||||
GE Capital Commercial Mortgage Corporation, 6.496%, 01/15/33 | 496,855 | 487,861 | |||||
GMAC Commercial Mortgage Securities, Inc., Series 2000-C3, Class A2, 6.957%, 09/15/35 | 1,547,910 | 1,531,871 | |||||
GMAC Commercial Mortgage Securities, Inc., Series 2000-C1, Class A2, 7.724%, 03/15/33 7 | 6,806,304 | 2 | 6,805,890 | ||||
Greenwich Capital Commercial Funding Corp., Class A2, Series 2005-GG3, 4.305%, 08/10/42 | 1,753,503 | 1,659,276 | |||||
Harborview Mortgage Loan Trust, Series 2004-8, Class 2A3, 0.991%, 11/19/34, (01/20/09) 5,9 | 1,425,019 | 963,131 | |||||
Merrill Lynch Mortgage Investors, Inc., Series 1999-C1, Class A2, 7.560%, 11/15/31 | 2,048,125 | 2,042,675 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Mortgage-Backed Securities—7.7% (continued) | |||||||
PNC Mortgage Acceptance Corp., Series 2000-C2, Class A2, 7.300%, 10/12/33 7 | $ | 1,913,944 | $ | 1,904,753 | |||
Salomon Brothers Mortgage Securities VII, Inc., Series 2000 C-2, Class A2, 7.455%, 07/18/33 | 282,143 | 281,379 | |||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-7, Class 2AS2, 5.750%, 08/25/47 7,9 | 2,300,287 | 1,055,035 | |||||
Washington Mutual, Class 2A3, Series 2005-AR2, 0.821%, 01/25/45, (01/25/09) 5,9 | 956,498 | 399,361 | |||||
Total Mortgage-Backed Securities | 18,812,405 | ||||||
Mortgage-Backed Interest Only Strips—0.1% | |||||||
Bank of America-First Union IO Strip, Series 2001-3, Class XC, 0.474%, 04/11/37 (a) 7 | 4,798,489 | 144,021 | |||||
CS First Boston Mortgage Securities Corp., IO Strip, Series 2001-CP4, Class AX, 0.552%, 12/15/35 (a) 7 | 1,392,723 | 31,303 | |||||
CS First Boston Mortgage Securities Corp., IO Strip, Series 1998-C1, Class AX, 0.983%, 05/17/40 7 | 760,430 | 23,814 | |||||
GMAC, Series 1999-C1 IO Strip, Class X, 0.575%, 05/15/33 7 | 2,552,778 | 27,313 | |||||
Total Mortgage-Backed Interest Only Strips | 226,451 | ||||||
Total Mortgage-Backed Securities and Interest Only Strips (cost $24,604,762) | 19,038,856 | ||||||
Asset-Backed Securities—1.0% | |||||||
First Franklin Mortgage Loan Asset Backed Certificates, Series 2005-FF10, Class A4, 0.791%, 11/25/35, (01/26/09) 5 | 1,800,000 | 1,375,257 | |||||
FNMA Grantor Trust, Series 2003-T4, Class A1, 0.581%, 09/26/33, (01/26/09) 5 | 19,049 | 13,680 | |||||
FNMA Grantor Trust, Series 2003-T2, Class A1, 0.751%, 03/25/33, (01/26/09) 5 | 394,826 | 310,715 | |||||
FNMA Whole Loan, Series 2003-W13, Class AV2, 0.751%, 10/25/33, (01/25/09) 5 | 156,016 | 145,622 | |||||
FNMA Whole Loan, Series 2001-W2, Class AS5, 6.473%, 10/25/31 (b) | 140,903 | 140,368 | |||||
Structured Asset Investment Loan Trust, 1.011%, 12/25/34, (01/26/09) 5 | 585,866 | 500,968 | |||||
Total Asset-Backed Securities (cost $3,098,523) | 2,486,610 | ||||||
Short-Term Investments—11.3% | |||||||
U.S. Government and Agency Discount Notes—0.5% | |||||||
FNMA Discount Notes, 0.009%, 02/11/09 4,14 | 50,000 | 49,999 | |||||
FHLMC Discount Notes, 0.011%, 02/02/09 4,14 | 800,000 | 799,993 | |||||
FHLMC Discount Notes, 0.070%, 03/30/09 4,14 | 250,000 | 249,958 | |||||
Total U.S. Government and Agency Discount Notes | 1,099,950 | ||||||
Shares | |||||||
Other Investment Companies—10.8%1 | |||||||
BNY Institutional Cash Reserves Fund, Series A, 0.07%3 | 2,462,004 | 2,462,004 | |||||
BNY Institutional Cash Reserves Fund, Series B*3,10 | 15,507 | 1,395 | |||||
BNY Institutional Cash Reserves Fund, Series C*3,11 | 42,215 | 42,215 | |||||
Dreyfus Cash Management Fund, Institutional Class Shares, 1.53%12 | 23,706,082 | 23,706,082 | |||||
Total Other Investment Companies | 26,211,696 | ||||||
Total Short-Term Investments (cost $27,322,312) | 27,311,646 | ||||||
Total Investments -113.6% (cost $284,684,391) | 276,610,258 | ||||||
Other Assets, less Liabilities—(13.6)% | (33,061,778 | ) | |||||
Net Assets—100.0% | $ | 243,548,480 |
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Managers Intermediate Duration Government Fund
Portfolio Manager’s Comments
The Managers Intermediate Duration Government Fund’s (the “Fund”) investment objective is to achieve total return in excess of the total return of the major market indices for mortgage-backed securities.
The Fund seeks to achieve its objective by matching the duration, or interest-rate risk, of a portfolio that invests exclusively in mortgage-backed securities, as weighted in the major market indices for mortgage-backed securities. These indices currently include the Citigroup Mortgage Index and the Barclays Mortgage Index, each of which includes all outstanding government sponsored fixed-rate mortgage-backed securities, weighted in proportion to their current market capitalization. The duration of these indices is generally similar to that of intermediate-term U.S. Treasury notes, and typically will range between three and five years.
Under normal circumstances, the Fund will invest at least 80% of its assets in debt securities issued by the U.S. Government, its agencies and instrumentalities, and synthetic instruments or derivatives, or securities having economic characteristics similar to such debt securities. The Fund’s benchmark is the Citigroup Mortgage Index (the “Index”).
The Portfolio Manager
Smith Breeden Associates, Inc.
Smith Breeden Associates, Inc. (“Smith Breeden”) is the subadvisor for the Fund. Smith Breeden, located at 280 South Mangum Street, Suite 301, Durham, NC., was founded in 1982. Smith Breeden is a money management and consulting firm involved in money management for separate accounts such as pensions and endowments, financial institution consulting and investment advice, and equity investments. The firm specializes in high-credit-quality fixed-income investments, interest-rate risk management, and the application of option pricing to banking and investments. As of December 31, 2008, Smith Breeden advised or managed assets of approximately $18.4 billion.
Smith Breeden believes that innovative research provides critical insights into the fixed income market. The firm’s experienced investment professionals apply these research insights to the management of investment portfolios designed to achieve our clients’ objectives. The key tenets of this market-tested investment philosophy are:
• | Over a market cycle, a portfolio of fixed income securities with wide risk-adjusted spreads produces an attractive total return in comparison to the market return. |
• | The incremental return available from security selection and sector allocation, based on careful relative-value analysis, quantitative research, and experienced market judgment, is more consistent than the incremental return from predicting the direction of interest rates. |
• | Within the investment-grade fixed income market, the spread sectors, e.g., corporate bonds, mortgage-backed securities (MBS), commercial MBS (CMBS), and asset-backed securities (ABS), will tend to outperform Treasury securities over a market cycle. The mortgage, corporate, CMBS, and ABS sectors also offer the greatest active management opportunity for adding value through security selection. |
The portfolio management team at Smith Breeden specializes in analyzing and investing in mortgage-backed securities. Through careful analysis and comparison of the characteristics of these securities, such as type of issuer, coupon, maturity, geographic structure, and historic and prospective prepayment rates, the team seeks to structure a portfolio that will outperform the Index. While the portfolio managers will purchase securities of any maturity or duration, they do not attempt to add value by actively positioning the interest rate sensitivity of the portfolio. Instead, they typically manage the weighted average duration of the portfolio so that it is similar to that of the duration of the Index.
The ideal investment exhibits the following traits:
• | Very high quality (AAA or Government) |
• | Attractive value relative to other MBS opportunities |
The portfolio managers limit purchases to securities from the following asset classes:
• | Securities issued directly or guaranteed by the U.S. government or its agencies or instrumentalities |
• | Mortgage-backed securities rated AAA by Standard & Poor’s Corporation (“S&P”) or Aaa by Moody’s Investors Service, Inc. (“Moody’s”) |
• | Securities fully collateralized by assets in either of the above classes |
• | Assets that would qualify as liquidity items under federal regulations (which may change from time to time) if held by a commercial bank or savings institution, and hedge instruments |
• | Stripped mortgage-backed securities, which may only be used for risk-management purposes |
The Smith Breeden investment team will make a sell decision when:
• | They no longer view the bonds as attractive |
• | To maintain the portfolio’s target duration |
• | For portfolio allocation purposes |
The Year in Review
During the 12 months ended December 31, 2008, the Fund returned 0.85% compared to 8.49% for the Index.
The credit and financial crisis of 2008 was an exceptionally challenging time for fixed-income markets and was marked by a number of significant events including:
• | Federal Reserve assisted purchase of Bear Stearns by JPMorgan |
• | Fannie Mae and Freddie Mac taken into conservatorship |
• | Lehman Brothers filed for Chapter 11 bankruptcy |
• | Goldman Sachs and Morgan Stanley’s conversion to bank holding companies |
• | Federal Reserve purchases warrants for 80% equity stake in AIG |
• | FOMC cuts the Federal Funds Rate to a record 0-25 basis point range |
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Managers Intermediate Duration Government Fund
Portfolio Manager’s Comments (continued)
As a result of the incredible market stress, all spread products, including the MBS, ABS, and CMBS on which Smith Breeden focuses, underperformed Treasuries as market participants largely executed a “flight-to-quality.” The resulting decrease in yields stemming from this increased demand for Treasuries was simply astounding. Three-month T-bills went from a 3.36% yield at the beginning of 2008 to a 0.11% yield by the end of the year. Thirty-year Treasury bond yields dropped from 4.45% to 2.69% over the same period as market participants were willing to accept lower returns in exchange for safety.
At the beginning of 2008, the Fund had a fairly modest allocation to non-agency adjustable-rate mortgages (ARMs), with the position representing roughly 7.6% of capital exposure. This exposure was positioned at the very top of the capital structure to provide maximum credit protection to the securities. Despite this relatively modest exposure to non-agency ARMs, this sector accounted for more than half of the underperformance of the Fund. The vast majority of the portfolio’s remaining underperformance came from other AAA-rated non-agency mortgage exposure in fixed-rate mortgages (FRMs) and collateralized mortgage obligations (CMOs). The agency exposure faired relatively well, in terms of its contribution to portfolio returns, with the exception of the agency interest-only (IO) positions. The dramatic decrease in interest rates, which increased the refinance- ability of conventional mortgages, decreased the value of the IO positions. For most of the year, the Fund maintained positions in the front end of the yield curve.
Favorable effects from yield curve positioning partially mitigated the adverse effects of widening non-agency mortgage spreads.
Looking Forward
On December 31, 2008, the Fund maintained most of its exposure in both 15-year and 30-year fixed-rate agency mortgages. In total, 15% of capital is allocated to adjustable-rate mortgages (ARMs), which are not included in the Index. The total allocation to nonagency ARMs has been reduced by almost 70% relative to where it began 2008. Smith Breeden continues to include agency ARMs in the Fund’s portfolio because they offer wider option-adjusted spreads than fixed-rate mortgages while also having a relatively high level of liquidity. The Fund also maintains a small allocation to CMBS, IO strips, CMOs, and treasury inflation protected securities (TIPS). Smith Breeden believes that the high-quality spread assets that are held in the Fund are likely to lead the recovery, as government intervention and stimulus continue to target these types of assets. As such, it is Smith Breeden’s opinion that the Fund is well positioned to benefit from this recovery.
Cumulative Total Return Performance
Managers Intermediate Duration Government Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all distributions were reinvested. Unlike the Fund, the Citigroup Mortgage Index is unmanaged, is not available for investment, and does not incur expenses. The chart illustrates the performance of a hypothetical $10,000 investment made in the
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Managers Intermediate Duration Government Fund
Portfolio Manager’s Comments (continued)
Cumulative Total Return Performance (continued)
Fund on December 31, 1998 to a $10,000 investment made in the Citigroup Mortgage Index for the same time periods. Figures include reinvestment of capital gains and dividends. The listed returns for the Fund are net of expenses and the returns for the indices exclude expenses. Total returns for the Fund would have been lower had certain expenses not been reduced.
The table below shows the average annualized total returns for the Managers Intermediate Duration Government Fund and the Citigroup Mortgage Index from December 31, 1998 through December 31, 2008.
Average Annual Total Returns:1 | 1 Year | 5 Years | 10 Years | ||||||
Intermediate Duration Government2,3,4,5 | 0.85 | % | 3.49 | % | 4.81 | % | |||
Citigroup Mortgage Index | 8.49 | % | 5.62 | % | 6.10 | % |
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 the principal value of an investment 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.
In choosing a Fund, 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 www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member FINRA.
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 December 31, 2008. 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 the risks associated with investments in debt securities, such as default risk and fluctuations in the perception of the debtor’s ability to pay their creditors. |
4 | The Fund may use derivative instruments for hedging purposes or as part of its investment strategy. There is a risk that a derivative intended as a hedge may not perform as expected. The main risk with derivatives is that some types can amplify a gain or loss, potentially earning or losing substantially more money than the actual cost of the derivative or that the counterparty may fail to honor its contract terms, causing a loss for the Fund. Use of these instruments may also involve certain costs and risks such as liquidity risk, interest rate risk, market risk, credit risk, management risk and the risk that a fund could not close out a position when it would be most advantageous to do so. |
5 | Many bonds have call provisions which allow the debtors to pay them back before maturity. This is especially true with mortgage securities, which can be paid back anytime. Typically debtors prepay their debt when it is to their advantage (when interest rates drop making a new loan at current rates more attractive), and thus likely to the disadvantage of bondholders, who may have to reinvest prepayment proceeds in securities with lower yields. Prepayment risk will vary depending on the provisions of the security and current interest rates relative to the interest rate of the debt. |
Not FDIC insured, nor bank guaranteed. May lose value.
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Managers Intermediate Duration Government Fund
Fund Snapshots
December 31, 2008
Portfolio Breakdown
Portfolio Breakdown | Intermediate Duration Government Fund** | ||
U.S. Government and Agency Obligations | 129.1 | % | |
Mortgage-Backed Securities | 8.7 | % | |
Other Assets and Liabilities | (37.8 | )% |
** | As a percentage of net assets |
Top Ten Holdings
Top Ten Holdings | % of Net Assets | ||
FHLMC, 5.500%, TBA | 17.1 | % | |
FNMA, 6.000%, TBA | 7.3 | ||
FNMA, 6.500%, TBA | 7.0 | ||
FNMA, 5.000%, 10/01/35* | 6.8 | ||
FHLMC Gold Pool, 5.500%, 02/01/35* | 5.9 | ||
FHLMC, 5.621%, 01/01/36 | 5.4 | ||
FHLMC Gold Pool, 5.500%, 06/01/35* | 5.2 | ||
GNMA, 6.000%, TBA | 4.2 | ||
FHLMC Gold Pool, 5.500%, 01/01/35* | 4.0 | ||
FHLMC Gold Pool, 6.000%, 10/01/21* | 3.5 | ||
Top Ten as a Group | 66.4 | % | |
* | Top Ten Holding at June 30, 2008 |
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.
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Managers Intermediate Duration Government Fund
Schedule of Portfolio Investments
December 31, 2008
Security Description | Principal Amount | Value | ||||
U.S. Government and Agency Obligations—129.1% | ||||||
Federal Home Loan Mortgage Corporation—74.3% | ||||||
FHLMC, 4.320%, 11/01/33, (12/01/09) 5 | $ | 2,367,145 | $ | 2,358,112 | ||
FHLMC, 4.500%, 04/01/35 | 687,465 | 698,304 | ||||
FHLMC, 5.000%, 05/01/18 to 12/01/35 | 8,796,463 | 8,992,147 | ||||
FHLMC, 5.000%, TBA | 3,000,000 | 3,065,625 | ||||
FHLMC, 5.500%, 11/01/17 to 05/01/34 | 4,609,454 | 4,742,768 | ||||
FHLMC, 5.500%, TBA | 28,500,000 | 29,167,983 | ||||
FHLMC, 5.621%, 01/01/36, (01/01/13) 5 | 9,054,265 | 9,231,270 | ||||
FHLMC, 5.953%, 02/01/37, (02/01/12) 5 | 843,486 | 864,485 | ||||
FHLMC, 6.000%, 02/01/22 to 03/01/22 | 1,963,882 | 2,036,550 | ||||
FHLMC, 7.500%, 01/01/31 to 07/01/34 | 3,368,221 | 3,557,098 | ||||
FHLMC Gold Pool, 3.750%, 11/15/25 | 2,685,653 | 2,687,058 | ||||
FHLMC Gold Pool, 4.000%, 12/01/20 | 837,131 | 846,257 | ||||
FHLMC Gold Pool, 4.500%, 05/01/34 to 01/01/36 | 17,864,373 | 18,136,544 | ||||
FHLMC Gold Pool, 5.000%, 04/01/19 to 08/01/19 | 325,598 | 335,512 | ||||
FHLMC Gold Pool, 5.500%, 10/01/33 to 06/01/35 | 29,548,842 | 30,301,767 | ||||
FHLMC Gold Pool, 6.000%, 09/01/17 to 05/01/22 | 7,800,545 | 8,089,333 | ||||
FHLMC Gold, 6.500%, TBA | 1,000,000 | 1,038,438 | ||||
FHLMC Structured Pass Through Securities, Series T-51, Class 2A, 7.500%, 08/25/42 7 | 315,808 | 331,006 | ||||
Total Federal Home Loan Mortgage Corporation | 126,480,257 | |||||
Federal National Mortgage Association—47.7% | ||||||
FNMA, 0.791%, 11/25/30, (01/25/09) 5 | 2,847,395 | 2,695,648 | ||||
FNMA, 0.871%, 03/25/35, (01/25/09) 5 | 1,913,204 | 1,767,790 | ||||
FNMA, 3.781%, 06/01/34, (06/01/09) 5 | 2,285,170 | 2,198,289 | ||||
FNMA, 4.254%, 06/01/34, (05/01/09) 5 | 2,697,100 | 2,746,225 | ||||
FNMA, 4.449%, 08/01/34, (06/01/09) 5 | 1,379,090 | 1,386,220 | ||||
FNMA, 4.500%, TBA | 5,000,000 | 5,045,310 | ||||
FNMA, 4.621%, 07/01/33, (06/01/09) 5 | 801,753 | 807,442 | ||||
FNMA, 5.000%, 06/01/18 to 10/01/35 | 15,315,137 | 15,674,575 | ||||
FNMA, 5.307%, 06/01/37, (05/01/10) 5 | 1,381,771 | 1,400,460 | ||||
FNMA, 5.500%, 03/01/17 to 12/01/37 | 13,115,312 | 13,507,857 | ||||
FNMA, 5.500%, TBA | 5,000,000 | 5,148,440 | ||||
FNMA, 5.541%, 02/01/36, (01/01/11) 5 | 371,087 | 378,202 | ||||
FNMA, 6.000%, 08/01/17 | 385,364 | 401,257 | ||||
FNMA, 6.000%, TBA | 12,000,000 | 12,352,500 | ||||
FNMA, 6.500%, 11/01/28 to 07/01/32 | 621,160 | 646,638 | ||||
FNMA, 6.500%, TBA | 11,500,000 | 11,942,037 | ||||
FNMA, Series 1994-55, Class H, 7.000%, 03/25/24 | 2,750,000 | 2,933,141 | ||||
FNMA Whole Loan, Series 2003-W4, Class 4A, 7.500%, 10/25/42 | 188,675 | 198,640 | ||||
Total Federal National Mortgage Association | 81,230,671 |
The accompanying notes are an integral part of these financial statements.
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Managers Intermediate Duration Government Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | ||||
Government National Mortgage Association—4.6% | ||||||
GNMA, 4.625%, 08/20/17, (10/01/09) 5 | $ | 49,551 | $ | 49,840 | ||
GNMA, 4.625%, 08/20/18, (10/01/09) 5 | 102,081 | 102,632 | ||||
GNMA, 5.125%, 11/20/17 to 12/20/17, (01/01/10) 5 | 303,302 | 306,218 | ||||
GNMA, 5.375%, 03/20/16, (04/01/09) 5 | 31,117 | 31,500 | ||||
GNMA, 5.375%, 06/20/16 to 05/20/21, (07/01/09) 5 | 87,827 | 88,986 | ||||
GNMA, 6.000%, TBA | 7,000,000 | 7,220,934 | ||||
GNMA, 7.500%, 09/15/28 to 11/15/31 | 72,710 | 77,081 | ||||
Total Government National Mortgage Association | 7,877,191 | |||||
Interest and Principal Only Strips—1.8% | ||||||
FHLMC IO Strip, 4.500%, 08/15/35 to 09/15/35 | 1,645,693 | 274,943 | ||||
FHLMC IO Strip, 5.000%, 05/15/17 to 09/15/35 | 9,261,246 | 1,059,182 | ||||
FHLMC IO Strip, 5.505%, 11/15/18, (01/15/09) 5,9 | 633,207 | 41,638 | ||||
FHLMC IO Strip, 5.905%, 11/15/30, (01/15/09) 5,9 | 241,193 | 13,895 | ||||
FHLMC IO Strip, 6.000%, 05/01/31 | 10,740 | 1,436 | ||||
FHLMC IO Strip, 6.455%, 9/15/16 to 10/15/16, (01/15/09) 5,9 | 441,236 | 22,922 | ||||
FHLMC IO Strip, 6.705%, 06/15/31, (01/15/09) 5 | 89,371 | 10,866 | ||||
FNMA IO Strip, 4.000%, 09/01/33 to 09/01/34 | 1,388,496 | 112,339 | ||||
FNMA IO Strip, 4.500%, 02/25/22 to 09/01/33 | 453,626 | 47,641 | ||||
FNMA IO Strip, 5.000%, 11/01/33 to 12/01/35 | 9,468,340 | 1,059,194 | ||||
FNMA IO Strip, 7.000%, 04/01/23 to 06/01/23 | 371,297 | 70,385 | ||||
FNMA PO Strip, 4.101%, 07/01/33 | 459,246 | 414,608 | ||||
Total Interest and Principal Only Strips | 3,129,049 | |||||
U.S. Treasury Notes—0.7% | ||||||
U.S. Treasury Inflation Linked Note, 2.375%, 04/15/11 | 1,136,231 | 1,109,689 | ||||
Total U.S. Government and Agency Obligations (cost $217,442,208) | 219,826,857 | |||||
Mortgage-Backed Securities—8.7% | ||||||
American Home Loan Investment Trust, 5.294%, 06/25/45, (03/25/10) 5,9 | 2,250,164 | 1,052,691 | ||||
American Home Mortgage Assets, Series 2005-1, Class 1A1, 5.463%, 11/25/35, (03/25/10) 5,9 | 189,421 | 95,756 | ||||
American Home Mortgage Investment Trust, 3.280%, 04/25/44, (02/25/09) 5,9 | 234,735 | 127,394 | ||||
American Home Mortgage Investment Trust, 4.390%, 02/25/45, (11/25/09) 5,9 | 1,087,369 | 545,739 | ||||
American Home Mortgage Investment Trust, 4.569%, 06/25/45, (02/01/09) 5,9 | 154,419 | 97,580 | ||||
Bank of America Funding Corp., 5.299%, 12/20/34 9 | 287,795 | 154,093 | ||||
Bear Stearns Alt-A Trust, 5.888%, 04/25/35 7,9 | 240,345 | 117,414 | ||||
Countrywide Alternative Loan Trust, 0.771%, 05/25/35, (01/25/09) 5,9 | 1,209,896 | 966,518 | ||||
Countrywide Alternative Loan Trust, 6.000%, 06/25/34 9 | 659,983 | 580,372 | ||||
Countrywide Alternative Loan Trust, Series 2007-25, Class 2A1, 6.000%, | 815,220 | 536,007 | ||||
Countrywide Home Loan Mortgage Pass Through Trust, Series 2007-HYB2, Class 3A1, 5.418%, 02/25/47 7,9 | 420,676 | 183,599 | ||||
Countrywide Home Loans, Inc., 6.355%, 05/20/35 7,9 | 186,435 | 100,668 | ||||
Countrywide Home Loans, Inc., Series 2004-R2, Class 1AF1, 0.891%, 11/25/34, (01/25/09) (a) 5,9 | 464,734 | 422,927 | ||||
Countrywide Home Loans, Inc., Series 2005-HYB8, Class 1A1, 5.383%, | 182,985 | 116,714 |
The accompanying notes are an integral part of these financial statements.
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Managers Intermediate Duration Government Fund
Schedule of Portfolio Investments (continued)
Security Description | Principal Amount | Value | |||||
Mortgage-Backed Securities—8.7% (continued) | |||||||
Deutsche Alt-A Securities, Inc., Series 2006-AR6, Class A6, 0.661%, 02/25/37, (01/26/09) 5,9 | $ | 1,682,977 | $ | 645,939 | |||
Goldman Sachs Mortgage Participating Loan Trust, Series 2005-RP2, Class 1AF, 0.821%, 03/25/35, (01/25/09) (a) 5,9 | 373,400 | 285,290 | |||||
GSR Mortgage Loan Trust, Series 2004-5, Class 1A3, 2.680%, 05/25/34, (02/01/09) 5,9 | 92,145 | 53,120 | |||||
Harborview Mortgage Loan Trust, 5.260%, 11/19/34 7,9 | 157,400 | 66,452 | |||||
Master Alternative Loans Trust, 6.000%, 01/25/35 9 | 1,268,236 | 861,608 | |||||
Merrill Lynch Mortgage Investors, Inc., 7.560%, 11/15/31 | 1,498,990 | 1,495,001 | |||||
Morgan Stanley Mortgage Loan Trust, 6.093%, 08/25/35 7,9 | 1,711,044 | 1,162,440 | |||||
Morgan Stanley Mortgage Loan Trust, Series 2007-14AR, Class 6A1, 6.425%, | 1,406,596 | 633,659 | |||||
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-7, Class 2AS2, 5.689%, 08/25/47 7,9 | 1,874,308 | 859,658 | |||||
Structured Asset Securities Corp., Series 2005-RF1, Class A, 0.821%, 03/25/35, (01/25/09) (a) 5,9 | 452,096 | 370,520 | |||||
Washington Mutual Mortgage Pass-Through Certificates, 6.000%, 10/25/35 9 | 2,391,510 | 1,505,157 | |||||
Wells Fargo Mortgage Backed Securities Trust, Series 2007-16, Class 1A1, 6.000%, 12/28/37 9 | 2,822,017 | 1,776,107 | |||||
Total Mortgage-Backed Securities (cost $24,220,472) | 14,812,423 | ||||||
Short-Term Investments—5.5% | |||||||
U.S. Government and Agency Discount Notes—0.2% | |||||||
FHLMC Discount Notes, 0.011%, 02/02/09 4,14 | 100,000 | 99,999 | |||||
FHLMC Discount Notes, 0.149%, 04/13/09 4,14 | 178,000 | 177,925 | |||||
Total U.S. Government and Agency Discount Notes | 277,924 | ||||||
Shares | |||||||
Other Investment Companies—5.3%1 | |||||||
BNY Institutional Cash Reserves Fund, Series B*3,10 | 13,850 | 1,246 | |||||
Dreyfus Cash Management Fund, Institutional Class Shares, 1.53% 12 | 6,952,076 | 6,952,076 | |||||
JPMorgan Liquid Assets Money Market Fund, Capital Shares, 2.02% 13 | 2,028,522 | 2,028,522 | |||||
Total Other Investment Companies | 8,981,844 | ||||||
Total Short-Term Investments (cost $9,271,165) | 9,259,768 | ||||||
Total Investments—143.3% (cost $250,933,845) | 243,899,048 | ||||||
Other Assets, less Liabilities—(43.3)% | (73,718,475 | ) | |||||
Net Assets—100.0% | $ | 170,180,573 |
The accompanying notes are an integral part of these financial statements.
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Notes to Schedules of Portfolio Investments
The following footnotes and abbreviations should be read in conjunction with each of the Schedules of Portfolio Investments previously presented in this report.
At December 31, 2008, the cost of securities for Federal income tax purposes and the gross aggregate unrealized appreciation and/or depreciation based on tax cost were approximately:
Fund | Cost | Appreciation | Depreciation | Net | ||||||||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | $ | 45,306,310 | $ | 789,347 | $ | (11,943,539 | ) | $ | (11,154,192 | ) | ||||
Managers AMG Chicago Equity Partners Balanced Fund | 23,848,353 | 692,431 | (2,627,678 | ) | (1,935,247 | ) | ||||||||
Managers High Yield Fund | 39,661,186 | 10,873 | (13,484,357 | ) | (13,473,484 | ) | ||||||||
Managers Fixed Income Fund | 140,502,401 | 1,992,973 | (21,097,778 | ) | (19,104,805 | ) | ||||||||
Managers Short Duration Government Fund | 284,684,391 | 1,817,749 | (9,891,882 | ) | (8,074,133 | ) | ||||||||
Managers Intermediate Duration Government Fund | 250,943,107 | 4,813,548 | (11,857,607 | ) | (7,044,059 | ) |
* | 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 December 31, 2008, the value of these securities amounted to the following: |
Fund | Value | % of Net Assets | ||||
Managers High Yield Fund | $ | 3,684,769 | 14.1 | % | ||
Managers Fixed Income Fund | 9,229,982 | 8.4 | % | |||
Managers Short Duration Government Fund | 175,324 | 0.1 | % | |||
Managers Intermediate Duration Government Fund | 1,078,737 | 0.6 | % |
(b) | Step Bond. A debt instrument with either deferred interest payments or an interest rate that resets at specific times during its term. |
1 | Yield shown for an investment company represents its December 31, 2008, seven-day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage. |
2 | Some or all of these securities were out on loan to various brokers as of December 31, 2008, amounting to: |
Fund | Value | % of Net Assets | ||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | $ | 2,842,923 | 9.1 | % | ||
Managers AMG Chicago Equity Partners Balanced Fund | 684,333 | 3.2 | % | |||
Managers High Yield Fund | 1,544,174 | 5.9 | % | |||
Managers Fixed Income Fund | 12,052,756 | 11.0 | % | |||
Managers Short Duration Government Fund | 2,668,838 | 1.1 | % |
3 | Collateral received from brokers for securities lending was invested in this short-term investment. |
4 | Percentage rate listed represents yield to maturity at December 31, 2008. |
5 | Floating rate security. The rate listed is as of December 31, 2008. Date in parentheses represents the securities next coupon rate reset. |
6 | Payment-in-kind security. A type of high yield debt instrument whose issuer has the option of making interest payments in either cash or additional debt securities. |
7 | Variable Rate Security. The rate listed is as of December 31, 2008 and is periodically reset subject to terms and conditions set forth in the debenture. |
8 | Security is in default. Issuer has failed to make a timely payment of either principal or interest or has failed to comply with some provision of the bond indenture. |
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Notes to Schedules of Portfolio Investments (continued)
9 | 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 Funds may not invest more than 15% of their net assets in illiquid securities. All securities are valued on the basis of valuations provided by dealers or independent pricing services. Illiquid securities at December 31, 2008, amounted to the following: |
Fund | Value | % of Net Assets | ||||
Managers Fixed Income Fund | $ | 1,682,265 | 1.5 | % | ||
Managers Short Duration Government Fund | 3,302,362 | 1.4 | % | |||
Managers Intermediate Duration Government Fund | 13,395,877 | 7.9 | % |
10 | On September 12, 2008, The Bank of New York Mellon (“BNYM”) established a separate sleeve of the BNY Institutional Cash Reserves Fund (“ICRF”) (Series B) to hold certain Lehman Brothers floating rate notes. The Fund’s position in Series B is being marked to market daily. |
11 | On October 6, 2008, The BNYM established a separate sleeve of the ICRF (Series C) to hold certain securities issued by Whistlejacket Capital Ltd. The Fund’s position in Series C is being marked to market daily. |
12 | Under the U.S. Treasury Temporary Money Market Fund Guarantee Program, the maximum amount covered for each Fund’s investment in the Dreyfus Cash Management Fund is: |
Fund | Market Value | ||
Managers AMG Chicago Equity Partners Mid-Cap Fund | $ | 669,850 | |
Managers AMG Chicago Equity Partners Balanced Fund | 1,690,163 | ||
Managers High Yield Fund | 535,122 | ||
Managers Fixed Income Fund | 6,475,984 | ||
Managers Short Duration Government Fund | 3,259,504 | ||
Managers Intermediate Duration Government Fund | 6,150,779 |
13 | Under the U.S. Treasury Temporary Money Market Fund Guarantee Program, the maximum amount covered for each Fund’s investment in the JPMorgan Liquid Assets Money Market Fund is: |
Fund | Market Value | ||
Managers Fixed Income Fund | $ | 1,550,100 | |
Managers Intermediate Duration Government Fund | 8,258,106 |
14 | Security pledged to cover margin requirements for open futures positions at December 31, 2008. |
Investments Definitions and Abbreviations:
AMBAC: | American Municipal Bond Assurance Corp. | GNMA: | Government National Mortgage Association | |||
BHAC: | Berkshire Hathaway Assurance Corp. | MBIA: | Municipal Bond Investor Assurance Corp. | |||
FHLB: | Federal Home Loan Bank | REIT: | Real Estate Investment Trust | |||
FHLMC: | Federal Home Loan Mortgage Corp. | USTB: | United States Treasury Bond | |||
FNMA: | Federal National Mortgage Association | USTN: | United States Treasury Note | |||
FSA: | FSA Capital, Inc. | |||||
Abbreviations have been used throughout the portfolios to indicate amounts shown in currencies of par values other than the U.S. dollar (USD):
| ||||||
AUD: | Australian Dollar | MXN: | Mexican Peso | |||
BRL: | Brazilian Real | NZD: | New Zealand Dollar | |||
CAD: | Canadian Dollar | SGD: | Singapore Dollar | |||
ISK: | Iceland Krona | THB: | Thailand Baht |
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Statements of Assets and Liabilities
December 31, 2008
Managers AMG Chicago Equity Partners Mid-Cap Fund | Managers AMG Chicago Equity Partners Balanced Fund | Managers High Yield Fund | Managers Fixed Income Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments at value* (including securities on loan valued at $2,842,923, $684,333, $1,544,174, and $12,052,756, respectively) | $ | 34,152,118 | $ | 21,913,106 | $ | 26,187,702 | $ | 121,397,596 | ||||||||
Cash | — | — | 181,473 | — | ||||||||||||
Foreign currency** | — | — | — | 117 | ||||||||||||
Receivable for investments sold | 666,195 | 25,171 | 32,200 | — | ||||||||||||
Receivable for Fund shares sold | 40,165 | 104,588 | 1,112,896 | 628,273 | ||||||||||||
Dividends, interest and other receivables | 41,885 | 94,623 | 705,974 | 1,787,778 | ||||||||||||
Prepaid expenses | 25,564 | 28,772 | 27,190 | 36,808 | ||||||||||||
Total assets | 34,925,927 | 22,166,260 | 28,247,435 | 123,850,572 | ||||||||||||
Liabilities: | ||||||||||||||||
Payable for Fund shares repurchased | 46,555 | 23,164 | 48,917 | 1,639,959 | ||||||||||||
Payable upon return of securities loaned | 2,846,791 | 708,302 | 1,619,947 | 12,371,957 | ||||||||||||
Payable for investments purchased | 644,096 | 26,777 | 427,934 | — | ||||||||||||
Accrued expenses: | ||||||||||||||||
Investment advisory and management fees | 14,309 | 7,588 | 264 | 13,605 | ||||||||||||
Administrative fees | 5,083 | 3,464 | 3,693 | 18,357 | ||||||||||||
Other | 53,209 | 38,919 | 58,469 | 92,647 | ||||||||||||
Total liabilities | 3,610,043 | 808,214 | 2,159,224 | 14,136,525 | ||||||||||||
Net Assets | $ | 31,315,884 | $ | 21,358,046 | $ | 26,088,211 | $ | 109,714,047 | ||||||||
Net Assets Represent: | ||||||||||||||||
Paid-in capital | $ | 54,627,535 | $ | 39,256,627 | $ | 47,788,343 | $ | 131,020,508 | ||||||||
Undistributed net investment income (loss) | 2,590 | — | — | (113,024 | ) | |||||||||||
Accumulated net realized loss from investments and foreign currency transactions | (12,505,810 | ) | (16,121,417 | ) | (8,268,217 | ) | (2,181,127 | ) | ||||||||
Net unrealized depreciation of investments and foreign currency translations | (10,808,431 | ) | (1,777,164 | ) | (13,431,915 | ) | (19,012,310 | ) | ||||||||
Net Assets | $ | 31,315,884 | $ | 21,358,046 | $ | 26,088,211 | $ | 109,714,047 | ||||||||
Class A Shares—Net Assets | $ | 3,863,193 | $ | 9,931,796 | $ | 17,105,244 | $ | 33,417,262 | ||||||||
Shares Outstanding | 493,947 | 949,966 | 3,260,295 | 3,741,105 | ||||||||||||
Net asset value and redemption price per share | $ | 7.82 | $ | 10.45 | $ | 5.25 | $ | 8.93 | ||||||||
Offering price per share based on a maximum sales charge of 5.75% (NAV per share/(100%-5.75%) | $ | 8.30 | $ | 11.09 | n/a | n/a | ||||||||||
Offering price per share based on a maximum sales charge of 4.25% (NAV per share/(100%-4.25%) | n/a | n/a | $ | 5.48 | $ | 9.33 | ||||||||||
Class B Shares—Net Assets | $ | 1,741,773 | $ | 2,434,467 | $ | 2,576,944 | $ | 6,349,381 | ||||||||
Shares Outstanding | 237,587 | 236,506 | 497,009 | 716,441 | ||||||||||||
Net asset value and offering price per share | $ | 7.33 | $ | 10.29 | $ | 5.18 | $ | 8.86 | ||||||||
Class C Shares—Net Assets | $ | 3,558,469 | $ | 2,926,336 | $ | 3,515,974 | $ | 41,386,816 | ||||||||
Shares Outstanding | 485,913 | 281,813 | 679,232 | 4,640,893 | ||||||||||||
Net asset value and offering price per share | $ | 7.32 | $ | 10.38 | $ | 5.18 | $ | 8.92 | ||||||||
Institutional Class Shares—Net Assets | $ | 22,152,449 | $ | 6,065,447 | $ | 2,890,049 | $ | 28,560,588 | ||||||||
Shares Outstanding | 2,687,596 | 575,513 | 546,257 | 3,187,448 | ||||||||||||
Net asset value, offering and redemption price per share | $ | 8.24 | $ | 10.54 | $ | 5.29 | $ | 8.96 | ||||||||
| ||||||||||||||||
* Investments at cost | $ | 44,960,549 | $ | 23,690,270 | $ | 39,619,617 | $ | 140,394,771 | ||||||||
** Foreign currency at cost | — | — | — | $ | 117 |
The accompanying notes are an integral part of these financial statements.
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Statements of Assets and Liabilities
December 31, 2008
Managers Short Duration Government Fund | Managers Intermediate Duration Government Fund | |||||||
Assets: | ||||||||
Investments at value* (including securities on loan valued at $2,668,838 and $0, respectively) | $ | 276,610,258 | $ | 243,899,048 | ||||
Receivable for delayed delivery investments sold | 23,330,344 | 6,053,751 | ||||||
Receivable for Fund shares sold | 822,468 | 339,704 | ||||||
Dividends, interest and other receivables | 1,461,580 | 1,057,111 | ||||||
Receivable for variation margin on futures | 355,628 | 89,463 | ||||||
Prepaid expenses | 36,001 | 12,628 | ||||||
Total assets | 302,616,279 | 251,451,705 | ||||||
Liabilities: | ||||||||
Payable to Custodian | — | 1,875 | ||||||
Payable upon return of securities loaned | 2,519,726 | — | ||||||
Payable for delayed delivery investments purchased | 50,027,714 | 79,326,808 | ||||||
Payable for investments purchased | — | 13,850 | ||||||
Payable for Fund shares repurchased | 1,091,321 | 714,630 | ||||||
Payable for TBA sale commitments | 4,926,000 | 1,023,438 | ||||||
Payable for variation margin on futures | 296,506 | 28,025 | ||||||
Investment advisory and management fee payable | 145,222 | 88,994 | ||||||
Other accrued expenses | 61,310 | 73,512 | ||||||
Total liabilities | 59,067,799 | 81,271,132 | ||||||
Net Assets | $ | 243,548,480 | $ | 170,180,573 | ||||
Shares outstanding | 26,477,209 | 16,735,368 | ||||||
Net asset value, offering and redemption price per share | $ | 9.20 | $ | 10.17 | ||||
Net Assets Represent: | ||||||||
Paid-in capital | $ | 260,200,924 | $ | 179,101,951 | ||||
Undistributed net investment income | 2,715 | 30,161 | ||||||
Accumulated net realized loss from investments and futures contracts | (7,343,656 | ) | (2,361,399 | ) | ||||
Net unrealized depreciation of investments, futures contracts and TBA sale commitments | (9,311,503 | ) | (6,590,140 | ) | ||||
Net Assets | $ | 243,548,480 | $ | 170,180,573 | ||||
| ||||||||
* Investments at cost | $ | 284,684,391 | $ | 250,933,845 |
The accompanying notes are an integral part of these financial statements.
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For the year ended December 31, 2008
Managers AMG Chicago Equity Partners Mid-Cap Fund | Managers AMG Chicago Equity Partners Balanced Fund | Managers High Yield Fund | Managers Fixed Income Fund | Managers Short Duration Government Fund | Managers Intermediate Duration Government Fund | |||||||||||||||||||
Investment Income: | ||||||||||||||||||||||||
Dividend income | $ | 833,281 | $ | 234,056 | $ | 50,087 | $ | 349,020 | $ | 914,752 | $ | 491,288 | ||||||||||||
Interest income | — | 418,551 | 3,311,914 | 7,019,338 | 10,889,362 | 9,285,588 | ||||||||||||||||||
Securities lending fees | 58,888 | 13,640 | 26,490 | 85,368 | 9,102 | 4,568 | ||||||||||||||||||
Total investment income | 892,169 | 666,247 | 3,388,491 | 7,453,726 | 11,813,216 | 9,781,444 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Investment advisory and management fees | 366,456 | 130,734 | 243,584 | 512,778 | 1,756,639 | 1,315,588 | ||||||||||||||||||
Administrative fees | 104,702 | 37,353 | 69,595 | 227,901 | — | — | ||||||||||||||||||
Distribution Fees—Class A | 13,431 | 10,321 | 54,639 | 84,844 | — | — | ||||||||||||||||||
Distribution Fees—Class B | 43,157 | 40,897 | 47,224 | 80,833 | — | — | ||||||||||||||||||
Distribution Fees—Class C | 62,969 | 34,991 | 53,164 | 403,862 | — | — | ||||||||||||||||||
Registration fees | 46,194 | 43,463 | 45,526 | 46,536 | 34,539 | 21,143 | ||||||||||||||||||
Professional fees | 37,149 | 29,802 | 37,124 | 57,435 | 93,808 | 81,193 | ||||||||||||||||||
Custodian | 24,430 | 21,571 | 41,381 | 28,849 | 81,981 | 55,640 | ||||||||||||||||||
Transfer agent | 17,778 | 6,695 | 24,917 | 34,084 | 65,220 | 249,577 | ||||||||||||||||||
Reports to shareholders | 17,400 | 6,652 | 17,531 | 21,821 | 34,826 | 41,280 | ||||||||||||||||||
Trustees fees and expenses | 4,071 | 1,271 | 2,751 | 8,843 | 18,684 | 11,405 | ||||||||||||||||||
Miscellaneous | 7,263 | 3,645 | 23,644 | 4,907 | 8,735 | 7,397 | ||||||||||||||||||
Total expenses before offsets | 745,000 | 367,395 | 661,080 | 1,512,693 | 2,094,432 | 1,783,223 | ||||||||||||||||||
Expense reimbursement | (104,179 | ) | (93,206 | ) | (171,743 | ) | (269,099 | ) | — | (107,402 | ) | |||||||||||||
Expense reductions | (29,094 | ) | (8,669 | ) | (629 | ) | (2,914 | ) | (13,675 | ) | (8,026 | ) | ||||||||||||
Net expenses | 611,727 | 265,520 | 488,708 | 1,240,680 | 2,080,757 | 1,667,795 | ||||||||||||||||||
Net investment income | 280,442 | 400,727 | 2,899,783 | 6,213,046 | 9,732,459 | 8,113,649 | ||||||||||||||||||
Net Realized and Unrealized Gain (Loss): | ||||||||||||||||||||||||
Net realized gain (loss) on investment transactions | (11,493,243 | ) | (863,028 | ) | (1,475,419 | ) | 676,661 | (376,321 | ) | 1,235,439 | ||||||||||||||
Net realized loss on options and futures contracts | — | — | — | — | (5,015,082 | ) | (260,937 | ) | ||||||||||||||||
Net realized loss on foreign currency transactions | — | — | — | (124,086 | ) | — | — | |||||||||||||||||
Net unrealized depreciation of investments | (14,400,228 | ) | (3,372,720 | ) | (12,135,159 | ) | (20,587,854 | ) | (7,233,086 | ) | (7,918,241 | ) | ||||||||||||
Net unrealized appreciation (depreciation) of futures contracts | — | — | — | — | (1,004,368 | ) | 48,048 | |||||||||||||||||
Net unrealized depreciation of foreign currency translations | — | — | — | (22,955 | ) | — | — | |||||||||||||||||
Net realized and unrealized loss | (25,893,471 | ) | (4,235,748 | ) | (13,610,578 | ) | (20,058,234 | ) | (13,628,857 | ) | (6,895,691 | ) | ||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | (25,613,029 | ) | $ | (3,835,021 | ) | $ | (10,710,795 | ) | $ | (13,845,188 | ) | $ | (3,896,398 | ) | $ | 1,217,958 |
The accompanying notes are an integral part of these financial statements.
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Statements of Changes in Net Assets
For the years ended December 31,
Managers AMG Chicago Equity Partners Mid-Cap Fund | Managers AMG Chicago Equity Partners Balanced Fund | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Increase (Decrease) in Net Assets From Operations: | ||||||||||||||||
Net investment income (loss) | $ | 280,442 | $ | (95,181 | ) | $ | 400,727 | $ | 347,759 | |||||||
Net realized gain (loss) on investments and foreign currency transactions | (11,493,243 | ) | 9,759,495 | (863,028 | ) | 1,622,090 | ||||||||||
Net unrealized appreciation (depreciation) of investments and foreign currency translations | (14,400,228 | ) | (8,462,133 | ) | (3,372,720 | ) | (1,021,872 | ) | ||||||||
Net increase (decrease) in net assets resulting from operations | (25,613,029 | ) | 1,202,181 | (3,835,021 | ) | 947,977 | ||||||||||
Distributions to Shareholders: | ||||||||||||||||
From net investment income: | ||||||||||||||||
Class A | (29,318 | ) | — | (128,430 | ) | (41,572 | ) | |||||||||
Class B | — | — | (48,453 | ) | (91,395 | ) | ||||||||||
Class C | — | — | (49,264 | ) | (54,519 | ) | ||||||||||
Institutional Class | (245,740 | ) | — | (170,512 | ) | (182,482 | ) | |||||||||
From net realized gain on investments: | ||||||||||||||||
Class A | (4,013 | ) | (543,259 | ) | — | — | ||||||||||
Class B | (1,900 | ) | (535,307 | ) | — | — | ||||||||||
Class C | (3,738 | ) | (641,479 | ) | — | — | ||||||||||
Institutional Class | (23,113 | ) | (3,769,867 | ) | — | — | ||||||||||
Return of capital: | ||||||||||||||||
Class A | — | — | (11,286 | ) | — | |||||||||||
Class B | — | — | (2,780 | ) | — | |||||||||||
Class C | — | — | (3,360 | ) | — | |||||||||||
Institutional Class | — | — | (6,852 | ) | — | |||||||||||
Total distributions to shareholders | (307,822 | ) | (5,489,912 | ) | (420,937 | ) | (369,968 | ) | ||||||||
From Capital Share Transactions: | ||||||||||||||||
Proceeds from sale of shares | 4,850,028 | 8,549,376 | 11,344,962 | 2,248,776 | ||||||||||||
Reinvestment of dividends and distributions | 252,585 | 4,213,056 | 240,711 | 236,946 | ||||||||||||
Cost of shares repurchased | (20,919,460 | ) | (23,552,407 | ) | (5,840,568 | ) | (5,768,240 | ) | ||||||||
Net increase (decrease) from capital share transactions | (15,816,847 | ) | (10,789,975 | ) | 5,745,105 | (3,282,518 | ) | |||||||||
Total increase (decrease) in net assets | (41,737,698 | ) | (15,077,706 | ) | 1,489,147 | (2,704,509 | ) | |||||||||
Net Assets: | ||||||||||||||||
Beginning of year | 73,053,582 | 88,131,288 | 19,868,899 | 22,573,408 | ||||||||||||
End of year | $ | 31,315,884 | $ | 73,053,582 | $ | 21,358,046 | $ | 19,868,899 | ||||||||
End of year undistributed net investment income (loss) | $ | 2,590 | — | — | $ | 2,097 |
The accompanying notes are an integral part of these financial statements.
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Managers High Yield Fund | Managers Fixed Income Fund | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||
$ | 2,899,783 | $ | 3,096,302 | $ | 6,213,046 | $ | 3,794,418 | |||||||
(1,475,419 | ) | 517,236 | 552,575 | 379,470 | ||||||||||
(12,135,159 | ) | (2,479,264 | ) | (20,610,809 | ) | 87,612 | ||||||||
(10,710,795 | ) | 1,134,274 | (13,845,188 | ) | 4,261,500 | |||||||||
(1,870,572 | ) | (1,827,273 | ) | (1,887,389 | ) | (928,844 | ) | |||||||
(361,874 | ) | (540,529 | ) | (384,003 | ) | (500,146 | ) | |||||||
(419,878 | ) | (430,397 | ) | (1,992,311 | ) | (1,155,466 | ) | |||||||
(256,424 | ) | (307,268 | ) | (1,843,604 | ) | (1,576,517 | ) | |||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
— | — | — | — | |||||||||||
(2,908,748 | ) | (3,105,467 | ) | (6,107,307 | ) | (4,160,973 | ) | |||||||
23,364,772 | 23,125,690 | 69,659,067 | 52,824,061 | |||||||||||
2,090,161 | 1,914,562 | 3,710,771 | 2,372,039 | |||||||||||
(26,043,337 | ) | (36,750,191 | ) | (42,420,841 | ) | (22,759,542 | ) | |||||||
(588,404 | ) | (11,709,939 | ) | 30,948,997 | 32,436,558 | |||||||||
(14,207,947 | ) | (13,681,132 | ) | 10,996,502 | 32,537,085 | |||||||||
40,296,158 | 53,977,290 | 98,717,545 | 66,180,460 | |||||||||||
$ | 26,088,211 | $ | 40,296,158 | $ | 109,714,047 | $ | 98,717,545 | |||||||
— | $ | 3,921 | $ | (113,024 | ) | $ | (81,339 | ) |
The accompanying notes are an integral part of these financial statements.
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Statements of Changes in Net Assets
Managers Short Duration Government Fund | ||||||||||||
For the year ended December 31, 2008 | For the period from April 1, 2007 to December 31, 2007 | For the fiscal year ended March 31, 2007 | ||||||||||
Increase (Decrease) in Net Assets From Operations: | ||||||||||||
Net investment income | $ | 9,732,459 | $ | 6,675,804 | $ | 8,483,687 | ||||||
Net realized gain (loss) on investments, options and futures | (5,391,403 | ) | (614,286 | ) | 721,946 | |||||||
Net unrealized appreciation (depreciation) of investments, options and futures | (8,237,454 | ) | 763,188 | 782,009 | ||||||||
Net increase (decrease) in net assets resulting from operations | (3,896,398 | ) | 6,824,706 | 9,987,642 | ||||||||
Distributions to Shareholders: | ||||||||||||
From net investment income | (9,735,159 | ) | (6,670,389 | ) | (8,566,062 | ) | ||||||
From net realized gain on investments | — | — | — | |||||||||
Total distributions to shareholders | (9,735,159 | ) | (6,670,389 | ) | (8,566,062 | ) | ||||||
From Capital Share Transactions: | ||||||||||||
Proceeds from sale of shares | 211,840,428 | 122,092,292 | 123,190,502 | |||||||||
Reinvestment of dividends and distributions | 9,362,027 | 6,371,801 | 8,136,268 | |||||||||
Cost of shares repurchased | (199,139,461 | ) | (73,485,510 | ) | (159,287,605 | ) | ||||||
Net increase (decrease) from capital share transactions | 22,062,994 | 54,978,583 | (27,960,835 | ) | ||||||||
Total increase (decrease) in net assets | 8,431,437 | 55,132,900 | (26,539,255 | ) | ||||||||
Net Assets: | ||||||||||||
Beginning of period | 235,117,043 | 179,984,143 | 206,523,398 | |||||||||
End of period | $ | 243,548,480 | $ | 235,117,043 | $ | 179,984,143 | ||||||
End of period undistributed net investment income | $ | 2,715 | $ | 732,491 | $ | 727,076 | ||||||
Share Transactions: | ||||||||||||
Sale of shares | 22,203,945 | 12,626,197 | 12,771,423 | |||||||||
Reinvestment of dividends and distributions | 985,459 | 659,682 | 844,943 | |||||||||
Shares repurchased | (20,999,033 | ) | (7,593,562 | ) | (16,513,626 | ) | ||||||
Net increase (decrease) in shares | 2,190,371 | 5,692,317 | (2,897,260 | ) |
The accompanying notes are an integral part of these financial statements.
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Managers Intermediate Duration Government Fund | ||||||||||
For the year ended December 31, 2008 | For the period from April 1, 2007 to December 31, 2007 | For the fiscal year ended March 31, 2007 | ||||||||
$ | 8,113,649 | $ | 6,388,790 | $ | 7,934,407 | |||||
974,502 | 297,557 | (348,413 | ) | |||||||
(7,870,193 | ) | 2,054,940 | 2,980,940 | |||||||
1,217,958 | 8,741,287 | 10,566,934 | ||||||||
(8,103,541 | ) | (6,439,350 | ) | (7,937,857 | ) | |||||
(2,192,978 | ) | — | — | |||||||
(10,296,519 | ) | (6,439,350 | ) | (7,937,857 | ) | |||||
69,809,959 | 54,398,859 | 66,087,961 | ||||||||
9,362,400 | 5,657,461 | 7,038,492 | ||||||||
(93,353,146 | ) | (51,689,803 | ) | (87,529,430 | ) | |||||
(14,180,787 | ) | 8,366,517 | (14,402,977 | ) | ||||||
(23,259,348 | ) | 10,668,454 | (11,773,900 | ) | ||||||
193,439,921 | 182,771,467 | 194,545,367 | ||||||||
$ | 170,180,573 | 193,439,921 | $ | 182,771,467 | ||||||
$ | 30,161 | $ | 788 | $ | 51,348 | |||||
6,633,814 | 5,177,651 | 6,314,692 | ||||||||
903,908 | 539,286 | 675,812 | ||||||||
(8,928,366 | ) | (4,935,351 | ) | (8,405,912 | ) | |||||
(1,390,644 | ) | 781,586 | (1,415,408 | ) |
The accompanying notes are an integral part of these financial statements.
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For a share outstanding throughout each year ended December 31,
Class A | ||||||||||||||||||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 13.67 | $ | 14.60 | $ | 13.48 | $ | 12.10 | $ | 10.36 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | (0.02 | )2 | 0.05 | (0.01 | )2 | (0.02 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (5.84 | ) | 0.17 | 2 | 1.11 | 1.39 | 2 | 1.76 | ||||||||||||
Total from investment operations | (5.78 | ) | 0.15 | 1.16 | 1.38 | 1.74 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.06 | ) | — | (0.04 | ) | — | — | |||||||||||||
Net realized gain on investments | (0.01 | ) | (1.08 | ) | — | — | — | |||||||||||||
Total distributions to shareholders | (0.07 | ) | (1.08 | ) | (0.04 | ) | — | — | ||||||||||||
Net Asset Value, End of Year | $ | 7.82 | $ | 13.67 | $ | 14.60 | $ | 13.48 | $ | 12.10 | ||||||||||
Total Return 1 | (42.28 | )% | 0.84 | % | 8.69 | % | 11.32 | % | 16.80 | % | ||||||||||
Ratio of net expenses to average net assets | 1.18 | % | 1.21 | % | 1.23 | % | 1.33 | % | 1.41 | % | ||||||||||
Ratio of net investment income (loss) to average net assets 1 | 0.57 | % | (0.10 | )% | 0.34 | % | (0.13 | )% | (0.16 | )% | ||||||||||
Portfolio turnover | 107 | % | 125 | % | 85 | % | 84 | % | 90 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 3,863 | $ | 6,464 | $ | 9,178 | $ | 8,712 | $ | 9,168 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 1.44 | % | 1.37 | % | 1.36 | % | 1.45 | % | 1.68 | % | ||||||||||
Ratio of net investment income (loss) to average net assets | 0.31 | % | (0.25 | )% | 0.22 | % | (0.24 | )% | (0.43 | )% | ||||||||||
Class C | ||||||||||||||||||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 12.79 | $ | 13.80 | $ | 12.83 | $ | 11.60 | $ | 9.99 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income (loss) | (0.03 | ) | (0.12 | )2 | (0.06 | ) | (0.06 | )2 | (0.08 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | (5.43 | ) | 0.12 | 2 | 1.07 | 1.29 | 2 | 1.69 | ||||||||||||
Total from investment operations | (5.46 | ) | — | 1.01 | 1.23 | 1.61 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | — | — | (0.04 | ) | — | — | ||||||||||||||
Net realized gain on investments | (0.01 | ) | (1.01 | ) | — | — | — | |||||||||||||
Total distributions to shareholders | (0.01 | ) | (1.01 | ) | (0.04 | ) | — | — | ||||||||||||
Net Asset Value, End of Year | $ | 7.32 | $ | 12.79 | $ | 13.80 | $ | 12.83 | $ | 11.60 | ||||||||||
Total Return 1 | (42.71 | )% | (0.19 | )% | 7.87 | % | 10.60 | % | 16.12 | % | ||||||||||
Ratio of net expenses to average net assets | 1.94 | % | 1.96 | % | 1.98 | % | 1.99 | % | 1.91 | % | ||||||||||
Ratio of net investment income (loss) to average net assets 1 | (0.23 | )% | (0.85 | )% | (0.41 | )% | (0.79 | )% | (0.67 | )% | ||||||||||
Portfolio turnover | 107 | % | 125 | % | 85 | % | 84 | % | 90 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 3,558 | $ | 8,651 | $ | 11,748 | $ | 13,845 | $ | 15,393 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 2.19 | % | 2.12 | % | 2.11 | % | 2.11 | % | 2.18 | % | ||||||||||
Ratio of net investment income (loss) to average net assets | (0.49 | )% | (1.02 | )% | (0.56 | )% | (0.91 | )% | (0.94 | )% | ||||||||||
67
Table of Contents
Class B | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 12.80 | $ | 13.79 | $ | 12.82 | $ | 11.59 | $ | 9.98 | |||||||||
(0.06 | ) | (0.13 | )2 | (0.08 | ) | (0.06 | )2 | (0.07 | ) | |||||||||
(5.40 | ) | 0.15 | 2 | 1.09 | 1.29 | 2 | 1.68 | |||||||||||
(5.46 | ) | 0.02 | 1.01 | 1.23 | 1.61 | |||||||||||||
— | — | (0.04 | ) | — | — | |||||||||||||
(0.01 | ) | (1.01 | ) | — | — | — | ||||||||||||
(0.01 | ) | (1.01 | ) | (0.04 | ) | — | — | |||||||||||
$ | 7.33 | $ | 12.80 | $ | 13.79 | $ | 12.82 | $ | 11.59 | |||||||||
(42.67 | )% | (0.03 | )% | 7.88 | % | 10.61 | % | 16.13 | % | |||||||||
1.94 | % | 1.96 | % | 1.98 | % | 1.99 | % | 1.90 | % | |||||||||
(0.30 | )% | (0.86 | )% | (0.41 | )% | (0.79 | )% | (0.67 | )% | |||||||||
107 | % | 125 | % | 85 | % | 84 | % | 90 | % | |||||||||
$ | 1,742 | $ | 6,909 | $ | 11,197 | $ | 15,512 | $ | 17,226 | |||||||||
2.20 | % | 2.12 | % | 2.11 | % | 2.11 | % | 2.18 | % | |||||||||
(0.56 | )% | (1.02 | )% | (0.59 | )% | (0.91 | )% | (0.95 | )% | |||||||||
Institutional Class | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 14.42 | $ | 15.41 | $ | 14.19 | $ | 12.70 | $ | 10.82 | |||||||||
0.10 | 0.03 | 2 | 0.09 | 0.10 | 2 | 0.04 | ||||||||||||
(6.18 | ) | 0.11 | 2 | 1.17 | 1.39 | 2 | 1.84 | |||||||||||
(6.08 | ) | 0.14 | 1.26 | 1.49 | 1.88 | |||||||||||||
(0.09 | ) | — | (0.04 | ) | — | — | ||||||||||||
(0.01 | ) | (1.13 | ) | — | — | — | ||||||||||||
(0.10 | ) | (1.13 | ) | (0.04 | ) | — | — | |||||||||||
$ | 8.24 | $ | 14.42 | $ | 15.41 | $ | 14.19 | $ | 12.70 | |||||||||
(42.13 | )% | 0.78 | % | 8.96 | % | 11.74 | % | 17.37 | % | |||||||||
0.94 | % | 0.96 | % | 0.98 | % | 0.99 | % | 0.90 | % | |||||||||
0.77 | % | 0.16 | % | 0.59 | % | 0.21 | % | 0.33 | % | |||||||||
107 | % | 125 | % | 85 | % | 84 | % | 90 | % | |||||||||
$ | 22,152 | $ | 51,029 | $ | 56,008 | $ | 59,571 | $ | 60,656 | |||||||||
1.19 | % | 1.12 | % | 1.11 | % | 1.11 | % | 1.18 | % | |||||||||
0.51 | % | 0.01 | % | 0.47 | % | 0.09 | % | 0.06 | % | |||||||||
68
Table of Contents
Financial Highlights
For a share outstanding throughout each year ended December 31,
Class A | ||||||||||||||||||||
Managers AMG Chicago Equity Partners Balanced Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 13.18 | $ | 12.86 | $ | 11.55 | $ | 11.24 | $ | 10.42 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.29 | 0.25 | 0.25 | 0.17 | 0.17 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.74 | ) | 0.34 | 1.32 | 0.30 | 0.81 | ||||||||||||||
Total from investment operations | (2.45 | ) | 0.59 | 1.57 | 0.47 | 0.98 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.27 | ) | (0.27 | ) | (0.26 | ) | (0.16 | ) | (0.16 | ) | ||||||||||
Return of capital | (0.01 | ) | — | — | — | — | ||||||||||||||
Total distributions to shareholders | (0.28 | ) | (0.27 | ) | (0.26 | ) | (0.16 | ) | (0.16 | ) | ||||||||||
Net Asset Value, End of Year | $ | 10.45 | $ | 13.18 | $ | 12.86 | $ | 11.55 | $ | 11.24 | ||||||||||
Total Return 1 | (18.68 | )% | 4.63 | % | 13.73 | % | 4.24 | % | 9.45 | % | ||||||||||
Ratio of net expenses to average net assets | 1.17 | % | 1.23 | % | 1.23 | % | 1.31 | % | 1.47 | % | ||||||||||
Ratio of net investment income to average net assets 1 | 2.53 | % | 1.93 | % | 2.05 | % | 1.45 | % | 1.46 | % | ||||||||||
Portfolio turnover | 99 | % | 206 | % | 66 | % | 53 | % | 85 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 9,932 | $ | 2,076 | $ | 1,933 | $ | 1,677 | $ | 2,366 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 1.68 | % | 1.78 | % | 1.81 | % | 1.85 | % | 2.05 | % | ||||||||||
Ratio of net investment income to average net assets | 2.03 | % | 1.38 | % | 1.49 | % | 0.89 | % | 0.88 | % | ||||||||||
Class C | ||||||||||||||||||||
Managers AMG Chicago Equity Partners Balanced Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 13.08 | $ | 12.76 | $ | 11.46 | $ | 11.16 | $ | 10.35 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.18 | 0.16 | 0.16 | 0.09 | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.70 | ) | 0.33 | 1.31 | 0.30 | 0.81 | ||||||||||||||
Total from investment operations | (2.52 | ) | 0.49 | 1.47 | 0.39 | 0.92 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.17 | ) | (0.17 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | ||||||||||
Return of capital | (0.01 | ) | — | — | — | — | ||||||||||||||
Total distributions to shareholders | (0.18 | ) | (0.17 | ) | (0.17 | ) | (0.09 | ) | (0.11 | ) | ||||||||||
Net Asset Value, End of Year | $ | 10.38 | $ | 13.08 | $ | 12.76 | $ | 11.46 | $ | 11.16 | ||||||||||
Total Return 1 | (19.36 | )% | 3.86 | % | 12.88 | % | 3.49 | % | 8.88 | % | ||||||||||
Ratio of net expenses to average net assets | 1.96 | % | 1.98 | % | 1.98 | % | 1.98 | % | 1.97 | % | ||||||||||
Ratio of net investment income to average net assets 1 | 1.57 | % | 1.17 | % | 1.30 | % | 0.79 | % | 0.97 | % | ||||||||||
Portfolio turnover | 99 | % | 206 | % | 66 | % | 53 | % | 85 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 2,926 | $ | 4,013 | $ | 4,479 | $ | 5,081 | $ | 6,377 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 2.52 | % | 2.53 | % | 2.56 | % | 2.52 | % | 2.56 | % | ||||||||||
Ratio of net investment income to average net assets | 1.01 | % | 0.62 | % | 0.71 | % | 0.24 | % | 0.38 | % | ||||||||||
69
Table of Contents
Class B | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 12.96 | $ | 12.64 | $ | 11.36 | $ | 11.06 | $ | 10.26 | |||||||||
0.16 | 0.16 | 0.18 | 0.09 | 0.34 | ||||||||||||||
(2.66 | ) | 0.33 | 1.29 | 0.30 | 0.80 | |||||||||||||
(2.50 | ) | 0.49 | 1.47 | 0.39 | 1.14 | |||||||||||||
(0.16 | ) | (0.17 | ) | (0.19 | ) | (0.09 | ) | (0.34 | ) | |||||||||
(0.01 | ) | — | — | — | — | |||||||||||||
(0.17 | ) | (0.17 | ) | (0.19 | ) | (0.09 | ) | (0.34 | ) | |||||||||
$ | 10.29 | $ | 12.96 | $ | 12.64 | $ | 11.36 | $ | 11.06 | |||||||||
(19.38 | )% | 3.86 | % | 12.83 | % | 3.53 | % | 11.11 | % | |||||||||
1.97 | % | 1.98 | % | 1.98 | % | 1.98 | % | 1.97 | % | |||||||||
1.53 | % | 1.16 | % | 1.30 | % | 0.79 | % | 0.97 | % | |||||||||
99 | % | 206 | % | 66 | % | 53 | % | 85 | % | |||||||||
$ | 2,434 | $ | 6,026 | $ | 8,485 | $ | 9,692 | $ | 11,090 | |||||||||
2.55 | % | 2.53 | % | 2.56 | % | 2.52 | % | 2.57 | % | |||||||||
0.95 | % | 0.61 | % | 0.71 | % | 0.25 | % | 0.37 | % | |||||||||
Institutional Class | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 13.28 | $ | 12.96 | $ | 11.64 | $ | 11.33 | $ | 10.50 | |||||||||
0.31 | 0.29 | 0.29 | 0.18 | 0.21 | ||||||||||||||
(2.74 | ) | 0.34 | 1.32 | 0.31 | 0.83 | |||||||||||||
(2.43 | ) | 0.63 | 1.61 | 0.49 | 1.04 | |||||||||||||
(0.30 | ) | (0.31 | ) | (0.29 | ) | (0.18 | ) | (0.21 | ) | |||||||||
(0.01 | ) | — | — | — | — | |||||||||||||
(0.31 | ) | (0.31 | ) | (0.29 | ) | (0.18 | ) | (0.21 | ) | |||||||||
$ | 10.54 | $ | 13.28 | $ | 12.96 | $ | 11.64 | $ | 11.33 | |||||||||
(18.51 | )% | 4.87 | % | 13.98 | % | 4.57 | % | 10.04 | % | |||||||||
0.96 | % | 0.98 | % | 0.98 | % | 0.98 | % | 0.97 | % | |||||||||
2.58 | % | 2.18 | % | 2.30 | % | 1.80 | % | 1.98 | % | |||||||||
99 | % | 206 | % | 66 | % | 53 | % | 85 | % | |||||||||
$ | 6,065 | $ | 7,754 | $ | 7,676 | $ | 7,501 | $ | 8,111 | |||||||||
1.52 | % | 1.53 | % | 1.56 | % | 1.52 | % | 1.57 | % | |||||||||
2.02 | % | 1.63 | % | 1.73 | % | 1.26 | % | 1.37 | % | |||||||||
70
Table of Contents
Financial Highlights
For a share outstanding throughout each year ended December 31,
Class A | ||||||||||||||||||||
Managers High Yield Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 8.23 | $ | 8.63 | $ | 8.30 | $ | 8.67 | $ | 8.46 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.64 | 0.59 | 0.55 | 0.57 | 0.67 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.99 | ) | (0.40 | ) | 0.33 | (0.37 | ) | 0.19 | ||||||||||||
Total from investment operations | (2.35 | ) | 0.19 | 0.88 | 0.20 | 0.86 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.63 | ) | (0.59 | ) | (0.55 | ) | (0.57 | ) | (0.65 | ) | ||||||||||
Total distributions to shareholders | (0.63 | ) | (0.59 | ) | (0.55 | ) | (0.57 | ) | (0.65 | ) | ||||||||||
Net Asset Value, End of Year | $ | 5.25 | $ | 8.23 | $ | 8.63 | $ | 8.30 | $ | 8.67 | ||||||||||
Total Return 1 | (30.02 | )%4 | 2.25 | % | 11.07 | % | 2.37 | % | 10.62 | % | ||||||||||
Ratio of net expenses to average net assets | 1.15 | %9 | 1.15 | % | 1.15 | % | 1.22 | % | 1.40 | % | ||||||||||
Ratio of net investment income to average net assets 1 | 8.57 | %9 | 6.92 | % | 6.65 | % | 6.64 | % | 7.68 | % | ||||||||||
Portfolio turnover | 41 | % | 51 | % | 65 | % | 63 | % | 74 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 17,105 | $ | 24,151 | $ | 26,953 | $ | 20,478 | $ | 16,612 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 1.70 | % | 1.55 | % | 1.54 | % | 1.59 | % | 1.72 | % | ||||||||||
Ratio of net investment income to average net assets | 8.01 | % | 6.52 | % | 6.26 | % | 6.28 | % | 7.37 | % | ||||||||||
Class C | ||||||||||||||||||||
Managers High Yield Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 8.12 | $ | 8.53 | $ | 8.21 | $ | 8.59 | $ | 8.39 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.57 | 0.53 | 0.49 | 0.51 | 0.60 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (2.94 | ) | (0.41 | ) | 0.32 | (0.38 | ) | 0.21 | ||||||||||||
Total from investment operations | (2.37 | ) | 0.12 | 0.81 | 0.13 | 0.81 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.57 | ) | (0.53 | ) | (0.49 | ) | (0.51 | ) | (0.61 | ) | ||||||||||
Total distributions to shareholders | (0.57 | ) | (0.53 | ) | (0.49 | ) | (0.51 | ) | (0.61 | ) | ||||||||||
Net Asset Value, End of Year | $ | 5.18 | $ | 8.12 | $ | 8.53 | $ | 8.21 | $ | 8.59 | ||||||||||
Total Return 1 | (30.54 | )%4 | 1.32 | % | 10.24 | % | 1.60 | % | 10.08 | % | ||||||||||
Ratio of net expenses to average net assets | 1.90 | %9 | 1.90 | % | 1.90 | % | 1.90 | % | 1.90 | % | ||||||||||
Ratio of net investment income to average net assets 1 | 7.91 | %9 | 6.18 | % | 5.89 | % | 5.97 | % | 7.17 | % | ||||||||||
Portfolio turnover | 41 | % | 51 | % | 65 | % | 63 | % | 74 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 3,516 | $ | 6,186 | $ | 7,653 | $ | 7,934 | $ | 10,474 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 2.46 | % | 2.30 | % | 2.29 | % | 2.27 | % | 2.27 | % | ||||||||||
Ratio of net investment income to average net assets | 7.36 | % | 5.78 | % | 5.50 | % | 5.60 | % | 6.80 | % | ||||||||||
71
Table of Contents
Class B | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 8.13 | $ | 8.54 | $ | 8.22 | $ | 8.60 | $ | 8.40 | |||||||||
0.56 | 0.54 | 0.50 | 0.51 | 0.60 | ||||||||||||||
(2.94 | ) | (0.43 | ) | 0.31 | (0.38 | ) | 0.21 | |||||||||||
(2.38 | ) | 0.11 | 0.81 | 0.13 | 0.81 | |||||||||||||
(0.57 | ) | (0.52 | ) | (0.49 | ) | (0.51 | ) | (0.61 | ) | |||||||||
(0.57 | ) | (0.52 | ) | (0.49 | ) | (0.51 | ) | (0.61 | ) | |||||||||
$ | 5.18 | $ | 8.13 | $ | 8.54 | $ | 8.22 | $ | 8.60 | |||||||||
(30.62 | )%4 | 1.30 | % | 10.21 | % | 1.59 | % | 10.07 | % | |||||||||
1.90 | %9 | 1.90 | % | 1.90 | % | 1.90 | % | 1.90 | % | |||||||||
7.80 | %9 | 6.14 | % | 5.88 | % | 5.96 | % | 7.18 | % | |||||||||
41 | % | 51 | % | 65 | % | 63 | % | 74 | % | |||||||||
$ | 2,577 | $ | 6,536 | $ | 12,318 | $ | 17,782 | $ | 27,287 | |||||||||
2.45 | % | 2.30 | % | 2.28 | % | 2.27 | % | 2.27 | % | |||||||||
7.25 | % | 5.74 | % | 5.50 | % | 5.59 | % | 6.81 | % | |||||||||
Institutional Class | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 8.29 | $ | 8.70 | $ | 8.36 | $ | 8.74 | $ | 8.52 | |||||||||
0.64 | 0.64 | 0.58 | 0.60 | 0.73 | ||||||||||||||
(2.98 | ) | (0.43 | ) | 0.34 | (0.38 | ) | 0.18 | |||||||||||
(2.34 | ) | 0.21 | 0.92 | 0.22 | 0.91 | |||||||||||||
(0.66 | ) | (0.62 | ) | (0.58 | ) | (0.60 | ) | (0.69 | ) | |||||||||
(0.66 | ) | (0.62 | ) | (0.58 | ) | (0.60 | ) | (0.69 | ) | |||||||||
$ | 5.29 | $ | 8.29 | $ | 8.70 | $ | 8.36 | $ | 8.74 | |||||||||
(29.80 | )%4 | 2.40 | % | 11.38 | % | 2.60 | % | 10.69 | % | |||||||||
0.90 | %9 | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | |||||||||
8.90 | %9 | 7.16 | % | 6.91 | % | 6.96 | % | 8.00 | % | |||||||||
41 | % | 51 | % | 65 | % | 63 | % | 74 | % | |||||||||
$ | 2,890 | $ | 3,423 | $ | 7,053 | $ | 3,440 | $ | 4,725 | |||||||||
1.46 | % | 1.30 | % | 1.29 | % | 1.27 | % | 1.26 | % | |||||||||
8.34 | % | 6.77 | % | 6.51 | % | 6.59 | % | 7.64 | % | |||||||||
72
Table of Contents
Financial Highlights
For a share outstanding throughout each year ended December 31,
Class A | ||||||||||||||||||||
Managers Fixed Income Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 10.54 | $ | 10.55 | $ | 10.36 | $ | 10.62 | $ | 10.56 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.55 | 0.56 | 0.52 | 0.53 | 0.49 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.62 | ) | 0.01 | 0.19 | (0.25 | ) | 0.07 | |||||||||||||
Total from investment operations | (1.07 | ) | 0.57 | 0.71 | 0.28 | 0.56 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.54 | ) | (0.58 | ) | (0.52 | ) | (0.54 | ) | (0.50 | ) | ||||||||||
Total distributions to shareholders | (0.54 | ) | (0.58 | ) | (0.52 | ) | (0.54 | ) | (0.50 | ) | ||||||||||
Net Asset Value, End of Year | $ | 8.93 | $ | 10.54 | $ | 10.55 | $ | 10.36 | $ | 10.62 | ||||||||||
Total Return 1 | (10.45 | )% | 5.53 | % | 7.10 | % | 2.68 | % | 5.44 | % | ||||||||||
Ratio of net expenses to average net assets | 0.84 | % | 0.82 | % | 0.74 | % | 0.81 | % | 1.02 | % | ||||||||||
Ratio of net investment income to average net assets 1 | 5.72 | % | 5.12 | % | 4.98 | % | 4.65 | % | 4.56 | % | ||||||||||
Portfolio turnover | 16 | % | 17 | % | 55 | % | 24 | % | 79 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 33,417 | $ | 24,122 | $ | 11,776 | $ | 7,591 | $ | 5,723 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 1.08 | % | 1.12 | % | 1.15 | % | 1.27 | % | 1.48 | % | ||||||||||
Ratio of net investment income to average net assets | 5.48 | % | 4.84 | % | 4.60 | % | 4.19 | % | 4.11 | % | ||||||||||
Class C | ||||||||||||||||||||
Managers Fixed Income Fund | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Net Asset Value, Beginning of Year | $ | 10.54 | $ | 10.55 | $ | 10.36 | $ | 10.63 | $ | 10.58 | ||||||||||
Income from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.48 | 0.48 | 0.43 | 0.46 | 0.43 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.62 | ) | 0.01 | 0.20 | (0.26 | ) | 0.07 | |||||||||||||
Total from investment operations | (1.14 | ) | 0.49 | 0.63 | 0.20 | 0.50 | ||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||
Net investment income | (0.48 | ) | (0.50 | ) | (0.44 | ) | (0.47 | ) | (0.45 | ) | ||||||||||
Total distributions to shareholders | (0.48 | ) | (0.50 | ) | (0.44 | ) | (0.47 | ) | (0.45 | ) | ||||||||||
Net Asset Value, End of Year | $ | 8.92 | $ | 10.54 | $ | 10.55 | $ | 10.36 | $ | 10.63 | ||||||||||
Total Return 1 | (11.11 | )% | 4.75 | % | 6.31 | % | 1.90 | % | 4.85 | % | ||||||||||
Ratio of net expenses to average net assets | 1.59 | % | 1.56 | % | 1.49 | % | 1.49 | % | 1.54 | % | ||||||||||
Ratio of net investment income to average net assets 1 | 4.96 | % | 4.38 | % | 4.23 | % | 3.96 | % | 4.04 | % | ||||||||||
Portfolio turnover | 16 | % | 17 | % | 55 | % | 24 | % | 79 | % | ||||||||||
Net assets at end of year (000’s omitted) | $ | 41,387 | $ | 32,154 | $ | 15,454 | $ | 11,480 | $ | 13,703 | ||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||
Ratio of total expenses to average net assets | 1.83 | % | 1.86 | % | 1.90 | % | 1.95 | % | 1.99 | % | ||||||||||
Ratio of net investment income to average net assets | 4.73 | % | 4.08 | % | 3.82 | % | 3.50 | % | 3.59 | % | ||||||||||
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Class B | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 10.47 | $ | 10.48 | $ | 10.30 | $ | 10.56 | $ | 10.51 | |||||||||
0.48 | 0.51 | 0.43 | 0.46 | 0.43 | ||||||||||||||
(1.62 | ) | (0.03 | ) | 0.19 | (0.25 | ) | 0.07 | |||||||||||
(1.14 | ) | 0.48 | 0.62 | 0.21 | 0.50 | |||||||||||||
(0.47 | ) | (0.49 | ) | (0.44 | ) | (0.47 | ) | (0.45 | ) | |||||||||
(0.47 | ) | (0.49 | ) | (0.44 | ) | (0.47 | ) | (0.45 | ) | |||||||||
$ | 8.86 | $ | 10.47 | $ | 10.48 | $ | 10.30 | $ | 10.56 | |||||||||
(11.13 | )% | 4.74 | % | 6.25 | % | 2.01 | % | 4.90 | % | |||||||||
1.59 | % | 1.55 | % | 1.49 | % | 1.49 | % | 1.54 | % | |||||||||
4.90 | % | 4.37 | % | 4.23 | % | 3.96 | % | 4.04 | % | |||||||||
16 | % | 17 | % | 55 | % | 24 | % | 79 | % | |||||||||
$ | 6,349 | $ | 9,029 | $ | 13,089 | $ | 16,837 | $ | 20,063 | |||||||||
1.82 | % | 1.85 | % | 1.90 | % | 1.95 | % | 1.99 | % | |||||||||
4.66 | % | 4.05 | % | 3.80 | % | 3.50 | % | 3.59 | % | |||||||||
Institutional Class | ||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||
$ | 10.59 | $ | 10.59 | $ | 10.40 | $ | 10.66 | $ | 10.61 | |||||||||
0.58 | 0.59 | 0.54 | 0.56 | 0.54 | ||||||||||||||
(1.63 | ) | 0.01 | 0.19 | (0.25 | ) | 0.07 | ||||||||||||
(1.05 | ) | 0.60 | 0.73 | 0.31 | 0.61 | |||||||||||||
(0.58 | ) | (0.60 | ) | (0.54 | ) | (0.57 | ) | (0.56 | ) | |||||||||
(0.58 | ) | (0.60 | ) | (0.54 | ) | (0.57 | ) | (0.56 | ) | |||||||||
$ | 8.96 | $ | 10.59 | $ | 10.59 | $ | 10.40 | $ | 10.66 | |||||||||
(10.23 | )% | 5.84 | % | 7.34 | % | 2.91 | % | 5.99 | % | |||||||||
0.59 | % | 0.56 | % | 0.49 | % | 0.49 | % | 0.50 | % | |||||||||
5.93 | % | 5.37 | % | 5.23 | % | 4.96 | % | 5.09 | % | |||||||||
16 | % | 17 | % | 55 | % | 24 | % | 79 | % | |||||||||
$ | 28,561 | $ | 33,412 | $ | 25,861 | $ | 25,641 | $ | 24,559 | |||||||||
0.83 | % | 0.86 | % | 0.90 | % | 0.95 | % | 0.97 | % | |||||||||
5.69 | % | 5.07 | % | 4.82 | % | 4.50 | % | 4.63 | % | |||||||||
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Table of Contents
Financial Highlights
For a share outstanding throughout each year ended
Short Duration Government Fund | For the year ended December 31, 2008 | For the period from April 1, 2007 to December 31, 2007 | For the fiscal year ended March 31, | |||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 9.68 | $ | 9.68 | $ | 9.61 | $ | 9.66 | $ | 9.69 | $ | 9.74 | ||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.34 | 0.31 | 0.42 | 0.34 | 0.27 | 0.25 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.45 | ) | 0.01 | 0.06 | (0.05 | ) | (0.02 | ) | (0.06 | ) | ||||||||||||||
Total from investment operations | (0.11 | ) | 0.32 | 0.48 | 0.29 | 0.25 | 0.19 | |||||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||||||
Net investment income | (0.37 | ) | (0.32 | ) | (0.41 | ) | (0.34 | ) | (0.28 | ) | (0.24 | ) | ||||||||||||
Total distributions to shareholders | (0.37 | ) | (0.32 | ) | (0.41 | ) | (0.34 | ) | (0.28 | ) | (0.24 | ) | ||||||||||||
Net Asset Value, End of Period | $ | 9.20 | $ | 9.68 | $ | 9.68 | $ | 9.61 | $ | 9.66 | $ | 9.69 | ||||||||||||
Total Return 1 | (1.19 | )% | 3.41 | %5 | 5.05 | % | 3.00 | % | 2.62 | % | 2.00 | % | ||||||||||||
Ratio of net expenses to average net assets 7 | 0.83 | % | 0.84 | %6 | 0.83 | % | 0.83 | % | 0.78 | % | 0.78 | % | ||||||||||||
Ratio of net investment income to average net assets 1,7 | 3.88 | % | 4.49 | %6 | 4.15 | % | 3.41 | % | 2.90 | % | 2.59 | % | ||||||||||||
Portfolio turnover | 282 | % | 199 | %5 | 230 | % | 315 | % | 341 | % | 349 | % | ||||||||||||
Net assets at end of period (000’s omitted) | $ | 243,548 | $ | 235,117 | $ | 179,984 | $ | 206,523 | $ | 237,900 | $ | 198,726 | ||||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||||||
Ratio of total expenses to average net assets | 0.84 | % | 1.22 | %6 | 1.36 | % | 1.08 | % | 1.00 | % | 0.95 | % | ||||||||||||
Ratio of net investment income to average net assets | 3.87 | % | 4.11 | %6 | 3.62 | % | 3.16 | % | 2.68 | % | 2.42 | % | ||||||||||||
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Financial Highlights
For a share outstanding throughout each year ended
Intermediate Duration Government Fund | For the year ended December 31, 2008 | For the period from April 1, 2007 to December 31, 2007 | For the fiscal year ended March 31, | |||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.67 | $ | 10.54 | $ | 10.37 | $ | 10.53 | $ | 10.74 | $ | 10.61 | ||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.45 | 0.37 | 0.47 | 0.37 | 0.26 | 0.23 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.37 | ) | 0.13 | 0.17 | (0.16 | ) | (0.06 | ) | 0.20 | |||||||||||||||
Total from investment operations | 0.08 | 0.50 | 0.64 | 0.21 | 0.20 | 0.43 | ||||||||||||||||||
Less Distributions to Shareholders from: | ||||||||||||||||||||||||
Net investment income | (0.45 | ) | (0.37 | ) | (0.47 | ) | (0.37 | ) | (0.26 | ) | (0.23 | ) | ||||||||||||
Net realized gain on investments | (0.13 | ) | — | — | — | (0.15 | ) | (0.07 | ) | |||||||||||||||
Total distributions to shareholders | (0.58 | ) | (0.37 | ) | (0.47 | ) | (0.37 | ) | (0.41 | ) | (0.30 | ) | ||||||||||||
Net Asset Value, End of Period | $ | 10.17 | $ | 10.67 | $ | 10.54 | $ | 10.37 | $ | 10.53 | $ | 10.74 | ||||||||||||
Total Return 1 | 0.85 | % | 4.85 | %5 | 6.30 | % | 2.02 | % | 1.78 | % | 4.07 | % | ||||||||||||
Ratio of net expenses to average net assets 8 | 0.89 | % | 0.83 | %6 | 0.87 | % | 0.88 | % | 0.88 | % | 0.88 | % | ||||||||||||
Ratio of net investment income to average net assets 1,8 | 4.32 | % | 4.62 | %6 | 4.46 | % | 3.53 | % | 2.45 | % | 2.09 | % | ||||||||||||
Portfolio turnover | 429 | % | 240 | %5 | 445 | % | 672 | % | 851 | % | 667 | % | ||||||||||||
Net assets at end of period (000’s omitted) | $ | 170,181 | $ | 193,440 | $ | 182,771 | $ | 194,545 | $ | 186,026 | $ | 123,826 | ||||||||||||
Ratios absent expense offsets: 3 | ||||||||||||||||||||||||
Ratio of total expenses to average net assets | 0.95 | % | 0.84 | %6 | 0.89 | % | 0.88 | % | 0.89 | % | 0.93 | % | ||||||||||||
Ratio of net investment income to average net assets | 4.26 | % | 4.61 | %6 | 4.44 | % | 3.53 | % | 2.44 | % | 2.04 | % | ||||||||||||
Notes to Financial Highlights
The following notes should be read in conjunction with the Financial Highlights of the Funds presented on the previous pages.
1 | 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.) |
2 | Per share numbers have been calculated using average shares. |
3 | Excludes the impact of expense reimbursements or fee waivers 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 Statements Net Asset Values as shown. |
5 | Not annualized. |
6 | Annualized. |
7 | Excludes interest expense for the year ended December 31, 2008, the period ended December 31, 2007 and the fiscal years ended March 31, 2007, 2006, 2005 and 2004 of 0.00%, 0.38%, 0.53%, 0.23%, 0.16% and 0.03%, respectively. (See Note 1(c) of Notes to Financial Statements.) |
8 | Excludes interest expense for the year ended December 31, 2008, the period ended December 31, 2007 and the fiscal years ended March 31, 2007, 2006, 2005 and 2004 of 0.00%, 0.01%, 0.04%, 0.00%, 0.01% and 0.00%, respectively. (See Note 1(c) of Notes to Financial Statements.) |
9 | Excludes interest expense for the year ended December 31, 2008, of 0.06%. (See Note 1(c) of Notes to Financial Statements.) |
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December 31, 2008
1. | Summary of Significant Accounting Policies |
Managers Trust II (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 is comprised of a number of different funds, each having distinct investment management objectives, strategies, risks and policies. Included in this report are: Managers AMG Chicago Equity Partners Mid-Cap Fund (“Mid-Cap”), Managers AMG Chicago Equity Partners Balanced Fund (“Balanced”), Managers High Yield Fund (“High Yield”), Managers Fixed Income Fund (“Fixed Income”), Managers Short Duration Government Fund (“Short Duration”), and Managers Intermediate Duration Government Fund (“Intermediate Duration”), collectively the “Funds.”
Mid-Cap, Balanced, High Yield, and Fixed Income each offer four classes of shares: Class A, Class B, Class C and Institutional Class. Sales of Class A shares may be subject to a front-end sales charge. Redemptions of Class A, Class B and Class C shares may be subject to a contingent-deferred sales charge (as a percentage of the original offering price or the net asset value at time of sale, whichever is less). Institutional Class shares are available, with no sales charge, to certain institutional investors and qualifying individual investors. Please refer to a current prospectus for additional information on each share class.
The Funds’ financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, 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 periods. Actual results could differ from those estimates and such differences may be material. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements:
a. | Valuation of Investments |
Equity securities traded on a domestic or international securities exchange are valued at the last quoted 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 Funds’ investments are generally valued based on market quotations provided by third party pricing services approved by the Board of Trustees of the Funds. Under certain circumstances, the value of each Fund’s investment may be based on an evaluation of its fair value, pursuant to procedures established by and under the general supervision of the Board of Trustees of the Trust. Each Fund may use the fair value of a portfolio security to calculate its NAV when, for example, (1) market quotations are not readily available because a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and has not resumed before the Fund calculates its NAV, (3) a significant event affecting the value of a portfolio security is determined to have occurred between the time of the market quotation provided for a portfolio security and the time as of which the Fund calculates its NAV, (4) a security’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 Funds calculate its NAV. In accordance with procedures approved by the Board of Trustees, the Investment Manager relies upon recommendations of a third-party fair valuation service in adjusting the prices of such foreign portfolio investments. The Funds may invest in securities that may be thinly traded. The Board of Trustees has adopted procedures to adjust prices when thinly traded securities 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.
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 valued at amortized cost, which approximates market value. Investments in other regulated investment companies are valued at their end of day net asset value per share except iShares or other ETF’s, which are valued the same as equity securities. Investments in certain mortgage-backed and stripped mortgage-backed securities, preferred stocks, convertible securities, derivatives and other debt securities not traded on an organized securities market are valued on the basis of valuations provided by dealers or by a pricing service which uses information with respect to transactions in such securities and various relationships between securities and yield to maturity in determining value. Securities (including derivatives) for which market quotations are not readily available are fair valued, as determined in good faith, and pursuant to procedures adopted by the Board of Trustees of the Trust. 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 Funds adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”), effective January 1, 2008. In accordance with FAS 157, fair value is defined 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. FAS 157 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 Funds. Unobservable inputs reflect the Funds’ 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 – quoted prices in active markets for identical investments
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Table of Contents
Notes to Financial Statements (continued)
Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk)
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. The following table summarizes the inputs used to value the Funds’ net assets by the above fair value hierarchy levels as of December 31, 2008:
Investments in | Other Financial | ||||||
Level | Securities | Instruments* | |||||
Mid-Cap | |||||||
Level 1 | $ | 34,021,678 | — | ||||
Level 2 | 130,440 | — | |||||
Level 3 | — | — | |||||
Total | $ | 34,152,118 | — | ||||
Balanced | |||||||
Level 1 | $ | 13,649,413 | — | ||||
Level 2 | 8,263,693 | — | |||||
Level 3 | — | — | |||||
Total | $ | 21,913,106 | — | ||||
High Yield | |||||||
Level 1 | $ | 3,856,289 | — | ||||
Level 2 | 22,331,413 | — | |||||
Level 3 | — | — | |||||
Total | $ | 26,187,702 | — | ||||
Fixed Income | |||||||
Level 1 | $ | 18,421,027 | — | ||||
Level 2 | 102,976,569 | — | |||||
Level 3 | — | ||||||
Total | $ | 121,397,596 | — | ||||
Short Duration | |||||||
Level 1 | $ | 26,168,086 | $ | (1,174,370 | ) | ||
Level 2 | 250,442,172 | — | |||||
Level 3 | — | — | |||||
Total | $ | 276,610,258 | $ | (1,174,370 | ) | ||
Intermediate Duration | |||||||
Level 1 | $ | 8,980,598 | $ | 456,533 | |||
Level 2 | 234,918,450 | — | |||||
Level 3 | — | — | |||||
Total | $ | 243,899,048 | $ | 456,533 | |||
* Other financial instruments are derivative instruments not reflected in the Schedule of Portfolio Investments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation of the instrument. |
|
b. | Security Transactions |
Security transactions are accounted for as of the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
c. | Investment Income and Expenses |
Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed. These dividends are recorded as soon as the Trust is informed of 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 each 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 each Fund. Each class has equal voting privileges except that each class has exclusive voting rights with respect to its services and/or distribution plan.
The following Funds had certain portfolio trades directed to various brokers who paid a portion of such Fund’s expenses. For the year ended December 31, 2008, under these arrangements, the amount by which the Funds’ expenses were reduced and the impact on the expense ratios were: Mid-Cap - $28,416 or 0.05%, and Balanced - $8,398 or 0.04%.
The Funds have a “balance credit” arrangement with The Bank of New York Mellon (formerly The Bank of New York) (“BNYM”), the Funds’ custodian, whereby each 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 each Fund. For the year ended December 31, 2008, the custodian expense was reduced as follows: Mid-Cap - $89, Balanced - $57, High Yield - $23, Fixed Income - $454, Short Duration - $2,051, Intermediate Duration – $1,018.
Overdrafts will cause a reduction of any earnings credits, computed at 2% above the effective Federal Funds rate on the day of the overdraft. For the year ended December 31, 2008, overdraft fees and the impact on the expense ratios, if any, for Mid-Cap, Balanced, High Yield, Fixed Income, Short Duration, and Intermediate Duration equaled $2,312, $946, $20,723 or 0.06%, $0, $243, and $0, respectively.
The Trust also has a balance credit arrangement with its Transfer Agent, PNC Global Investment Servicing (U.S.) Inc. (formerly PFPC, Inc.), whereby earnings credits are used to offset banking charges and other out-of-pocket expenses. For the year ended December 31, 2008, the transfer agent expense was reduced as follows: Mid-Cap - $589, Balanced - $214, High Yield - $386, Fixed Income - $1,294, Short Duration - $2,788, and Intermediate Duration - $2,127.
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Table of Contents
Notes to Financial Statements (continued)
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 each Fund may have made in the JPMorgan Liquid Assets Portfolio – Capital Shares and JPMorgan U.S. Government Money Market Portfolio – Capital Shares. For the year ended December 31, 2008, the management fee was reduced as follows: Mid-Cap - $0, Balanced - $0, High Yield - $220, Fixed Income - $1,166, Short Duration - $8,836, and Intermediate Duration - $4,881.
Total returns and net investment income for the Funds 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-reimburseable expenses, if any, such as interest and taxes.
d. | Dividends and Distributions |
Dividends resulting from net investment income, if any, normally will be declared and paid annually for the Mid-Cap Fund, monthly for the Fixed Income, High Yield, Short Duration and Intermediate Duration and quarterly for the Balanced Fund. Distributions of capital gains, if any, will be made on an annual basis and when required for Federal excise tax purposes. Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for losses deferred due to wash sales, REITS, 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. The tax character of distributions paid during the fiscal years ended 2008 and 2007 were as follows:
Mid Cap | Balanced | High Yield | Fixed Income | ||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||||||
Distributions paid from: | |||||||||||||||||||||||||||
Ordinary income | $ | 277,852 | — | $ | 396,655 | $ | 345,299 | $ | 2,908,748 | $ | 3,092,381 | $ | 6,107,307 | $ | 4,086,823 | ||||||||||||
Short-term capital gains | — | — | — | — | — | — | — | — | |||||||||||||||||||
Long-term capital gains | 29,970 | $ | 5,486,487 | — | — | — | — | — | — | ||||||||||||||||||
$ | 307,822 | $ | 5,486,487 | $ | 396,655 | $ | 345,299 | $ | 2,908,748 | $ | 3,092,381 | $ | 6,107,307 | $ | 4,086,823 | ||||||||||||
As a % of distributions paid (unaudited): | |||||||||||||||||||||||||||
Qualified ordinary income | 51.62 | % | — | 48.06 | % | 23.60 | % | — | — | — | — | ||||||||||||||||
Ordinary income—dividends received deduction | 100.00 | % | — | 54.23 | % | 65.50 | % | — | — | — | — |
Short Duration | Intermediate Duration | |||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||
Distributions paid from: | ||||||||||||
Ordinary income | $ | 9,735,159 | $ | 6,670,389 | $ | 8,106,785 | $ | 6,439,350 | ||||
Short-term capital gains | — | — | 1,562,810 | — | ||||||||
Long-term capital gains | — | — | 626,924 | — | ||||||||
$ | 9,735,159 | $ | 6,670,389 | $ | 10,296,519 | $ | 6,439,350 | |||||
As a % of distributions paid (unaudited): | ||||||||||||
Qualified ordinary income | — | — | — | — | ||||||||
Ordinary income - dividends received deduction | — | — | — | — |
As of December 31, 2008, the components of distributable earnings (excluding unrealized appreciation/depreciation) on a tax basis consisted of:
Mid Cap | Balanced | High Yield | Fixed Income | Short Duration | Intermediate Duration | |||||||||||||
Capital loss carryforward | $ | 2,458,446 | $ | 15,330,717 | $ | 7,511,141 | $ | 1,790,459 | $ | 2,379,692 | — | |||||||
Undistributed ordinary income | 2,590 | — | — | 77,781 | 2,715 | $ | 30,161 | |||||||||||
Undistributed short-term capital gains | — | — | — | — | — | — | ||||||||||||
Undistributed long-term capital gains | — | — | — | — | — | — |
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Notes to Financial Statements (continued)
e. | Federal Taxes |
Each 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 each Fund’s understanding of the tax rules and rates related to income, gains and transactions for the foreign jurisdictions in which it invests, each 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, 2005-2008), and has concluded that no provision for federal income tax is required in the Funds’ financial statements. Additionally, the Funds are 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.
f. | Capital Stock |
The Trust’s Declaration of Trust authorizes for each series the issuance of an unlimited number of shares of beneficial interest, without par value. Each Fund records sales and repurchases of its capital stock on the trade date. Dividends and distributions to shareholders are recorded on the ex-dividend date. For the years ended December 31, 2008 and 2007, the capital stock transactions by class for Mid-Cap, Balanced, High Yield, and Fixed Income were:
Mid-Cap | Balanced | |||||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||
Class A: |
| |||||||||||||||||||||||||||
Proceeds from sales | 193,100 | $ | 2,186,766 | 174,624 | $ | 2,677,409 | 887,710 | $ | 9,935,110 | 56,145 | $ | 732,763 | ||||||||||||||||
Reinvestment of distributions | 2,277 | 17,119 | 17,545 | 245,106 | 3,175 | 36,148 | 1,923 | 25,329 | ||||||||||||||||||||
Cost of shares repurchased | (174,458 | ) | (1,997,426 | ) | (347,741 | ) | (5,297,263 | ) | (98,450 | ) | (1,068,697 | ) | (50,851 | ) | (680,836 | ) | ||||||||||||
Net Increase (Decrease)—Class A | 20,919 | $ | 206,459 | (155,572 | ) | $ | (2,374,748 | ) | 792,435 | $ | 8,902,561 | 7,217 | $ | 77,256 |
| |||||||||||||
Class B: |
| |||||||||||||||||||||||||||
Proceeds from sales | 5,625 | $ | 56,961 | 33,150 | $ | 458,765 | 19,896 | $ | 233,307 | 9,773 | $ | 125,376 | ||||||||||||||||
Reinvestment of distributions | 122 | 860 | 13,109 | 171,594 | 1,609 | 18,325 | 1,954 | 25,272 | ||||||||||||||||||||
Cost of shares repurchased | (307,761 | ) | (3,310,412 | ) | (318,832 | ) | (4,596,519 | ) | (249,963 | ) | (2,999,626 | ) | (217,938 | ) | (2,810,029 | ) | ||||||||||||
Net Decrease—Class B | (302,014 | ) | $ | (3,252,591 | ) | (272,573 | ) | $ | (3,966,160 | ) | (228,458 | ) | $ | (2,747,994 | ) | (206,211 | ) | $ | (2,659,381 | ) | ||||||||
Class C: |
| |||||||||||||||||||||||||||
Proceeds from sales | 12,546 | $ | 135,835 | 50,160 | $ | 688,679 | 34,838 | $ | 413,646 | 9,119 | $ | 119,367 | ||||||||||||||||
Reinvestment of distributions | 129 | 910 | 10,655 | 139,371 | 1,068 | 12,081 | 730 | 9,536 | ||||||||||||||||||||
Cost of shares repurchased | (203,110 | ) | (2,045,048 | ) | (235,928 | ) | (3,427,065 | ) | (60,886 | ) | (715,503 | ) | (54,020 | ) | (705,519 | ) | ||||||||||||
Net Decrease—Class C | (190,435 | ) | $ | (1,908,303 | ) | (175,113 | ) | $ | (2,599,015 | ) | (24,980 | ) | $ | (289,776 | ) | (44,171 | ) | $ | (576,616 | ) | ||||||||
Institutional Class: |
| |||||||||||||||||||||||||||
Proceeds from sales | 199,679 | $ | 2,470,466 | 290,909 | $ | 4,724,523 | 63,486 | $ | 762,899 | 96,331 | $ | 1,271,270 | ||||||||||||||||
Reinvestment of distributions | 29,469 | 233,696 | 248,099 | 3,656,985 | 14,878 | 174,157 | 13,330 | 176,809 | ||||||||||||||||||||
Cost of shares repurchased | (1,080,728 | ) | (13,566,574 | ) | (634,275 | ) | (10,231,560 | ) | (86,606 | ) | (1,056,742 | ) | (118,166 | ) | (1,571,856 | ) | ||||||||||||
Net Decrease—Institutional Class | (851,580 | ) | $ | (10,862,412 | ) | (95,267 | ) | $ | (1,850,052 | ) | (8,242 | ) | $ | (119,686 | ) | (8,505 | ) | $ | (123,777 | ) | ||||||||
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High Yield | Fixed Income | |||||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||
Class A: |
| |||||||||||||||||||||||||||
Proceeds from sales | 2,801,422 | $ | 20,561,791 | 2,321,944 | $ | 19,882,916 | 3,327,108 | $ | 32,869,031 | 1,696,074 | $ | 17,826,303 | ||||||||||||||||
Reinvestment of distributions | 230,576 | 1,572,459 | 181,714 | 1,545,504 | 111,756 | 1,075,961 | 48,605 | 506,986 | ||||||||||||||||||||
Cost of shares repurchased | (2,706,598 | ) | (20,623,729 | ) | (2,693,687 | ) | (23,063,355 | ) | (1,986,511 | ) | (18,515,373 | ) | (572,203 | ) | (6,036,138 | ) | ||||||||||||
Net Increase (Decrease)—Class A | 325,400 | $ | 1,510,521 | (190,029 | ) | $ | (1,634,935 | ) | 1,452,353 | $ | 15,429,619 | 1,172,476 | $ | 12,297,151 | ||||||||||||||
Class B: |
| |||||||||||||||||||||||||||
Proceeds from sales | 14,993 | $ | 109,348 | 26,725 | $ | 227,385 | 177,579 | $ | 1,818,362 | 63,279 | $ | 660,314 | ||||||||||||||||
Reinvestment of distributions | 21,065 | 141,495 | 11,860 | 99,730 | 15,233 | 147,128 | 13,190 | 137,318 | ||||||||||||||||||||
Cost of shares repurchased | (342,829 | ) | (2,470,946 | ) | (677,011 | ) | (5,779,918 | ) | (338,815 | ) | (3,309,389 | ) | (463,226 | ) | (4,837,057 | ) | ||||||||||||
Net Decrease—Class B | (306,771 | ) | $ | (2,220,103 | ) | (638,426 | ) | $ | (5,452,803 | ) | (146,003 | ) | $ | (1,343,899 | ) | (386,757 | ) | $ | (4,039,425 | ) | ||||||||
Class C: |
| |||||||||||||||||||||||||||
Proceeds from sales | 77,051 | $ | 547,383 | 104,832 | $ | 881,044 | 2,518,847 | $ | 25,245,989 | 1,884,490 | $ | 19,847,157 | ||||||||||||||||
Reinvestment of distributions | 24,296 | 161,751 | 13,456 | 112,711 | 86,932 | 836,530 | 33,978 | 354,851 | ||||||||||||||||||||
Cost of shares repurchased | (183,999 | ) | (1,222,428 | ) | (253,818 | ) | (2,137,953 | ) | (1,015,969 | ) | (9,644,130 | ) | (332,155 | ) | (3,488,168 | ) | ||||||||||||
Net Increase (Decrease)—Class C | (82,652 | ) | $ | (513,294 | ) | (135,530 | ) | $ | (1,144,198 | ) | 1,589,810 | $ | 16,438,389 | 1,586,313 | $ | 16,713,840 | ||||||||||||
Institutional Class: |
| |||||||||||||||||||||||||||
Proceeds from sales | 326,591 | $ | 2,146,250 | 237,475 | $ | 2,055,697 | 983,478 | $ | 9,725,685 | 1,377,200 | $ | 14,490,100 | ||||||||||||||||
Reinvestment of distributions | 31,126 | 214,456 | 27,420 | 235,265 | 169,130 | 1,651,152 | 130,502 | 1,373,072 | ||||||||||||||||||||
Cost of shares repurchased | (224,492 | ) | (1,726,234 | ) | (662,798 | ) | (5,768,965 | ) | (1,120,916 | ) | (10,951,949 | ) | (793,501 | ) | (8,398,180 | ) | ||||||||||||
Net Increase (Decrease)—Institutional Class | 133,225 | $ | 634,472 | (397,903 | ) | $ | (3,478,003 | ) | 31,692 | $ | 424,888 | 714,201 | $ | 7,464,992 | ||||||||||||||
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Notes to Financial Statements (continued)
At December 31, 2008, certain unaffiliated shareholders, specifically omnibus accounts, individually held greater than 10% of the outstanding shares of the following Funds:
Mid-Cap | Balanced | |||||
1 owns 48% | Class A | 1 owns 81% | Class A | |||
2 own 60% | Class B | 1 owns 57% | Class B | |||
1 owns 74% | Class C | 1 owns 74% | Class C | |||
2 own 96% | Inst. Class | 1 owns 94% | Inst. Class | |||
High Yield | Fixed Income | |||||
1 owns 55% | Class A | 3 own 56% | Class A | |||
2 own 57% | Class B | 2 own 63% | Class B | |||
3 own 67% | Class C | 2 own 60% | Class C | |||
3 own 85% | Inst. Class | 3 own 82% | Inst. Class | |||
Short Duration | Intermediate Duration | |||||
2 own 67% | 1 owns 48% |
g. | Capital Loss Carryovers |
As of December 31, 2008, the following Funds had accumulated net realized capital loss carryovers from securities transactions for Federal income tax purposes as shown in the following chart. These amounts may be used to offset realized capital gains, if any, through the expiration dates listed.
Capital Loss | |||||
Carryover Amount | Expires Dec. 31, | ||||
Mid-Cap | $ | 2,458,446 | 2016 | ||
Balanced | $ | 13,683,503 | 2009 | ||
1,575,061 | 2010 | ||||
72,153 | 2016 | ||||
Total | $ | 15,330,717 | |||
High Yield | $ | 6,767,059 | 2009 | ||
744,082 | 2016 | ||||
Total | $ | 7,511,141 | |||
Fixed Income | $ | 1,790,459 | 2009 | ||
Short Duration | $ | 362,610 | 2009 | ||
213,372 | 2012 | ||||
285,554 | 2014 | ||||
1,518,156 | 2016 | ||||
Total | $ | 2,379,692 | |||
For the year ended December 31, 2008, Balanced, Fixed Income, and Intermediate Duration utilized capital loss carryovers in the amounts of $1,178,534, $1,024,518, and $602,304, respectively.
h. | Reverse Repurchase Agreements |
A reverse repurchase agreement involves the sale of portfolio assets together with an agreement to repurchase the same or substantially the same assets later at a fixed price. An interest expense is charged to the Fund for the duration of the sale. Additional assets are maintained in a segregated account with the custodian, and are marked to market daily. The segregated assets may consist of cash, U.S. Government securities, or other liquid securities at least equal in value to the obligations under the reverse repurchase agreements. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, a fund’s use of the proceeds under the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the obligation to repurchase the securities. For the year ended December 31, 2008, there were no reverse repurchase agreements, and therefore no interest expense.
i. | Delayed Delivery Transactions and When-Issued Securities |
The Funds may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. During the time a delayed delivery sell is outstanding, the contract is marked to market daily and equivalent deliverable securities are held for the transaction. The value of the securities purchased on a delayed delivery or when-issued basis are identified as such in the Funds’ Schedules of Portfolio Investments. With respect to purchase commitments, the Funds identify securities as segregated in its records with a value at least equal to the amount of the commitment. The payables and receivables associated with the purchases and sales of delayed delivery securities having the same coupon, settlement date and broker are offset. Delayed delivery or when-issued securities that have been purchased from and sold to different brokers are reflected as both payables and receivables in the Funds’ Statement of Assets and Liabilities. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract, or if the issuer does not issue the securities due to political, economic, or other factors.
j. | Dollar Roll and Reverse Dollar Roll Agreements |
The Funds may enter into dollar rolls in which they sell debt securities for delivery currently and simultaneously contract to repurchase similar, but not identical, securities at the same price or a lower price on an agreed date. The Funds receive compensation as consideration for entering into the commitment to repurchase. The compensation is the difference between the current sale price and the forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. The Funds may also be compensated by the receipt of a commitment fee. As the holder, the counterparty receives all principal and interest payments, including prepayments, made with respect to the similar security. Dollar rolls may be renewed with a new sale and repurchase price with a cash settlement made at renewal without physical delivery of the securities subject to the contract.
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Notes to Financial Statements (continued)
Certain risks may arise upon entering into dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of such securities may change adversely before the Funds are able to repurchase them. There can be no assurance that the Funds’ use of the cash that they receive from a dollar roll will provide a return that exceeds its cost.
k. | Securities Transacted on a When Issued Basis |
The Funds may enter into To Be Announced (“TBA”) sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as “cover” for the transaction. Unsettled TBA sale commitments are valued at the current market value of the underlying securities, according to the procedures described under “Valuation of Investments,” in footnote 1a above. Each contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss. If the Fund delivers securities under the commitment, the Fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into.
TBA sale commitments outstanding at December 31, 2008 were as follows:
Principal/Share | ||||||||
Fund | Amount | Security | Current Liability | |||||
Short Duration | $ | 4,800,000 | FNMA, 5.000%, 1/15/23 | $ | 4,926,000 | |||
Intermediate Duration | $ | 1,000,000 | FHLMC, 5.500%, 1/15/39 | $ | 1,023,438 | |||
l. | Futures Contracts |
The Funds may use interest rate futures contracts for risk management purposes in order to reduce the interest rate risk of fixed income securities. 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.
Short Duration had the following open futures contracts as of December 31, 2008:
Number of | Unrealized | |||||||||
Type | Contracts | Position | Expiration Month | Gain/(Loss) | ||||||
2-Year U.S. Treasury Note | 241 | Long | March 2009 | $ | 429,538 | |||||
5-Year U.S. Treasury Note | 122 | Short | March 2009 | (294,820 | ) | |||||
10-Year U.S. Treasury Note | 20 | Short | March 2009 | (67,706 | ) | |||||
30- Year U.S. Treasury Bond | 84 | Long | March 2009 | 689,696 | ||||||
5-Year Swap | 105 | Short | March 2009 | (240,615 | ) | |||||
10-Year Swap | 158 | Short | March 2009 | (859,301 | ) | |||||
3-Month Eurodollar | 61 | Long | March 2008 - September 2011 | 306,782 | ||||||
3-Month Eurodollar | 223 | Short | March 2008 - December 2012 | (1,137,944 | ) | |||||
Total | $ | (1,174,370 | ) | |||||||
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Notes to Financial Statements (continued)
Intermediate Duration had the following open futures contracts as of December 31, 2008:
Number of | Unrealized | |||||||||
Type | Contracts | Position | Expiration Month | Gain/(Loss) | ||||||
2-Year U.S. Treasury Note | 7 | Short | March 2009 | $ | (10,299 | ) | ||||
5-Year U.S. Treasury Note | 46 | Short | March 2009 | (111,162 | ) | |||||
10-Year U.S. Treasury Note | 34 | Short | March 2009 | (115,101 | ) | |||||
30- Year U.S. Treasury Bond | 3 | Long | March 2009 | 24,110 | ||||||
5-Year Swap | 20 | Short | March 2009 | (45,831 | ) | |||||
10-Year Swap | 6 | Long | March 2009 | 19,954 | ||||||
3-Month Eurodollar | 118 | Long | September 2008 - September 2012 | 1,044,145 | ||||||
3-Month Eurodollar | 44 | Short | June 2010 | (349,283 | ) | |||||
Total | $ | 456,533 | ||||||||
Futures transactions involve additional costs and may result in losses. The effective use of futures depends on the Fund’s ability to close futures positions at times when the Fund’s portfolio managers deem it desirable to do so. The use of futures also involves the risk of imperfect correlation among movements in the values of the securities underlying the futures purchased and sold by the Funds, of the futures contracts themselves, and of the securities that are the subject of a hedge.
m. | Assets Pledged to Cover Margin Requirements for Open Futures Positions |
The aggregate market value of assets pledged to cover margin requirements for the open futures positions at December 31, 2008 was:
Fund | Assets Pledged | ||
Short Duration | $ | 1,099,950 | |
Intermediate Duration | 277,924 |
n. | Option Contracts |
A written option contract is a contract in which the writer of the option grants the buyer of the option the right to purchase from (call option) or sell to (put option) the writer a designated instrument at a specified price within a specified period of time. Options written (sold) are recorded as liabilities. When an option expires, the premium (original option value) is realized as a gain if the option was written or as a loss if the option was purchased. When the exercise of an option results in a cash settlement, the difference between the premium and the settlement proceeds is recognized as realized gain or loss. When securities are acquired or delivered upon exercise of an option, the acquisition cost or sale proceeds are adjusted by the amount of the premium. When an option is closed, the difference between the premium and the cost to close the position is realized as a gain or loss. For the year ended December 31, 2008, there were no options written or outstanding.
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o. | Stripped Securities |
The Funds expect that interest-only STRIPS will be purchased for their hedging characteristics. Stripped Securities (“STRIPS”) are usually structured with two classes that receive different proportions of the interest and principal distributions from a pool of underlying assets. A common type of STRIP will have one class receiving all of the interest from the underlying assets (“interest-only” or “IO” class), while the other class will receive all of the principal (“principal only” or “PO” class). However, in some instances, one class will receive some of the interest and most of the principal while the other class will receive most of the interest and the remainder of the principal. STRIPS are unusually volatile in response to changes in interest rates. The yield to maturity on an IO class of STRIPS is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurably adverse effect on a Fund’s yield to maturity to the extent it invests in IOs. Conversely, POs tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. Thus, if the underlying assets experience greater than anticipated prepayments of principal, a Fund may fail to fully recover its initial investment in these securities, even if the STRIPS were rated of the highest credit quality by Standard & Poor’s Corporation or Moody’s. These risks will be managed by investing in a variety of such securities and by using certain hedging techniques. In addition the secondary market for STRIPS may be less liquid that that of other mortgage-backed or asset-backed securities, potentially limiting a Fund’s ability to buy of sell those securities at any particular time.
p. | Commitments and Contingencies |
In the normal course of business, the Funds may enter into contracts and agreements that contain a variety of representations and warranties which provide general indemnifications. The maximum exposure to the Funds under these agreements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risks of loss to be remote.
q. | Foreign Currency Translation |
The books and records of the Funds are maintained in U.S. dollars. The value of investments, assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon current foreign exchange rates. Purchases and sales of foreign investments, income, and expenses are converted into U.S. dollars based on currency exchange rates prevailing on the respective dates of such transactions. Net realized and unrealized gain (loss) on foreign currency transactions represent: (1) foreign exchange gains and losses from the sale and holdings of foreign currencies; (2) gains and losses between trade date and settlement date on investment securities transactions and forward foreign currency exchange contracts; and (3) gains and losses from the difference between amounts of interest and dividends recorded and the amounts actually received.
In addition, the Funds do not isolate the net realized and unrealized gain or loss resulting from changes in exchange rates from the fluctuations resulting from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
2. | Agreements and Transactions with Affiliates |
The Trust has entered into an Investment Management Agreement under which the Investment Manager, an independently managed subsidiary of Affiliated Managers Group, Inc. (“AMG”), provides or oversees investment management services to the Funds. The Investment Manager selects subadvisors for each Fund (subject to Trustee approval), allocates assets among subadvisors and monitors the subadvisors’ investment programs and results. Each Fund’s investment portfolio is managed by a portfolio manager who serves pursuant to Subadvisory Agreements with the Investment Manager.
Investment management fees are paid directly by each Fund to the Investment Manager based on average daily net assets. The annual investment management fee rates, as a percentage of average daily net assets for the year ended December 31, 2008, were as follows:
Investment | |||
Management Fee | |||
Mid-Cap | 0.70 | % | |
Balanced | 0.70 | % | |
High Yield | 0.70 | % | |
Fixed Income | 0.45 | % | |
Short Duration | 0.70 | % | |
Intermediate Duration | 0.70 | % |
The Investment Manager has contractually agreed, through at least May 1, 2009 to waive fees and pay or reimburse expenses to the extent that the total operating expenses (exclusive of brokerage costs, interest, taxes, acquired fund fees and extraordinary expenses) exceed the following percentages of the following Fund’s average daily net assets.
Mid-Cap | Balanced | |||||
1.24% | Class A | 1.25% | Class A | |||
1.99% | Class B | 2.00% | Class B | |||
1.99% | Class C | 2.00% | Class C | |||
0.99% | Inst. Class | 1.00% | Inst. Class | |||
High Yield | Fixed Income | |||||
1.15% | Class A | 0.84% | Class A | |||
1.90% | Class B | 1.59% | Class B | |||
1.90% | Class C | 1.59% | Class C | |||
0.90% | Inst. Class | 0.59% | Inst. Class | |||
Intermediate Duration | ||||||
0.89% |
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Notes to Financial Statements (continued)
Each Fund may be 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 expenses in any such year to exceed the above percentages, based on the Fund’s average daily net assets. For the year ended December 31, 2008, the Funds made no such repayments to the Investment Manager.
For the year ended December 31, 2008, the cumulative amount of expense reimbursement by the Investment Manager subject to the repayment by Mid-Cap, Balanced, High Yield, Fixed Income, and Intermediate Duration equaled $318,462, $337,110, $545,337, $756,014, and $107,402, respectively. Total returns and net investment income for the Funds would have been lower had certain expenses not been offset. Total expenses exclude the impact of expense reimbursements and expense offsets such as brokerage recapture credits but include non-reimbursable expenses such as interest and taxes, if any.
Mid-Cap, Balanced, High Yield, and Fixed Income have entered into an Administration and Shareholder Servicing Agreement under which Managers Investment Group LLC serves as each Fund’s administrator (the “Administrator”) and is responsible for all aspects of managing the Funds’ operations, including administration and shareholder services to each Fund, its shareholders, and certain institutions, such as bank trust departments, broker-dealers and registered investment advisers, that advise or act as an intermediary with the Funds’ shareholders. During the year ended December 31, 2008, each of these Funds paid an Administration fee at the rate of 0.20% per annum of the Fund’s average daily net assets.
Prior to July 1, 2007, the aggregate annual retainer paid to each Independent Trustee was $55,000, plus $4,000 or $2,000 for each regular or special meeting attended, respectively. Effective July 1, 2007, the aggregate annual retainer paid to each Independent Trustee is $65,000, plus $4,000 or $2,500 for each regular or special meeting attended, respectively. The Trustees’ fees and expenses are allocated amongst 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 Independent Chairman of the Trusts receives an additional payment of $15,000 per year. (Prior to July 1, 2007, the Independent Chairman received an additional payment of $10,000 per year). The Chairman of the Audit Committee receives an additional payment of $5,000 per year. (Prior to July 1, 2007, the Chairman of the Audit Committee received an additional payment of $2,000 per year). The “Trustees fees and expenses” shown in the financial statements represents the Funds’ allocated portion of the total fees and expenses paid by the Managers Funds.
The Funds are distributed by Managers Distributors, Inc. (the “Distributor” or “MDI”), a wholly-owned subsidiary of the Investment Manager. The MDI serves as the principal underwriter for each Fund in the Trust. MDI is a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Shares of each Fund will be continuously offered and will be sold by brokers, dealers or other financial intermediaries who have executed selling agreements with the Distributor. MDI bears all the expenses of providing services pursuant to the Underwriting 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 Funds are Officers and/or Directors of the Investment Manager, AMG and/or the Distributor.
Mid-Cap, Balanced, High Yield, and Fixed Income have adopted distribution and service plans with respect to the Class A, Class B and Class C shares of each Fund (the “Plans”), in accordance with the requirements of Rule 12b-1 under the 1940 Act and the requirements of the applicable rules of the FINRA regarding asset-based sales charges. Pursuant to the Plans, each Fund may compensate MDI for its expenditures in financing any activity primarily intended to result in the sale of each such class of Fund shares and for maintenance and personal service provided to existing shareholders of that class. The Plans authorize payments to MDI up to 0.25%, 1.00% and 1.00% annually of each Fund’s average daily net assets attributable to its Class A, Class B and Class C shares, respectively.
The Plans further provide for periodic payments by MDI to brokers, dealers and other financial intermediaries for providing shareholder services and for promotional and other sales related costs. The portion of payments by Class A, Class B or Class C shares of a Fund for shareholder servicing may not exceed an annual rate of 0.25% of the average daily net asset value of Fund shares of that class owned by clients of such broker, dealer or financial intermediary.
The following summarizes the total fees incurred under the plans for Class A, Class B and Class C shares for the year ended December 31, 2008:
Amount | |||
Mid-Cap | $ | 119,557 | |
Balanced | 86,209 | ||
High Yield | 155,027 | ||
Fixed Income | 569,539 |
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Notes to Financial Statements (continued)
3. | Purchases and Sales of Securities |
Purchases and sales of securities, excluding short-term securities, for the year ended December 31, 2008, were as follows:
Long-Term Securities | U.S. Government Securities | |||||||||||
Fund | Purchases | Sales | Purchases | Sales | ||||||||
Mid-Cap | $ | 56,512,898 | $ | 72,894,347 | n/a | n/a | ||||||
Balanced | 14,235,623 | 8,757,527 | $ | 9,589,375 | $ | 9,678,049 | ||||||
High Yield | 13,470,171 | 16,056,522 | n/a | n/a | ||||||||
Fixed Income | 41,932,089 | 7,575,634 | 3,918,018 | 9,554,468 | ||||||||
Short Duration | 4,906,843 | 9,987,103 | 799,207,127 | 776,033,078 | ||||||||
Intermediate Duration | 136,309 | 3,173,825 | 1,060,435,805 | 1,038,902,965 |
4. | Portfolio Securities Loaned |
The Funds may participate in a securities lending program offered by BNYM, providing for the lending of securities to qualified brokers. Securities lending fees 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 Funds’ 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 Funds 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. The Funds bear 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 Institutional Cash Reserves Fund (the “ICRF”), or other short-term investments as defined in the Securities Lending Agreement with BNYM.
In September and October of 2008, BNYM advised the Investment Manager that the ICRF had exposure to certain defaulted debt obligations, and that BNYM had established separate sleeves of the ICRF to hold these securities. The net impact of these positions is not material to each Fund. Each Fund’s position in the separate sleeves of the ICRF is included in the Schedule of Investments and the unrealized loss on such investment is included in Net Unrealized Depreciation on the Statement of Assets and Liabilities and Statement of Operations.
5. | Risks Associated with Collateralized Mortgage Obligations (“CMOs”) |
The net asset value of the Funds may be sensitive to interest rate fluctuations because the Funds may hold several instruments, including CMOs and other derivatives, whose values can be significantly impacted by interest rate movements. CMOs are obligations collateralized by a portfolio of mortgages or mortgage-related securities. Payments of principal and interest on the mortgages are passed through to the holder of the CMOs on the same schedule as they are received, although certain classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, the investment in CMOs may be subject to a greater or lesser risk of prepayment than other types of mortgage-related securities. CMOs may have a fixed or variable rate of interest.
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Notes to Financial Statements (continued)
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. | New Accounting Pronouncement |
In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivatives are accounted for, and how derivative instruments affect a fund’s results of operations and financial position. Management is currently evaluating the impact of SFAS 161 on the Funds’ financial statement disclosures, if any.
Tax Information (unaudited)
Each Fund hereby designates the maximum amount allowable of its net taxable income as qualified dividends as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003. The 2008 Form 1099-DIV you receive for each Fund will show the tax status of all distributions paid to you during the year.
Pursuant to section 852 of the Internal Revenue Code, Mid-Cap, Balanced, High Yield, Fixed Income, Short Duration, and Intermediate Duration hereby designate as a capital gain distribution with respect to the taxable year ended December 31, 2008, $29,970, $0, $0, $0, $0 and $626,924, respectively or, if subsequently determined to be different, the net capital gains of such year.
The Balanced Fund previously reported estimated sources of dividends, short-term capital gains and long-term capital gains distributions paid on a per share basis. Pursuant to Rule 19a-1(e) of the Investment Company Act of 1940, the following serves as a correction of such estimates. 5.77% of distributions to shareholders declared from net investment income during the Fund’s year were reclassified to return of capital and are reflected as such in the Balanced Fund’s Statement of Changes in Net Assets and Financial Highlights.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Managers Trust II and the Shareholders of Managers AMG Chicago Equity Partners Mid-Cap Fund, Managers AMG Chicago Equity Partners Balanced Fund, Managers High Yield Fund, Managers Fixed Income Fund, Managers Intermediate Duration Government Fund and Managers Short Duration Government Fund:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of portfolio investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Managers AMG Chicago Equity Partners Mid-Cap Fund, Managers AMG Chicago Equity Partners Balanced Fund, Managers High Yield Fund, Managers Fixed Income Fund, Managers Intermediate Duration Government Fund and Managers Short Duration Government Fund (six of the series constituting Managers Trust II, hereafter referred to as the “Funds”) at December 31, 2008, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 27, 2009
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The Trustees and Officers of the Trust, their business addresses, principal occupations for the past five years and dates of birth are listed below. The Trustees provide broad supervision over the affairs of the Trust and the Funds. The Trustees are experienced executives who meet periodically throughout the year to oversee the Funds’ activities, review contractual arrangements with companies that provide services to the Funds, and review the Funds’ performance. Unless otherwise noted, the address of each Trustee or Officer is the address of the Trust: 800 Connecticut Avenue, Norwalk, Connecticut 06854.
There is no stated term of office for Trustees. Trustees serve until their resignation, retirement or removal in accordance with the Trust’s organizational documents and policies adopted by the Board from time to time. The Chairman of the Trustees, President, Treasurer and Secretary of the Trust are elected by the Trustees annually. Other officers hold office at the pleasure of the Trustees.
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Name, Date of Birth, Number of | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
Jack W. Aber, 9/9/37 • Trustee since 2000 • Oversees 32 Funds in Fund Complex | Professor of Finance, Boston University School of Management (1972-Present); Trustee of Appleton Growth Fund (1 portfolio); Trustee of Third Avenue Trust (4 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
William E. Chapman, II, 9/23/41 • Independent Chairman • Trustee since 2000 • Oversees 32 Funds in Fund Complex | President and Owner, Longboat Retirement Planning Solutions (1998-Present); Hewitt Associates, LLC (part time) (provider of Retirement and Investment Education Seminars); Trustee of Bowdoin College (2002-Present); Director of Harding, Loevner Funds, Inc. (6 portfolios); Trustee of Third Avenue Trust (4 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
Edward J. Kaier, 9/23/45 • Trustee since 2000 • Oversees 32 Funds in Fund Complex | Attorney at Law and Partner, Teeters Harvey Gilboy & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (4 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
Steven J. Paggioli, 4/3/50 • Trustee since 2000 • Oversees 32 Funds in Fund Complex | Consultant (2001-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986- 2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (22 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008 – Present). | |
Eric Rakowski, 6/5/58 • Trustee since 2000 • Oversees 32 Funds in Fund Complex | Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (6 portfolios); Trustee of Third Avenue Trust (4 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
Thomas R. Schneeweis, 5/10/47 • Trustee since 2000 • Oversees 32 Funds in Fund Complex | Professor of Finance, University of Massachusetts (1977-Present); Director, CISDM at the University of Massachusetts, (1996-Present); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-Present); Partner, White Bear Partners, LLC (2007-Present); Partner, Schneeweis Capital Management, LLC (2007-Present); Partner, Schneeweis Associates, LLC (2007-Present); Partner, Northampton Capital Management, LLC (2004-Present); Partner, TRS Associates (2007-Present). |
* | The Fund Complex consists of Managers AMG Funds, The Managers Funds, Managers Trust I and Managers Trust II. |
Interested Trustees
The following Trustees are “interested persons” of the Trust within the meaning of the 1940 Act. Mr. Dalton is an interested person by virtue of his positions with, and interest in securities of, Affiliated Managers Group, Inc. Mr. Streur is an interested person by virtue of his positions with Managers Investment Group LLC.
Name, Date of Birth, Number of | Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
Nathaniel Dalton, 9/29/66 • Trustee since 2008 • Oversees 32 Funds in Fund Complex | Executive Vice President and Chief Operating Officer, Affiliated Managers Group, Inc., (2006-Present); Executive Vice President, Affiliated Managers Group, Inc., (2002 -2006); Executive Vice President and General Counsel, Affiliated Managers Group, Inc. (2001-2002); Senior Vice President and General Counsel, Affiliated Managers Group, Inc. (1996-2001). Director, Managers Distributors, Inc. (2000-Present). | |
John H. Streur, 2/6/60 • Trustee since 2008 • President since 2008 • Oversees 32 Funds in Fund Complex | Senior Managing Partner, Managers Investment Group LLC (2006-Present); President, Managers Distributors, Inc. (2006-Present); Managing Partner, Managers Investment Group LLC (2005-2006); Chief Executive Officer, President and Chief Operating Officer, The Burridge Group LLC (1996-2004). | |
Officers | ||
Name, Date of Birth, Position(s) | Principal Occupation(s) During Past 5 Years | |
Christine C. Carsman, 4/2/52 • Secretary since 2004 | Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-Present); Secretary, The Managers Funds, Managers AMG Funds and Managers Trust II (2004-Present); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004); Deputy General Counsel, The Boston Company, Inc. (1993-1995); Associate General Counsel, The Boston Company Advisors, Inc. (1991-1993); Associate, Sullivan & Worcester LLP (1987-1991). | |
Donald S. Rumery, 5/29/58 • Chief Financial Officer since 2007 • Treasurer since 2000 | Senior Vice President, Managers Investment Group LLC (2005-Present); Director, Finance and Planning, The Managers Funds LLC, (1994-2004); Treasurer and Chief Financial Officer, Managers Distributors, Inc. (2000-Present); Treasurer, The Managers Funds (1995-Present); Treasurer, Managers AMG Funds (1999-Present); Treasurer, Managers Trust I (2000-Present); Secretary, Managers Trust I and Managers Trust II (2000-2004) and Secretary, The Managers Funds (1997-2004); Chief Financial Officer, The Managers Funds, Managers AMG Funds and Managers Trust I (2007-Present). | |
Keitha L. Kinne, 5/16/58 • Chief Operating Officer since 2007 | Managing Partner and Chief Operating Officer, Managers Investment Group LLC (2007-Present); Chief Investment Officer, Managers Investment Group LLC (2008-Present); Chief Operating Officer, The Managers Funds, Managers AMG Funds and Managers Trust I (2007-Present); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004- 2006); Senior Vice President, Prudential Investments (1999-2004). | |
David Kurzweil, 6/22/74 • Assistant Secretary since 2008 | Senior Vice President and Associate Counsel, Managers Investment Group LLC (2008-Present); Assistant Secretary, The Managers Funds, Managers Trust I, Managers Trust II, and Managers AMG Funds (2008-Present); Counsel and Senior Vice President, Lazard Asset Management LLC (2003-2008). |
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Investment Manager and Administrator
Managers Investment Group LLC
800 Connecticut Avenue
Norwalk, Connecticut 06854
(203) 299-3500 or (800) 835-3879
Distributor
Managers Distributors, Inc.
800 Connecticut Avenue
Norwalk, Connecticut 06854
(203) 299-3500 or (800) 835-3879
Custodian
The Bank of New York Mellon
2 Hanson Place
Brooklyn, New York 11217
Legal Counsel
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110-2624
Transfer Agent
PNC Global Investment Servicing (U.S.) Inc.
Attn: Managers
P.O. Box 9769
Providence, Rhode Island 02940
(800) 548-4539
For Managers Choice Only
Managers
c/o PNC Global Investment Servicing (U.S.) Inc.
P.O. Box 61204
King of Prussia, Pennsylvania 19406-0851
(800) 358-7668
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MANAGERSAND MANAGERS AMG FUNDS
EQUITY FUNDS |
EMERGING MARKETS EQUITY |
Rexiter Capital Management Limited |
ESSEX GROWTH |
ESSEX LARGE CAP GROWTH |
ESSEX SMALL/MICRO CAP GROWTH |
Essex Investment Management Co., LLC |
FQ TAX-MANAGED U.S. EQUITY |
FQ U.S. EQUITY |
First Quadrant, L.P. |
GW&K MULTI-CAP EQUITY |
Gannet Welsh & Kotler, LLC |
INSTITUTIONAL MICRO-CAP |
MICRO-CAP |
Lord, Abbett & Co. LLC |
WEDGE Capital Management L.L.P. |
OFI Institutional Asset Management, Inc. |
Next Century Growth Investors LLC |
INTERNATIONAL EQUITY |
AllianceBernstein L.P. |
Lazard Asset Management, LLC |
Wellington Management Company, LLP |
CHICAGO EQUITY PARTNERS |
MID-CAP |
Chicago Equity Partners, LLC |
REAL ESTATE SECURITIES |
Urdang Securities Management, Inc. |
SKYLINE SPECIAL EQUITIES |
PORTFOLIO |
Skyline Asset Management, L.P. |
SMALL CAP |
TIMESSQUARE MID CAP GROWTH |
TIMESSQUARE SMALL CAP GROWTH |
TimesSquare Capital Management, LLC |
SPECIAL EQUITY |
Ranger Investment Management, L.P. |
Lord, Abbett & Co. LLC |
Skyline Asset Management, L.P. |
Smith Asset Management Group, L.P. |
Federated MDTA LLC |
Westport Asset Management, Inc. |
SYSTEMATIC VALUE |
SYSTEMATIC MID CAP VALUE |
Systematic Financial Management, L.P. |
BALANCED FUNDS |
CHICAGO EQUITY PARTNERS BALANCED |
Chicago Equity Partners, LLC |
GLOBAL |
AllianceBernstein L.P. |
First Quadrant, L.P. |
Wellington Management Company, LLP |
ALTERNATIVE FUNDS |
FQ GLOBAL ALTERNATIVES |
First Quadrant, L.P. |
INCOME FUNDS |
BOND (MANAGERS) |
FIXED INCOME |
GLOBAL BOND |
Loomis, Sayles & Co., L.P. |
BOND (MANAGERS FREMONT) |
Pacific Investment Management Co. LLC |
CALIFORNIA INTERMEDIATE TAX-FREE |
Miller Tabak Asset Management LLC |
GW&K MUNICIPAL ENHANCED YIELD |
Gannet Welsh & Kotler, LLC |
HIGH YIELD |
J.P. Morgan Investment Management LLC |
INTERMEDIATE DURATION GOVERNMENT |
SHORT DURATION GOVERNMENT |
Smith Breeden Associates, Inc. |
MONEY MARKET |
JPMorgan Investment Advisors 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 December 31, 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.
www.managersinvest.com
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Item 2. | CODE OF ETHICS |
Registrant has adopted a Code of Ethics. See attached Exhibit (a)(1).
Item 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
Registrant’s Board of Trustees has determined that independent Trustees Mr. Jack W. Aber and Mr. Steven J. Paggioli each qualify as the Audit Committee Financial Expert. Mr. Aber and Mr. Paggioli are “independent” as such term is defined in Form N-CSR.
Item 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The aggregate fees billed by PwC to the Fund for the Funds’ two most recent fiscal years for professional services rendered for audits of annual financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements (“Audit Fees”) were as follows:
Fiscal 2008 | Fiscal 2007 | |||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | $ | 21,594 | $ | 19,161 | ||
Managers AMG Chicago Equity Partners Balanced Fund | $ | 20,551 | $ | 21,101 | ||
Managers High Yield Fund | $ | 21,704 | $ | 22,286 | ||
Managers Fixed Income Fund | $ | 26,789 | $ | 23,471 | ||
Managers Short Duration Government Fund | $ | 22,897 | $ | 20,804 | ||
Managers Intermediate Duration Government Fund | $ | 22,897 | $ | 20,804 | ||
All Funds in the Managers Complex Audited by PwC | $ | 769,183 | $ | 758,032 |
Audit-Related Fees
There were no fees billed by PwC to the Funds in its two recent fiscal years for services rendered for assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements, but are not reported as Audit Fees (“Audit-Related Fees”).
For the Funds’ two most recent fiscal years, there were no Audit-Related Fees billed by PwC for engagements related directly to the operations and financial reporting of one or more Funds by a Fund Service Provider. A Fund Service Provider is (a) any investment adviser to the Fund (not including any Subadvisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) or (b) any entity that provides ongoing services to the Fund and is controlling, controlled by or under common control with a Fund investment adviser described in (a).
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Tax Fees
The aggregate fees billed by PwC to the Funds for the two most recent fiscal years for professional services rendered for tax compliance, tax advice, and tax planning (“Tax Fees”) were as follows:
Fiscal 2008 | Fiscal 2007 | |||||
Managers AMG Chicago Equity Partners Mid-Cap Fund | $ | 5,556 | $ | 6,000 | ||
Managers AMG Chicago Equity Partners Balanced Fund | $ | 5,656 | $ | 6,200 | ||
Managers High Yield Fund | $ | 6,327 | $ | 6,600 | ||
Managers Fixed Income Fund | $ | 6,135 | $ | 6,400 | ||
Managers Intermediate Duration Government Fund | $ | 8,939 | $ | 9,100 | ||
Managers Intermediate Duration Government Fund | $ | 8,939 | $ | 9,100 |
For the Funds’ two most recent fiscal years, Tax Fees billed by PwC for engagements by Fund Service Providers that related directly to the operations and financial reporting of the Funds were $0 for fiscal 2008 and $0 for fiscal 2007, respectively.
The services for which Tax Fees were charged comprise all services performed by professional staff in PwC’s tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
All Other Fees
There were no other fees billed by PwC to the Funds for all other non-audit services (“Other Fees”) during the Funds’ two most recent fiscal years. During the same period, there were no Other Fees billed by PwC for engagements by Fund Service Providers that related directly to the operations and financial reporting of the Funds.
According to policies adopted by the Audit Committee, services provided by PwC to the Funds must be pre-approved by the Audit Committee. On an annual basis, the Audit Committee reviews and pre-approves various types of services that PwC may perform for the Funds without specific approval of each engagement, subject to specified budget limitations. As contemplated by the Sarbanes-Oxley Act of 2002 and related SEC rules, the Audit Committee also pre-approves non-audit services provided by PwC to any Fund Service Provider for any engagement that relates directly to the operations and financial reporting of the Funds. Any engagement that is not already pre-approved or that will exceed a pre-approved budget must be submitted to the Audit Committee for pre-approval. The Chairman of the Audit Committee is authorized on behalf of the Board of Trustees and the Audit Committee to approve the engagement of PwC to perform non-audit services subject to certain conditions, including notification to the Audit Committee of such pre- approval not later than the next meeting of the Audit Committee following the date of such pre-approval.
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There were no other fees billed by PwC for non-audit services rendered to the Funds and to Fund Service Providers for the Funds’ two most recent fiscal years.
The Audit Committee has considered whether the provision of non-audit services by PwC to Fund Service Providers that were not required to be pre-approved by the Audit Committee is compatible with maintaining PwC’s independence in its audit of the Funds, taking into account representations from PwC, in accordance with Independence Standards Board Standard No. 1, regarding its independence from the Funds and its related entities.
The following table sets forth the non-audit services provided by PwC to the Funds and its service affiliates defined as the Funds’ investment advisor and any entity controlling, controlled by or under common control with Managers Investment Group LLC that provides ongoing services to the Funds (“Control Affiliates”) for the last two fiscal years.
Audit-related fees A | Tax fees A | All other fees A | ||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||
Control Affiliates | $ | 467,485 | $ | 357,120 | $ | 1,264,360 | $ | 839,245 | $ | 0 | $ | 0 |
A | Aggregate amounts may reflect rounding. |
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 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 fourth fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to affect, the internal control over financial reporting.
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Item 12. | EXHIBITS |
(a) (1) | Any Code of Ethics or amendments hereto. Filed herewith. | |
(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. |
Table of Contents
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.
MANAGERS TRUST II | ||
By: | /s/ John H. Streur | |
John H. Streur, President | ||
Date: | February 27, 2009 |
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/ John H. Streur | |
John H. Streur, President | ||
Date: | February 27, 2009 | |
By: | /s/ Donald S. Rumery | |
Donald S. Rumery, Chief Financial Officer | ||
Date: | February 27, 2009 |