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)
40 Richards Avenue, Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip code)
The Managers Funds LLC
40 Richards Avenue, Norwalk, Connecticut 06854
(Name and address of agent for service)
Registrant's telephone number, including area code: (203) 857-5321
Date of fiscal year end: MARCH 31
Date of reporting period: APRIL 1, 2003 - SEPTEMBER 30, 2003
(Semi-Annual Shareholder Report)
Item 1. REPORT TO SHAREHOLDERS
===================================================================
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)
40 Richards Avenue, Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip code)
The Managers Funds LLC
40 Richards Avenue, Norwalk, Connecticut 06854
(Name and address of agent for service)
Registrant's telephone number, including area code: (203) 857-5321
Date of fiscal year end: MARCH 31
Date of reporting period: APRIL 1, 2003 - SEPTEMBER 30, 2003
(Semi-Annual Shareholder Report)
Item 1. REPORT TO SHAREHOLDERS
===================================================================
MANAGERS
- --------
Semi-Annual Report
[Managers Logo Omitted]
The Managers Funds
Short Duration Government Fund
Intermediate Duration Government Fund
Total Return Bond Fund
Dated September 30, 2003
Access to Excellence
<Page>
TABLE OF CONTENTS
<Table>
Begins
on Page
-------
Letter to Shareholders 1
Managers Performance 2
Complete performance table for all The Managers Funds
as of September 30, 2003
Schedule of Portfolio Investments 3
Detailed portfolio listings by security type and
industry sector, as valued at September 30, 2003
Financial Statements
Statement of Assets & Liabilities 12
Fund balance sheets, Net Asset Value (NAV) per share
computations and related components
Statement of Operations 13
Detail of sources of income, Fund expenses, and
realized gains (losses) during the fiscal period
Statement of Changes in Net Assets 14
Detail of changes in Fund assets for the past two
fiscal periods
Financial Highlights 16
Historical net asset values per share, distributions,
total returns, expense ratios, turnover ratios and
total net assets for the Funds
Notes to Financial Statements 19
Accounting and distribution policies, details of
agreements and transactions with Fund management and
description of certain investment risks
</Table>
Founded in 1983, The Managers Funds offers individual and institutional
investors the experience and descipline of some of the world's most
highly regarded investment professionals.
<Page>
Letter to Shareholders
- -------------------------------------------------------------------------
Dear Fellow Shareholders:
Investors' outlook for the financial markets has changed radically
since our last report. Earlier this year the stock market was bottoming
under the weight of the military confrontation with Iraq and the sluggishness
of the US economy. Since then, the stock market has vaulted by more than 25%.
Initially this was catalyzed by the seemingly swift success of our military
in toppling the government in Iraq. The rally continued throughout the
summer as evidence began to suggest that the economy was strengthening. This
had broad ramifications in the debt markets as well. Signs that the economy
was improving albeit sluggishly had the dual effect of pushing yields down
and improving investors' outlook for corporate credits. As evidence mounted
that the economy was picking up momentum, interest rates reversed in July,
sending the bond market to one of its worst monthly performances in a decade.
This was particularly harmful to the prices of mortgage securities as the
sharp back-up in rates caused expected paydowns to slow and implied durations
to extend. Debt prices rebounded somewhat in August and September as interest
rates drifted lower again.
Within this environment, the Funds detailed within this report provided
modest returns. Managers Short Duration Government Fund returned 1.00% for the
six months ended September 30, 2003, while its primary benchmark, the six-month
U.S. Treasury bill, returned 0.64%. The portfolio manager's decision to remain
conservative in terms of spread risk was beneficial throughout the period,
particularly in July. Managers Intermediate Duration Government Fund returned
1.71% for the period, slightly outperforming its primary benchmark, the
Citigroup Mortgage Index, which returned 1.29%. Again, low exposure to spread
risk with particular emphasis on mortgage securities with less sensitivity to
changes in prepayment rates helped the Fund. Managers Total Return Bond Fund,
a diversified investment grade portfolio, returned 2.09% for the six-month
period, which was slightly behind its benchmark (Lehman Brothers Aggregate
Index), which returned 2.69%. The portfolio manager's emphasis on high credit
quality securities hindered the Fund relative to its benchmark as medium and
lower credit quality instruments performed well with the improving economy.
Given the low level of current interest rates, prospects for the returns of
these Funds in the near future remain modest.
The following report contains a listing of the period-end portfolio of
each Fund, along with detailed financial reports. As always, we post any
news or other pertinent information about the Funds as soon as applicable on
our website at www.managersfunds.com. Should you have any questions about
this report, please feel free to contact us at 1-800-835-3879, or visit the
website. We thank you for your investment in The Managers Funds.
/s/ Peter M. Lebovitz /s/ Thomas G. Hoffman
- --------------------- ----------------------
Peter M. Lebovitz Thomas G. Hoffman, CFA
President Director of Research
The Managers Funds The Managers Funds
1
</Page>
- ---------------------------------------------------------------------------
The Managers Funds Performance (unaudited)
All periods ended September 30, 2003
- ---------------------------------------------------------------------------
<Table>
Average Annual Total Returns (1)
------------------------------------------------------------------
The Managers Funds Nine 1 3 5 10 Since Inception
Equity Funds Months Year Years Years Years Inception Date
============ ------ ---- ----- ----- ----- --------- ----
Value 13.19% 21.88% (2.17)% 3.04% 8.80% 11.28% Oct.'84
Capital Appreciation 14.49% 22.11% (25.49)% 2.46% 8.94% 12.18% Jun.'84
Small Company (2) 25.78% 34.62% (7.31)% - - (6.40)% Jun.'00
Special Equity 23.86% 32.70% (7.77)% 9.83% 10.87% 13.36% Jun.'84
International Equity 16.81% 22.58% (9.00)% (0.53)% 4.84% 9.14% Dec.'85
Emerging Markets
Equity (2) 29.09% 42.36% (2.41)% 13.68% - 4.39% Feb.'98
- -------------------------------------------------------------------------------------------
First Quadrant
Tax-Managed Equity (2,3)
Before Taxes 17.05% 20.88% - - - (3.69)% Dec.'00
After Taxes on
Distributions 16.86% 20.30% - - - (3.86)%
After Taxes on
Distributions and
Sale of Fund Shares 11.08% 13.51% - - - (3.22)%
- -------------------------------------------------------------------------------------------
Income Funds
============
Money Market (2) 0.53% 0.83% 2.44% 3.59% 4.19% 5.29% Jun.'84
Bond (2) 8.37% 11.55% 10.30% 8.77% 8.16% 10.23% Jun.'84
Global Bond (2) 14.04% 21.66% 10.99% 4.13% - 5.63% Mar.'94
Intermediate Duration
Government (2) 2.67% 4.04% 7.76% 6.28% 6.44% 7.48% Mar.'92
Short Duration
Government (2) 1.84% 2.78% 5.02% 4.68% 5.12% 5.17% Mar.'92
Total Return Bond (2) 3.52% - - - - 3.52% Dec.'02
===========================================================================================
</Table>
See the Notes to the Performance Table on the following page.
Past performance is not a guarantee of future results. The investment and
principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
An investment in Managers Money Market Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government
agency. Although the Money Market Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the Fund. Additional risks are associated with investing in
international and emerging markets, and such securities may be considered
speculative. There are also risks associated with investing in small-cap
companies, such as increased volatility. For more information regarding
The Managers Funds and Managers AMG Funds, including fees, expenses and
risks, please call (800) 835-3879 or visit our website at
www.managersfunds.com for a Prospectus. Please read the Prospectus
carefully before you invest or send money. The prospectus is not an offer
to sell shares in the Funds. Distributed by Managers Distributors, Inc.,
member NASD.
(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. Year to date total returns are based on calendar year.
(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) After-tax returns are calculated by Lipper using the historical highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor's
tax situation and may differ from those shown, and after-tax returns are
not relevant to investors who hold their Fund shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts.
2
<Page>
- -------------------------------------------------------------------------
Managers Short Duration Government Fund
Schedule of Portfolio Investments (unaudited)
September 30, 2003
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
---------- ----------
U.S.Government and Agency Obligations - 96.0% (1)
Federal Home Loan Mortgage Corporation - 27.9%
FHLMC Gold, 5.000%, 05/01/18 to 11/15/18 $ 7,920,687 $ 8,090,198
FHLMC,5.000%, 05/01/18 to 10/20/18 17,952,332 18,385,676
FHLMC,5.500%, 11/01/17 to 12/01/17 3,142,712 3,252,707
FHLMC Gold, 6.000%, 09/01/17 3,134,398 3,263,189
FHLMC IO Strip, 6.000%, 05/15/18 to 09/15/27 148,157 1,294
FHLMC, 6.500%, 09/01/32 517,302 540,169
FHLMC Gold, 6.500%, 10/01/03 450,000 469,828
FHLMC, 6.691%, 04/25/28 337,798 353,796
FHLMC, 7.500%, 04/01/15 to 08/25/42 (2) 9,721,622 10,465,329
FHLMC Gold, 7.500%, 04/01/15 to 04/01/29 1,008,319 1,074,962
FHLMC Gold, 8.500%, 05/01/25 to 12/01/25 187,327 203,635
-----------
Total Federal Home Loan Mortgage Corporation 46,100,783
-----------
Federal Home Association/Veteran's Association - 1.0%
FHA/VA, 5.625%, 12/20/26 (2) 636,670 662,879
FHA/VA, 5.750%,08/20/23 (2) 326,527 333,327
FHA/VA, 6.625%,10/20/17 to 12/20/25 (2) 556,226 578,421
Total Federal Home Association/Veteran's -----------
Association 1,574,627
-----------
Federal National Mortgage Association - 62.5%
FNMA Grantor Trust, 1.230%, 05/25/32 (2) 7,461,223 7,472,548
FNMA Grantor Trust, 1.250%, 03/25/33 (2) 9,010,764 9,012,508
FNMA, 1.510%, 05/25/42 (2) 9,891,634 9,915,368
FNMA, 4.500%, 10/20/18 to 11/15/18 15,500,000 15,598,447
FNMA, 5.000%, 07/01/18 1,957,076 2,005,744
FNMA, 5.250%, 04/15/07 60,000 65,560
FNMA, 5.500%, 10/20/18 7,500,000 7,757,813
FNMA, 5.700%, 07/01/09 736,158 799,749
FNMA, 5.900%, 12/01/08 947,163 1,038,022
FNMA, 5.920%, 01/01/09 471,366 517,795
FNMA IO Strip, 6.000%, 06/25/21 47,546 237
FNMA, 6.000%, 03/01/17 to 08/01/17 2,690,618 2,808,619
FNMA, 6.010%, 12/01/08 4,604,561 5,073,785
FNMA, 6.040%, 10/01/08 1,252,181 1,381,900
FNMA, 6.170%, 04/01/08 1,867,566 2,067,082
FNMA, 6.205%, 04/01/05 466,919 486,195
FNMA, 6.230%, 07/01/08 to 09/01/08 3,022,834 3,356,330
FNMA, 6.265%, 06/01/08 93,800 104,258
FNMA, 6.275%, 02/01/06 1,360,830 1,456,544
FNMA, 6.305%, 02/01/08 23,305 25,515
FNMA, 6.310%, 07/01/08 295,976 329,640
FNMA, 6.419%, 06/01/08 454,160 507,459
FNMA, 6.500%, 01/01/08 to 04/01/17 3,527,978 3,740,559
FNMA, 6.510%, 01/01/08 154,504 172,300
FNMA, 6.590%, 12/01/07 348,717 389,436
</Table>
The accompanying notes are an integral part of these financial
statements.
3
<Page>
- -------------------------------------------------------------------------
Managers Short Duration Government Fund
Schedule of Portfolio Investments (continued)
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- ------------
Federal National Mortgage
Association (continued)
FNMA, 6.620%, 11/01/07 to 01/01/08 $ 1,936,003 $ 2,162,397
FNMA, 6.725%, 10/01/07 186,618 208,820
FNMA, 6.740%, 06/01/09 956,293 1,054,883
FNMA, 6.750%, 08/01/07 1,864,376 2,082,644
FNMA, 6.825%, 09/01/07 2,470,601 2,769,299
FNMA, 7.035%, 06/01/06 548,057 599,773
FNMA, 7.105%, 08/01/05 2,962,325 3,152,228
FNMA, 7.500%, 10/01/15 to 01/25/48 13,662,716 14,981,435
FNMA IO Strip, 8.000%, 08/25/02 413,582 77,463
FNMA IO Strip, 9.000%, 12/15/16 207,712 42,457
-----------
Total Federal National Mortgage Association 103,214,812
-----------
Government National Mortgage Association - 3.8%
GNMA, 4.250%, 01/20/28 (2) 162,198 165,889
GNMA, 4.375%, 03/20/21 (2) 201,348 206,884
GNMA, 5.375%, 03/20/23 to 04/20/26 (2) 1,057,238 1,081,889
GNMA, 5.750%, 08/20/21 (2) 299,068 305,114
GNMA, 6.375%, 06/20/22 to 05/20/27 (2) 467,297 479,125
GNMA, 6.500%, 09/15/29 to 02/15/32 775,559 814,919
GNMA, 6.625%, 11/20/17 to 11/20/27 (2) 2,226,413 2,315,694
GNMA, 6.750%, 07/20/18 to 09/20/20 (2) 774,365 790,748
GNMA, 9.500%, 07/15/09 to 12/15/17 103,171 113,918
-----------
Total Government National Mortgage Association 6,274,180
-----------
U.S.Treasury Note - 0.8%
U.S.Treasury Note, 2.625%, 05/15/08 1,260,000 1,256,703
-----------
Total U.S.Government and Agency Obligations
(cost $156,638,498) 158,421,105
-----------
Asset Backed - 16.1%
Bank of America-First Union,0.866%, 04/11/37 (2,3) 5,760,896 318,114
Chase Commercial Mortgage
Securities Corp., 6.390%, 11/18/30 4,500,000 5,069,333
CS First Boston Mortgage Securities Corp.,
0.943%, 12/15/35 (2,3) 1,842,603 93,155
CS First Boston Mortgage Securities Corp.,
1.249%, 05/17/40 (2,3) 3,974,466 185,643
DLJ Commercial Mortgage Corp., 6.410%, 06/10/31 3,760,000 4,233,975
DVI Receivables Corp., 5.808%, 04/11/09 (2) 2,100,000 1,995,000
DVI Receivables Corp., 1.796%, 09/12/10 (2) 1,120,000 996,800
GMAC Commercial Mortgage Securities,Inc.,
0.839%, 05/15/33 11,503,187 322,199
GMAC Commercial Mortgage Securities,Inc.,
6.420%, 08/15/08 6,321,000 7,095,561
GMAC Commercial Mortgage Securities,Inc.,
7.455%, 08/16/33 1,130,000 1,332,987
LB Commercial Mortgage Trust, 6.210%, 10/15/35 1,250,000 1,398,225
Merrill Lynch Mortgage
Investors, Inc., 7.560%, 11/15/31 2,760,000 3,209,844
</Table>
The accompanying notes are an integral part of these financial statements.
4
<Page>
- -------------------------------------------------------------------------
Managers Short Duration Government Fund
Schedule of Portfolio Investments (continued)
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- ------------
Asset Backed (continued)
Salomon Brothers Mortgage Securities,Inc.,
1.448%, 03/18/36 (2,3) $ 4,037,174 $ 291,276
Total Asset Backed (cost $25,945,861) 26,542,112
------------
Shares
Preferred Stock - 2.3% (3) ------------
Home Ownership Funding Corp. (cost $4,320,833) 7,300 3,872,942
------------
Short-Term Investments - 11.8%
Other Investment Companies - 11.1% (4)
JPMorgan Prime Money Market Fund,
Institutional Class Shares, 0.920% 9,384,059 9,384,059
JPMorgan Liquid Assets Money Market Fund,
Institutional Class Shares, 1.000% 9,000,000 9,000,000
------------
Total Other Investment Companies 18,384,059
------------
Principal
Amount
U.S.Government Agency Discount Notes - 0.7% (5,6) ---------
FNMA, 0.000%, 11/14/03 to 08/20/04 315,000 313,533
FHLMC, 0.000%, 11/06/03 to 07/15/04 875,000 869,115
Total U.S. Government Agency Discount Notes
(cost $1,132,407) 1,182,648
------------
Total Short-Term Investments
(cost $19,516,466) 19,566,707
------------
Total Investments - 126.2%
(cost $206,421,658) 208,402,866
Other Assets,less Liabilities -(26.2)% (43,257,990)
-------------
Net Assets -100.0% $ 165,144,876
=============
</Table>
The accompanying notes are an integral part of these financial statements.
5
<Page>
- -------------------------------------------------------------------------
Managers Intermediate Duration Government Fund
Schedule of Portfolio Investments (unaudited)
September 30, 2003
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- ------------
U.S. Government and Agency Obligations - 120.2% (1)
Federal Home Loan Bank Corporation - 1.0%
FHLB, 5.125%, 05/10/07 $ 300,000 $ 307,562
FHLB, 5.850%, 02/13/09 450,000 457,571
----------
Total Federal Home Loan Bank Corporation 765,133
----------
Federal Home Loan Mortgage Corporation - 55.9%
FHLMC, 2.500%, 09/26/06 2,000,000 2,008,142
FHLMC IO Strip, 5.000%, 05/15/17 935,792 140,641
FHLMC Gold 15 Year, 5.000%, 05/01/18 to 11/01/33 7,920,687 7,995,820
FHLMC, 5.375%, 08/16/06 1,000,000 1,034,645
FHLMC Gold 30 Year,5.500%, 10/15/33 to 11/01/33 11,400,000 11,603,815
FHLMC, 5.500%, 11/01/17 to 01/01/18 3,545,679 3,669,813
FHLMC, 6.000%, 09/01/17 to 06/01/33 3,159,229 3,233,669
FHLMC IO Strip, 6.000%, 05/15/18 to 05/01/31 198,749 9,039
FHLMC Gold 30 Year, 6.000%, 11/01/33 5,700,000 5,872,778
FHLMC, 6.500%, 11/01/32 734,219 765,345
FHLMC, 6.530%, 09/15/16 to 10/15/16 (2) 1,892,616 191,325
FHLMC, 6.780%, 06/15/31 392,106 32,468
FHLMC Gold 30 Year, 7.500%, 01/01/31 155,666 166,552
FHLMC, 7.500%, 08/01/32 to 08/25/42 (2) 4,940,315 5,357,083
----------
Total Federal Home Loan Mortgage Corporation 42,081,135
----------
Federal National Mortgage Association - 54.1%
FNMA, 4.250%, 07/15/07 3,700,000 3,913,150
FNMA, 5.000%, 05/01/07 to 07/01/18 1,923,201 1,971,548
FNMA, 5.250%, 03/01/07 to 04/15/07 2,920,000 3,066,440
FNMA, 5.375%, 01/29/09 500,000 506,202
FNMA, 5.500%, 05/24/06 to 11/01/33 8,046,033 8,239,893
FNMA, 6.000%, 03/29/11 to 11/01/33 6,578,452 6,770,313
FNMA, 6.500%, 11/01/28 to 09/01/32 7,909,745 8,256,877
FNMA, 6.625%, 11/01/10 600,000 701,787
FNMA IO Strip, 7.000%, 06/01/23 178,151 27,057
FNMA, 7.000%, 03/25/24 2,750,000 3,030,722
FNMA, 7.500%, 06/25/32 to 01/25/48 3,922,326 4,301,079
----------
Total Federal National Mortgage Association 40,785,068
----------
Government National Mortgage Association - 5.8%
GNMA, 4.375%, 06/20/16 to 05/20/21 (2) 247,731 254,330
GNMA, 5.375%, 03/20/16 (2) 121,012 124,052
GNMA, 5.750%, 08/20/17 to 08/20/18 (2) 340,376 349,265
GNMA, 6.500%, 10/1/03 to 04/15/32 2,394,772 2,514,983
GNMA, 6.625%, 11/20/17 to 12/20/17 (2) 125,871 131,226
GNMA, 7.500%, 09/15/28 to 11/15/31 929,685 995,902
----------
Total Government National Mortgage Association 4,369,758
----------
</Table>
The accompanying notes are an integral part of these financial statements.
6
<Page>
- -------------------------------------------------------------------------
Managers Intermediate Duration Government Fund
Schedule of Portfolio Investments (unaudited)
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- -------------
U.S. Treasury Bond - 3.4%
U.S. Treasury Bond, 7.250%, 08/15/22 $ 2,000,000 $ 2,590,390
-----------
Total U.S.Government and Agency Obligations
(cost $89,796,277) 90,591,484
-----------
Asset Backed - 3.5%
DLJ Commercial Mortgage Corp., 6.410%, 06/10/31 250,000 281,514
Merrill Lynch Mortgage Investors, Inc.,
7.560%, 11/15/31 2,020,000 2,349,234
-----------
Total Asset Backed (cost $2,558,694) 2,630,748
-----------
Shares
Preferred Stock - 2.1% (3) --------
Home Ownership Funding Corp. 1,500 795,810
Home Ownership Funding Corp. II 1,500 796,139
-----------
Total Preferred Stock (cost $1,587,757) 1,591,949
-----------
Short-Term Investments - 9.6%
Other Investment Companies - 9.5% (4)
JPMorgan Liquid Assets Money Market Fund,
Institutional Class Shares, 1.000% 7,000,000 7,000,000
JPMorgan Prime Money Market Fund,
Institutional Class Shares, 0.920% 209,158 209,158
-----------
Total Other Investment Companies 7,209,158
-----------
Principal
U.S. Government Agency Amount
Discount Notes - 0.1% (5,6) ---------
FNMA, 0.000%, 06/25/04 (cost $49,602) $ 50,000 49,583
-----------
Total Short-Term Investments
(cost $7,258,760) 7,258,741
-----------
Total Investments - 135.4%
(cost $101,201,488) 102,072,922
Other Assets, less Liabilities - (35.4)% (26,702,556)
------------
Net Assets - 100.0% $ 75,370,366
============
</Table>
The accompanying notes are an integral part of these financial statements.
7
<Page>
- -------------------------------------------------------------------------
Managers Total Return Bond Fund
Schedule of Portfolio Investments (unaudited)
September 30, 2003
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- -------------
U.S. Government and Agency Obligations - 28.4%
Federal Farm Credit Bank - 3.6%
FFCB, 5.750%, 01/18/11 $ 275,000 $ 305,758
FFCB, 6.000%, 03/07/11 250,000 282,166
----------
Total Federal Farm Credit Bank 587,924
----------
Federal Home Loan Mortgage Corporation - 7.8%
FHLMC, 4.000%, 05/15/19 250,000 253,979
FHLMC, 5.500%, 06/01/14 193,592 200,861
FHLMC, 5.500%, 04/01/17 165,368 171,156
FHLMC, 5.500%, 08/01/29 195,903 200,970
FHLMC, 6.000%, 12/01/32 183,864 189,979
FHLMC, 6.000%, 01/01/33 226,467 233,725
----------
Total Federal Home Loan Mortgage Corporation 1,250,670
----------
Federal National Mortgage Association - 10.8%
FNMA, 4.500%, 05/01/13 229,388 235,204
FNMA, 5.500%, 02/01/13 237,082 249,539
FNMA, 5.500%, 12/01/22 178,127 183,358
FNMA, 6.000%, 09/01/31 183,790 189,666
FNMA, 6.250%, 07/01/24 249,155 259,625
FNMA, 6.470%, 09/25/12 200,000 232,079
FNMA, 6.500%, 08/01/32 153,744 160,261
FNMA, 7.000%, 07/01/32 217,929 230,539
----------
Total Federal National Mortgage Association 1,740,271
----------
Federal Home Loan Bank Corporation - 3.7%
FHLB, 6.625%, 11/15/10 250,000 290,471
FHLB, 7.375%, 02/12/10 250,000 301,939
----------
Total Federal Home Loan Bank Corporation 592,410
----------
U.S.Treasury Bond - 2.5%
United States Treasury Bond, 6.250%, 08/15/23 350,000 409,158
----------
Total U.S.Government and Agency Obligations
(cost $5,483,748) 4,580,433
----------
Foreign Government Obligations - 8.9%
New Zealand Government, 10.625%, 11/15/05 125,000 148,024
Ontario Province, 5.125%, 07/17/12 100,000 109,043
Province of British Columbia, 4.625%, 10/03/06 250,000 266,861
Province of Manitoba, 4.250%, 11/20/06 250,000 263,816
Republic of Italy, 4.375%, 10/25/06 200,000 213,260
Saskatchewan Province, 7.125%, 3/15/08 150,000 175,103
Sweden Kingdom, 0.000%, 04/01/09 250,000 203,567
Sweden Kingdom, 11.125%, 06/01/15 30,000 45,945
Total Foreign Government ----------
Obligations (cost $1,409,624) 1,425,619
----------
</Table>
The accompanying notes are an integral part of these financial statements.
8
<Page>
- -------------------------------------------------------------------------
Managers Total Return Bond Fund
Schedule of Portfolio Investments (continued)
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- -------------
Corporate Bonds - 57.4%
Asset Backed - 22.4%
Bear Stearns Commercial Mortgage Securities,
Inc., 3.970%, 11/11/35 $ 244,356 $ 248,793
Bear Stearns Commercial Mortgage Securities,Inc.,
5.060%, 11/15/16 89,437 94,995
California Infrastructure PG&E-1, 6.480%, 12/26/09 250,000 282,081
Citibank Credit Card Issuance
Trust, 5.650%, 06/16/08 250,000 271,726
College & University Facility Loan
Trust, 4.000%, 06/01/18 148,764 150,294
Community Program Loan Trust, 4.500%, 10/01/18 213,195 216,281
CS First Boston Mortgage Securities,
Inc., 3.006%, 03/15/36 144,040 145,366
Detroit Edison Securitization
Funding LLC, 6.420%, 03/01/15 300,000 343,835
Franklin Auto Trust, 2.270%, 05/20/11 250,000 248,623
LB-UBS Commercial Mortgage Trust, 3.478%, 07/20/27 100,000 100,367
Morgan Stanley Dean Witter
Capital I, 4.090%, 12/15/35 205,869 213,555
Peco Energy Transition Trust, 6.520%, 12/31/10 200,000 229,913
PP&L Transition Bond Company LLC, 7.050%, 06/25/09 300,000 340,932
PSE&G Transition Funding LLC, 6.610%, 06/15/15 246,000 284,597
Public Service New Hampshire Funding LLC,
6.480%, 05/1/15 250,000 288,167
Wachovia Bank Commercial Mortgage Trust,
2.986%, 06/15/35 149,015 143,565
-----------
Total Asset Backed 3,603,090
-----------
Finance - 27.3%
Ambac Financial Group, 9.375%, 08/01/11 100,000 131,409
Associates Corp., Series B, 7.950%, 02/15/10 150,000 175,824
Bank of America, 7.800%, 02/15/10 200,000 240,249
Bank of Montreal-Chicago, 6.100%, 09/15/05 250,000 269,135
Deutsche Bank Financial, 6.700%, 12/13/06 100,000 113,418
Fifth Third Bancorp., 3.375%, 08/15/08 100,000 100,583
First Union Corp., 7.550%, 08/18/05 150,000 166,035
General Electric Capital Corp., 8.700%, 03/01/07 200,000 237,658
General Electric Capital Corp., 8.850%, 03/01/07 250,000 298,283
Hudson United Bank, 3.500%, 05/13/08 100,000 98,879
Inter-American Development Bank, 8.400%, 09/01/09 100,000 126,267
Inter-American Development Bank, 12.250%, 12/15/08 210,000 302,020
International Lease Finance Corp., 2.950%, 05/23/06 150,000 151,726
KFW International Finance, 8.200%, 06/01/06 250,000 289,270
Massachusetts RRB Special Purpose
Trust, 7.030%, 03/15/12 200,000 234,332
Midland Bank PLC, 8.625%, 12/15/04 150,000 162,416
National Westminister Bank PLC, 7.375%, 10/01/09 125,000 148,373
Norwest Corp., 6.750%, 10/01/06 105,000 117,985
Norwest Corp., 6.750%, 06/15/07 115,000 130,607
Svenska Handlesbanken, 8.125%, 08/15/07 150,000 177,006
Swiss Bank Corp. - New York, 6.750%, 07/15/05 150,000 163,388
Swiss Bank Corp. - New York, 7.250%, 09/01/06 200,000 228,405
</Table>
The accompanying notes are an integral part of these financial statements.
9
<Page>
- -------------------------------------------------------------------------
Managers Total Return Bond Fund
Schedule of Portfolio Investments (continued)
- -------------------------------------------------------------------------
<Table>
Principal
Amount Value
------------- -------------
Finance (continued)
US Central Credit Union, 2.750%, 05/30/08 $ 100,000 $ 98,220
Wells Fargo Financial, 6.125%, 02/15/06 210,000 228,757
----------
Total Finance 4,390,245
----------
Industrials - 6.1%
ChevronTexaco Corp., 8.110%, 12/01/04 177,600 185,333
General Mills,Inc., 5.125%, 02/15/07 150,000 161,405
International Game Technology, 7.875%, 05/15/04 150,000 155,365
Johnson & Johnson, 3.800%, 05/15/13 150,000 144,827
Merck & Co., Inc., 4.375%, 02/15/13 100,000 100,653
Tosco Corp., 7.250%, 01/01/07 200,000 226,427
----------
Total Industrials 974,010
----------
Utilities - 1.6%
PacifiCorp., Series MBIA, 8.950%, 09/01/11 200,000 257,241
----------
Total Corporate Bonds (cost $8,183,568) 9,224,586
----------
Other Investment Companies - 2.6% Shares
JPMorgan Prime Money Market Fund, -------
Institutional Class Shares, 0.920% (4)
(cost $410,229) 410,229 410,229
----------
Total Investments - 97.3%
(cost $15,487,168) 15,640,867
Other Assets, less Liabilities - 2.7% 432,007
----------
Net Assets - 100.0% $16,072,874
==========
</Table>
The accompanying notes are an integral part of these financial statements.
10
<Page>
- -------------------------------------------------------------------------
The Managers Funds
Notes to Schedules of Portfolio Investments
- -------------------------------------------------------------------------
The following footnotes and abbreviations are to be read in conjunction
with the Schedules of Portfolio Investments previously presented in the
report.
At September 30, 2003, the cost of securities for Federal income tax
purposes and the gross aggregate unrealized appreciation and/or
depreciation based on tax cost were approximately as follows:
<Table>
Fund Cost Appreciation Depreciation Net
- --------------------- -------------- ------------- ------------- --------------
Short Duration $206,421,658 $2,924,377 $ (943,169) $ 1,981,208
Intermediate Duration 101,201,488 1,108,415 (236,981) 871,434
Total Return Bond 15,487,168 186,028 (32,329) 153,699
</Table>
1 Mortgage-backed obligations and other assets are subject to principal
paydowns as a result of prepayments or refinancings of the underlying
mortgage instruments. As a result, the average life may be substantially
less than the original maturity. The interest rate shown is the rate in
effect at September 30, 2003.
2 Adjustable-rate mortgages with coupon rates that adjust periodically. The
interest rate shown is the rate in effect at September 30, 2003.
3 Security is exempt from registration under Rule 144A of the Securities
Act of 1933, as amended. These securities may be resold in transactions
exempt from registration, normally to qualified buyers. At September 30,
2003, such securities represented 2.9% of net assets for Short Duration
and 2.1% of net assets for Intermediate Duration.
4 Yield shown for this investment company represents the September 30, 2003,
seven-day average yield, which refers to the sum of the previous seven days '
dividends paid, expressed as an annual percentage.
5 Zero-coupon security.
6 Security is held as collateral for futures transactions by J.P.Morgan
Futures, Inc.
# Rounds to less than 0.1%.
Security Ratings (unaudited)
The composition of debt holdings as a percentage of portfolio assets is as
follows:
<Table>
S&P/Moody's Ratings Gov't/AAA AA A BBB BB Not Rated
- ------------------- --------- ------- ------- ------- ------- ---------
Short Duration 97.9% 0.0% 0.0% 0.0% 0.0% 2.1%
Intermediate Duration 99.5 0.0 0.0 0.0 0.0 0.5
Total Return Bond 63.3 14.7 14.2 2.7 0.0 5.17
</Table>
Investments Abbreviations:
- --------------------------
DLJ: Donaldson,Lufkin & Jenrette Securities Corp.
FHLMC: Federal Home Loan Mortgage Corporation
FNMA: Federal National Mortgage Association
FFCB: Federal Farms Credit Bank
GMAC: General Motors Acceptance Corporation
GNMA: Government National Mortgage Association
IO: Interest Only
The accompanying notes are an integral part of these financial statements.
11
<Page>
- -------------------------------------------------------------------------
The Managers Funds
Statements of Assets and Liabilities (unaudited)
September 30, 2003
- -------------------------------------------------------------------------
<Table>
Managers
Managers Intermediate Managers
Short Duration Duration Total
Government Government Return
Fund Fund Bond Fund
--------------- -------------- ----------
Assets:
- -------
Investments at value * $ 208,402,866 $102,072,922 $15,640,867
Cash 41,487 - -
Receivable for investments sold 16,172,344 38,679,463 108,209
Receivable for Fund shares sold 2,061,339 682,326 294,130
Dividends, interest and other
receivables 797,379 625,977 141,006
Prepaid expenses 36,391 22,539 8,522
------------- ------------ -----------
Total assets 227,511,806 142,083,227 16,192,734
------------- ------------ -----------
Liabilities:
- ------------
Payable to Custodian - 9,941 -
Payable for investments purchased 57,775,063 58,704,773 99,904
Payable for Fund shares repurchased 2,915,149 92,266 3,691
Interest payable-short positions 2,639 18,542 -
Payable for securities sold short,
at value
at value (proceeds $1,013,125
and $7,620,781,respectively) 1,024,375 7,715,782 -
Payable for variation margin on
futures 549,179 97,609 -
Investment advisory and
management fee payable 71,521 37,390 1,107
Administration fee payable - - 3,136
Other accrued expenses 29,004 36,558 12,022
------------- ------------ -----------
Total liabilities 62,366,930 66,712,861 119,860
------------- ------------ -----------
Net Assets $165,144,876 $75,370,366 $16,072,874
============= ============ ===========
Shares outstanding 16,980,478 7,074,247 1,585,262
------------- ------------ -----------
Net asset value,offering and
redemption price per share $9.73 $10.65 $10.14
========= ======== =======
Net Assets Represent:
- ---------------------
Paid-in capital $ 170,732,757 $ 74,404,289 $ 15,934,434
Undistributed net investment
income (loss) (728,147) (38,087) 3,422
Accumulated net realized gain
(loss) from investments,
futures and option contracts (5,167,850) 610,895 (18,681)
Net unrealized appreciation of
investments, futures and
option contracts 308,116 393,269 153,699
------------- ------------ ------------
Net Assets $ 165,144,876 $ 75,370,366 $ 16,072,874
============= ============ ============
*Investments at cost $ 206,421,658 $101,201,488 $ 15,487,168
------------- ------------ ------------
</Table>
The accompanying notes are an integral part of these financial statements.
12
<Page>
- -------------------------------------------------------------------------
The Managers Funds
Statements of Operations (unaudited)
For the six months ended September 30, 2003
- -------------------------------------------------------------------------
<Table>
Managers
Managers Intermediate Managers
Short Duration Duration Total
Government Government Return
Fund Fund Bond Fund
-------------- -------------- ------------
Investment Income:
- ------------------
Interest income $ 2,500,480 $ 1,212,075 $ 263,525
Dividend income 91,755 - -
----------- ----------- ----------
Total investment income 2,592,235 1,212,075 263,525
----------- ----------- ----------
Expenses:
- ---------
Investment advisory and
management fees 564,319 262,894 37,417
Administrative fees - - 18,708
Transfer agent 49,062 36,163 4,599
Custodian 65,734 19,095 9,205
Professional fees 24,772 19,266 23,566
Registration fees 25,205 15,441 7,397
Trustees fees and expenses 4,628 2,672 468
Interest expense 25,254 67 -
Insurance 2,809 1,549 45
Miscellaneous 3,858 3,332 230
----------- ----------- ----------
Total expenses before offsets 765,641 360,479 101,635
Expense reimbursements (111,346) (29,910) (27,545)
Expense reductions (6) - -
----------- ----------- ----------
Net expenses 654,289 330,569 74,090
----------- ----------- ----------
Net investment income 1,937,946 881,506 189,435
=========== =========== ==========
Net Realized and Unrealized
Gain (Loss):
- ---------------------------
Net realized gain (loss) on
investments and option contracts 966,229 635,741 (18,280)
Net realized gain (loss)
on futures contracts (294,119) 207,171 -
Net unrealized appreciation
(depreciation)of investments
and option contracts (188,786) (166,125) 48,737
Net unrealized depreciation
of futures contracts (764,537) (371,639) -
Net realized and unrealized gain
(loss)on investments (281,213) 305,148 30,457
Net Increase in Net Assets ----------- ----------- ----------
Resulting from Operations $ 1,656,733 $ 1,186,654 $ 219,892
=========== =========== ==========
</Table>
The accompanying notes are an integral part of these financial statements.
13
<Page>
- -------------------------------------------------------------------------
The Managers Funds
Statements of Changes in Net Assets (unaudited)
For the six months ended September 30,2003 and for the fiscal period
ended March 31, 2003.
- -------------------------------------------------------------------------
<Table>
Managers
Short Duration Government Fund
Sept. 30, 2003 Mar. 31, 2003
-------------- --------------
Increase in Net Assets From Operation
- -------------------------------------
Net investment income $ 1,937,946 $ 2,587,796
Net realized gain (loss) on investments 672,110 (782,256)
Net unrealized appreciation (depreciation)
of investments (953,323) 1,390,485
Net increase in net assets ------------ ------------
resulting from operations 1,656,733 3,196,025
Net increase in net assets ------------ ------------
Distributions to Shareholders:
- ------------------------------
From net investment income (1,939,017) (2,877,036)
From realized gains on investments - -
Return of capital - (192,995)
Net increase in net assets ------------ ------------
Total distributions to shareholders (1,939,017) (3,070,031)
Net increase in net assets ------------ ------------
From Capital Share Transactions:
- --------------------------------
Proceeds from sale of shares 100,231,114 172,951,398
Net asset value of shares issued in
connection with reinvestment of
dividends and distributions 1,773,599 2,744,405
Cost of shares repurchased (97,287,289) (45,581,966)
Net increase from
capital share transactions 4,717,424 130,113,837
Net increase in net assets ----------- -----------
Total increase in net assets 4,435,140 130,239,831
Net increase in net assets ----------- -----------
Net Assets:
- -----------
Beginning of period 160,709,736 30,469,905
------------ ------------
End of period $165,144,876 $160,709,736
============ ============
End of period (distributed in excess)/
undistributed net investment income $ (728,147) $ (727,076)
- -------------------------------------------------------------------------
Share Transactions:
- -------------------
Sale of shares 10,285,779 17,759,101
Shares issued in connection with
reinvestment of dividends and
distributions 182,127 282,118
Net increase in net assets ------------ ------------
Shares repurchased (9,981,531) (4,681,287)
------------ ------------
Net increase in shares 486,375 13,359,932
------------ ------------
</Table>
The accompanying notes are an integral part of these financial statements.
14
<Page>
<Table>
Managers Managers
Intermediate Duration Government Fund Total Return Bond Fund
Sept. 30, 2003 Mar. 31, 2003 Sept. 30, 2003 Mar. 31, 2003*
- -------------- ------------- -------------- --------------
$ 881,506 $2,241,861 $189,435 $74,950
842,912 749,685 (18,280) 45,567
(537,764) 992,154 48,737 104,962
----------- ----------- --------- --------
1,186,654 3,983,700 219,892 225,479
----------- ----------- --------- --------
(919,593) (2,279,093) (194,875) (66,088)
- - (45,968) -
- - - -
----------- ----------- --------- --------
(919,593) (2,279,093) (240,843) (66,088)
----------- ----------- --------- --------
32,827,350 79,442,303 5,215,463 14,430,799
823,910 2,102,884 239,861 65,859
(29,889,588) (38,800,162) (3,023,040) (994,508)
----------- ----------- --------- --------
3,761,672 42,745,025 2,432,284 13,502,150
----------- ----------- --------- --------
4,028,733 44,449,632 2,411,333 13,661,541
71,341,633 26,892,001 13,661,541 -
----------- ----------- ---------- ---------
$75,370,366 $71,341,633 $16,072,874 $13,661,541
============ =========== =========== ===========
$ (38,087) $ - $ 3,422 $ 8,862
----------- ----------- ---------- ---------
3,097,869 7,546,058 512,507 1,441,496
77,816 199,836 23,649 6,543
(2,826,109) (3,669,312) (300,444) (98,489)
- ----------- ----------- ----------- ----------
349,576 4,076,582 235,712 1,349,550
- ----------- ----------- ----------- ----------
</Table>
*Commencement of operations was December 30, 2002.
The accompanying notes are an integral part of these financial statements.
15
<Page>
- -------------------------------------------------------------------------
Managers Short Duration Government Fund
Financial Highlights
For a share outstanding throughout the six months ended September
30, 2003
(unaudited) and each fiscal year ended March 31,
- -------------------------------------------------------------------------
<Table>
Sept. 30, Fiscal Year Ended March 31,
--------- -------------------------------------
2003 2003 2002 2001 2000 1999
----- ----- ----- ----- ----- -----
Net Asset Value,
Beginning of Period $9.74 $9.72 $9.71 $9.64 $9.94 $9.92
----- ----- ----- ----- ----- -----
Income from
Investment Operations:
- -----------------------
Net investment income 0.13 0.30 0.54 0.74 0.54 0.45
Net realized and
unrealized gain (loss)
on investments (0.02) 0.06 0.01 (0.06) (0.27) 0.02
Total from investment ----- ----- ----- ----- ----- -----
operations 0.11 0.36 0.55 0.68 0.27 0.47
----- ----- ----- ----- ----- -----
Less Distributions to
Shareholders from:
- ----------------------
Net investment income (0.12) (0.32) (0.54) (0.61) (0.57) (0.45)
Return of capital - (0.02) - - - -
Total distributions to ----- ----- ----- ----- ----- -----
shareholders (0.12) (0.34) (0.54) (0.61) (0.57) (0.45)
----- ----- ----- ----- ----- -----
Net Asset Value,
End of Period $9.73 $9.74 $9.72 $9.71 $9.64 $9.94
===== ===== ===== ===== ===== =====
- ---------------------------------------------------------------------------------
Total Return (a) 1.11% (d) 3.76% 6.06% 7.35% 2.75% 4.83%
- ---------------------------------------------------------------------------------
Ratio of net
operating expenses to
average net assets (b) 0.78% (e) 0.78% 0.78% 0.78% 0.78% 0.78%
Ratio of total expenses
to average net assets 0.95% (c,e) 0.92%(c)1.39%(c)2.18%(c)1.07% 1.00%
Ratio of net
investment income to
average net assets (a) 2.40% (e) 2.74% 5.71% 6.24% 6.01% 4.78%
Portfolio turnover 173% (d) 418% 683% 866% 268% 298%
- ----------------------------------------------------------------------------------
Net assets at end of
period (000's omitted) $165,145 $160,710 $30,470 $26,263 $35,540 $60,807
==================================================================================
</Table>
(a) Total returns and net investment income would have been lower had
certain expenses not been reduced.
(b) After expense offsets. (See Note 1(c) of "Notes to Financial
Statements.")
(c) Includes interest expense for the six months ended September 30, 2003
and the fiscal years ended March 31, 2003, 2002 and 2001 of 0.03%, 0.01%,
0.28% and 1.14%, respectively. (See Note 1(i) of "Notes to Financial
Statements.")
(d) Not annualized.
(e) Annualized.
16
<Page>
- -------------------------------------------------------------------------
Managers Intermediate Duration Government Fund
Financial Highlights
For a share outstanding throughout the six months ended September
30, 2003 (unaudited) and each fiscal year ended March 31,
- -------------------------------------------------------------------------
<Table>
Sept. 30, Fiscal Year Ended March 31,
--------- --------------------------------------
2003 2003 2002 2001 2000 1999
----- ----- ----- ----- ----- -----
Net Asset Value,
Beginning of Period $10.61 $10.16 $9.94 $9.37 $9.91 $10.00
------ ------ ----- ----- ----- ------
Income from
Investment Operations:
- ----------------------
Net investment income 0.12 0.40 0.41 0.61 0.53 0.53
Net realized and
unrealized gain (loss)
on investments 0.05 0.45 0.26 0.49 (0.50) 0.03
------ ------ ----- ----- ----- ------
Total from investment
operations 0.17 0.85 0.67 1.10 0.03 0.56
------ ------ ----- ----- ----- ------
Less Distributions to
Shareholders from:
- ---------------------
Net investment income (0.13) (0.40) (0.45) (0.53) (0.53) (0.52)
Return of capital - - - - (0.02) -
Net realized gain
on investments - - - - (0.02) (0.13)
------ ------ ----- ----- ----- ------
Total distributions to
shareholders (0.13) (0.40) (0.45) (0.53) (0.57) (0.65)
------ ------ ----- ----- ----- ------
Net Asset Value,
End of Period $10.65 $10.61 $10.16 $9.94 $9.37 $9.91
====== ====== ====== ===== ===== =====
- ----------------------------------------------------------------------------------
Total Return (a) 1.62% (d) 8.48% 6.78% 12.17% 0.40% 5.73%
- ----------------------------------------------------------------------------------
Ratio of net
operating expenses to
average net assets (b) 0.88% (e) 0.88% 0.88% 0.88% 0.88% 0.88%
Ratio of total expenses
to average net assets 0.96% (c,e) 1.03% (c) 1.09% 1.07% (c) 1.06% 1.06%
Ratio of net
investment income to
average net assets (a) 2.34% (e) 3.75% 3.76% 5.85% 5.72% 5.25%
Portfolio turnover 288% (d) 578% 1,106% 690% 455% 423%
- -----------------------------------------------------------------------------------
Net assets at end of
period (000's omitted) $75,370 $71,342 $26,892 $24,077 $31,139 $55,126
===================================================================================
</Table>
(a) Total returns and net investment income would have been lower had certain
expenses not been reduced.
(b) After expense offsets. (See Note 1(c) of "Notes to Financial
Statements.")
(c) Includes interest expense for the fiscal years ended March 31, 2003 and
2001 of 0.03% and 0.01%, respectively. (See Note 1(i) of "Notes to
Financial Statements.")
(d) Not annualized.
(e) Annualized.
17
</Page>
- -------------------------------------------------------------------------
Managers Total Return Bond Fund
Financial Highlights
For a share outstanding throughout the six months ended September
30, 2003 (unaudited) and the fiscal period ended March 31, 2003
- -------------------------------------------------------------------------
<Table>
Sept. 30 For the period* ended
2003 March 31, 2003
---------- -----------------------
Net Asset Value,
Beginning of Period $10.12 $10.00
-------- -------
Income from
Investment Operations:
- -----------------------
Net investment income 0.13 0.06
Net realized and unrealized
gain on investments 0.05 0.11
Total from investment -------- -------
operations 0.18 0.17
-------- -------
Less Distributions to
Shareholders from:
- -----------------------
Net investment income (0.13) (0.05)
Net realized gain on
investments (0.03) -
-------- -------
Total distributions to
shareholders (0.16) (0.05)
-------- -------
Net Asset Value,
End of Period $10.14 $10.12
======= =======
- ------------------------------------------------------------------------
Total Return (a) 1.79% (c) 1.70% (c)
- ------------------------------------------------------------------------
Ratio of net operating
expenses to average net
assets (b) 0.99% (d) 0.99% (d)
Ratio of total expenses
to average net assets 1.35% (d) 1.95% (d)
Ratio of net investment
income to average net
assets (a) 2.58% (d) 2.37% (d)
Portfolio turnover 23% (c) 62% (c)
- ------------------------------------------------------------------------
Net assets at end of period
(000's omitted) $ 16,073 $ 13,662
========================================================================
</Table>
*Commencement of operations was December 30, 2002.
(a)Total returns and net investment income would have been lower had
certain expenses not been reduced.
(b)After expense offsets.(See Note 1(c) of "Notes to Financial
Statements.")
(c)Not annualized.
(d)Annualized.
18
<Page>
- ------------------------------------------------------------------------
The Managers Funds
Notes to Financial Statements (unaudited)
September 30,2003
- ------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies
- ----------------------------------------------
Managers Trust II ("Trust II") is a no-load, open-end, management
investment company organized as a Massachusetts business trust and
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Currently, Trust II currently offers shares in three series:
Managers Short Duration Government Fund ("Short Duration"), Managers
Intermediate Duration Government Fund ("Intermediate Duration") and
Managers Total Return Bond Fund ("Total Return Bond").
The financial statements of Short Duration,Intermediate Duration and
Total Return Bond (each a "Fund" and collectively, the "Funds") 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 amount of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting periods. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
followed by the Funds in the preparation of their financial statements.
(a)Valuation of Investments
- ---------------------------
Equity securities traded on a domestic or international securities
exchange and over-the counter securities are valued at the last quoted
sales price, or, lacking any sales, at the last quoted bid price.
Fixed-income securities are valued based on valuations furnished by
independent pricing services that utilize matrix systems, which reflect
such factors as security prices, yields, maturities, and ratings, and are
supplemented by dealer and exchange quotations. 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.
Investments in other regulated investment companies are valued at their
end of day net asset value per share. Investments in certain mortgage-backed,
stripped mortgage-backed, preferred stocks, convertible securities,
derivatives and other debt securities not traded on an organized securities
market are valued on the basis of valuations provided by dealers or by
a pricing service which uses information with respect to transactions in such
securities, various relationships between securities and yield to maturity in
determining value. Securities (including derivatives) for which market
quotations are not readily available are valued at fair value, as determined
in good faith and pursuant to procedures adopted by the Board of Trustees of
the Trust.
(b) Security Transactions
- -------------------------
Security transactions are accounted for as of trade date. Realized gains
and losses on securities sold are determined on the basis of identified cost.
(c)Investment Income and Expenses
- ---------------------------------
Dividend income is recorded on the ex-dividend date. Interest income, which
includes amortization of premium and accretion of discount on debt securities,
as required, 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. An
expense that cannot be directly attributed to a particular Fund is
apportioned among the Fund, and in some cases other funds in the family,based
upon their relative net assets or number of shareholders.
The Funds have an arrangement with the Bank of New York ("BNY") whereby
each Fund is credited with an interest factor equal to 1% below the
effective 90-day T-Bill rate for account balances left uninvested overnight.
These credits serve to reduce custody expenses that would otherwise be
charged to each Fund. For the six months ended September 30, 2003, the
custodian expense was reduced under the BNY arrangement as follows: Short
Duration -$6.
The Managers Funds LLC (the "Investment Manager"), a subsidiary of
Affiliated Managers Group, Inc. ("AMG"), has contractually agreed, through
at least August 1, 2004, to waive its fees and/or bear expenses of each Fund
to cause total operating expenses (excluding interest, taxes, brokerage and
extraordinary expenses) to not exceed the annual rate of 0.88% for
Intermediate Duration, 0.78% for Short Duration and 0.99% for Total Return
Bond (the "Expense Agreements"). Each Fund is obligated to repay the
Investment Manager such amounts waived, paid or reimbursed in future years
19
<Page>
- ------------------------------------------------------------------------
The Managers Funds
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------
provided that the repayment occurs with three years after the waiver or
reimbursement and that such repayment would not cause the Short Duration,
Intermediate Duration or Total Return Bond Fund's expenses as a percent of
average net assets in any such future year to exceed 0.78%, 0.88% or 0.99%,
respectively.
(d)Dividends and Distributions
- ------------------------------
Dividends resulting from net investment income, if any, normally are
declared and paid monthly for Intermediate Duration, Short Duration and
Total Return Bond. Dividends and distributions to shareholders are
recorded on the ex-dividend date. Distributions of capital gains, if any,
will be made on an annual basis in December and when required for Federal
excise tax purposes. Income and capital gain distributions are determined
in accordance with Federal income tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for losses deferred due to wash sales,
equalization accounting for tax purposes, 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.
(e)Federal Taxes
- ----------------
Each Fund intends to comply with the requirements under Subchapter M of
the Internal Revenue Code of 1986, as amended,and to distribute
substantially all of its taxable income and gains to its shareholders and
to meet certain diversification and income requirements with respect to
investment companies.
(f)Capital Loss Carryovers
- --------------------------
As of March 31, 2003, the following Fund has accumulated net realized
capital loss carryovers from securities transactions for Federal income
tax purposes as shown in the chart. These amounts may be used to offset
realized capital gains, if any, through March 31, 2010.
<Table>
Capital Loss
Fund Carryover Amounts Expires Mar. 31,
- ----------------- -------------------- -------------------
Short Duration $276,167 2004
829,556 2005
760,963 2008
1,568,229 2009
362,610 2010
</Table>
(g)Capital Stock
- ----------------
The Trust's Declaration of Trust authorizes 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.
At September 30, 2003, certain unaffiliated shareholders, specifically
omnibus accounts, held greater than 10% of the outstanding shares of the
following Funds: Short Duration - 2 own 78%; Intermediate Duration - 2
own 67% and Total Return Bond - 1 owns 77%.
(h)Repurchase Agreements
- ------------------------
Each Fund may enter into repurchase agreements provided that the value of
the underlying collateral, including accrued interest, will be equal to
or exceed the value of the repurchase agreement during the term of the
agreement. The underlying collateral for all repurchase agreements is
held in safekeeping by the Fund's custodian or at the Federal Reserve
Bank.
If the seller defaults and the value of the collateral declines, or if
bankruptcy proceedings commence with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
(i)Reverse Repurchase Agreements (Short Duration & Intermediate Duration)
- -------------------------------------------------------------------------
A reverse repurchase agreement involves the sale of portfolio assets
together with an agreement to repurchase the same assets later at a
fixed price. Additional assets are maintained in a segregated account
with the custodian, and are marked to market daily. The segregated
assets may consist of cash, U.S. Government securities, or other
liquid securities at least equal in value to the obligations under
the reverse repurchase agreements. In the event the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, a fund's use of the proceeds under the agree-
20
<Page>
- ------------------------------------------------------------------------
The Managers Funds
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------
ment may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the obligation to repurchase
the securities.
(j)Delayed Delivery Transactions and When-Issued Securities (Short
Duration & Intermediate Duration)
- ------------------------------------------------------------------
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 Schedule of Investments. The
Funds may receive compensation for interest forgone in the purchase of a
delayed delivery or when-issued security. 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
under the caption Delayed delivery. 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.
(k) Dollar Roll and Reverse Dollar Roll Agreements (Short Duration &
Intermediate Duration)
- ---------------------------------------------------------------------------
A dollar roll is an agreement to sell securities for delivery in the
current month and to repurchase substantially similar securities on a
specified future date. During the roll period, principal and interest
paid on these securities are not received. When a fund invests in a dollar
roll, it is compensated by the difference between the current sales price
and the forward price for the future purchase as well as by earnings on the
cash proceeds of the initial sale. A reverse dollar roll is agreement to
buy securities for delivery in the current month and to sell substantially
similar securities on a specified future date, typically at a lower price.
During the roll period, the Fund receives the principal and interest on the
securities purchased in compensation for the cash invested in the
transaction.
(l) Short Sales (Short Duration & Intermediate Duration)
- --------------------------------------------------------
A short sale is a transaction in which a fund sells a security it does
not own in anticipation that the market value of that security will decline.
Each of the Funds expects to engage in short sales as a form of hedging in
order to shorten the overall duration of its portfolio and maintain portfolio
flexibility. While a short sale may act as an effective hedge to reduce the
market or interest rate risk of a portfolio, it may also result in losses,
which can reduce the portfolio's total return.
Short Sales as of September 30, 2003:
<Table>
Fund Amount Security Proceeds Current Liability
- -------------- ----------- -------------------- ------------ -----------------
Short Duration $1,000,000 FNMA 15 Yr. 5.000% $1,013,125 $(1,024,375)
Intermediate
Duration $2,000,000 FNMA 30 Yr. 5.000% $1,942,031 $(2,000,000)
3,500,000 FNMA 30 Yr. 6.500% 3,626,250 (3,647,658)
2,000,000 FHLMC 15 Yr. 5.500% 2,052,500 (2,068,124)
---------- -------------
Total $7,620,781 $(7,715,782)
========== =============
</Table>
(m) Futures Contracts Held or Issued for Purposes other than Trading
(Short Duration &Intermediate Duration)
- -----------------------------------------------------------------------
Each of the Funds may use interest-rate futures contracts for risk
management purposes in order to reduce fluctuations in each Fund's net asset
values relative to each Fund's targeted option-adjusted duration. On entering
into a futures contract, either cash or securities in an amount equal to a
certain percentage of the contract value (initial margin) must be deposited
with the futures broker. Sub-sequent payments (variation margin)are made or
received each day. The variation margin payments
21
<Page>
- ------------------------------------------------------------------------
The Managers Funds
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------
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
September 30, 2003:
<Table>
Number of Expiration Unrealized
Type Contracts Position Month Gain/(Loss)
- ----------------------------- --------------- -------------- -------------- ------------
2-Year U.S. Treasury Note 94 Long June 2003 $257,554
5-Year U.S. Treasury Note 222 Short June 2003 (703,906)
10-Year U.S. Treasury Bond 76 Short June 2003 (443,933)
15-Year U.S. Treasury Bond 14 Short June 2003 (102,754)
10 Yr. Interest Swap 34 Short December 2003 (62,622)
3-Month Eurodollar 65 Long September 2007 89,695
3-Month Eurodollar 868 Short December 2006 -
March 2008 (672,834)
------------
Total $(1,638,800)
============
</Table>
Intermediate Duration had the following open futures contracts as of
September 30, 2003:
<Table>
Number of Expiration Unrealized
Type Contracts Position Month Gain/(Loss)
- ----------------------------- --------------- -------------- -------------- ------------
5-Year U.S. Treasury Note 11 Short June 2003 $(44,805)
2-Year U.S. Treasury Note 1 Long June 2003 2,465
15-Year U.S. Treasury Bond 27 Short June 2003 (198,167)
3-Month Eurodollar 31 Long December 2003 -
March 2008 40,414
3-Month Eurodollar 160 Short December 2006 -
March 2008 (156,977)
-----------
Total $ (357,070)
===========
</Table>
Futures transactions involve additional costs and may result in losses.
The effective use of futures depends on the Funds' ability to close
futures positions at times when the Funds' portfolio managers deem it
desirable to do so. The use of futures also involves the risk of
imperfect correlation among movements in the values of the securities
underlying the futures purchased and sold by the Funds, of the futures
contracts themselves, and of the securities that are the subject of a
hedge.
(n)Assets Pledged to Cover Margin Requirements for Open Futures Positions
(Short Duration & Intermediate Duration)
- -------------------------------------------------------------------------
The aggregate market value of assets pledged to cover margin requirements
for the open futures positions at September 30, 2003 was:
<Table>
Fund Assets Pledged
- ---------------------- --------------
Short Duration $1,105,731
Intermediate Duration 200,696
</Table>
(o) Interest Rate Caps, Swap Contracts and Options (Short Duration
& Intermediate Duration)
- -------------------------------------------------------------------------
Each Fund may enter into over-the-counter transactions involving interest
rate caps, swap contracts, or purchase options to enter into such contracts,
in order to manage interest rate risk. In an interest rate cap agreement,
one party agrees to make payments only under specified circumstances,
usually in return for payment of a fee by the other party. An interest rate
cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. Swap
contracts represent an agreement between counter parties to exchange cash
flows based on the difference between
22
<Page>
- ------------------------------------------------------------------------
The Managers Funds
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------
two rates applied to a notional principal amount for a specified period.
The most common type of interest rate swap involves the exchange of
fixed-rate cash flows for variable-rate cash flows. Swaps do not involve
the exchange of principal between the parties. Purchased options on swap
contracts ("swaptions") give the holder the right, but not the obligation,
to enter into a swap contract with the counter party which has written
the option on a date, at an interest rate, and with a notional amount
as specified in the swaption agreement. If the counter party to the swap
transaction defaults, the Fund will be limited to contractual remedies
pursuant to the agreements governing the transaction.
There is no assurance that swap or swaption contract counter parties
will be able to meet their obligations under the contracts or that, in
the event of default, the Fund will succeed in pursuing contractual
remedies. The Fund may thus assume the risk that payments owed the Fund
under a swap or swaption contract will be delayed, or not received at all.
During the term of the swap agreement or swaption, unrealized gains or
losses are recorded as a result of "marking to market." When the swap
agreement or swaption is terminated,the Fund will record a realized gain
or loss equal to the difference between the proceeds from (or cost of)the
closing transaction and the Fund's basis in the contract, if any. In each
of the contracts, the Fund pays a premium, to the counter party, in return
for the swaption. These swaptions may be exercised by entering into a swap
contract with the counter party only on the date specified in each
contract.
(2) Agreements and Transactions with Affiliates
- -----------------------------------------------
The Trust has entered into separate Fund Management Agreements with the
Investment Manager dated August 1, 2000, with respect to Short Duration,
Intermediate Duration and December 20, 2002 for Total Return Bond. Under
these agreements, the Investment Manager provides or oversees investment
advisory and management services to the Funds. The Investment Manager
selects sub-advisors for each Fund (subject to Trustee approval), and
monitors the portfolio managers' investment programs and results. The
Funds are distributed by Managers Distributors, Inc. ("MDI"), a wholly-
owned subsidiary of The Managers Funds LLC. Short Duration's and
Intermediate Duration's investment portfolios are currently managed by
Smith Breeden, pursuant to SubAdvisory Agreements by and between the
Investment Manager on behalf of each Fund and Smith Breeden and Total Return
Bond's investment portfolio is currently managed by Merganser. Certain
Trustees and Officers of the Funds are Officers and/or Directors of the
Investment Manager, AMG and/or MDI.
Investment advisory and management fees of 0.70%, 0.70% and 0.50% per annum
are paid directly by Short Duration, Intermediate Duration and Total Return
Bond, respectively, to the Investment Manager based on average daily net
assets.
Total Return Bond has entered into a Administration and Shareholder Servicing
Agreement under which The Managers Funds LLC serves as the Fund's
administrator (the "Administrator") and is responsible for all aspects of
managing the Fund operations, including administration and shareholder
services to the Fund, its shareholders, and certain institutions, such as
bank trust departments, broker-dealers and registered investment advisers,
that advise or act as an intermediary with the Fund's shareholders. During
the six months ended September 30, 2003, the Fund paid a fee to the
Administrator at the rate of 0.25% per annum of the Fund's average daily
net assets. The aggregate annual fee paid to each independent Trustee for
serving as a Trustee of Managers Trust I and Trust II is $2,000. The Trustees
fee expense shown in the financial statements represents each Fund's
allocated portion of the total fees and expenses paid by the Trust II for the
fiscal six months ended September 30, 2003.
(3)Purchases and Sales of Securities
- ------------------------------------
Purchases and sales of securities, excluding short-term securities, for the
six months ended September 30, 2003, were as follows.
<Table>
Long-Term Securities U.S.Government Securities
-------------------------- -------------------------
Fund Purchases Sales Purchases Sales
- ---------------------- ----------- ---------- ----------- ----------
Short Duration $345,693,426 $316,214,755 $4,479,504 $5,784,797
Intermediate Duration 287,565,622 276,724,453 930,981 893,974
Total Return Bond* 3,608,237 1,791,441 2,408,549 1,679,239
</Table>
23
<Page>
- ------------------------------------------------------------------------
The Managers Funds
Notes to Financial Statements (continued)
- ------------------------------------------------------------------------
(4)Portfolio Securities Loaned
- ------------------------------
The Funds may participate in a securities lending program offered by
BNY, providing for the lending of corporate bonds, equity and government
securities to qualified brokers. Collateral on all securities loaned are
accepted in cash and/or government securities. Collateral is maintained at
a minimum level of 102% of the market value, plus interest, if applicable,
of investments on loan.
Collateral received in the form of cash is temporarily invested in
institutional money market funds or other short-term investments by BNY.
Earnings of such temporary cash investments are divided between BNY, as a
fee for its services under the program, and the Fund loaning the security,
according to agreed-upon rates.
(5)Risks Associated with Mortgage Related and Asset-backed Securities
- ---------------------------------------------------------------------
Asset-backed securities are less effective than other types of securities
as a means of "locking in" attractive long-term interest rates. One reason
is the need to reinvest prepayments of principal; another is the possibility
of significant unscheduled prepayments resulting from declines in interest
rates. These prepayments would have to be reinvested at lower rates. As a
result, these securities may have less potential for capital appreciation
during periods of declining interest rates than other securities of
comparable maturities, although they may have a similar risk of decline in
market value during periods of rising interest rates. Prepayments may also
significantly shorten the effective maturities of these securities, especially
during periods of declining interest rates. Conversely, during periods of
rising interest rates, a reduction in prepayments may increase the effective
maturities of these securities, subjecting them to a greater risk of decline
in market value in response to rising interest rates than traditional debt
securities, and therefore, potentially increasing the volatility of the
Funds.
Prepayments may cause losses on securities purchased at a premium. At times,
some mortgage-backed and asset-backed securities will have higher than market
interest rates and therefore will be purchased at a premium above their par
value.
CMO's may be issued by a U.S. government agency or instrumentality or by a
private issuer. Although payment of the principal of, and interest on, the
underlying collateral securing privately issued CMO's may be guaranteed by
the U.S. government or its agencies or instrumentalities, these CMO's represent
obligations solely of the private issuer and are not insured or guaranteed by
the U.S. government, its agencies or instrumentalities or any other person or
entity.
Prepayments could cause early retirement of CMO's. CMO's are designed to
reduce the risk of prepayment for investors by issuing multiple classes of
securities, each having different maturities, interest rates and payment
schedules, and with the principal and interest on the underlying mortgages
allocated among the several classes in various ways. Payment of interest or
principal on some classes or series of CMO's may be subject to contingencies or
some classes or series may bear some or all of the risk of default on the
underlying mortgages. CMO's of different classes or series are generally
retired in sequence as the underlying mortgage loans in the mortgage pool are
repaid. If enough mortgages are repaid ahead of schedule, the classes or series
of a CMO with the earliest maturities generally will be retired prior to their
maturities. Thus, the early retirement of particular classes or series of a CMO
would have the same effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than anticipated prepayments
can extend the effective maturities of CMO's, subjecting them to a greater risk
of decline in market value in response to rising interest rates than
traditional debt securities, and therefore, potentially increasing their
volatility. Prepayments could result in losses on stripped mortgage-backed
securities. Stripped mortgage-backed securities are usually structured with two
classes that receive different portions of interest and principal distributions
on a pool of mortgage loans. The yield to maturity on an interest only or "IO"
class of stripped mortgage--backed securities is extremely sensitive not only to
changes in prevailing interest rates but also to the rate of principal payments
(including prepayments) and the underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on the Fund's yield to maturity
to the extent it invests in IO's. If the assets underlying the IO experience
greater than anticipated prepayments of principal, the Funds may fail to recoup
fully its initial investment in these securities. Conversely, principal only or
"PO's" tend to increase in value if pre-payments are greater than anticipated
and decline if prepayments are slower than anticipated.
24
<Page>
MANAGERS
- --------
Investment Manager
and Administrator
- ------------------
The Managers Funds LLC
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
Distributor
- -----------
Managers Distributors, Inc.
40 Richards Avenue
Norwalk, Connecticut 06854-2325
(203)857-5321 or (800)835-3879
Custodian
- ---------
The Bank of New York
100 Church Street, 10th Floor
New York, New York 10286
Legal Counsel
- -------------
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
Transfer Agent
- --------------
Boston Financial Data Services, Inc.
Attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800)252-0682
For ManagersChoice Only
- -----------------------
PFPC Brokerage Services, Inc.
P.O. Box 61487
King of Prussia, Pennsylvania 19406-0897
(800)358-7668
</Page>
The Managers Funds
Equity Funds:
- --------------------
VALUE FUND
Armstrong Shaw Associates Inc.
Osprey Partners Investment Mgmt., LLC
CAPITAL APPRECIATION FUND
Essex Investment Management Co., LLC
Bramwell capital Management, Inc.
SMALL COMPANY FUND
Kalmar Investment Advisers, Inc.
SPECIAL EQUITY FUND
Donald Smith & Co., Inc.
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
Skyline Asset Management, L.P.
INTERNATIONAL EQUITY FUND
Lazard Asset Management LLC
Bernstein Investment Research and Management
Mastholm Asset Management, L.L.C.
EMERGING MARKETS EQUITY FUND
Rexiter Capital Management Limited
FIRST QUADRANT TAX-MANAGED EQUITY FUND
First Quadrant, L.P.
Income Funds:
- -------------
MONEY MARKET FUND
J.P.Morgan Fleming Asset Management (USA), Inc.
SHORT DURATION GOVERNMENT FUND
Smith Breeden Associates, Inc.
TOTAL RETURN BOND FUND
Merganser Capital Management LP
INTERMEDIATE DURATION GOVERNMENT FUND
Smith Breeden Associates, Inc.
BOND FUND
Loomis, Sayles & Co. L.P.
GLOBAL BOND FUND
Loomis, Sayles & Co. L.P.
Managers AMG Funds
Equity Funds:
- ------------------
ESSEX AGGRESSIVE GROWTH FUND
ESSEX LARGE CAP GROWTH FUND
Essex Investment Management Company, LLC
FRONTIER GROWTH FUND
FRONTIER SMALL COMPANY VALUE FUND
Frontier Capital Management Co., LLC
RORER LARGE-CAP FUND
RORER MID-CAP FUND
Rorer Asset Management, LLC
SYSTEMATIC VALUE FUND
Systematic Financial Management, LLP
BURRIDGE SMALL CAP GROWTH FUND
The Burridge Group LLC
This report is prepared for the information of shareholders. It is
authorized for distribution to prospective investors only when preceded
or accompanied by an effective prospectus, which is available by calling
1-800-835-3879. Distributed by Managers Distributors, Inc., member NASD.
www.managersfunds.com
www.managersamg.com
www.managerschoice.com
<Page>
Item 2. CODE OF ETHICS
===================================================================
Not applicable.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT
===================================================================
Not applicable.
Item 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
===================================================================
Not applicable.
Item 5. AUDIT COMMITTEE OF LISTED REGISTRANT
===================================================================
Not applicable.
Item 6. [RESERVED]
===================================================================
Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-
END MANAGEMENT INVESTMENT COMPANIES
===================================================================
Not applicable.
Item 8. [RESERVED]
===================================================================
Item 9. CONTROLS AND PROCEDURES
===================================================================
(a) Disclosure Controls and Procedures. The Principal Executive
and Financial Officers concluded that the Registrant's
Disclosure Controls and Procedures are effective based on
their evaluation of the Disclosure Controls and Procedures as
of a date within 90 days of the filing of this report.
(b) Internal Controls. There were no significant changes in the
Registrant's internal controls or in other factors that could
significantly affect these controls subsequent to the date of
our evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
<Page>
Item 10. EXHIBITS
===================================================================
(a) Not applicable.
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. Filed herewith.
(c) Certifications pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. Filed herewith.
<Page>
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/ Peter M. Lebovitz
----------------------------
Peter M. Lebovitz, President
Date: November 25, 2003
-----------------
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/ Peter M. Lebovitz
----------------------------
Peter M. Lebovitz, President
Date: November 25, 2003
-----------------
By: /s/ Galan G. Daukas
----------------------------------------
Galan G. Daukas, Chief Financial Officer
Date: November 25, 2003
-----------------
<Page>