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: 811-6520
MANAGERS TRUST I
(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, 2003
Date of reporting period: MARCH 31, 2003
ITEM 1. REPORT TO SHAREHOLDERS
===============================
Annual Report
March 31, 2003
[LOGO OMITTED]
The Managers Funds
------------------
U.S. Stock Market
Plus Fund
access to excellence
<Page>
<Table>
Begins
on
page
------
Table of Contents
-----------------
Letter to Shareholders 1
Investment Manager Comments and
Schedule of Portfolio Investments 3
Financial Statements
Statement of Assets & Liabilities 10
Fund balance sheet, Net Asset Value (NAV) per share
computation and related components
Statement of Operations 11
Detail of sources of income, Fund expenses, and realized
and unrealized gains (losses) during the fiscal year
Statement of Changes in Net Assets 12
Detail of changes in Fund assets for the past two
fiscal years
Financial Highlights 13
Historical net asset values per share, distributions,
total returns, expense ratios, turnover ratios and
total net assets for the Fund
Notes to Financial Statements 14
Accounting and distribution policies, details of
agreements and transactions with Fund management
and description of certain investment risks
Report of Independent Accountants 21
Trustees and Officers 22
</Table>
Founded in 1983, The Managers Funds offers individual and
institutional investors the experience and discipline of
some of the world's most highly regarded investment
professionals.
<Page>
Letter to Shareholders
- ---------------------------------------------------------------
Dear Fellow Shareholders:
The past year has proven to be an extremely difficult
environment for investors, as uncertainties about everything
from the reliability of corporate reporting to the solidarity
of the United Nations increased. For much of 2002, the markets
were forced to digest an ever-increasing spate of revelations
of corporate mismanagement and fraud. In addition, increasing
terrorist activity in the Middle East added political
uncertainty to the range of outcomes that investors needed to
factor into their forecasts. As 2002 progressed into 2003,
investors, it seemed, dispensed with bottom-up fundamentals all
together and focused exclusively on the impending war with Iraq.
Day by day, the markets moved as a result of changing
perceptions about the likelihood, duration and outcome of
military conflict. While this was understandable, it added to
the challenge in that it obscured many of the other important
factors that typically drive investment decisions. In addition,
uncertainty about the war impeded the progress of the economy,
as business managers remained conservative in terms of capital
expenditures and hiring, while consumers seemed to curb their
spending.
Because it is so closely tied to the performance of the S&P 500
Index, the Fund performed quite poorly during the 12 months
ended March 31, 2003. While the S&P 500 returned -24.76% (with
dividends reinvested), the Fund returned -25.71%. Since it is
the goal of the Fund to outperform this benchmark regardless
of the environment, we are disappointed with this result. As
you know, the principal investments within this portfolio are
mortgage securities. The equity market returns come as a result
of futures contracts (and other similar instruments) designed
to exactly match the performance of the S&P 500. Any increase
or decline in the Fund's return relative to this index comes
as a result of the mortgage portfolio's return relative to the
return of U.S. Treasury securities. Virtually all of the Fund's
underperformance for the year occurred during a period from
June through October when a significant flight to safety drove
returns for U.S. Treasury securities ahead of virtually all
other financial assets, including mortgage securities. A more
detailed description of the Fund's investment policies and
an analysis of the performance for the year are included within
this report.
We are currently in the process of circulating proxy materials
seeking shareholder approvals related to a few significant
changes to this Fund's investment strategy. On the broadest
level, the goals of the Fund will change only slightly. Where
its current goal is to approximate yet improve upon the return
of the S&P 500, its future goal, if we obtain the necessary
shareholder approvals and certain other conditions are met,
will be to improve upon the return of the Russell 3000 Index.
Although the Russell 3000 is a more diversified index, it, like
the S&P 500, is dominated by large capitalization companies.
Over the past one-year period the returns for these two indices
differed by only 0.10%. The difference over various longer time
periods (annualized) has typically been within 1.0%, with the
Russell 3000 having the advantage in periods when smaller
capitalization companies have outperformed. Thus, the goal will
essentially remain the same.
1
<Page>
Letter to Shareholders (continued)
- ---------------------------------------------------------------
The proposed investment strategy, however, is significantly
different from the current strategy in certain respects. As
described above, the Fund's current policy is to invest
principally in mortgage securities and achieve equity market
exposure through the use of futures and other derivative
instruments. If approved, the future strategy will be to invest
directly in equity securities, and to manage transactions in an
effort to minimize taxable distributions to shareholders. The
proposed sub-advisor, First Quadrant, L.P. has been implementing
this strategy for corporate and high net worth clients since 1997.
All of the proposals as well as a description of First Quadrant's
investment strategy are detailed in the proxy, which we encourage
you to read in its entirety. In addition, we ask that you please
vote your proxies for it is important that all shareholders are
represented.
Should you have any questions about this report or the proposed
changes to the Fund, please feel free to contact us at
1-800-835-3879, or visit our website, www.managersfunds.com. We
thank you for your investment.
Sincerely,
/s/ Peter M. Lebovitz
- ---------------------
Peter M. Lebovitz
President
Managers AMG Funds
/s/ Thomas G. Hoffman
- ----------------------
Thomas G. Hoffman, CFA
Director of Research
The Managers Funds
2
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Portfolio Manager Comments
- -----------------------------------------------------------------
The Managers U.S. Stock Market Plus Fund
- ----------------------------------------
The Managers U.S. Stock Market Plus Fund ("Stock Market Plus")
seeks to provide a total return exceeding that of the S&P 500
Index without additional market risk. The Fund invests primarily
in an actively managed portfolio of fixed-income securities and
maintains positions in S&P 500 futures, swaps, options and
similar investments. The Fund does not invest principally in the
common stocks that make up the S&P 500 Index or any other index.
The Managers Funds LLC ("TMF") currently utilizes a single
independent sub-advisor, Smith Breeden Associates, Inc. ("Smith
Breeden") to manage the portfolio. John Sprow, of Smith Breeden,
has been managing the portfolio since the Fund's inception in 1992.
The Portfolio Manager
- ---------------------
John and the portfolio management team at Smith Breeden
specialize in analyzing and investing in mortgage-backed and
corporate 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, John seeks to buy relatively
undervalued securities. Using index futures and/or swaps, an
investor can replicate an investment in the actual stocks within
an index such as the S&P 500. Instead of buying the shares outright,
an investor only needs to put aside a small portion of the value of
the shares (called a margin) to cover changes in prices. Thus, most
of the assets in the portfolio can be used to buy other securities.
As it typically works out, an investment in index futures along
with an appropriate portion of cash invested in short-term U.S.
Treasury securities will have risk and return parameters that
are almost identical to the index. John Sprow and the portfolio
managers at Smith Breeden believe that if they can consistently
exceed the performance of short-term Treasury securities by investing
in mortgage and corporate securities, they can use this technique to
create a portfolio that will have a return pattern very similar to
the S&P 500, but slightly better-an enhanced index. Specifically,
John buys enough futures and swaps contracts on the S&P 500 to
replicate an actual investment in the stocks with the entire
portfolio. He then uses his expertise in fixed-income securities
to construct a portfolio that he believes will outperform a similarly
structured portfolio of Treasury securities. Finally, he hedges most
of the interest rate volatility by selling (shorting) interest rate
futures contracts. The result is a bond portfolio that acts similarly
to the stock market. In this way, investors can utilize John Sprow's
bond picking prowess within an equity allocation.
The Year in Review
- ------------------
U.S. equity prices fell steeply over the year ended March 31,
2003. Investors had to deal with a lot of bad news and uncertainty
during the twelve months, and the breadth of the market's decline
reflected those factors. The S&P 500 declined 24.8%, with little
opportunity for gains either stylistically or among the various
sectors that make up the index. The S&P 500\BARRA Growth Index fell
23.6% while its value counterpart fell 26.2%. Also, every sector
within the S&P fell at least 17% over those twelve months. It
was the only 12-month period since S&P started tracking the data
in 1989 that each sector within the S&P 500 fell by 10% or more.
The reasons for the declines, as mentioned above, were many. In
the second and third quarters of 2002, for instance, there was a
growing list of accounting probes, fraud, tax evasion, insider
trading, research misguidance, and Chapter 11 headlines. The loss
of over 28% during the second and third quarters was the S&P
500's worst six-month
3
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Portfolio Manager Comments (continued)
- -----------------------------------------------------------------
decline since the bear market of 1974. The market rallied during
the fourth quarter and into early 2003, as investors put an
optimistic spin (as we now look back) on some reports on economic
activity and corporate profitability. The hope was that three
consecutive annual declines in equity prices would be enough.
The S&P rose over 20% from early October through mid-January.
Unfortunately, non-economic factors, including the war in Iraq,
North Korea, and SARS, cut the rally short. Also, the economic news
released late in the first quarter was universally disappointing.
Thus, the aggregate decline in share prices for these twelve months
was broad, and yet it also contained considerable volatility.
The U.S. bond market was the beneficiary of the "flight to quality"
that resulted from the drop in share prices and volatility in the
equity market. U.S. Treasury yields declined in the twelve months
ended March 2003, with the middle portion of the yield curve (2-5
years) having the largest drops. Rates at the end of the first
quarter were as low as they have been in years. The monthly
average yield of the 10-year Treasury bond, for example, was it's
lowest since 1961. The Lehman Brothers Aggregate Index returned
11.7% during the period. An analysis of returns by sector and
duration shows that long government bonds were the securities to
own. The LB Long Government Index rose over 20% during the year.
While the poor economic backdrop and reduced inflation expectations
were good for interest rates in general, they were not as good for
corporate bonds. The LB U.S. Credit Index, though up over 13%,
lagged the performance of like-duration Treasuries by a wide margin.
Other "spread sectors" also lagged behind Treasuries. Asset -backed
securities (ABS) returned "only" 9.7%. While fixed-rate
mortgage-backed securities (MBS) outperformed like-duration
Treasuries, they rose just 8.7%. High-yield bonds gained just over
4%. The securitized assets (ABS and MBS) were soft primarily because
the decline in interest rates resulted in faster prepayments. As
consumers pay back their loans faster, bondholders receive their
principal faster than they anticipated, thus collecting less interest
(and making the bonds less valuable). In addition, these cash flows
then need to be reinvested at lower prevailing interest rates. The
high yield sector, meanwhile, was especially susceptible to the tougher
economic environment and volatility in aggregate corporate credit
quality. The best performing spread sector was commercial
mortgage-backed securities (CMBS), which rose 16% during the twelve
months.
Within this backdrop, Managers U.S. Stock Market Plus Fund declined
25.7% in the 12 months ended March 2003. This was 0.95% below the
benchmark return for the same period. While the manager hopes to add
value above the return of the index, such a magnitude of decline would
be impossible to overcome even in the most favorable environment for
debt securities. Considering the manager's investment philosophy and
process, the magnitude of underperformance, while unwelcome, was
understandable. As discussed, Treasuries outperformed most other
sectors of the bond market during this period. Smith Breeden's basic
strategy of investing in mortgages, asset-backed, and corporate
securities, while shorting Treasuries to neutralize the portfolio's
duration would be expected to underperform in such an environment.
This could have been worse had the manager not become a bit more
defensive heading into 2002. As we noted in the previous Annual Report
(dated March 2002), portfolio manager John Sprow "reduced the MBS
weight due to the recent performance of the MBS sector and the belief
that volatility is unlikely to drop much further." In
4
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Portfolio Manager Comments (continued)
- -----------------------------------------------------------------
addition, Sprow began to invest more in mortgages with less
sensitivity to prepayments, including shorter maturity and
reperforming securities. Reperforming MBS, although still fully
backed by the agency that issues them, have significantly different
credit standings and thus significantly different prepayment rates
than generic MBS. Thus, the portfolio was not impacted by the rise
in prepayments as much as it might have been. Also, Sprow emphasized
the high quality CMBS sector throughout the year, which was a
rewarding investment decision.
Looking Ahead
- -------------
The overall posture of the Fund remains defensive heading into the
second quarter of 2003: a higher allocation to generic agency notes,
and an emphasis on CMBS and ABS among the spread sectors. Also,
Sprow continues to emphasize MBS with low sensitivity to prepayments.
Cumulative Total Return Performance:
- ------------------------------------
Stock Market Plus's cumulative total return is based on the daily
change in net asset value ("NAV"), and assumes that all distributions
were reinvested. The S&P 500 Index consists of 500 stocks chosen by
Standard & Poor's for market size (generally the largest market value
within their industry), liquidity (trading volume is analyzed to ensure
ample liquidity and efficient share pricing), and industry group
representation (representing important industry segments within the U.S.
economy). It is a market value weighted index (stock price times number
of shares outstanding), with each stock's weight in the Index
proportionate to its market value. The Index assumes reinvestment of
dividends. This chart compares a hypothetical $10,000 investment made
in Stock Market Plus on March 31, 1993 to a $10,000 investment made in
the S&P 500 for the same time period.
Past performance is not indicative of future resuults.
<Table>
[GRAPH OMITTED]
Value of $10,000 Investment
---------------------------
Stock Market
Year End Plus S&P 500 Index
- -------- ----------- -------------
March 31, 1993 $10,000 $10,000
March 31, 1994 $10,222 $10,147
March 31, 1995 $11,975 $11,727
March 31, 1996 $15,845 $15,491
March 31, 1997 $19,237 $18,563
March 31, 1998 $28,030 $27,473
March 31, 1999 $32,843 $32,544
March 31, 2000 $37,738 $38,383
March 31, 2001 $29,258 $30,063
March 31, 2002 $21,964 $22,673
</Table>
The table below shows the average annual total returns for U.S.
Stock Market Plus and the S&P 500 Index for the one-year, five-year
and 10-year periods ending March 31, 2003.
<Table>
Average Annual Total Returns: 1 Year 5 Years 10 Years
- ----------------------------- ------ ------- --------
Stock Market Plus -25.71% -4.78% 8.18%
S&P 500 Index -24.76% -3.77% 8.53%
</Table>
5
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Schedule of Portfolio Investments
- -----------------------------------------------------------------
March 31, 2003
<Table>
Principal
Amount Value
---------- ----------
U.S. Government Agency Obligations - 52.8% (1)
Federal Government Loan Mortgage Corp. - 16.5%
FGLMC, 6.000%, 04/01/18 $1,800,000 $1,879,312
FGLMC, 7.500%, 10/01/16 326,064 349,793
FGLMC, 7.500%, 04/14/33 3,700,000 3,942,813
---------
Total Federal Government Loan Mortgage Corp. 6,171,918
---------
Federal Home Loan Mortgage Corporation - 0.3%
FHLMC 15 Year, 5.500%, TBA 100,000 103,656
---------
Federal National Mortgage Association - 26.0%
FNMA, 4.215%, 09/01/18 (2) 127,323 131,907
FNMA, 4.250%, 07/15/07 4,600,000 4,874,918
FNMA, 15 Year, 5.000%, TBA 3,000,000 3,073,125
FNMA, 7.500%, 06/25/42 968,168 1,054,742
FNMA IO Strip, 8.000%, 03/25/23
through 11/01/23 3,226,938 546,163
FNMA, 12.500%, 09/01/12 21,591 25,064
---------
Total Federal National Mortgage Association 9,705,919
---------
Government National Mortgage Association - 10.0%
GNMA, 5.375%, 02/20/16 through 02/20/21 (2) 1,176,432 1,209,948
GNMA, 5.625%, 12/20/17 910,222 937,717
GNMA, 6.375%, 05/20/16 through 06/20/21 (2) 1,256,344 1,289,128
GNMA, 6.750%, 09/20/21 (2) 263,957 271,351
---------
Total Government National Mortgage Association 3,708,144
---------
Total U.S. Government Agency Obligations
(cost $19,602,479) 19,689,637
----------
Corporate Bonds - 61.6%
Asset Backed - 50.4%
American Airlines, Inc., 6.817%, 05/23/11 300,000 195,929
Chase Funding Loan Acquisition, 1.000%,
01/25/32 (2) 160,000 157,975
Chase Funding Loan Trust, 2.910%, 03/25/32 (2) 350,000 347,316
Chase Funding Loan Trust, 3.408%, 11/25/30 (2) 1,000,000 996,298
Continental Airlines, Inc., 7.707%, 04/02/21 782,822 640,652
Countrywide Alternative Loan Trust, Series 1999-1
Class A4, 6.750%, 06/01/29 693,328 695,526
Countrywide Asset-Backed Certificates,
6.565%, 11/25/31 800,000 864,964
CS First Boston Mortgage Securities Corp.,
2.293%, 12/05/12 584,084 583,558
CS First Boston Mortgage Securities Corp.,
6.550%, 11/19/07 600,000 672,200
FHLMC Structured Pass Through, 7.500%, 08/25/42 916,972 998,967
First Union-Lehman Brothers Commercial Mortgage
Trust, 7.380%, 04/18/07 1,800,000 2,053,690
IMPAC CMB Trust, 2.755%, 10/25/31 647,076 641,414
IndyMac ABS, Inc., 3.121%, 12/25/32 825,000 823,385
The accompanying notes are an integral part of these financial statements.
</Table>
6
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Schedule of Portfolio Investments (continued)
- -----------------------------------------------------------------
<Table>
Principal
Amount Value
---------- ----------
Asset Backed (continued)
IndyMac ABS, Inc., 3.159%, 05/25/33 $ 550,000 $ 540,436
Long Beach Mortgage Loan Trust, 2.255%,
07/25/31 through 09/25/31 (2) 1,490,000 1,455,271
Morgan Stanley Dean Witter Capital I, 2.255%,
01/25/32 800,000 772,872
Nomura Asset Securities Corp., 6.590%,
03/17/28 1,715,000 1,947,262
Option One Mortgage Loan Trust, 2.080%,
08/25/32 1,128,974 1,126,053
Residential Asset Securities Corp., 1.555%,
07/25/32 1,628,410 1,623,882
Residential Asset Securities Corp., 8.035%,
09/25/28 300,000 313,069
Salomon Brothers Mortgage Securities VII,
7.930%, 06/25/28 889,957 958,778
Southern Pacific Secured Asset Corp., 1.505%,
04/25/27 106,713 106,732
United Airlines Inc., 6.201%, 09/01/08 400,000 295,562
----------
Total Asset Backed 18,811,791
----------
Finance - 4.7%
Gatx Financial Corp., 7.750%, 12/01/06 195,000 178,538
Household Finance Corp., 6.500%, 01/24/06 275,000 299,482
Old National Bank, 6.750%, 10/15/11 225,000 253,107
SouthTrust Corp., 8.625%, 05/15/04 535,000 575,013
Union Planters Corp., 6.250%, 11/01/03 150,000 153,798
Washington Mutual Bank FA, 6.875%, 06/15/11 245,000 278,496
---------
Total Finance 1,738,434
----------
Industrials - 6.5%
America West Airlines Inc., 7.105%, 04/02/21 347,953 353,173
Black & Decker, 7.500%, 04/01/03 125,000 125,000
Energy East Corp., 7.750%, 11/15/03 150,000 153,693
HCA Inc., 6.300%, 10/01/12 150,000 151,944
Potash Corp., 7.750%, 05/31/11 350,000 416,386
Safeway Inc., 7.250%, 09/15/04 250,000 267,359
Santa Fe Pacific Corp., 8.625%, 11/01/04 280,000 304,030
Union Pacific Corp., 7.600%, 05/01/05 75,000 82,836
United Airlines Inc., 7.032%, 10/01/10 478,257 353,819
WellPoint Health Networks, 6.375%, 06/15/06 200,000 220,790
---------
Total Industrials 2,429,030
----------
Total Corporate Bonds (cost $23,118,975) 22,979,255
----------
S&P 500 Swap - (1.8)% Notional
Morgan Guaranty Trust Co. Swap, receive S&P Amount
500 Index, Pay 3-Month LIBOR + 14 basis --------
points, expires 03/23/04 (3) $15,327,708 (670,248)
----------
The accompanying notes are an integral part of these financial statements.
</Table>
7
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Schedule of Portfolio Investments (continued)
- -----------------------------------------------------------------
<Table>
Shares Value
---------- ----------
Preferred Stock - 4.3% (3)
Home Ownership Funding Corp.
(cost $1,928,662) 2,700 1,592,501
---------
Short-Term Investments - 8.1%
Other Investments Companies - 2.6%(4)
JPMorgan Prime Money Market Fund,
Institutional Class Shares, 1.18% 982,596 982,596
JPMorgan Liquid Assets Money Market Fund,
Institutional Class Shares, 1.24% 882 882
-------
Total Other Investment Companies 983,478
-------
Principal
Amount
U.S. Government Agency Discount Notes-5.5% (5),(6)---------
FNMA, 0.000%, 04/04/03 $75,000 74,993
FNMA, 0.000%, 02/06/04 2,000,000 1,980,130
---------
Total U.S. Government Agency Discount Notes 2,055,123
---------
Total Short-Term Investments
(cost $3,039,112) 3,038,601
---------
Total Investments - 125.0% (cost $47,689,228) 46,629,746
----------
Other Assets, less Liabilities - (25.0)% (9,309,080)
----------
Net Assets - 100.0% $ 37,320,666
----------
The accompanying notes are an integral part of these financial statements.
</Table>
8
<Page>
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Managers U.S. Stock Market Plus Fund
Notes to Schedule of Portfolio Investments
- -----------------------------------------------------------------
The following footnotes and abbreviations are to be read in
conjunction with the Schedule of Portfolio Investments previously
presented in this report.
At March 31, 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
- ---- ---- ------------ ------------ ------------
Stock Market Plus $47,689,228 $673,529 $(1,733,011) $(1,059,482)
</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 March 31, 2003.
(2) Adjustable-rate mortgages with coupon rates that adjust
periodically. The interest rate shown is the rate in effect at
March 31, 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 March 31, 2003, such securities represented
2.5% of net assets for Stock Market Plus.
(4) Yield shown for these investment companies represent the
March 31, 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.
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 B Not Rated
- ------------------- --------- ---- ---- ---- ---- ---- ---------
Stock Market Plus 67.35% 0.00% 8.16% 8.12% 0.52% 0.00% 16.38%
</Table>
Investments Abbreviations:
- --------------------------
FGLMC: Federal Government Loan Mortgage Corp.
FNMA: Federal National Mortgage Association
GNMA: Government National Mortgage Association
IO: Interest Only
TBA: To Be Announced
The accompanying notes are an integral part of these financial statements.
9
<Page>
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Managers U.S. Stock Market Plus Fund
Statement of Assets and Liabilities
March 31, 2003
- -----------------------------------------------------------------
<Table>
Managers
U.S. Stock
Market Plus
Fund
-----------
Assets:
- -------
Investments at value* $46,629,746
Cash 4,219
Receivable for investments sold 2,045,313
Receivable for Fund shares sold 12,411
Dividends, interest and other receivables 316,843
Prepaid expenses 8,693
----------
Total assets 49,017,225
----------
Liabilities:
- ------------
Payable for investments purchased 11,089,840
Payable for Fund shares repurchased 29,599
Payable for futures variation margin 484,213
Interest payable-swap positions 4,024
Investment advisory and management fee 7,441
Other accrued expenses 81,442
----------
Total liabilities 11,696,559
----------
Net Assets $37,320,666
===========
Shares outstanding 5,161,722
----------
Net asset value, offering and redemption
price per share $7.23
======
Net Assets Represent:
- ---------------------
Paid-in capital $110,332,579
Undistributed net investment income (593,501)
Accumulated net realized loss from
investments, futures and option contracts (69,629,669)
Net unrealized depreciation of investments (389,234)
Net unrealized depreciation of futures and swaps (2,399,509)
-----------
Net Assets $37,320,666
===========
*Investments at cost $47,689,228
-----------
The accompanying notes are an integral part of these financial statements.
</Table>
10
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Statement of Operations
For the fiscal year ended March 31, 2003
- -----------------------------------------------------------------
<Table>
Managers
U.S. Stock
Market Plus
Fund
-----------
Investment Income:
- ------------------
Interest income $ 2,157,250
Dividend income 288,414
---------
Total investment income 2,445,664
---------
Expenses:
- ---------
Investment advisory and management fees 344,871
Interest expense 212,333
Transfer agent 137,780
Custodian 64,503
Professional fees 25,677
Registration fees 20,131
Trustees fees and expenses 4,239
Insurance 3,836
Miscellaneous 8,543
-------
Total expenses before offsets 821,913
-------
Expense reimbursement (174,725)
Expense reductions (572)
-------
Net expenses 646,616
-------
Net investment income 1,799,048
---------
Net Realized and Unrealized Gain (Loss):
- ----------------------------------------
Net realized loss on investments
and option contracts (5,655,188)
Net realized loss on futures contracts (12,202,898)
Net unrealized appreciation
of investments 929,692
Net unrealized depreciation
of futures and swap contracts (2,291,217)
Net realized and unrealized loss
on investments (19,219,611)
Net Decrease in Net Assets -------------
Resulting from Operations $(17,420,563)
-------------
The accompanying notes are an integral part of these financial statements.
</Table>
11
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Statement of Changes in Net Assets
For the fiscal years ended March 31,
- -----------------------------------------------------------------
<Table>
Managers
U.S. Stock Market Plus Fund
---------------------------
2003 2002
----------- -----------
Increase (Decrease) in Net Assets
From Operations:
- ---------------------------------
Net investment income $ 1,799,048 $ 4,548,243
Net realized loss on investments (17,858,086) (11,201,762)
Net unrealized appreciation (depreciation)
of investments (1,361,525) 7,149,077
Net increase (decrease) in net assets ------------ -------
resulting from operations (17,420,563) 495,558
------------ -------
Distributions to Shareholders:
- ------------------------------
From net investment income (2,087,575) (9,128,793)
Return of capital (1,018,275) -
----------- -----------
Total distributions to shareholders (3,105,850) (9,128,793)
----------- -----------
From Capital Share Transactions:
- --------------------------------
Proceeds from sale of shares 4,606,825 10,277,404
Net asset value of shares issued in
connection with reinvestment of
dividends and distributions 2,934,876 8,752,726
Cost of shares repurchased (22,105,458) (33,779,709)
Net decrease from capital
share transactions (14,563,757) (14,749,579)
------------ ------------
Total decrease in net assets (35,090,170) (23,382,814)
------------ ------------
Net Assets:
- -----------
Beginning of year 72,410,836 95,793,650
End of year $37,320,666 $72,410,836
------------ ------------
End of year (distributed in excess)/
undistributed net investment income $(593,501) $1,370,108
---------- ----------
Share Transactions:
- -------------------
Sale of shares 560,316 928,274
Shares issued in connection with
reinvestment of dividends and
distributions 376,485 816,211
Shares repurchased (2,757,891) (3,217,943)
----------- -----------
Net decrease in shares (1,821,090) (1,473,458)
----------- -----------
The accompanying notes are an integral part of these financial statements.
</Table>
12
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Financial Highlights
For a share outstanding throughout the fiscal years ended March 31,
- -----------------------------------------------------------------
<Table>
2003 2002 2001 2000 1999
------ ------ ------ ------ ------
Net Asset Value,
Beginning of Year $10.37 $11.33 $16.02 $16.78 $16.86
Income from
Investment Operations:
- -----------------------
Net investment income 0.19 0.59 1.00 0.88 0.69
Net realized and
unrealized gain (loss)
on investments (2.83) (0.45) (4.34) 1.38 1.76
Total from investment ------ ---- ------ ---- ----
operations (2.64) 0.14 (3.34) 2.26 2.45
------ ---- ------ ---- ----
Less Distributions to
Shareholders from:
- ---------------------
Net investment income (0.33) (1.10) (0.30) (0.98) (0.62)
Return of capital (0.17) - - - -
Net realized gain on
investments - - (1.05) (2.04) (1.91)
Total distributions to ------ ------ ------ ------ ------
shareholders (0.50) (1.10) (1.35) (3.02) (2.53)
------ ------ ------ ------ ------
Net Asset Value,
End of Year $7.23 $10.37 $11.33 $16.02 $16.78
----- ------ ------ ------ ------
Total Return (a) (25.71)% 0.97% (22.47)% 14.91% 17.17%
Ratio of net operating
expenses to average net
assets (b) 0.88% 0.88% 0.88% 0.88% 0.88%
Ratio of total expenses
to average net assets 1.67%(c)1.54%(c)1.02%(c) 1.01% 1.04%
Ratio of net investment
income to average net
assets (a) 4.08% 5.25% 6.17% 5.47% 4.62%
Portfolio turnover 271% 598% 624% 442% 527%
Net assets at end of year
(000's omitted) $37,321 $72,411 $95,794 $191,375 $185,584
------- ------- ------- -------- --------
</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, 2002 and 2001 of 0.43%, 0.46% and 0.04%, respectively.
(See Note 1(i) of "Notes to Financial Statements.")
13
<Page>
- -----------------------------------------------------------------
Managers U.S. Stock Market Plus Fund
Notes to Financial Statements
March 31, 2003
- -----------------------------------------------------------------
(1) Summary of Significant Accounting Policies
- ----------------------------------------------
Managers Trust I ("Trust I" or the "Fund") 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 I is
comprised of Managers U.S. Stock Market Plus Fund ("Stock Market
Plus"). The Fund's 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 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 period. Actual results
could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund in the
preparation of its financial statements.
(a) Valuation of Investments
- ----------------------------
Equity securities traded on a domestic or international
securities exchange 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 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 are apportioned among
the Fund in the Trust, and in some cases other funds in the family,
based upon their relative net assets or number of shareholders.
In addition, the Fund had a "balance credit" arrangement with
State Street Bank ("SSB"), the Fund's custodian prior to August 5,
2002, whereby the Fund was credited with an interest factor equal
to 75% of the nightly Fed Funds Rate for account balances left
uninvested overnight. Beginning August 5, 2002, the Fund has an
arrangement with the Bank of New York ("BNY") whereby the Fund is
credited with an interest
14
<Page>
- -----------------------------------------------------------------
Notes to Financial Statements (continued)
- -----------------------------------------------------------------
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 the
Fund. For the fiscal year ended March 31, 2003, the custodian
expense was reduced under the SSB arrangement by $572.
The Managers Funds LLC (the "Investment Manager"), a subsidiary
of Affiliated Managers Group, Inc. ("AMG"), has contractually
agreed, through August 1, 2003, to waive its fees and/or bear
expenses of the Fund to cause total operating expenses (excluding
interest, taxes, brokerage and other extraordinary expenses) to
not exceed the annual rate of 0.88% (the "Expense Agreement").
The Fund is obligated to repay the Investment Manager such amounts
waived, paid or reimbursed in future years provided that the
repayment occurs within three years after the waiver or
reimbursement and that such repayment would not cause the Fund's
expenses as a percent of average net assets in any such future year
to exceed 0.88%. At March 31, 2003, the cumulative amount of
reimbursement is $174,725.
(d) Dividends and Distributions
- -------------------------------
Dividends resulting from net investment income, if any, normally
are declared and paid quarterly. 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. The tax character
of distributions paid during the fiscal years ended March 31, 2003
and 2002 were as follows:
<Table>
2003 2002
----------- -----------
Ordinary income $2,087,575 $9,128,793
Short-term capital gains - -
Return of capital $1,018,275 -
---------- ----------
$3,105,850 $9,128,793
---------- ----------
</Table>
As of March 31, 2003, the components of distributable earnings
(excluding unrealized appreciation/depreciation) on a tax basis
consisted of:
<Table>
Capital loss carryforward $69,904,066
Undistributed ordinary income -
</Table>
(e) Federal Taxes
- -----------------
The Fund intends to comply with the requirements under
Subchapter M of the Internal Revenue Code of 1986, as amended,
and to distribute substantially all of its taxable income and
gains to its shareholders and to meet certain diversification
and income requirements with respect to investment companies.
(f) Capital Loss Carryovers
- ---------------------------
As of March 31, 2003, the Fund had accumulated net realized
capital loss carryovers from securities transactions for Federal
income tax purposes as shown in the chart below. These amounts
may be used to offset realized capital gains, if any, through
March 31, 2011.
15
<Page>
- -----------------------------------------------------------------
Notes to Financial Statements (continued)
- -----------------------------------------------------------------
<Table>
Capital Loss
Fund Carryover Amounts Expires Mar. 31,
- ------------------ ------------------ ----------------
Stock Market Plus $16,102,872 2009
36,304,053 2010
17,497,141 2011
</Table>
(g) Capital Stock
- -----------------
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest, without par value. The Fund
records sales and repurchases of its capital stock on the trade date.
At March 31, 2003, a certain unaffiliated shareholder, specifically
an omnibus processing agent, held 45% of the outstanding shares of
the Fund.
(h) Repurchase Agreements
- -------------------------
The Fund may enter into repurchase agreements provided that the
value of the underlying collateral, including accrued interest, will
be equal to or exceed the value of the repurchase agreement during
the term of the agreement. The underlying collateral for all
repurchase agreements is held in safekeeping by the Fund's custodian
or at the Federal Reserve Bank.
If the seller defaults and the value of the collateral declines, or
if bankruptcy proceedings commence with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or
limited.
(i) Reverse Repurchase Agreements
- ---------------------------------
A reverse repurchase agreement involves the sale of portfolio assets
together with an agreement to repurchase the same assets later at a
fixed price. Additional assets are maintained in a segregated account
with the custodian, and are marked to market daily. The segregated
assets may consist of cash, U.S. Government securities, or other
liquid securities at least equal in value to the obligations under
the reverse repurchase agreements. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy
or becomes insolvent, a fund's use of the proceeds under the
agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the obligation
to repurchase the securities.
(j) Delayed Delivery Transactions and When-Issued Securities
- ------------------------------------------------------------
The Fund 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 Fund's Schedule of Investments. The
Fund may receive compensation for interest forgone in the purchase
of a delayed delivery or when-issued security. With respect to
purchase commitments, the Fund identifies 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 Fund's 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.
16
<Page>
- -----------------------------------------------------------------
Notes to Financial Statements (continued)
- -----------------------------------------------------------------
(k) Dollar Roll and Reverse Dollar Roll Agreements
- --------------------------------------------------
A dollar roll is an agreement to sell securities for delivery in
the current month and to repurchase substantially similar
securities on a specified future date. During the roll period,
principal and interest paid on these securities are not received.
When a fund invests in a dollar roll, it is compensated by the
difference between the current sales price and the forward price
for the future purchase as well as by earnings on the cash
proceeds of the initial sale. A reverse dollar roll is agreement
to buy securities for delivery in the current month and to sell
substantially similar securities on a specified future date,
typically at a lower price. During the roll period, the Fund
receives the principal and interest on the securities purchased in
compensation for the cash invested in the transaction.
(l) Short Sales
- ---------------
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. The Fund 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.
(m) Futures Contracts Held or Issued for Purposes other than Trading
- --------------------------------------------------------------------
The Fund uses interest-rate futures contracts for risk management
purposes in order to reduce fluctuations in the Fund's net asset
values relative to the 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. 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.
Stock Market Plus had the following open futures contracts as of
March 31, 2003:
<Table>
Number of Expiration Unrealized
Type Contracts Position Month Gain/(Loss)
- -------------------- --------- -------- ------------ -------------
10-Year U.S. Treasury 1 Long June 2003 $ (1,636)
2-Year U.S. Treasury 28 Long June 2003 4,868
5-Year U.S. Treasury 58 Long June 2003 (55,740)
15-Year U.S.
Treasury Bond 28 Short June 2003 19,821
10-Year Interest Swap 15 Short June 2003 12,225
3-Month Eurodollar 123 Long June 2003-
Sept. 2011 259,421
3-Month Eurodollar 283 Short Sept. 2003-
March 2009 (1,504,921)
------------
Total (1,265,962)
============
</Table>
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 Fund, of the futures contracts themselves, and of the
securities that are the subject of a hedge.
17
<Page>
- -----------------------------------------------------------------
Notes to Financial Statements (continued)
- -----------------------------------------------------------------
(n) Derivative Financial Instruments Held or Issued for Trading
Purposes
- ---------------------------------------------------------------
Stock Market Plus invests in futures contracts on the S&P 500
Index whose returns are expected to track movements in the S&P
500 Index.
Stock Market Plus had the following open futures contracts on
the S&P 500 Index as of March 31, 2003:
<Table>
Number of Expiration Unrealized
Contracts Position Month Gain/(Loss)
- --------- -------- ---------- -----------
111 Long June 2003 $(463,299)
</Table>
(o) 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 March 31, 2003 is
$2,055,123.
(p) Interest Rate Caps, Swap Contracts and Options
- --------------------------------------------------
The 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 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 a Fund Management Agreement with the
Investment Manager dated August 1, 2000. Under this agreement, the
Investment Manager provides or oversees investment advisory and
management services to the Fund. The Investment Manager selects
sub-advisors for the Fund (subject to Trustee approval), and
monitors the portfolio manager's investment programs and results.
The Fund is distributed by Managers Distributors, Inc. ("MDI"),
a wholly-owned subsidiary of The
18
<Page>
- -----------------------------------------------------------------
Notes to Financial Statements (continued)
- -----------------------------------------------------------------
Managers Funds LLC. The Fund's investment portfolio is currently
managed by Smith Breeden Associates, Inc., pursuant to a
Sub-Advisory Agreement by and between the Investment Manager on
behalf of the Fund and Smith Breeden. Certain Trustees and
Officers of the Fund are Officers and/or Directors of the
Investment Manager, AMG and/or MDI.
Investment advisory and management fees of 0.70% per annum are
paid directly by the Fund to the Investment Manager based on
average daily net assets.
The aggregate annual fee paid to each independent Trustee for
serving as a Trustee for Managers Trust I and Trust II is $2,000.
The Trustees fee expense shown in the financial statements
represents the Fund's allocated portion of the total fees and
expenses paid by the Trust for the fiscal year ended March 31,
2003.
(3) Purchases and Sales of Securities
- -------------------------------------
Purchases and sales of securities, excluding short-term securities,
for the fiscal year ended March 31, 2003 were as follows.
<Table>
Long-Term Securities U.s. Government Securities
------------------------ --------------------------
Purchases Sales Purchases Sales
---------- ----------- ---------- -------------
$172,928,822 $230,333,222 $315,959 $4,513,852
</Table>
(4) Portfolio Securities Loaned
- -------------------------------
The Fund may participate in a securities lending program
providing for the lending of corporate bonds, equity and
government securities to qualified brokers. Collateral on
all securities loaned are accepted in cash and/or government
securities. Collateral is maintained at a minimum level of
102% of the market value, plus interest, if applicable, of
investments on loan. Collateral received in the form of cash
is invested temporarily 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 Fund.
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
19
<Page>
- -----------------------------------------------------------------
Notes to Financial Statements (continued)
- -----------------------------------------------------------------
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 Fund may fail to recoup fully its initial investment in these
securities. Conversely, principal only or "PO's" tend to increase in
value if prepayments are greater than anticipated and decline if
prepayments are slower than anticipated.
(6) Pending Fund Reorganization
- -------------------------------
At a meeting held on March 14, 2003, the Fund's Board of Trustees
approved the reorganization of the Fund with First Quadrant Tax-Managed
Equity Fund ("FQ" Fund"), a series of Managers AMG Funds. Consummation
of the reorganization is contingent upon approval by the Fund's
shareholders of proposals (the "Proposals") that would replace the Fund's
current investment objectives, policies and advisory arrangements with
investment objectives, policies and advisory arrangements substantially
the same as those of FQ Fund. If Fund shareholders approve the Proposals,
the surviving fund, following the reorganization, will operate under
investment objectives, policies and advisory arrangements substantially
the same as those currently in place for FQ Fund.
The Fund will provide a definitive proxy statement to shareholders
prior to a special meeting of the Fund to consider the Proposals.
Shareholders are urged to read the definitive proxy statement when it
becomes available. It will contain important information regarding the
Proposals.
In light of the proposed reorganization, effective March 18, 2003, the
Fund no longer accepts investments to open new shareholder accounts.
Shareholders may, however, continue to purchase and redeem shares in
existing accounts.
20
<Page>
- -----------------------------------------------------------------
Report of Independent Accountants
- -----------------------------------------------------------------
To the Trustees of Managers Trust I and the
Shareholders of Managers U.S. Stock Market Plus Fund:
In our opinion, the accompanying statements of assets and
liabilities, including the schedule 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 U.S. Stock Market Plus
Fund (constituting Managers Trust I, hereafter referred to as the
"Fund"), at March 31, 2003, and the results of its operations, the
changes in its net assets and the financial highlights for 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 Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits
of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatements. 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 March 31, 2003, by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 21, 2003
21
<Page>
- -----------------------------------------------------------------
Trustees and Officers
- -----------------------------------------------------------------
The Trustees and Officers of the Trust, their business
addresses, principal occupations for the past fiveyearsand
dates of birth are listed below. The Trustees provide broad
supervision over the affairs of the Trust and the Fund. 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: 40 Richards Avenue, Norwalk, Connecticut
06854.
The Trustees hold office without limit in time except that (a)
any Trustee may resign; (b) any Trustee may be removed for cause
by the remaining Trustees; and (c) any Trustee may be removed by
action of two-thirds of the outstanding shares of the Trust.
Independent Trustees
- --------------------
<Table>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Jack W.Aber Trustee since Professor of Finance, 22 Trustee of Appleton Growth
DOB: 9/9/37 2000 Boston University Fund (1 portfolio);
School of Management Trustee of Third Avenue
(1972-Present) Trust (4 portfolios);
Trustee of Third Avenue
Variable Trust (1 portfolio)
- ------------- ---------------- --------------------- ------------- ----------------------------
William E. Trustee since President and Owner, 22 Trustee of Third Avenue
Chapman,II 2000 Longboat Retirement Trust (4 portfolios);
DOB: 9/23/41 Planning Solutions Trustee of Third Avenue
(1998-Present); Variable Trust (1 portfolio)
Hewitt Associates,LLC
(part time)(provider
of Retirement and
Investment Education
Seminars); President,
Retirement Plans Group,
Kemper Funds (1990-1998)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Edward J. Trustee since Partner, Hepburn Willcox 22 Trustee of Third Avenue
Kaier 2000 Hamilton & Putnam (1977- Trust (4 portfolios);
DOB: 9/23/45 Present) Trustee of Third Avenue
Variable Trust (1 portfolio)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Madeline H. Trustee since Member,Investment 14 None
McWhinney 2000 Committee, New Jersey
DOB :3/11/22 Supreme Court (1990-
Present); Member,
Advisory Board on
Professional Ethics,
New Jersey Supreme
Court (1983-1998);
President, Dale, Elliott
& Company, Inc.
(Management Consultant)
(1977-1994)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Steven J. Trustee since Executive Vice President, 14 Trustee of Professionally
Paggioli 2000 Secretary and Director, Managed Portfolios
DOB:4/3/50 Investment Company (19 portfolios)
Administration, LLC
(1990-2001); Trustee,
Professionally Managed
Portfolios, (1991-2001);
Consultant, formerly
Executive Vice President
and Director, The
Wadsworth Group (1986-
2001); Vice President,
Secretary and Director,
First Fund Distributors,
Inc.(1991-2001)
- ------------- ---------------- ---------------------- ------------- ---------------------------
Eric Rakowski Trustee since Professor, University of 22 Trustee of Third Avenue
DOB:6/5/58 2000 California at Berkeley Trust (4 portfolios)
School of Law (1990- Director of Third Avenue
Present); Visiting Variable Trust (1 portfolio)
Professor, Harvard Law
School (1998-1999)
- ------------- ---------------- ---------------------- ------------- ---------------------------
</Table>
22
<Page>
- -----------------------------------------------------------------
Trustees and Officers (continued)
- -----------------------------------------------------------------
<Table>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Thomas R. Trustee since Professor of Finance, 14 None
Schneeweis 2000 University of Massa-
DOB :5/10/47 chusetts (1985-Present);
Managing Director,
CISDM at the University
of Massachusetts, (1994-
Present); President and
Chief Executive Officer,
Schneeweis Partners, LLC
(2001-Present)
- ------------- ---------------- ---------------------- ------------- ---------------------------
</Table>
Interested Trustees (1)
- ---------------------
<Table>
POSITION(S) HELD NUMBER OTHER
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS OF FUNDS IN DIRECTORSHIPS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS FUND COMPLEX HELD BY TRUSTEES
OF BIRTH SERVED OVERSEEN BY
TRUSTEE*
- ------------- ---------------- --------------------- ------------- ---------------------------
Sean M.Healey Trustee since President and Chief 22 None
DOB:5/9/61 2000 Operating Officer,
Affiliated Managers
Group,Inc.(1999-Present);
Director,Affiliated
Managers Group,Inc.
(2001-Present);
Executive Vice President,
Affiliated Managers Group,
Inc.(1995-1999); Vice
President, Goldman, Sachs
& Company (1987-1995)
- ------------- ---------------- --------------------- ------------- ---------------------------
Peter M. President since President and Chief 22 None
Lebovitz 2000; Executive Officer,
DO :1/18/55 Trustee since The Managers Funds
2002 LLC (1999-Present);
President, Managers
Distributors, Inc. (2000-
Present); Director of
Marketing, The Managers
Funds, LP (1994-1999);
Director of Marketing,
Hyperion Capital
Management, Inc. (1993-
1994); Senior Vice
President, Greenwich
Asset Mgmt.,Inc. (1989-
1993)
- ------------- ---------------- --------------------- ------------- ---------------------------
</Table>
(1) The following Trustee are "interested persons" of the Trust
within the meaning of the 1940 Act. Mr. Healeyis an interested
person of the Trust within the meaning of the 1940 Act by virtue
of his positions with, and interest in securities of, Affiliated
Managers Group, Inc. Mr. Lebovitz is an interested person of the
Trust within the meaningof the 1940 Act byvirtue of his positions
with The ManagersFundsLLC and Managers Distributors, Inc.
23
<Page>
- -----------------------------------------------------------------
Trustees and Officers (continued)
- -----------------------------------------------------------------
Officers
- --------
<Table>
POSITION(S) HELD
NAME WITH TRUST AND PRINCIPAL OCCUPATIONS
AND DATE LENGTH OF TIME DURING PAST 5 YEARS
OF BIRTH SERVED
- ------------- ---------------- --------------------------------------
Galan G.Daukas Chief Financial Chief Operating Officer,The Managers
DOB:10/24/63 Office since 2002 Funds LLC (2002-Present); Chief Financial
Officer Managers AMG Funds, Managers Trust
Trust II and The Managers Funds;
Chief Operating Officer
and Chairman of the Management Committee,
Harbor Capital Management Co., Inc. (2000-
2002); Chief Operating Officer, Fleet
Investment Advisors (1992-2000)
- ------------- ---------------- ---------------------------------------
Donald S. Treasurer and Director, Finance and Planning, The
Rumery Secretary since Managers Funds LLC,(1994-Present);
DOB:5/29/58 2000 Treasurer and Chief Financial Officer,
Managers Distributors, Inc. (2000-Present);
Secretary and Treasurer, Managers Trust II;
and The Managers Funds; and
Treasurer of Managers AMG Funds
- ------------- ---------------- --------------------------------------
</Table>
24
<Page>
MANAGERS
- --------
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
New York, New York 10286
Legal Counsel
- -------------
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109-2881
Transfer Agent
- --------------
Boston Financial Data Services, Inc.
attn: The Managers Funds
P.O. Box 8517
Boston, Massachusetts 02266-8517
(800) 252-0682
Trustees
- --------
Jack W. Aber
William E. Chapman, II
Sean M. Healey
Edward J. Kaier
Peter M. Lebovitz
Madeline H. McWhinney
Steven J. Paggioli
Eric Rakowski
Thomas R. Schneeweis
25
<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
Holt-Smith & Yates Advisors, Inc.
SMALL COMPANY FUND
Kalmar Investment Advisers, Inc.
SPECIAL EQUITY FUND
Donald Smith & Co.
Pilgrim Baxter & Associates, Ltd.
Westport Asset Management, Inc.
Kern Capital Management LLC
Skyline Asset Management, L.P.
INTERNATIONAL EQUITY FUND
Deutsche Asset Management
Bernstein Investment Research and Management
Mastholm Asset Management, L.L.C.
EMERGING MARKETS EQUITY FUND
Rexiter Capital Management Limited
U.S. STOCK MARKET PLUS FUND
Smith Breeden Associates, Inc.
Income Funds:
- -------------
BOND FUND
Loomis, Sayles & Co. L.P.
GLOBAL BOND FUND
Loomis, Sayles & Co. L.P.
INTERMEDIATE DURATION
GOVERNMENT FUND
Smith Breeden Associates, Inc.
INTERMEDIATE BOND FUND
Loomis, Sayles & Co. L.P.
SHORT DURATION
GOVERNMENT FUND
Smith Breeden Associates, Inc.
TOTAL RETURN BOND FUND
Merganser Capital Management LP
MONEY MARKET FUND
J.P. Morgan Fleming Asset Management (USA), Inc.
Managers AMG Funds
Equity Funds:
- -------------
ESSEX AGGRESSIVE GROWTH FUND
Essex Investment Management Company, LLC
FRONTIER GROWTH FUND
FRONTIER SMALL COMPANY VALUE FUND
Frontier Capital Management Co., LLC
FIRST QUADRANT TAX-MANAGED EQUITY FUND
First Quadrant, L.P.
RORER LARGE-CAP FUND
RORER MID-CAP FUND
Rorer Asset Management, LLC
SYSTEMATIC VALUE FUND
Systematic Financial Management, L.P.
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
26
<Page>
ITEM 2. CODE OF ETHICS
===============================================================
Not applicable pursuant to SEC Release No. 34-47262
(January 7, 2003).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
===============================================================
Not applicable pursuant to SEC Release No. 34-47262
(January 7, 2003).
ITEMS 4-6. [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) Not applicable pursuant to SEC Release No. 34-47262
(January 7, 2003).
(b) 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.
ITEM 10. EXHIBITS
===============================================================
(a) Not applicable pursuant to SEC Release No. 34-47262
(January 7, 2003).
(b) A separate certification for each principal executive
officer and principal financial officer of the registrant
as required by Rule 30a-2 under the Act (17 CFR 270.30a-2)
is attached as Exhibit 99.CERT.
<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 I
By: /s/ Peter M. Lebovitz
----------------------------
Peter M. Lebovitz, President
Date: May 29, 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: May 29, 2003
--------------
By: /s/ Galan G. Daukas
----------------------------------------
Galan G. Daukas, Chief Financial Officer
Date: May 29, 2003
--------------
<Page>